offset credits – GHG Accounting

Manitoba Releases Draft Framework for Output-based Carbon Pricing System for Large Industrial Emitters

In October 2017, the Manitoba government released its Made-in-Manitoba Climate and Green Plan (the Plan) and announced that it would be introducing a flat carbon tax of $25 per tonne of carbon dioxide equivalent (CO₂e). One of the commitments set out by the Manitoba government in the Plan was the development an output-based pricing system (OBPS) for large industrial emitters. In July 2018, Manitoba fulfilled this commitment by releasing its Draft Regulatory Framework for a Made-in-Manitoba Output-based Pricing System (the Draft Framework) for public consultation.

The release of the Draft Framework follows the introduction of Bill 16 into the provincial legislature in March 2018. Bill 16, also known as The Climate and Green Plan Implementation Act – is expected to come into law in November 2018. Bill 16 provides the legislative authority for the Manitoba government to implement the Plan, along with the fiscal tools needed to introduce a carbon price in the province. Bill 16 also establishes the Industrial Greenhouse Gas Emissions Control and Reporting Act, which provides the government with the authority to develop an OBPS for industrial facilities competing in emissions intensive, trade exposed (EITE) sectors of the economy. Manitoba’s proposed OBPS is described in further detail below.

Overview of Manitoba’s Proposed OBPS

The Draft Framework describes the key elements to be considered in the design and implementation of the OBPS. Manitoba’s proposed OBPS is separate from the proposed federal OBPS. Manitoba’s OBPS will apply to large industrial emitters in the province, specifically those facilities with emissions of 50,000 tonnes or more of CO₂e. At the moment, there are six large industrial emitters in Manitoba (representing approximately 6% of the province’s total emissions): Koch Fertilizer Canada, TransCanada Pipelines, Graymont, Canadian Kraft Papers, Husky Oil and Vale.

Manitoba plans to establish emission limits for covered facilities in the form of emissions intensity performance standards, or EIPS, which are expressed in tonnes of carbon dioxide equivalent (tCO2e). Covered facilities with emissions above their established limit will be required to pay the $25 per tCO2e emitted beyond their limit or meet their compliance obligations through another approved compliance option (e.g. emission offset credits). Covered facilities which emit less than their established emissions limit will be able to bank or sell emissions to other covered facilities up to their limit at a compliance price of $25 per tCO2e.

Manitoba’s OBPS will cover emissions from the following on-site sources: stationary combustion, on-site transportation, industrial processes and product use, waste and wastewater, flaring, and some venting and fugitive sources.

The Manitoba government is considering three options for setting EIPS:

Facility-specific Standards – an EIPS is set at the individual facility level based on a facility’s historical GHG performance.
Sector-level Standards – an EIPS is set at a designated percentage below the production-weighted average emissions intensity of similar facilities within the same sector.
Best-in-class Standards – an EIPS is set at the emissions intensity of the best-performing facility within a sector, globally, nationally, regionally, or provincially.

The Draft Framework notes that there are industrial facilities in the province with multiple product/activity lines that may warrant establishing multiple emissions-intensity performance standards (one for each product/activity). The emissions limit for these facilities will be based on the sum of the limits for each product/activity. A covered facility’s compliance obligation will be based on the following formula:

Compliance Obligation (tCO2e) = Facility’s Total Emissions – Facility’s Emissions Limit

In order to facilitate continuous improvement in GHG performance, the stringency of EIPS will increase over time. It is proposed that each EIPS be subject to an annual 2% declining cap factor. The declining cap factor would apply to all emissions included in the emissions intensity standard, with the exception of industrial process emissions.

Covered industrial facilities will receive an OBPS registration certificate that enables them to purchase carbon tax-free natural gas and solid fuels and receive a full rebate on the carbon tax paid throughout the calendar year on all other fuel types. The first compliance period would begin in January 2019 and reporting would be required as of January 1, 2019. However, performance standards would not be set until June 2019 given the time constraints for implementation.

For compliance purposes, covered facilities must compensate for excess emissions by: (a) remitting an emissions performance credit at a rate of one credit for each tonne of greenhouse gas emissions in excess of the limit; (b) paying a levy at a rate of $25 for each tonne of greenhouse gas emissions in excess of the limit; or (c) a combination of both (a) and (b). The Manitoba government will issue performance credits to facilities for each tCO₂e below their emissions limit. Under the OBPS, the following types of emission credits will be available:

Performance Credits – issued to an industrial operation whose emissions in a compliance period are below the limit that applies in that period.
Manitoba Offset Credits – under the regulations, an emissions offset credit system may be established for projects in Manitoba that reduce emissions or remove emissions from the atmosphere.
Agreements with Other Jurisdictions – the minister may enter an agreement respecting recognition of credits issued by the other jurisdiction.

The Manitoba government plans to establish an emissions registry to track the issuance, trading, and use of emissions performance credits. Each registered facility will be required to create an account with the registry once it becomes available.

In addition, registered facilities will be required to quantify emissions using a prescribed methodology. Consideration is being given to requiring third-party review of facility reports verified by a certified third-party accredited to ISO 14065 by the Standards Council of Canada or the American National Standards Institute.

The Manitoba government is also considering an opt-in provision for industrial facilities that do not meet the 50,000 tCO₂e eligibility threshold, but may experience competitiveness pressures due to the carbon tax. Facilities that meet both of the following criteria would be eligible to opt-in:

Have annual emissions between 10,000 and 50,000 tCO₂
Compete in an EITE sector/sub-sector of the economy.

The Manitoba government will hold workshop and information sessions for stakeholders throughout fall 2018, and will issue registration certificates to covered facilities in December 2018. The OBPS would be implemented in January 2019, followed by the establishment of EIPS in June 2019. The opt-in for qualified entities would commence in January 2020.

The Manitoba government has invited interested parties to provide written comments/feedback on the proposed regulatory framework to Manitoba Sustainable Development by September 30, 2018. Comments may be submitted in writing to the following address or email:

Sustainable Development Climate Change and Energy Branch

12-155 Carlton St., Winnipeg, MB, R3C 5R9

Email: ccinfo@gov.mb.ca

Climate Policy Innovation: California Considers a New Approach Post-2020 – The End of the Offsets System?

With the introduction of Senate Bill SB 775 (California Global Warming Solutions Act of 2006: Market-based Compliance Mechanisms) into the California Senate on May 2, 2017, California is innovating on climate policy once again. Although it has a long journey to complete before becoming law, SB 775 is significant because it would completely revamp California’s cap and trade system once the current program ends in 2020. Under SB 775, the key features of California’s proposed new system are as follows:

The cap and trade system would be completely overhauled with a new program commencing on January 1, 2021; no allowances and offsets from the current system would be transferred over.
All allowances under the proposed new program would be auctioned, meaning that no allowances will be allocated for free. Further, no offsets will be permitted for use as a compliance mechanism.
A price collar would be established in 2021, with the price floor starting at US $20 and a price ceiling of US $30 (the initial auction price would be set at US $30 per allowance). The price floor would rise at $5 per year plus inflation; while the price ceiling would rise at US $10 per year plus inflation. The proposed program is designed to operate in perpetuity, so in the absence of amendments to the program, the price ceiling could exceed US $300 by 2050.
A broad revenue structure would be established to allocate revenue into three programs: (1) California Climate Dividend Program, which will rebate revenue on a per-capita basis; (2) public infrastructure investments and investments in disadvantaged communities; and (3) climate and clean energy research and development.
The new cap-and-trade program will not link to any other jurisdiction until that jurisdiction has a minimum carbon price that is equal to or greater than California’s. Also, the Governor must be satisfied that the linkage will not adversely impact California dividends.
The proposed cap-and-trade program would impose a border adjustment tax on imports based on their carbon intensity, which would be administered by a newly created Economic Competitiveness Assurance Program. The border adjustment tax would seek to ensure that in-state industry is not unduly impacted by California’s carbon pricing regime. In the event that a border adjustment tax is reduced or eliminated following a legal decision, SB 775 provides a safety net for California businesses in the event the border adjustment tax is reduced or eliminated following a legal challenge. In particular, free allowances, would be made available to eligible companies for the purpose of maintaining economic parity between producers of carbon intensive goods that are subject to the cap and trade system and those who produce or sell similar products that are not.

The introduction of SB 775 comes on the heels of Bill SB 584, which was introduced in February 2017 and calls for 100% of the state’s electricity to come from renewable sources by 2045. Bill SB 32, which was passed in 2016, establishes an ambitious emissions reduction target for 2030 – i.e. beyond the current emissions reduction target of returning to 1990 emission levels by 2020, SB 32 mandates a reduction of an additional 40% in emissions by 2030.

The passage of SB 775 in its current form will no doubt have implications for the existing cap and trade programs in Québec and Ontario. Since 2014, California’s cap and trade program has been linked to Québec’s emissions trading system and Ontario is expected to link to both California and Québec’s cap-and-trade programs in 2018. Since any jurisdiction looking to link with California’s program from post-2020 would first need to match the state’s level of carbon pricing, Québec and Ontario may have limited incentive to link to California from 2021, since California’s minimum carbon price in 2021 will already be close to or exceed the carbon pricing requirements of the Canadian federal government (starting in 2018, provinces and territories are expected to implement a carbon price of CAD $10, which will increase by $10 per year until it reaches CAD $50 in 2022). SB 775 is now undergoing review by the Committee on Environmental Quality, after which it will be sent to the state Senate and then on to the state Assembly, before it is sent back fro reconciliation. California Governor Jerry Brown has asked for reauthorization of the cap and trade program by July 2017.

BC Restructures GHG Emissions Regulatory Framework in Light of LNG Projects

On October 20, 2014, Environment Minister Mary Polak announced the first part of a restructuring of BC’s GHG emissions regulatory framework with the release of Bill 2, also known as the Greenhouse Gas Industrial Reporting and Control Act. This piece of legislation will replace the Greenhouse Gas Reduction (Cap and Trade) Act that came into force on May 29, 2008. The restructuring will continue with the release of the relevant Regulations under the new Act once it is given Royal Assent and comes into force. These regulations will include a new GHG Reporting Regulation and a new Emission Offset Regulation. It is expected that the reporting thresholds in the new GHG Reporting Regulation and the resulting obligations thereunder will remain the same. Tim Lesiuk, Executive Director and Chief Negotiator at Climate Action Secretariat, emphasized in a technical briefing the importance and responsibility of companies assuming to be below the lowest reporting threshold of 10,000 t CO2e annually (called non-reporting entities), to also monitor and document their GHG emissions in order to mitigate the risk of regulatory non-compliance and provide proof of their status as a non-reporting entity in case of an inspection.
A new Emission Offset Regulation is expected to offer an independent offset certification process from the BC Government’s Carbon Neutral purchase program. This will be achieved through a new certification and registry system. The BC Government’s existing Carbon Neutral purchase program conducted by the Climate Investment Branch will continue, but they will source their offsets from the new certification and registry system. Existing offset purchase contracts are expected to be grandfathered into the new system.
The functional new aspect in Bill 2 is the introduction of a new carbon intensity performance requirement. This carbon intensity performance target, called Regulated Operations’ Emission Limits in the Act is an additional requirement beyond the reporting obligation that only applies to industries that are listed in the Schedule of Regulated Operations and Emission Limits in the Act.
The only two listed industries so far are coal-based electricity generation operation with a limit of 0 tonnes carbon dioxide equivalent emissions and liquefied natural gas operations with a limit of 0.16 carbon dioxide equivalent tonnes for each tonne of liquefied natural gas produced. However, additional industries may be added and the BC Government has indicated that it will be announcing climate change measures in other sectors going forward.
The emission target carbon intensity performance quantification is limited to the facility level and therefore does not include any upstream or downstream emissions outside of the facility boundary. In order to meet their obligations, regulated entities with prescribed emission limits will have several compliance mechanisms available to them. In particular, they can:
• improve energy efficiency or increase the use of clean electricity through facility design;
• acquire emissions offsets by investing in BC-based emission reduction projects at market prices; or
• contribute to a technology fund at a rate of $25 per tonne of CO2e.

Besides setting up a new technology fund, Bill 2 also requires the establishment of a registry for the purposes of the Act. This registry will be the only place where offset units and earned credits, resulting from performance below the emissions limit, are tracked. This is also the only place where transactions under the Act can be executed for compliance purposes.
If you have any questions about Bill 2 and the proposed changes to the BC emission offset regime or their potential impacts on your operations or offset project, please contact GHG Accounting Services.

UN Climate Talks Conclude with an Agreement on the “Doha Climate Gateway”

The United Nations’ annual global climate negotiations – or Conference of the Parties (COP) 18 – took place in the City of Doha, Qatar from November 26 to December 8, 2012. As the country with the highest per capita emissions in the world at 50 tonnes per person, Qatar was an interesting choice of venue. Negotiations ran a day over schedule, but concluded with an agreement on the “Doha Climate Gateway”. According to the United Nations Framework Convention on Climate Change, the agreement marks the beginning of discussions on a legally binding international agreement to cap emissions at scientifically acceptable levels (restricting warming to a two degree Celsius increase in global average temperature).

At COP 17 in Durban, South Africa, the parties agreed to create a treaty by 2015 which would come into force by 2020. The objectives at COP 18 were to move the collective agreement forward at an appropriate rate to meet the 2015 deadline. Following the talks, the parties agreed to the following:

1. The Kyoto Protocol was officially extended for a second commitment period from January 1, 2013 to 2020. A number of previous signatories, including Canada, have withdrawn from the Kyoto Protocol, which now covers only 15% of the world’s emissions. Its primary participants are the European Union, Norway and Australia.

2. The final text of the agreement “encourages” developed nations to pay $10 billion a year to 2020 to help developing nations access clean energy and implement climate change adaptation measures. The agreement is not legally binding and does not ascribe blame to developed nations for “loss or damages” experienced as a result of events related to climate change.

Developing countries and observers expressed disappointment with the lack of ambition in outcomes in terms of mitigation and finance by developed countries, but most agreed that the conference had paved the way for a new phase of focusing on the implementation of the outcomes from negotiations under the ad hoc working groups.

An important achievement outside of COP was that 25 members of the Climate and Clean Air Coalition agreed to significantly reduce emissions of short-lived pollutants, including soot, methane and ozone, and excluding carbon dioxide. It is estimated that this agreement could reduce the expected temperature increase by 0.5 degrees Celsius by 2050, a fraction of the four to six degrees forecast by the end of the century if we stay on the current emissions path.

COP 19 will be hosted by Poland in 2013.

California Completes Successful Trial Auction for Cap-and-Trade Program

In advance of the November 2012 launch of California’s carbon trading scheme, the state’s Air Resources Board (ARB) completed in August a successful trial of its carbon allowance auction system, where companies pretended to bid for carbon allowances in order to test out the system ahead of its official launch on November 14, 2012. According to ARB officials, the trial auction ran smoothly, with approximately 150 companies submitting bids during the simulation.

Following the roll out of the platform in November, more than 400 companies will be able to buy and sell carbon credits through quarterly auctions. From 2013, a statewide cap on carbon emissions will be imposed. This cap will be gradually lowered year-on-year, thus providing companies with a financial incentive to curb their greenhouse gas emissions.

Under the planned scheme, companies will need to hold carbon allowances to cover their own emissions and they will be required to purchase additional allowances if they exceed their cap. In the first year of the scheme, the ARB plans to give away the vast majority of credits and auction only 10% in order to put a price on carbon. However, the amount of free carbon allowances will be reduced each year so that by 2020, 50% of allowances will be auctioned, providing a clear price signal for firms to invest in low emission technologies.

China Announces Carbon Trading Pilot Scheme

On July 17, 2011, China’s official state news agency, Xinhua, reported that the Chinese government is planning to introduce a carbon trading pilot scheme as part of the country’s measures aimed at reducing emissions from energy-intensive industries. The pilot scheme would be introduced with a view to eventually establishing a national carbon market. While no specifics were given on how and when the schemes would be implemented, Chinese officials have indicated previously that a pilot scheme would be introduced in a handful of major cities (including Guangdong, Hubei, Beijing, Shanghai, Tianjin and Chongqing) by 2013 and then expanded nationally in 2015.

Xinhua quoted Xie Zhenhua, vice-minister of China’s National Development and Reform Commission, as saying the scheme would result in more punitive electricity tariffs being imposed on energy-intensive industries in an attempt to encourage them to enhance their efficiency. The China Daily newspaper also reported comments from Xie suggesting that a new wave of carbon regulations would be introduced with the carbon trading pilot scheme. These regulations would be geared towards accelerating the development of a more standardized approach to energy efficiency and introducing tighter regulations on labeling low-carbon products. Furthermore, Xie said that the Chinese government would introduce further incentives for companies producing energy-efficient products and business models.

This move will not only provide an extra tool for China to achieve its Copenhagen commitment to reduce carbon emissions relative to economic growth by 40-45% below 2005 levels by 2020, but a Chinese carbon market could represent a major boost to the global carbon market.

Study finds that cap-and-trade more likely to trigger clean tech adoption than carbon tax

A study by Professor Yihsu Chen at the University of California Merced has found that a cap-and-trade system is more likely than a carbon tax system to trigger the adoption of clean energy technologies. The study, which was coauthored by Chung-Li Tseng of the University of New South Wales in Australia and that is published in the Energy Journal Volume 32, Number 3, 2011 (a quarterly journal of the International Association for Energy Economics) also found that the volatile pricing of a cap-and-trade system could lead to earlier adoption of clean technology by firms looking to hedge against carbon cost risks.

The study used economic models based on a framework of real options to determine the optimal timing for a coal-burning firm to introduce clean technologies using the two most commonly considered policies: (1) cap-and-trade, in which carbon emissions are capped and low-emission firms can sell excess permits to high-emission firms; and (2) carbon taxes, which employ a fixed monetary penalty for per-unit carbon emissions.

According to Professor Chen, “…cap-and-trade offers ‘carrots’ while taxes offer ‘sticks’. Cap-and-trade induces firms to explore profit opportunities, while taxes simply impose penalties to turn clean technology into a less costly option.”

For the study, researchers considered the scenario of a small firm that owns a coal-fired power plant and is obliged to supply power to its customers. They compared cap-and-trade and carbon tax models in determining when the firm would choose to add a natural gas power plant – a relatively clean energy resource – in order to meet its energy demands while maximizing its long-term profits. The study found that the cap-and-trade model triggered the adoption of clean energy technology at a lower overall carbon price than a tax policy did. Further, the study found that the volatility of non-fixed permit prices was the key difference that led the firm to add a natural gas plant earlier than it would have under a more predictable tax system. Professor Chen said that: “Based on our study, mechanisms designed to reduce cap-and-trade permit prices or suppress price volatility — which have been implemented in existing cap-and-trade programs like the Regional Greenhouse Gas Initiative — are likely to delay clean technology investments.”

California to delay carbon trading program to 2013, but targets remain the same

On June 29, 2011, chairwoman of California’s Air Resources Board (CARB), Mary Nichols, announced that the state will delay enforcement of California’s cap-and-trade program until 2013. The announcement was made at a hearing on the status of California’s cap-and-trade system, which had been called to explore the implications of a law suit brought by environmental justice groups advocating policies other than cap-and-trade to reduce greenhouse gas emissions. In that law suit, a judge ruled in March that CARB had not sufficiently analyzed alternatives to cap-and-trade as required under the state’s Environmental Quality Act. CARB has appealed the decision and an appeals court ruled recently that officials could continue working on cap-and-trade regulations pending the court’s decision. Ms. Nichols indicated that the law suit was not a deciding factor in her decision to delay the first carbon trading program in the U.S.

The delay in the cap-and-trade program, which was originally scheduled to come into force on January 1, 2012, was proposed because of the need for “all necessary elements to be in place and fully functional”. In particular, Ms. Nichols cited the need to protect the cap-and-trade system from potential market manipulation. The decision came after Ms. Nichols conferred with the state attorney general’s office as well as experts on California’s ill-fated foray into deregulated electricity sales which led to widespread fraud and rolling blackouts in 2000 and 2001. However, Ms. Nichols said that the postponement would not affect the stringency of the program or the amount of greenhouse gas reductions required to be made by industries. Under the cap-and-trade program, 600 industrial facilities (including cement manufacturers, power plants and oil refineries) would be required to cap their emissions in 2012, with that limit gradually decreasing over eight years. The one-year delay will enable CARB to test the system and carry out simulation models.

Ms. Nichols said that quarterly auctions of emissions allowances that each regulated emitter must turn in would begin in the second half of 2012, rather than February 2012 as originally planned. Entities emitting more than 25,000 metric tons of carbon dioxide equivalent per year will begin trading credits at the end of 2012 to cover their emission reduction obligations for 2012 and later. Hence, the first three-year compliance period, which originally covered the years 2012 to 2014, will be shortened to two years. CARB has indicated that it will release draft regulations covering allowance distribution and details on offset protocols within the next two weeks. In addition, CARB has said that it is still on track to finish its cap-and-trade regulations by the end of October 2011.

It is likely that BC and Québec, California’s anticipated carbon trading partners, will follow California’s lead and delay their carbon markets until 2013 as well.

California & EU Plan to Link Emissions Trading Markets

Europe’s commissioner for climate action, Connie Hedegaard, has confirmed plans to link the EU emissions trading scheme (ETS) with California’s carbon market which is scheduled to start trading on January 1, 2012. On April 5, 2011, Hedegaard met with California’s governor, Jerry Brown, and Mary Nicholls, chair of the California Air Resources Board, in Sacramento to discuss how the parties could cooperate to join together the world’s largest carbon market with what will be the world’s second largest carbon market.

Hedegaard said: “We told Governor Brown that we would very much like to co-operate with them so that no matter how California constructs their scheme, it is linkable to the way we do things in Europe. It doesn’t have to be identical, just compatible.”

According to Point Carbon, the estimated value of transactions on the EU ETS was US $103 billion in 2010 and California’s cap-and-trade program could be worth US $10 billion by 2016.

While the EU ETS has been fraught with problems including over-allocation of allowances and allegedly fraudulent transactions worth US $7 billion, Hedegaard said schemes in other countries should learn from the EU’s example. Hedegaard also suggested that a successful carbon market in California could pave the way to a national US scheme in the future: “If the biggest American state, and 8th largest economy joins the growing crop of emissions trading schemes, it could break the ice in this field in the United States.” (F. Carus, The Guardian, April 7, 2011).

Implementation of California’s Cap & Trade Program Faces Potential Delay after Court Ruling

In a decision issued on March 18, 2011, a California Superior Court judge threw up a roadblock to the implementation of California’s cap-and-trade program by suspending the implementation of A.B. 32, the state’s landmark climate change law on the grounds that the California Air Resources Board (CARB) failed to properly consider alternatives to a cap-and-trade system. While the Court upheld the validity of CARB’s Scoping Plan for implementing A.B. 32, thus saving CARB from having to revise the Scoping Plan, it found flaws with CARB’s environmental review of the Scoping Plan under the California Environmental Quality Act. As a result, not only has the proposed cap-and-trade program been put on hold, but at risk are other elements of the Scoping Plan, including the state’s low-carbon fuel standard and a 33% renewable portfolio standard for electricity by 2020. In his ruling, Judge Ernest Goldsmith of San Francisco Superior Court said that the CARB “seeks to create a fait accompli by premature establishment of a cap-and-trade program before alternatives can be exposed to public comment and properly evaluated.”

The ruling by Judge Goldsmith does not prohibit the CARB from adopting cap-and-trade or require the delay of the scheduled start of date of January 1, 2012, but Judge Goldsmith said that CARB must first analyze other options (such as a carbon tax) and explain why it did not choose such options. Given the tight timeline this year for finalizing the details of California’s climate change plan, the ruling represents a potentially significant hurdle in the timely implementation of the state’s greenhouse gas emission reduction initiatives. The CARB’s spokesperson, Stanley Young, expressed dismay at the scope of the ruling, which requires the board to conduct an environmental review and invite public comment before taking further steps to implement the law. Mr. Young has indicated that the CARB will appeal the decision, which could result in pushing back the cap-and-trade program’s January 1, 2012 start date. An alternative is for the CARB to seek a stay on the ruling that will allow it to implement the climate policies as planned until a final verdict is issued. Also, the CARB could complete the necessary analyses as quickly as possible, but the results of this approach would be uncertain. For example, if the CARB is unable to satisfy the court’s concerns by October 2011 – which is the key deadline for adopting cap-and-trade regulations – this would most likely put the January 1, 2012 start date at risk. If California’s cap-and-trade program is delayed, it is likely that other WCI jurisdictions such as B.C., Ontario and Québec, will also delay the implementation of their cap-and-trade programs until such time as California begins trading.

A.B. 32 was passed in 2006 and requires the state to reduce greenhouse gas emissions to 1990 levels by 2020. The legal challenge to California’s cap-and-trade program was brought by environmental justice groups (the Association of Irritated Residents and other groups) that consider the plan too weak. In particular, they argued that the cap-and-trade program would result in increased pollutants in poor and non-white communities. More mainstream environmental groups, however, have supported cap-and-trade and stayed out of the legal action.

The next likely step is that a Writ of Mandate will be filed within 10 days of the March 18 decision. The Writ is the plaintiffs’ interpretation of the decision and will include their preferred remedies. The judge will then decide on the final remedy. Any appeal to that decision would have to be filed within 60 days from the date the decision was entered.

At this stage, it is unclear what the court-ordered remedy will consist of and whether it will affect all work on measures to reduce greenhouse gas pollution – observers indicate that it most likely it will not. Following the decision, the Environmental Defense Fund issued a conciliatory statement that perhaps best captures the intent of the parties: “It is clear from examining arguments of both parties before the Court that CARB and the environmental justice groups bringing the action against the State are committed to improving California’s environment and fighting climate change and do not intend to bring AB 32 work to a halt.” Stay tuned as this story evolves.