The California Global Warming Solutions Act of 2006 (commonly known as AB 32) requires the reduction of statewide greenhouse gas (GHG) emissions to 1990 levels by 2020. Under AB 32 the California Air Resources Board (CARB) is primarily responsible for the  development of regulations needed to attain the targeted level of emission reductions.  In 2008, A Climate Change Scoping Plan (Scoping Plan) was adopted by CARB outlining measures to be adopted to implement AB 32.  In December of 2010 CARB adopted a market based cap and trade regulation as one of the final elements of Scoping Plan.  The cap and trade program provides for the creation, sale, and transfer of GHG emission credits as one means of reaching the GHG reduction goals of AB 32  and is scheduled to be effective on January 1, 2012 for certain facilities.

In a legal challenge to AB 32 brought by a number of environmental interest groups (Association of Irritated Residents v. CARB), a San Francisco trial court recently ruled that CARB’s environmental document supporting the adoption of the cap and trade regulations failed to comply with the California Environmental Quality Act (CEQA) due to its failure to sufficiently consider regulatory alternatives to the market based cap and trade program.  The Court has enjoined CARB from proceeding with the cap and trade program until CEQA compliance is achieved.

There are a number of uncertainties related to the ruling including:

  1. whether it prohibits implementation of all the Scoping Plan measures that have been adopted or just the cap and trade regulation;
  2. whether CARB will appeal the decision or attempt to correct the CEQA deficiencies identified by the court; and
  3. whether the ruling itself, time associated with a potential appeal, or attempt an attempt by CARB to comply with the ruling will impact the currently proposed January 1, 2012 effective date for the cap and trade program?

It is somewhat ironic that, while attempts by certain industry groups to delay implementation of AB 32 in the November 2010 election (Proposition 23) were unsuccessful, a significant delay may result from a legal challenge filed by those groups historically most supportive of  AB 32 and eager for its implementation.