By Jon Campisi, Northern California Record.

During the past four years, more than $4 billion from greenhouse gas emission credits that are auctioned off through the state’s cap-and-trade program have poured into California’s general fund.

The money, which is paid for by businesses seeking to emit more pollution into the atmosphere than is allowed through state caps, has become somewhat controversial, given the way it is collected from industry.

By late April, California’s Third District Court of Appeal is expected to rule whether the auction scheme constitutes illegal taxes or regulatory fees, a question raised in litigation challenging the auctions.

Cap and trade began in California in 2013. It was born out of a law, AB 32, which was enacted by the state legislature in 2006 as a way to help control greenhouse gas emissions.

The way the program works is that companies receive an allowance for each ton of greenhouse gases they emit, and if they seek to go above that cap, they are able to purchase additional allowances from other companies—hence "cap and trade."

The additional allowances, or credits, are obtained through state auctions.

One of the legal arguments made by those challenging the auctions is that business owners are essentially paying a new tax through the program, something that would require a two-thirds supermajority of the legislature for passage.