California has implemented a Low Carbon Fuel Standard program since 2011, requiring sellers of oil, ethanol, and other fuels to reduce the carbon intensity of their fuel within certain deadlines. (Alternatively, they can buy credits from other companies that meet the requirements of the program.) Entities in the ethanol and oil industries recently challenged the LCFS program in court, but the Ninth Circuit Court of Appeals ruled that the program is compatible with the federal government’s authority under the Commerce Clause.
The plaintiffs had argued that California could not measure the intensity of the fuel over its life cycle. This type of analysis means that certain types of oil would receive greater penalties than other types of oil, depending on the amount of processing required. Also, ethanol made with natural gas would have an advantage over ethanol made with coal. According to the plaintiffs, the life cycle analysis results in favoring in-state fuels over out-of-state fuels, which violates the federal government’s power to regulate interstate commerce under the Commerce Clause. This is because out-of-state fuels typically have a greater carbon intensity. Ethanol made in California is often made with natural gas, while ethanol made outside California is usually made with coal.
The Ninth Circuit agreed with the lower courts in upholding California’s right to make laws that have an impact on commerce when the products involved affect public health concerns. It pointed out that the program does not explicitly discriminate against out-of-state fuels or provide separate rules for them. The Ninth Circuit felt that California (and any other state) has a right to make regulations that take the concerns posed by climate change into account. The opinion does not affect vehicle fuel economy standards, which have been a looming battleground between California and the federal government.
You can read the full opinion at Justia here.
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