* State must assess cap-and-trade alternatives
* Effect on cap-and-trade timetable not clear
(Adds comment from petitioners, analyst, byline)
By Peter Henderson and Rory Carroll
SAN FRANCISCO/WASHINGTON, March 21 California
did not adequately consider alternatives to its plan to create
a cap-and-trade market for carbon emissions, a judge ruled on
Monday, throwing a wrench into the most aggressive U.S. effort
to combat climate change.
The state's regulator on climate change matters, the Air
Resources Board (ARB), will need to consider other
possibilities to meet state environmental law, San Francisco
Superior Court Judge Ernest Goldsmith wrote in an opinion.
In particular he said that the state had not made a
thorough examination of putting a tax on carbon.
"ARB seeks to create a fait accompli by premature
establishment of a cap and trade program before alternatives
can be exposed to public comment and properly evaluated by ARB
itself," he ruled.
California has forged ahead with its climate change plan,
arguing it will attract new "green" business as it improves the
environment, and environmentalists see its success as key to
any future U.S. federal effort. Key to California's plan is to
establish a limit on total greenhouse gas emissions and let
companies and power plants trade for the right to pollute.
The court case in question, though, is by "environmental
justice" groups who seek to make sure environmental regulation
benefits the least wealthy parts of society.
'THIS COULD BE HUGE'
One analyst saw a potential major effect of the ruling.
"This could be huge," said Jon Costantino, a senior advisor
with law firm Manatt, Phelps & Phillips in Sacramento and
former climate change planning manager at the Air board.
If ARB is able to complete the analysis this summer and go
forward with the cap and trade rulemaking, the decision would
only amount to a "bump in the road", he said.
"But it could be more problematic if ARB can't satisfy the
court's concerns by October" -- the key deadline for adoption
of the cap-and-trade regulation, he added.
Plaintiffs in the case challenged the plan, fearing it
would inadvertently increase air pollution in some pockets of
With carbon trade due to start in California in 2012, it
was not immediately clear if the ruling would threaten that
Air Resources Board Chairman Mary Nichols at a conference
last week dismissed fears by many market participants that the
lawsuit would delay the start of the program.
"The lawsuit is not a factor in terms of delay. It's just
part of what you have to go through to implement a program,"
In a statement on Monday the board said it would appeal the
ruling and that it would respond to the court's order, relying
on a previously written 500-page environmental analysis that it
said addressed the judge's concerns.
The judge, who directed plaintiffs to draft a formal order,
or writ of mandate, made clear that cap-and-trade rulemaking
should be put on hold but also indicated other measures in the
state's master document of climate change measures, called the
Scoping Plan, could be held up.
"We are clarifying the scope of the judge's order," the
board said, arguing that slowing down other measures in the
Scoping Plan, such as energy efficiency and clean car
standards, was at odds with the court's focus on
"A broadly worded writ puts at risk a range of efforts to
move California to a clean energy economy and improve the
environment and public health," it said.
But Alegria De La Cruz, lead attorney for the group
challenging the state's process, said that the judge clearly
wanted a real discussion of alternatives. By holding out the
possibility of slowing programs beyond cap-and-trade, it had
given her side room to negotiate with the state.
"The order gives us lots of room to play there," she said,
rebuffing Nichols' view that the suit was not a big concern.
"It's not an exercise in futility," she said by telephone.
The particular issue regards a document called a Functional
Equivalent Document (FED) prepared to assess environmental
consequences of the Scoping Plan, which sets out cap-and-trade
"In order to ensure that ARB adequately considers
alternatives to the Scoping Plan and exposes its analysis to
public scrutiny prior to implementing the measures contained
therein, the court must enjoin any further rulemaking until ARB
amends the FED in accordance with this decision," the judge
De La Cruz estimated that the process of a new analysis,
public review, state response to public comments, and adoption
of the new document could take three and a half to five
The Association of Irritated Residents, the plaintiffs in
the case, hailed the decision.
"This ruling will compel ARB to fully consider those of us
most affected by its decisions, and not just move forward in
its haste to make major polluters happy," Association President
Tom Frantz said in a statement.
The judge also rejected another challenge to cap and trade,
which was part of the same case. That challenge was
specifically related to the state's 2006 climate change law,
known as AB 32.
The Superior Court case is Association of Irritated
Residents vs. California Air Resources Board, CPF-09-509562.
(For more environmental news see our Environment blog at
(Reporting by Peter Henderson of Reuters in San Francisco and
Rory Carroll of Point Carbon in Washington; editing by Jeffrey
Benkoe and Diane Craft)