Court ruling supports California carbon market

Last week the California Court of Appeals upheld a previous verdict granting the California Air Resources Board (ARB) authority to regulate state emissions through economic means, including a state-wide carbon market.

In a unanimous decision amongst the three presiding judges, the ARB was deemed to be acting in accordance with California’s AB 32 climate law that seeks to reduce state emissions to 1990 levels by 2020.

Plaintiffs in the case originally argued that the ARB overstepped its authority when it began implementing the carbon market in 2011, stating that alternative methods to emission reductions had not been thoroughly investigated.

However, after learning of the appeal, the ARB provided an extensive document that included testimonials from several esteemed professionals who supported the work of the ARB, as well as a number of market simulations that analyzed the effect of different options, including a carbon tax.

The results of that intensive study showed that a carbon market was the most efficient means to reduce emissions while allowing the free market to determine an accurate carbon price.

In response to the court ruling, the price for California carbon allowances shot up to over $17 a piece. The California carbon market is expected to generate over $1 billion through the sale of allowances.

Additionally, regulated emitters can meet up to 8% of their compliance obligation by purchasing California carbon offsets (CCO) certified by the ARB. This could create demand for over 10 million credits in 2013 alone, despite only four carbon protocols being approved for CCO development.