Tuesday, March 29, 2011

A Historical Perspective on the AB32 Lawsuit

The folks at Legal Planet have done a great job discussing the California Superior Court decision, Association of Irritated Residents, et al. v.  California Air Resources Board (available here), which enjoins further AB32 rulemaking and implementation until the Air Resources Board adequately considers alternatives to cap-and-trade.

I agree very much with Sean Hecht that the environmental justice groups’ challenge is an expression of their values, and more specifically of their concerns about both the efficacy and the equity of cap-and- trade as a regulatory instrument.  The groups that filed this lawsuit, particularly Communities for a Better Environment (CBE), also strongly opposed the Regional Clean Air Incentives Market (RECLAIM) program, the cap-and-trade program instituted by the South Coast Air Quality Management District (SCAQMD) in 1994 to control the emissions of NOx and SOx from utilities and industrial facilities in the LA air district.  As it turns out, their concerns were well-founded.

An important question early on in the RECLAIM rulemaking process was whether the program would achieve emissions reductions equivalent to those that would have been achieved under the direct regulatory approach that RECLAIM subsumed and replaced.  Indeed, California Health and Safety Code Section 39616(c)(1) legally required RECLAIM to achieve such equivalence.

As CBE predicted in its comments on the draft RECLAIM rules in 1993, the RECLAIM program failed the equivalence test.  SCAQMD found ways to claim RECLAIM was equivalent, but I think there was good lawsuit material there (where were you, CBE?).  Allowances in the program were greatly overallocated, and only minimal emissions reductions were achieved in the program’s first seven years.  Emissions weren’t reduced to manifestly feasible levels until RECLAIM experienced market failure with the California Energy Crisis in 2001 and SCAQMD pulled large polluters out of the program and ordered them to install pollution control equipment.

In the AB32 lawsuit, CBE argued that the court should find the AB32 Scoping Plan illegal on the basis that it hadn't shown that a cap-and-trade approach would be as effective in reducing emissions as direct regulation. However, the law was not as clear on this point as it had been in RECLAIM, and the court rejected this and other substantive challenges to ARB’s implementation of AB32.  Rather, CBE prevailed in its procedural claim that ARB had not adequately studied alternatives to cap-and-trade under CEQA.

This history is nonetheless relevant.  It shows that CBE and its allies have been watchful, serious and consistent in their concern about the efficacy and equity of cap and trade.  And it shows that there are good historical reasons for demanding that ARB closely examine alternatives to a cap-and-trade approach.  I, for one, would like to see a careful study of how the 1990s emissions reduction trajectory in the LA air district compared to the 1990s emissions reduction trajectory in all the other California air districts that didn’t adopt a cap and trade approach. I suspect that such a study would find that significant (negative) environmental effects resulted from SCAQMD's decision to adopt RECLAIM in the early 1990s.

- Lesley McAllister


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