A federal appeals court affirmed California's right to impose low carbon fuel standards aimed at reducing greenhouse gas emissions, rejecting an industry argument that the regulations penalized out-of-state fuel producers.
A three-judge panel of the U.S. 9th Circuit Court of Appeals ruled 2 to 1 Wednesday to reverse a lower-court ruling from 2011 that temporarily halted California's ability to enforce rules in AB 32, the state's landmark global warming law.
The decision allows the California Air Resources Board to begin implementing the law and restores the state's ability to punish fuel wholesalers and refineries that sell gasoline or biofuels with carbon footprints that exceed California's guidelines.
Air Resources Board spokesman Dave Clegern called the decision "a very good step for Californians and the fight against climate change."
In the first year of the program, wholesalers were to reduce the carbon footprint of their products 0.25%.
The regulations require producers, refiners and importers of gasoline and diesel to reduce the carbon footprint of their fuel by 10% over the next decade as part of California's goal of reducing greenhouse gas emissions to 1990 levels by 2020.
The low-carbon requirement calculates the life cycle of fuels from their extraction — or cultivation, in the case of biofuels such as corn-based ethanol — to their combustion.
For example, the state considers how corn is grown, harvested and converted to ethanol intended for California gas tanks, a life-cycle evaluation called "seeds to wheels."
Out-of-state refiners and ethanol companies said that just the act of transporting fuels into California raised their scores, imposing an unfair burden and making them less competitive with fuels produced in-state.
They argued the law violated the commerce clause of the U.S. Constitution by imposing limits on interstate commerce.
The 9th Circuit disagreed.
"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 Gould wrote for the majority. "If no such solution is found, California residents and people worldwide will suffer great harm. We will not at the outset block California from developing this innovative, nondiscriminatory regulation to impede global warming."
Environmental groups applauded the ruling.
"A great day for public health and the economy of California," said Tim O'Connor of the
Transportation fuel producers called the decision misguided and warned of higher fuel costs for California consumers.
Charles T. Drevna, president of the American Fuel & Petrochemical Manufacturers, said the law's "broad reach and intended scope means that implementing the [fuel standards] will have adverse consequences throughout the nation's fuel refining facilities and supply chain far beyond California's borders."
The group said it will consider its legal options.