Capitol Alert

California’s carbon market in the clear? Not so fast

Opponents of California’s “cap and trade” carbon market said Friday they will take their fight to the state Supreme Court.

The Pacific Legal Foundation, a conservative nonprofit law firm based in Sacramento, announced it will appeal the case to the Supreme Court.

The announcement came a week after the Third District Court of Appeal dismissed the group’s lawsuit by a 2-1 vote.

Cap and trade, a centerpiece of the state’s battle against climate change, forces hundreds of trucking firms, food processors and others to purchase credits in order to emit carbon and other greenhouse gases. These companies have spent a combined $4.4 billion on credits at state-run auctions since the market debuted in late 2012, according to the California Air Resources Board.

The opponents’ argument is that the auctions represent an unconstitutional tax.

New taxes can’t take effect without a two-thirds approval. The 2006 law that authorized cap and trade was passed by the Legislature on a simple majority vote.

The appeals court, however, said the auctions aren’t a form of taxation because the companies have other options and aren’t required to buy the credits.

Some market experts say the legal fight has cast a cloud on recent auctions, depressing demand for credits. That’s deprived the state of hundreds of millions of dollars in revenue for projects such as high-speed rail.

The Air Resources Board is poised to extend cap and trade for another ten years, beyond its planned 2020 expiration date, but the program could run into fresh legal challenges. SB 32, the law passed last fall that extends California’s climate change programs to 2030, also passed by a simple majority vote, and Gov. Jerry Brown has been seeking new legislation with a super-majority vote to remove any legal issues.

“To remove any cloud of perceived legal uncertainty about the continuation of cap and trade beyond 2020, we are seeking a two-thirds vote on legislation to confirm ARB’s authority,” the governor’s deputy press secretary Deborah Hoffman said last week.

Dale Kasler: 916-321-1066, @dakasler