Recently, the San Francisco Superior Court sweepingly placed “on hold” the five-year-old climate change program because, effectively, a cap-and-trade approach might not be “green” enough. Environmental groups had challenged an early-stage planning document, the Scoping Plan, adopted by the Air Resources Board two years ago, on the grounds that ARB failed to properly explain the costs and benefits of alternatives to cap-and-trade. As a result, ARB is enjoined from further implementation of the cap-and-trade program under AB32 until ARB completes a more comprehensive review. This review would examine the cost-effectiveness of cap-and-trade against, among other options, a carbon tax and source-specific regulation of greenhouse gas emissions.
ARB should have a fairly easy task of explaining the benefits of cap-and-trade over a carbon tax or source-specific regulation. When compared with carbon taxes or source-specific regulation, cap-and-trade would normally be superior on the two criteria that matter — effectiveness and cost. To comply with the order, ARB should be able to expand its explanation of the relative benefits of cap-and-trade on the basis of analyses it has already completed.
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