Calling California’s cap-and-trade emissions auctions a form of extortion, the National Federal of Independent Business’ Small Business Legal Center has filed a brief in the Third District California Court of Appeals, saying the auctions are a burden to small business and that the California Air Resources Board lacks the legal authority to sell emission allowances.

The brief was filed in support of lawsuits filed by the California Chamber of Commerce and the Pacific Legal Foundation contesting CARB’s decision to auction off emission allowances. Businesses have to buy those allowances as part of the state’s greenhouse gas cap-and-trade program, which is designed to give businesses an economic incentive to reduce pollution.

Luke Wake, a senior staff attorney at NFIB, said the program is unfair to small businesses which is why the NFIB’s Legal Center stepped in.

“We thought it was important to weigh in on this case because the Air Resources Board’s decision to auction emission allowances unnecessarily adds to the cost of compliance for businesses subject to CARB’s cap-and-trade program,” Wake said. “As a general principle, we think government should seek to advance its regulatory goals without imposing unnecessary burdens on small business.”

Signal Hill Petroleum Inc., an energy company that produces natural gas used to generate electricity, spends about $300,000 a year purchasing emission credits, according to the company’s executive vice president David Slater. He wonders about the legality of the fees.

“The program, overall, we believe is just a tax on business,” Slater said. “It is a tax on combustion.”

CARB spokesman Dave Clegern would not comment specifically on the brief that was filed but said the cap and trade program can stand for itself.

“We’re confident the program will stand up to any legal challenges,” Clegern said. “It has so far, and we believe it will continue to.”

Wake said CARB could reach its goal of reducing greenhouse gas emissions without auctioning emission allowances, and that it is unfortunate small businesses statewide will have to suffer as a result.

“The auctioning of emission allowances is really going to impact the vast majority of small businesses in the state as they will be forced to pay higher energy costs and higher costs for products and services,” Wake said. “Ultimately, we think this is bad for the consumer.”

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