Environmental Justice Group Sues Over California’s New Cap-and-Trade Rules
Just days after California’s controversial overhaul of its cap-and-trade (called cap-and-invest by Governor Gavin Newsom’s office) program took effect, an environmental justice organization has filed suit (link directly to lawsuit) seeking to overturn the regulations.
On July 1, Communities for a Better Environment (CBE) filed a petition in Sacramento County Superior Court arguing that the California Air Resources Board (CARB) violated the California Environmental Quality Act (CEQA) when it approved sweeping changes to the state’s flagship climate program in May. The lawsuit asks the court to invalidate the regulations and require CARB to complete a new environmental review before adopting them again.
The lawsuit comes after months of criticism from transit advocates, affordable housing groups, environmental justice organizations, and climate activists who argued the Newsom administration’s changes shifted billions of dollars away from climate investments, mostly local programs to build affordable housing and support transit, while providing additional free emissions allowances to large industrial polluters.
The Lawsuit Focuses on Process, But Challenges the Heart of the Program
While the complaint does not argue that CARB lacks the authority to operate California’s cap-and-trade program, it contends the agency approved major changes without adequately studying their environmental impacts or giving the public a meaningful opportunity to review them.
According to the complaint, CARB made substantial revisions during the final stages of the rulemaking process, including increasing the number of free emissions allowances available to major industrial facilities such as refineries. CBE argues those changes required additional environmental review under CEQA because they could increase greenhouse gas emissions, worsen air pollution in communities already burdened by industrial facilities, and reduce revenues that currently fund transit, affordable housing, active transportation, wildfire prevention, and other climate programs.
The lawsuit also alleges that CARB failed to adequately respond to hundreds of public comments raising concerns about the environmental consequences of the changes and improperly certified its environmental review despite significant unanswered questions.
CARB has defended the changes as an effort to balance California’s climate goals with affordability during a time when gas prices are spiking in California and the world and the competitiveness of in-state manufacturers. During the board’s May meeting, Deputy Executive Officer Rajinder Sahota acknowledged the competing pressures facing the agency and attempted to absolve politicians, such as Governor Newsom who appoints twelve of the fourteen boardmembers, from blowback.
“There is no direction to us, as an agency, to maximize one trade-off versus another,” Sahota said. “What we’re trying to do is balance all of the pieces that we’re getting.”
The environmental organization is asking the court to vacate CARB’s approval of the regulations, set aside the environmental review, and require the agency to conduct a legally adequate CEQA analysis before readopting the rules.
Critics Say the Changes Will Mean More Pollution—and Less Money for Climate Solutions
Although the lawsuit is framed as a CEQA challenge, its practical implications are much broader. If successful, it could force CARB to revisit one of the most consequential climate policy decisions of the Newsom administration and reopen the debate over whether California should prioritize protecting industrial polluters or maximizing investments in emissions reductions, transit, housing, and environmental justice.
As Streetsblog reported in June, the new regulations dramatically increase the amount of emissions allowances distributed for free to industrial polluters while reducing the number sold at auction. Because auction proceeds finance many of California’s climate investments, critics warned the changes could significantly reduce funding available for public transit, affordable housing near transit, bicycle and pedestrian infrastructure, and other programs supported by the Greenhouse Gas Reduction Fund.
Environmental justice advocates also argue that giving refineries additional free allowances weakens incentives to reduce emissions and could prolong harmful pollution in neighborhoods located near industrial facilities.
“Relying on cap-and-trade alone was never going to be enough, and a cap-and-trade program that is weak on emissions reductions will not get us there,” wrote CBE Policy Director Lauren Gallagher in an essay explaining the organization’s opposition to the changes. Gallagher argued the revised regulations provide larger giveaways to major polluters while reducing resources available for clean transportation, affordable housing, and other climate investments.
Not everyone opposed the new regulations. Adam Smith, representing Southern California Edison, praised CARB’s action during the May board meeting, calling it “the most direct and substantial affordability action for electric customers this year and likely for years to come.” He said the package “strikes the right balance between affordability and stringency to keep us on track for our shared climate goals.”
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