Environment Forum

Passage of little-known initiative may disrupt California climate plan

By Rory Carroll
November 8, 2010

While California’s election results offered plenty for state environmentalists to cheer, the passage of a so-called “stealth” ballot initiative could undermine its proposed carbon market.

Last Tuesday, voters rejected Proposition 23, which sought to halt California’s landmark environmental law, AB 32, which mandates the state reduce its greenhouse gas emissions to 1990 levels by 2020. They also elected climate hawk and AB 32 champion Jerry Brown governor.

But with little fanfare, voters also approved Proposition 26 by a margin of 52.8% to 47.2%. Proposition 26, officially called the “Stop the Hidden Taxes Initiative,” requires two-thirds of legislators to approve fee increases, as opposed to just a simple majority – a difficult political hurdle given the makeup of the state legislature.

In the run-up to the election, not a single public opinion poll was conducted on Proposition 26, and Brown never took a position on the measure. The campaign backing Proposition 26 claimed during the campaign that it was not aimed at disarming the state’s environmental laws.

“Proposition 26 will not diminish the ability of state regulatory agencies to implement and enforce environmental laws in any way,” said Maureen Gorsen, a spokeswoman with the Yes on 26 campaign. But its outspent opponents weren’t buying it then, and they aren’t buying it now. They question why oil giants like Exxon Mobil, Chevron, and Conoco-Philips would funnel millions into the campaign to pass Proposition 26 if not to cripple the state’s environmental law.

Jon Costantino, a senior advisor with law firm Manatt, Phelps & Phillips in Sacramento, said the initiative could now threaten the California Air Resources Board’s (Carb) ability to collect the roughly $30 million a year in administrative fees it uses to implement AB 32 down the road. Carb is responsible for designing the plan to achieve the AB 32 goal.

“I can’t see the Republicans voting for a global warming fee in California,” he said after the election. Another threat to the program depends on whether the sale of carbon allowances in the proposed cap-and-trade system will need the approval of two-thirds of the legislature. If so, that could create a major obstacle when the time comes for the program’s first allowance auction, currently set for early 2012.

“This is going to be litigated intensely,” Costantino said. “If it is found to be a tax, then that would be a major roadblock for the program.”

In draft regulations released last week, Carb spelled out a system where most – but not all – of the cap-and-trade system’s allowances would be given away to emitters. The draft regulations are open for a 45-day public comment period and are expected to be voted on at Carb’s board meeting on December 16-17. Costantino, a former climate change planning manager at Carb, said regulators may want to tweak the program in the next 45 days so it doesn’t run afoul of Proposition 26.

Carb officials, meanwhile, were defiant in the wake of the vote, saying it would not change their process.

“We believe Proposition 26 does not impair AB 32, signed into law in 2006, or the scoping plan adopted in 2008 or any regulations developed under that plan,” Carb Chairman Mary Nichols said. Looks like state environmentalists who thought they had won the day on Tuesday have another battle to fight. But instead of at the ballot box, this time it will be in court.

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