By Alejandro Lazo, The Wall Street Journal.

SAN FRANCISCO—Democratic Gov. Jerry Brown has launched a political-action committee to preserve California’s cap-and-trade program—setting up a potential battle over the state’s environmental policy.

Cap and trade aims to reduce carbon emissions by imposing a limit on the amount of CO2 released by industry and then selling a finite number of permits every quarter for businesses to meet those allowances.

California, the first state with a comprehensive cap-and-trade system, launched its program in 2012. After robust permit sales early on, the program has become beset with political and legal challenges, and demand for carbon permits has shrunk.