234 Cal. App. 4th 870
Cal. Ct. App.2015Background
- The California Air Resources Board (CARB) implemented a Cap-and-Trade program (2012) under the California Global Warming Solutions Act of 2006 to reduce statewide GHGs, including a limited use of offset credits (up to 8% per covered entity).
- Offsets are voluntary GHG reductions from sources not covered by the cap; CARB adopted detailed regulatory requirements and "Compliance Offset Protocols" (standards-based, with some project-specific elements) that must be used for offset eligibility and quantification.
- Statutory requirement: market-based mechanisms must ensure reductions are "real, permanent, quantifiable, verifiable, enforceable" and "in addition to any...reduction otherwise required by law or...that otherwise would occur" (section 38562(d)(2)).
- Petitioners (Our Children’s Earth Foundation et al.) challenged CARB’s protocols, arguing the standards-based performance tests allow non-additional projects (activities that "would otherwise occur") to receive credits, violating the statute.
- The trial court denied the writ, holding the Legislature delegated authority to CARB to adopt standards-based approaches and that CARB’s protocols were not arbitrary or capricious. The Court of Appeal affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether CARB exceeded statutory authority by using standards-based offset protocols that allow credits for projects that "otherwise would occur" | The statute’s phrase "any...that otherwise would occur" requires proof that each credited reduction would not otherwise happen; standards-based tests permit non-additional projects and thus violate the statute | Legislature delegated rulemaking; phrase is not self-executing and CARB may adopt workable standards/protocols to implement additionality; project-by-project certainty is impossible | CARB acted within its delegated authority; it may use standards-based protocols to implement the additionality requirement; protocols were not arbitrary or capricious |
| Whether early-action credits (pre-Act projects) violate additionality requirement | Early projects already occurring cannot be credited because they "otherwise would occur" | Statute contemplates and authorizes crediting early voluntary reductions; CARB may recognize pre-Act voluntary actions | Early-action credits permitted; statutory provisions expressly allow credit for voluntary early reductions and CARB’s program complied |
| Whether courts should substitute their judgment for CARB’s technical choices in protocol design | Court should independently evaluate each performance standard to ensure strict statutory compliance | Courts give deference to agency on technical, policy-laden rulemaking unless arbitrary or capricious | Court will independently construe statute but will not substitute its policy judgment for CARB; review of protocols is deferential and they passed that review |
| Whether "any" in statute compels absolute, proof-based additionality on each offset | "Any" means each and every reduction must be proven additional with certainty | "Any" does not eliminate delegation; absolute proof of counterfactual is unworkable, so agency may define enforceable standards | "Any" does not preclude delegated rulemaking; CARB reasonably defined additionality given impossibility of absolute counterfactual proof |
Key Cases Cited
- American Coatings Assn. v. South Coast Air Quality Management Dist., 54 Cal.4th 446 (agency interpretation deference when statute is technical, complex)
- Western States Petroleum Assn. v. Board of Equalization, 57 Cal.4th 401 (independent review of regulatory consistency with statute)
- Yamaha Corp. of America v. State Bd. Of Equalization, 19 Cal.4th 1 (deferential review of agency rulemaking unless arbitrary or capricious)
- Carrancho v. California Air Resources Board, 111 Cal.App.4th 1255 (agency rulemaking is quasi-legislative and courts should defer to technical policy choices)
- Irritated Residents v. State Air Resources Board, 206 Cal.App.4th 1487 (broad, discretionary mandates in the 2006 Act and deference to CARB’s policy judgments)
- Watkins v. County of Alameda, 177 Cal.App.4th 320 (two-prong test for regulatory validity: consistency with statute and reasonable necessity)