Using language that sounded, at times, like a cheer rally for California’s innovative global warming law, a federal appeals court reversed a lower court’s decision that the state had violated the Constitution’s Commerce Clause.

“California should be encouraged to continue and to expand its efforts to find a workable solution to lower carbon emissions, or to slow their rise,” Judge Ronald M. Gould wrote (pdf) for the 2-1 majority of the U.S. Court of Appeals for the Ninth District. “If no such solution is found, California residents and people worldwide will suffer great harm.”

At issue was a key component of AB 32, the California “Global Warming Solutions Act” of 2006, passed when Arnold Schwarzenegger was governor. It established the first comprehensive program of regulatory and market mechanisms in the world to achieve real, quantifiable, cost-effective reductions in greenhouse gases (GHG). The goal is to cut those emissions to 1990 levels by 2020.

The state’s plan is to have cuts in carbon emissions account for one-tenth of that reduction. To do that, it created a capped trading system that values a product’s carbon intensity (including demerits for burning gasoline to drive it cross-country) and makes a company pay for credits if it exceeds the cap.

The “Low Carbon Fuel Standard” (LCFS) uses the carbon intensity score to rate the impact of transportation and other elements on the production of energy. A primary aim of the fuel standard is to push the oil industry to invest in new technology and cleaner fuels.

Out-of-state companies cried foul and claimed they were being blatantly discriminated against just because they weren’t from around these parts. Ethanol producers using corn from Iowa complained when their product was valued higher than ethanol from local sources—and they had to pay for it—although both products cost the same on the open market.

The U.S. District Court judge agreed with the American Trucking Association, the Center for North American Energy Security and the Consumer Energy Alliance, but the appellate court said the case was more nuanced than that. The court ruled that California was trying to legitimately strike a balance between a known environmental harm and the costs of mitigating it. It instructed the lower court to apply that test, generally regarded as easier for states to pass, and then gave them big hints which way they wanted the district court judge to go.

“We will not at the outset block California from developing this innovative, nondiscriminatory regulation to impede global warming,” Gould wrote.

By “we,” Gould meant his court, not the judiciary in general. The lower-court judge could think otherwise. The full nine-judge appeals court might accept an appeal of the three-judge panel, although that is considered unlikely. There is also the possibility that the U.S. Supreme Court could accept an appeal. The conservative court is attentive to business interests and not averse to taking an expansive view of the Commerce Clause.

–Ken Broder   

To Learn More:

Ninth Circuit Upholds California’s Low Carbon Fuel Standard (by Ann Carlson, Legal Planet)

The Ninth Circuit Decides the California Low Carbon Fuel Standard Case (by David Pettit, Natural Resources Defense Council staff blog)

California's Global Warming Law Upheld By Federal Appeals Court (by Jason Dearen, Associated Press)

Ninth Circuit Upholds California's Low Carbon Fuel Standard (by Dana Hull, San Jose Mercury News)

California Fuel Standard Doesn’t Discriminate, Court Says (by Karen Gullo, Bloomberg)

Rocky Mountain Farmers Union v. Corey (U.S. Court of Appeals for the Ninth Circuit) (pdf)