IETA files to intervene in DOJ vs. CA linkage lawsuit

This analysis has originally been published for ICIS subscribers on 09 Jan 2020 at 09:50 PST.

International Emissions Trading Association (IETA) is the latest organization to file a motion to intervene in support of California in the lawsuit filed by the United States Department of Justice (DOJ) that argues California and Quebec’s cap-and-trade linkage agreement is unconstitutional.

IETA, in addition to a joint filing by Environmental Defense Fund (EDF) and National Resources Defense Council (NRDC), requested to intervene in court proceedings filed by the DOJ that aim to sever California and Quebec’s cap-and-trade linkage.

The civil suit filed by the DOJ against California, state officials, the California Air Resources Board (CARB) and the Western Climate Initiative Inc. (WCI) claims the linkage agreement with Quebec violates the US Constitution by (a) constituting a treaty that only the federal government can enter, and (b) having been entered into without gaining congressional consent.  (DOJ also asserted two other claims in its original complaint but is not pursuing them at this time.)

Partner at Sheppard Mullin Richter & Hampton Nico van Aelstyn who is representing IETA in this case spoke with ICIS on the intervenor process and shared his expert legal opinion on the lawsuit.

“The main point of intervention is to show you have interest and that none of the parties in the case will adequately represent those interests,” explained van Aelstyn.  “IETA makes the case that its members are participants in the cap-and-trade markets and have property rights and interests in allowances and offsets held that will be potentially affected by the lawsuit.”

IETA’s interest is distinct from the state of California’s in that the state will seek to defend regulations and policies, while IETA would present arguments based on the property interests of its members.  The motions to intervene by EDF, NRDC and IETA have not yet been granted, but are also currently unopposed.  A decision to approve or deny the intervenors is expected to be made by January 27.

IETA will file an opposition to DOJ’s Motion for Summary Judgment (MSJ) on February 10, provided that the Court grants its motion to intervene.  MSJs are used to decide cases that present purely legal questions where there are no facts at issue and therefore no need to try the case before a jury.  In their filings on February 10, defendants and likely intervenors will present arguments on why DOJ’s MSJ should be denied. The MSJ hearing is scheduled for February 24.

“We want the voice of business to be heard by the court; this is not a dry academic legal discussion about what the constitution requires,” van Aelstyn said.  “This has real world impacts on businesses today and the court needs to appreciate the context that we believe only market participants like IETA’s members can provide.”

When asked about the outlook for the case, van Aelstyn explained that one of the key issues will be “practice versus plain language.”  The US Constitution’s “Compact Clause” specifically states that congressional approval must be obtained for agreements between states or cities and foreign jurisdictions, yet countless agreements of this type have been made and were never contested.  Van Aelstyn said that a practice has arisen over the last hundred years or more whereby if Congress doesn’t weigh in and contest the agreement, then there is de facto consent through its silence.

“If you find a judge who is leaning in that direction [a strictly constitutional bias], they might say the Constitution says you have to get Congress’s approval; you didn’t do that, you’re done,” van Aelstyn said.   “I don’t think that is the right interpretation; I don’t think it’s likely to happen, but it certainly could.”

The court has no deadline for issuing a decision, and it is unlikely the court will issue a decision on February 24; however, a decision is expected within a few months after the hearing.

Sunny Roe is Analyst – North America Carbon Markets at ICIS. She can be reached at sunny.roe@icis.com

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