January 14, 2009

The Role of States in Climate Change Regulation

Posted on January 14, 2009 by Roger Ferland

50 Ariz. L. Rev. 674-938 (2008)

            The primary function of the articles produced to date for this blog has been to alert colleagues of current developments of which they should be aware. This article’s purpose, however, is broader. There appear on occasion in law reviews and other publications valuable perspectives on law and policy issues in areas like climate change that are worthy of attention but might escape notice. The above-referenced symposium is such a document. In the spirit of full disclosure, it should be noted that the authors of the majority of the articles are law professors and consequently it is necessary to wade through a great deal of legal theory to glean the valuable nuggets of insight that are prevalent throughout the document.

The basis theme of the articles and commentaries is that states have a significant and critical role to play in the reduction of greenhouse gases (GHGs) even after the likely enactment of federal cap-and-trade legislation during the next two years. That role would not seem to be immediately apparent, particularly if EPA proceeds to fill those areas of regulation not covered by cap-and-trade legislation by maximizing the agency’s scope of regulation of GHG’s under the Clean Air Act. Indeed, several of the authors concede that, following national legislation, the climate benefits of state initiatives “would be so small as to be undetectable.” Nevertheless, the authors suggest that states and localities will continue to have a unique and important role to play, not so much in directly achieving reductions in GHGs through regulation, but by providing or encouraging the mechanisms to indirectly achieve those reductions. This facilitation role takes a number of forms:

  • State or local support of research and development of new renewable energy and innovative GHG control technologies through targeted subsidies and tax credits
  • Continuation and expansion of renewable portfolio standards imposed by state public utility regulatory bodies
  • State-level energy efficiency standards
  • Green building codes and certification systems
  • Gap-filling environmental regulation that forces the adoption or diffusion of existing technologies

            The articles also provide a comprehensive treatment of the potential legal barriers and drawbacks to state actions. One of those drawbacks that is discussed by several of the authors is the cost externalization produced by individual state initiatives. The most cited example of a cost externalization is the push by California and other states allied with California for automotive emission standards for GHGs. While California’s actions seem laudable on their face and it is likely that EPA will grant the waiver that California needs to enforce the standards, the cost of complying with the standards will ultimately be borne by the rest of the country even though they had no say in their adoption.

            The primary legal barriers to state action are preemption and its allied concept, the so-called dormant Commerce Clause. The range of legislation currently before Congress addresses preemption by either expressing a clear intent to broadly preempt state initiatives as far as GHG regulation or no preemption language thereby leaving it up to the federal courts to apply general principles of preemption to specific state actions. The authors tend to favor limiting the applicability of preemption, particularly when the state action does not directly impair the sale of allowances or does not directly impair the functioning of the other mechanisms necessary for a successful national cap-and-trade program. Thus, such state measures as renewable energy portfolio requirements, measures that encourage technological innovation or diffusion of existing technology and even product efficiency standards that are more restrictive than national standards, should not be subject to being invalidated because of preemption. Conversely, state restrictions on the sale or purchase of emissions allowances even as part of the direct regulation of GHG emissions would probably be preempted by federal legislation.

            A similar analysis is followed concerning the applicability of the dormant Commerce Clause to state climate change initiatives. A state’s regulations that directly discriminate between, for example, in-state and out-of-state electric utility companies, particularly if the effect of such discrimination was to interfere with the functioning of the national cap-and-trade program, would clearly run afoul of the dormant Commerce Clause. However, the range of state measures discussed in the articles would not seem to raise either dormant or general Commerce Clause issues, particularly if the national legislation, as seems likely, contains a savings clause like that in Section 116 of the Clean Air Act that explicitly allows states to adopt “standards or limitations” that are more stringent than federal standards or limitations.

            Obviously, the foregoing vastly oversimplifies what are a number of complex topics and their analyses, but it should provide enough of an overview of the content of the symposium to motivate interested parties to pursue the full benefit of its articles. As all of the authors note, it was the states, in the absence of federal action, that have been the leaders in GHG regulation and it is their initiative, experience and expertise that ensure that they will have a role and continued interest in addressing climate change even in the face of federal legislation.

Tags: Climate

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