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How Courts Can Prevent Excess Emitters From Using Bankruptcy as a Forum to Avoid California AB 32’s Allowance Deductions I Mohammed Tehrani

How Courts Can Prevent Excess Emitters From Using Bankruptcy as a Forum to Avoid California AB 32’s Allowance Deductions I Mohammed Tehrani

This paper identifies bankruptcy as a forum in which entities that exceed their emissions limit might be able to avoid the accompanying allowance deduction. Specifically, an entity might be able to sell its assets free and clear of its allowance deduction liabilities through Section 363 to a new company comprised of the same actors. Part II contrasts which liabilities can be discharged through a Chapter 11 plan and which can be avoided through a free and clear sale under Section 363. Part III analyzes whether allowance deductions could be discharged through a Chapter 11 plan or avoided through a free and clear sale under Section 363. Part IV discusses measures which would strengthen AB 32 against such possible abuse. Part V concludes.

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