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California Court Favors Fees For Polluters Who Exceed Limits Under Cap And Trade

By Carmen Heruela | Apr 09, 2017 02:08 PM EDT

The Third District Court of Appeals in Sacramento, California gave environmentalists another victory after it ruled the constitutionality of requiring polluting companies that exceed their limits to buy credits. California's business sector also argued that the conduct of the auction was never authorized under the program. The cap and trade program of the state sets limits on the amount of pollution that companies can release. The Air Resources Board administers the auctions where firms can purchase carbon emission credits.The program aims to reduce pollution in the atmosphere by providing financial incentives.

The California Chamber of Commerce, however, questioned the auction of carbon emission credits and asserted that this constitutes illegal taxation. The court's decision is expected to have significant implications for the state and the environmentalists' goal of reducing greenhouse gas emissions. Even before the court's ruling, Governor Jerry Brown already launched a campaign to extend the cap and trade program beyond 2020. California's greenhouse gas emissions were reduced by four percent from the time the program was launched in 2013 to 2015.

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California's cap and trade program are seen as the most ambitious effort to curb greenhouse gas emissions in the United States, according to ABC News. The court's ruling favoring the auction is not expected to deter further challenges to the program. However, it could again increase the demand for pollution permits, which provided millions of dollars annually to the state's coffers.

The Court's ruling hopefully settled the contention of the California Chamber of Commerce that the auction is unauthorized taxation, according to the National Law Review As the California Air Resources Board (CARB) said, the auction fees are more like regulatory fees but not taxes at all. The court said there is actually no tax imposition because companies are not forced to buy the credits. And in case they bought the credits, these can be sold or traded.

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