Yesterday, California’s Third District Court of Appeal heard oral argument in the related cases California Chamber of Commerce v. California Air Resources Board and Morning Star Packing Co. v. California Air Resources Board. The three-justice panel actively questioned both sides as lawyers for the State, the Chamber, Morning Star, and Environmental Defense Fund made their arguments. One news outlet has forecast the justices’ leanings, based on the questions asked. As arguments were heard, across the street in the Capitol, Governor Brown highlighted in the annual State of the State address California’s actions to reduce greenhouse gas emissions. While the pending CalChamber/Morning Star lawsuit is important, it is only one of several moving parts in play this year affecting greenhouse gas regulation in California. SB 32, effective January 1, 2017, extends and deepens the state’s greenhouse gas reduction goals to 40% below 1990 emission levels by 2030, codifying Governor Brown’s Executive Order No. B-30-15. But SB 32 is silent on cap and trade, and the question of whether AB 32 — the original statutory greenhouse gas reduction mandate enacted in 2006 — authorizes cap and trade past 2020 (see the Legislative Counsel’s letter) means that additional legal challenges to the cap and trade regulation are virtually guaranteed unless legislation clears up the ambiguity. To that end, in his recent budget proposal, Governor Brown called for urgency legislation to confirm the Air Resource Board’s authority to continue cap and trade beyond 2020. If passed by the Legislature as an urgency measure, the bill would be adopted with a two-thirds supermajority. This would moot going forward the main contention before the Court of Appeal – that cap and trade auctions authorized under AB 32 constitute an unconstitutional tax, passed without the requisite legislative supermajority. Meanwhile, the Air Resources Board is moving forward with implementation of SB 32 and the extension of cap and trade through 2030, with the release of the draft 2017 Climate Change Scoping Plan Update on January 20, 2017 and a vote expected on cap and trade amendments in the spring. As for the fate of allowance auctions under the current cap and trade program, we’ll have a decision from the Court of Appeal within 90 days. Regardless of the outcome, expect an appeal to the California Supreme Court, keeping this piece of the California greenhouse gas puzzle in play.