California Trial Court Upholds CARB Authority to Use Offsets in Cap-and-Trade Program

On January 25, 2013, a California Superior Court issued a ruling allowing the California Air Resources Board (ARB) to use carbon offset projects as a compliance tool under the state’s economy-wide greenhouse gas cap-and-trade program.

At issue in the case are four protocols the California ARB approved in October 2011 that give cap-and-trade program participants the option of meeting a portion of their emissions reduction obligations by investing in projects that reduce methane from livestock operations, destroy refrigerants with high-global warming potential, and create carbon sinks by planting new forests through two separate protocols. 

The case was brought by the Citizens Climate Lobby, which argued that the offset projects undercut the goals of the state's Global Warming Solutions Act of 2006 (A.B. 32) because they do not ensure the emissions reductions would be “additional” to those otherwise achieved under the state's climate policies.  The court rejected this argument, holding that A.B. 32 gives the California ARB “vast discretion” to develop regulations to curb greenhouse gas emissions, and that evidence in the administrative record shows the California ARB's use of the standards-based approach in developing the carbon offset protocols is consistent with the law.