The Lawsuit Against California's AB32 -- Why EJ Advocates Are Right for All the Wrong Reasons

Environmental justice advocates filed suit against AB32, California's landmark cap-and-trade emissions law, claiming that the California Air Resources Board erred by not considering alternatives more carefully. Sidestepping the administrative law matters, it seems to me that as a substantive matter, EJ advocates are worried about all the wrong things. EJ advocates are worried that cap-and-trade could allow "hotspots" of pollution. Carbon dioxide emissions are, of course, not harmful, but EJ advocates are worried about the co-pollutant hotspots that would be allowed by a cap-and-trade scheme.

But I don't get it. If hotspots are what EJ advocates are worried about, why is a carbon tax (as they favor) better? Why can't hotspots form in a carbon tax regime?

In fact, the real reason that people should be unhappy with a cap-and-trade scheme, and especially poverty advocates that often overlap with EJ advocates, is that cap-and-trade is *often* regressive because of the way that emissions permits are allocated -- usually by grandfathering, essentially a freebie to shareholders of emitting firms. The revenues of a carbon tax might or might not be recycled to addressed the perceived regressiveness of carbon taxes, but in no case is it worse than simply giving emitters a free pass. Incidentally, recent research seems to suggest that because some of the poorest derive much of their income from government programs, and because some of these programs are indexed to inflation, a carbon tax may not be regressive after all.