Cap and trade seems to have a green light in California, but it may face a new legal attack from conservatives.
Jon Coupal, president of the Howard Jarvis Taxpayers Association, the main organization opposing California's climate legislation, told me today there is a "very strong possibility" of a conservative lawsuit challenging cap and trade.
This isn't what the plan's supporters had expected. On Oct. 20, when the state's Air Resources Board gave its much-anticipated final approval for the cap and trade plan to go into effect in 2013, it seemed that supporters could take a victory walk. A lawsuit by environmental justice groups against cap and trade was still winding its way through the courts but seemed fatally weakened after a federal court lifted a previous injunction.
The sleeper issue, however, is California's Proposition 26, approved by voters last year. Under Prop. 26, the state constitution now requires a two-thirds vote by both houses of the Legislature to approve any revenue increase -- even indirect fees. Late last year and early this year, business groups threatened to use Prop. 26 to block implementation of the cap and trade plan because it could be seen as effectively charging emitters a fee for their emissions. Some legal experts warned that the threat was real and dangerous.
Since then, however, conservative business groups have been silent. Are they just biding their time, or have they realized that their legal case is too weak, as environmentalists claim?
To find out, I emailed Coupal, and this was his one-line reply:
I think there is a very strong possibility of litigation over cap & trade under the new constitutional rules set forth in Prop 26.
He declined to say more. Of course, it could just be empty bluster. But maybe not. California's anti-tax conservatives are a litigious bunch, and they have notched up many court victories over the years.
The legal issues at stake are complex, as described for me by Thomas Donnelly, a leading environmental corporate attorney and partner in the San Francisco office of Jones Day. Here is his analysis:
Proposition 26 requires a two-thirds vote of the California legislature for any "change in state statute which results in any taxpayer paying a higher tax," and applies to any tax adopted after January 1, 2010. "Tax" is defined to include "any levy, charge or exaction of any kind," with various exceptions. AB 32 was adopted in 2006. A key issue, then, in any challenge to CARB's cap and trade regulations under Proposition 26, would be whether the regulations impose a "tax" (as defined by Prop 26) not authorized by AB 32. If they do, then one would argue that CARB is imposing a new "tax" not authorized by a state statute adopted before January 1, 2010, and therefore requires authorization from the California legislature.
Stay tuned. Defenders of AB32 may need to get back in the fight.
* Update: Dan Farber, law professor and chair of the Energy and Resources Group at UC Berkeley, emailed me to point out his post yesterday about the same topic on the Legal Planet blog. Here is an excerpt from his post:
A reader sent me an email from the Coalition of Energy Users trying to find plaintiffs for a challenge to AB 32 implementation. CEU claims to be a grassroots group that does not have a deep-pocket funding source, and that may be true. On the other hand, its interests are so precisely aligned with the oil and coal industries that it’s hard not to wonder a bit. (For example, they want to abolish the California air board entirely, and they are vehemently opposed to a severance tax for gas and oil, even though such taxes are common among almost all gas and oil-producing states including Texas and Louisiana.) The group is affiliated with the Tea Party and was founded by someone at the Howard Jarvis Taxpayers Association, who also worked on Prop. 23, an effort to block climate change action through the initiative process. As you may recall, that effort was largely funded by sources like the Koch brothers. If the Kochs aren’t funding CEU, they really ought to be.
Here’s an excerpt from the email to potential plaintiffs:
Warren and Pam Duffy’s southern California chapter of the Committee for a Constructive Tomorrow (CFACTSoCal) has found a legal team who seeks injured parties as potential Plaintiffs in an Anti Cap and Trade-AB32/CARB lawsuits.
CFACT will set up teleconference interviews with the attorneys to determine qualifying criteria.