Trump can't weaken California's climate change carbon market, federal judge rules

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California beat President Donald Trump's efforts to water down its signature climate-change initiative, a market-based program that's designed to reduce carbon emissions.

A federal judge in Sacramento on Friday dismissed a lawsuit the Trump administration filed challenging California's cap-and-trade program, which requires hundreds of businesses to purchase or reduce their greenhouse gas emissions. The program, a centerpiece of the 2006 global warming law signed by former Gov. Arnold Schwarzenegger, has forced businesses to spend billions of dollars on the credits.

The decision marks the latest chapter in the court battles between the Trump administration and the state over a multitude of issues, including the environment and immigration. The two sides have spent much of the past two years in particular fighting over California's efforts to rein in greenhouse gases.

Friday's decision stems from the White House's lawsuit over California's cap-and-trade initiative—in particular the state's decision in 2014 to link its program with a comparable cap-and-trade market operating in the Canadian province of Quebec. The alliance allows companies in both states to sell carbon credits to each other and, California officials say, broadens the market for credits and strengthens the overall program.

The Trump administration argued that the alliance was the equivalent of California signing a treaty with a foreign government—something disallowed by the U.S. Constitution, which says foreign policy is under the federal government's jurisdiction.

In addition, federal officials said California officials are using the cap-and-trade program to defy the president's wishes on environmental matters, including his decision to withdraw the United States from the Paris climate accord in 2017.

"California's Governors have defied this clear constitutional structure," federal officials argued in court papers. "They have positioned the State in open opposition to the foreign policy of the United States on ."

U.S. District Judge William B. Shubb, however, said California hasn't exceeded its legal limits or intruded on Trump's "foreign affairs power."

The has shown no "concrete evidence that the President's power to speak and bargain effectively with other countries has actually been diminished," the judge wrote.

In a tweet, Gov. Gavin Newsom called Shubb's decision a "clear victory in an unwarranted and vindictive lawsuit against California."

The decision comes as California officials ponder the effectiveness of the cap-and-trade program.

The program revolves largely around a series of carbon-credit auctions held every three months by the California Air Resources Board, the state's air-pollution agency. In the most recent auction, barely one-third of the 57 million carbon credits were sold, the result of the plunge in demand for gasoline as the coronavirus pandemic brought economic activity to a standstill.

Each credit enables the purchaser to emit a ton of carbon pollution. The amount of available credits ratchets down with each auction, effectively forcing businesses to find ways to reduce their carbon footprint or buy extra credits on the open market. This market-based approach is designed to give individual businesses flexibility while reducing the overall volume of .

But with so many credits going unsold in the latest auction, the pressure to reduce emissions has been relaxed, at least for the time being. The Newsom administration is looking at whether other programs can do a better job of keeping the heat on businesses to reduce carbon pollution, the nonprofit news organization Cal Matters has reported.

According to Cal Matters, California Environmental Protection Agency Secretary Jared Blumenfeld has told lawmakers he would work with the Air Resources Board to consider "the extent to which the state's climate strategy should rely on the cap-and-trade program reductions relative to other approaches."


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