California to debut landmark cap-and-trade system

California is debuting its new, landmark cap-and-trade program with an auction of greenhouse gas pollution permits, despite an eleventh-hour lawsuit filed by the state’s largest business group.

The California Chamber of Commerce filed the lawsuit Tuesday in Sacramento Superior Court.

It was not expected to halt Wednesday’s auction.

The suit challenges the California Air Resources Board’s authority under the state’s 2006 climate-change law to sell the permits, called “allowances,” for the purpose of generating revenue for the state.

The group says the state is only allowed to charge businesses for the costs of administering the program, not for producing additional state revenue.

The cap-and-trade plan is a central piece of the state’s 2006 global warming law, AB32, a suite of regulations meant to reduce dramatically the state’s emissions of heat-trapping gases.

The program places a limit, or cap, on emissions from individual polluters. Businesses are required to cut emissions to cap levels or buy allowances from other companies for each ton over the cap that is discharged annually. If a business were to cut emissions below the cap, it could profit by selling its extra allowances.

The program’s first auction on Wednesday is being closely watched, as it will essentially put a price on carbon emissions for the first time in state history.

Some of the businesses regulated under California’s plan say the extra costs will result in higher electricity rates and job losses.