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California Wins Temporary Reinstatement of Carbon Fuel Standard

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April 24 (Bloomberg) -- California won temporary reinstatement of its low-carbon fuel standard, which was blocked last year by a federal judge.

The U.S. Court of Appeals in San Francisco yesterday granted a request by California officials to put on hold the Dec. 29 ruling that the standard is unconstitutional while the case is on appeal. The rule was to have taken effect Jan. 1, 2012.

“Today’s decision allows the Air Resources Board to continue implementation and resume enforcement of this important program to reduce greenhouse gas emissions,” California Air Resources Board Executive Officer James Goldstene said in an e-mail yesterday. “The Low Carbon Fuel Standard drives investment and innovation, creates new jobs and provides the next generation of clean fuels to all Californians.”

U.S. District Judge Lawrence O’Neill in Fresno, California, ruled Dec. 29 that California’s method of assigning a higher so-called carbon intensity score to ethanol produced in the Midwest, which is otherwise chemically and physically identical to that produced in California, discriminates against interstate commerce. The judge sided with agriculture and oil-industry groups that sued to overturn the standards.

Tom Buis, chief executive officer of Growth Energy, an ethanol trade group that opposed the rules, said he hadn’t yet reviewed the ruling and couldn’t comment.

December Delivery

California carbon allowance futures for December delivery slipped 75 cents to $14.75 per ton yesterday, according to data from CME Group Inc.’s Green Exchange in New York.

Bids for California carbon permit forwards cleared by IntercontinentalExchange Inc. closed at $15.25 per ton yesterday, down 75 cents from April 20, Samantha Katz, managing director of carbon broker BGC Environmental Brokerage Services, said in a telephone interview from New York.

The judge’s ruling may boost carbon prices today as the market speculates on whether California’s carbon cap-and-trade program would survive a similar court challenge, said Jon Costantino, senior climate change adviser for law firm Manatt, Phelps & Phillips LLP in Los Angeles.

“Any court victory (even one that may only be temporary) seems to lift the long-term view on price,” Costantino, executive director of the Association of Carbon Market Participants in Sacramento, California, said in an e-mail.

Lawyers for the state had argued that California would be irreparably harmed by increased greenhouse-gas emissions if barred from implementing the standard, which is aimed at encouraging the use of cleaner low-carbon fuels.

The lower-court case is Rocky Mountain Farmers Union v. Goldstene, 09-2234, U.S. District Court, Eastern District of California (Fresno).

To contact the reporters on this story: Karen Gullo in San Francisco at kgullo@bloomberg.net; Lynn Doan in San Francisco at ldoan6@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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