UPDATE 1-California Chamber of Commerce seeks to stop cap-and-trade

Tue Nov 13, 2012 6:15pm EST

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By Rory Carroll

SAN FRANCISCO Nov 13 (Reuters) - The California Chamber of Commerce filed a petition that seeks to block the state from auctioning carbon allowances to large emitting businesses, one day before the cap-and-trade program's inaugural permit sale.

The complaint, filed in a Sacramento state court on Tuesday, argues that California's landmark emissions reduction law AB 32 does not authorize the California Air Resources Board (CARB) to raise money beyond what is needed to cover its administrative costs through the sale of carbon allowances.

"The current CARB proposal is the most costly way to implement AB 32, and it will hurt consumers, the job climate, and the ability of businesses to expand here," says a copy of the complaint posted on the Chamber's web site.

The state on Wednesday is planning to sell 39.5 million allowances to cover emissions in 2015 and put those revenues into a new government account. Stanley Young, a spokesman for the resources board, said they are confident cap-and-trade will withstand any court challenge.

"We are going forward with tomorrow's auction," Young said.

That money is expected to be used to help the state further reduce its emissions, although the details of its use have still to be hammered out.

California plans to give away 90 percent of the allowances for free at the outset of the program, a percentage that will diminish over time.

California businesses including oil refineries and large manufacturers have complained that having to purchase 10 percent of their compliance obligation at the start of the program will put them at a competitive disadvantage to their out-of-state competitors.

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