California set to overcome CO2 market lawsuit: Point Carbon

Thu Jun 16, 2011 8:13am EDT

The skyline of downtown Los Angeles through a layer of smog is seen in the distance from a rooftop in Hollywood, California, May 31, 2006. REUTERS/Fred Prouser/Files

The skyline of downtown Los Angeles through a layer of smog is seen in the distance from a rooftop in Hollywood, California, May 31, 2006.

Credit: Reuters/Fred Prouser/Files

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SAN FRANCISCO (Thomson Reuters Point Carbon) - Lawyers following the twists and turns of a legal challenge to California's planned carbon market said it looks increasingly likely the state will win.

Several California-based attorneys told Point Carbon News on Wednesday there are a number of reasons to believe that the widely-discussed lawsuit will not delay the start of the market in January 2012.

Earlier this year, the California Air Resources Board (ARB), which is charged with designing and implementing the market's rules, was sued by a group of organizations opposed to cap-and-trade.

A San Francisco Superior Court judge dismissed many of the group's claims, but agreed that ARB had failed to adequately consider policy alternatives to cap-and-trade, such as a carbon tax.

Late last month, Judge Ernest Goldsmith ordered ARB to halt work on the program, but ARB was successful in getting a temporary stay on that order from an appeals court.

Although ARB has held fewer public meetings on the cap-and-trade program than expected, it has never officially halted the complicated work of designing the carbon trading system.

ANALYSIS GETS HIGH MARKS

Despite the suspension, ARB released a report requested by Goldsmith on Monday.

The 120-page document says cap-and-trade is still the best approach for helping the state cut 22 million tonnes of CO2e by 2020.

Two California-based lawyers said the report should satisfy Goldsmith.

"I think the analysis is thorough and supports cap and trade as the most environmentally sound outcome," said Ann Carlson, a law professor specializing in climate change policy at UCLA.

Nicholas van Aelstyn, a principle with Beveridge & Diamond, agreed.

"The expanded alternatives analysis that ARB just released substantively complies with the trial court's order," he said.

WILL THE STAY BE OVERTURNED?

At this point, the plaintiff's best shot at halting work on the program is convincing the appeals court to lift the temporary stay it instituted.

For that to happen, the environmental groups would have to show "irreparable harm" is being done to them by ARB staffers drafting regulations in Sacramento, a spokesman for the appeals court said.

"I don't think there's significant harm in allowing the board to continue working," said UCLA's Carlson.

Malcolm Weiss, a partner with Hunton & Williams, said he also thought the stay would continue, a sentiment shared by van Aelstyn as well.

If so, it is unlikely the case will get resolved until well after the market has begun, a spokesman for the appeals court said.

Still, the case is an evolving and complex situation that could take several years to completely play out, the lawyers said.

No one could say for sure how it will ultimately be resolved.

"I think that's a harder call, but I think the state will prevail," Carlson said.

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