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California State-Run Carbon Auctions—A Taxing Matter

Expert Bloomberg BNA authors examine an upcoming California state court case concerning the state’s auctions of carbon allowances. The court will decide whether the legislature authorized the California Air Resources Board to conduct the auctions, and whether funds raised by the auctions constitute revenue or a regulatory fee. The authors believe that the outcome of the case will not remove cap-and-trade, as the auctions are nonessential and allowances can be freely distributed.

 

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By Peter M. Morrisette, Ph.D., and Robert D. Infelise (Aug. 19, 2013)

A California state court is preparing to resolve major issues in two cases addressing the state's auctions of carbon allowances. The court will have to determine whether the legislature authorized the California Air Resources Board to conduct the auctions, and whether the billions of dollars raised by the auctions constitute revenue or a regulatory fee. The authors of this article believe that, even if the auctions do not survive the legal challenge, cap-and-trade will remain because the auctions are not essential to the program, as the allowances can be distributed for free.

 


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