LOS ANGELES — California’s Chamber of Commerce has asked the state Supreme Court to review a ruling by an appeals court that found the state’s cap and trade auction is not an unconstitutional tax.

The state chamber and Morning Star Packing Co. filed a suit against the state’s Air Resources Board arguing that the auction portion of the state’s cap-and-trade program is an illegal tax.

Cap-and-trade requires polluters to reduce their greenhouse gas emissions or pay for carbon emission allowances at auction.

“While CalChamber remains a strong supporter of a cap-and-trade program to reduce greenhouse gases, it is clear that revenues generated by the California Air Resources Board’s AB 32 implementation program are legally proceeds of a tax that required legislative authorization with a 2/3 majority vote,” said California Chamber Spokeswoman Denise Davis.

In a 2-1 opinion on April 4, the appeals court ruled the auction is not an illegal tax.

California's cap-and-trade revenues help fund its high-speed rail project.
California's cap-and-trade revenues help fund its high-speed rail project. California High-Speed Rail Authority

The Legislature has appropriated $3.4 billion from the program to state agencies to date, according to the Air Resources Board’s annual report on the program.

California lawmakers passed AB32, the state's cap-and-trade law in 2006, in order to lower greenhouse gas emissions in California by 2020 to 1990 levels.

The regulation places a cap on greenhouse gas emissions from companies responsible for 85% of the state's emissions. The companies are permitted to sell or trade the unused portion of their allowances to other companies that are struggling to comply.

Brown included a $2.2 billion cap–and–trade expenditure plan in his 2017-18 budget proposal.

Consistent with current law, 60% or $900 million of projected 2017‑18 revenue would be continuously appropriated, according to a Legislative Analysts Office report from February. Under the Governor’s proposal, the remaining $1.3 billion in proposed discretionary spending would be spent only after the Legislature enacted—with a two‑thirds urgency vote—new legislation extending the ARB’s authority to operate a cap‑and‑trade program beyond 2020, according to a Legislative Analyst’s Office report from February.

“In addition to the continuously appropriated programs, the budget would provide $500 million in auction revenues to support the Governor’s transportation funding package,” the report said. “The remaining $755 million would be allocated for other categories of activities—rather than provided to specific departments and programs—designed to reduce GHG emissions.”

The programs that receive money in this year’s budget under the “continuously appropriated” category include $375 million for high speed rail, $300 million for affordable housing and sustainable projects ant $150 million for local transit projects.

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