The dormant commerce clause threat to market-based environmental regulation: The case of electricity deregulation

Ecology Law Quarterly

Volumn 26, Issue 2, 1999, Pages 243-347

  Engel, Kirsten H ^a  

^a NONE

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EID: 0033421923     PISSN: 00461121     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (359)

1. See, e.g., Dean Milk Co. v. City of Madison, 340 U.S. 349, 354 (1950) (striking down a local ordinance prohibiting the sale of all milk except that which is pasteurized within five miles of the city center).
2. See Philadelphia v. New Jersey, 437 U.S. 617, 626-27 (1978) (striking down a state statute prohibiting the importation of municipal waste generated out of state).
3. See infra text accompanying notes 34-62.
4. 437 U.S. at 617.
5. See id. at 624.
6. After nearly 90 years, the monopoly status of electric power utilities is coming to an end. As of February 1999, 16 states had enacted legislation restructuring their electricity industry to allow for retail competition in the provision of electricity to commercial and residential customers. See 1998 ARIZ. REV. STAT. ANN. § 30-803 (1998) (electric utilities shall open their service territory to competition in the sale of 20% of the 1995 retail load by Dec. 31, 1998 and 100% of their retail load by Dec. 31, 2000); CAL. PUB. UTIL. CODE. § 331-381 (WEST 1996) (retail competition to begin Jan. 1, 1998); 1998 Conn. Acts 16-244, § 4 (retail competition shall begin by July 1, 2000); IL. REV. STAT. ch. 220, §§ 5/16-101, 5/16-104 (retail competition for nonresidential consumers shall begin by Oct. 1, 1999, and for residential consumers by May 1, 2002); ME. LAWS 568 (retail competition to begin Mar. 1, 2000); MONT. CODE ANN. tit. 69 § 201 (1997) (retail competition for customers with loads greater than 1000 kWh begins July 1, 1998, and for all other customers by July 1, 2002, unless an earlier date is established by the State Public Service Commission); MASS. GEN. LAWS ch. 164, § 11F (1998) (retail competition shall begin by Mar. 1, 1998); NEV. REV. STAT. 704.970 (1997) (retail competition to begin Dec. 31, 1999, unless a later date is chosen by the State Public Utilities Commission); 1997 N. H. REV. STAT. ANN. § 374-F(xv) (retail competition is to begin as expeditiously as possible); A. 10, 208th Leg. (N.J. 1998) (enacted) (retail competition will begin on June 1, 1999); N.Y. PUB. SERV. § 77-A (McKinney 1997) (as soon as possible, but not later than Mar. 1, 2000, all customers of electric corporations, including municipal utilities, shall have the opportunity to purchase electricity services from any supplier of electricity); OKLA. STAT. tit. 17, § 190.4 (1997) (retail competition to begin by July 1, 2002); 1997 PA. LAWS 1509 (transition to retail competition began Jan. 1, 1997; all customers are to have retail access by Jan. 1, 2001); 1997 R. I. LAWS 96-H 8124 (retail access for all customers to take place no later than July 1, 1998); H.B. 1172 (Va. 1998) (enacted) (retail competition shall commence on Jan. 1, 2004); VT. STAT. ANN. tit. 89, § 8001 (1997) (retail competition to begin no later than Jan. 1, 2000). Nearly thirty other state legislatures have established special or oversight committees to study electricity restructuring with an eye toward future legislative proposals. 30 "Laboratories of Democracy" Test Electric Industry Issues, 2 LEAP LETTER 24-31 (July-Aug. 1997). The transition to competition was given a tremendous boost in 1996 when the Federal Energy Regulatory Commission required all public utilities owning or controlling facilities used for transmitting electricity in interstate commerce to offer nondiscriminatory transmission services so that power can be wheeled or transported from one utility to another across a third utility's transmission system. See Federal Energy Regulatory Commission, Promoting Wholesale Competition Through Open Access Nondiscriminatory Transmission Services by Public Utilities and Recovery of Stranded Costs by Public Utilities and Transmitting Utilities, Order No. 888, 61 Fed. Reg. 21,540 (1996) [hereinafter F.E.R.C. Order No. 888]. For a useful overview of electricity restructuring, see TIMOTHY J. BRENNAN ET AL., A SHOCK TO THE SYSTEM: RESTRUCTURING AMERICA'S ELECTRICITY INDUSTRY (1996). For an overview of the complicated federal and state regulatory jurisdictional issues involved in restructuring, see Richard J. Pierce, Jr., The State of the Transition to Competitive Markets in Natural Gas and Electricity, 15 ENERGY L. J. 323, 328-50 (1994) . For a regional perspective on the interface between electricity restructuring and environmental and consumer organizations' efforts to replace unproductive and environmentally harmful energy sources with clean technologies, see ED SMELOFF & PETER ASMUS, REINVENTING ELECTRIC UTILITIES: COMPETITION, CITIZEN ACTION, AND CLEAN POWER (1997). For a history of the growth of state-regulated monopoly electricity utilities in the early 1900s and the shift to competition in the 1990s, see generally Robert L. Bradley, The Origins of Political Electricity: Market Failure or Political Opportunism?, 17 ENERGY L. J. 59 (1996); SMELOFF & ASMUS, supra at 7-23.
7. After nearly 90 years, the monopoly status of electric power utilities is coming to an end. As of February 1999, 16 states had enacted legislation restructuring their electricity industry to allow for retail competition in the provision of electricity to commercial and residential customers. See 1998 ARIZ. REV. STAT. ANN. § 30-803 (1998) (electric utilities shall open their service territory to competition in the sale of 20% of the 1995 retail load by Dec. 31, 1998 and 100% of their retail load by Dec. 31, 2000); CAL. PUB. UTIL. CODE. § 331-381 (WEST 1996) (retail competition to begin Jan. 1, 1998); 1998 Conn. Acts 16-244, § 4 (retail competition shall begin by July 1, 2000); IL. REV. STAT. ch. 220, §§ 5/16-101, 5/16-104 (retail competition for nonresidential consumers shall begin by Oct. 1, 1999, and for residential consumers by May 1, 2002); ME. LAWS 568 (retail competition to begin Mar. 1, 2000); MONT. CODE ANN. tit. 69 § 201 (1997) (retail competition for customers with loads greater than 1000 kWh begins July 1, 1998, and for all other customers by July 1, 2002, unless an earlier date is established by the State Public Service Commission); MASS. GEN. LAWS ch. 164, § 11F (1998) (retail competition shall begin by Mar. 1, 1998); NEV. REV. STAT. 704.970 (1997) (retail competition to begin Dec. 31, 1999, unless a later date is chosen by the State Public Utilities Commission); 1997 N. H. REV. STAT. ANN. § 374-F(xv) (retail competition is to begin as expeditiously as possible); A. 10, 208th Leg. (N.J. 1998) (enacted) (retail competition will begin on June 1, 1999); N.Y. PUB. SERV. § 77-A (McKinney 1997) (as soon as possible, but not later than Mar. 1, 2000, all customers of electric corporations, including municipal utilities, shall have the opportunity to purchase electricity services from any supplier of electricity); OKLA. STAT. tit. 17, § 190.4 (1997) (retail competition to begin by July 1, 2002); 1997 PA. LAWS 1509 (transition to retail competition began Jan. 1, 1997; all customers are to have retail access by Jan. 1, 2001); 1997 R. I. LAWS 96-H 8124 (retail access for all customers to take place no later than July 1, 1998); H.B. 1172 (Va. 1998) (enacted) (retail competition shall commence on Jan. 1, 2004); VT. STAT. ANN. tit. 89, § 8001 (1997) (retail competition to begin no later than Jan. 1, 2000). Nearly thirty other state legislatures have established special or oversight committees to study electricity restructuring with an eye toward future legislative proposals. 30 "Laboratories of Democracy" Test Electric Industry Issues, 2 LEAP LETTER 24-31 (July- Aug. 1997). The transition to competition was given a tremendous boost in 1996 when the Federal Energy Regulatory Commission required all public utilities owning or controlling facilities used for transmitting electricity in interstate commerce to offer nondiscriminatory transmission services so that power can be wheeled or transported from one utility to another across a third utility's transmission system. See Federal Energy Regulatory Commission, Promoting Wholesale Competition Through Open Access Nondiscriminatory Transmission Services by Public Utilities and Recovery of Stranded Costs by Public Utilities and Transmitting Utilities, Order No. 888, 61 Fed. Reg. 21,540 (1996) [hereinafter F.E.R.C. Order No. 888]. For a useful overview of electricity restructuring, see TIMOTHY J. BRENNAN ET AL., A SHOCK TO THE SYSTEM: RESTRUCTURING AMERICA'S ELECTRICITY INDUSTRY (1996). For an overview of the complicated federal and state regulatory jurisdictional issues involved in restructuring, see Richard J. Pierce, Jr., The State of the Transition to Competitive Markets in Natural Gas and Electricity, 15 ENERGY L. J. 323, 328-50 (1994) . For a regional perspective on the interface between electricity restructuring and environmental and consumer organizations' efforts to replace unproductive and environmentally harmful energy sources with clean technologies, see ED SMELOFF & PETER ASMUS, REINVENTING ELECTRIC UTILITIES: COMPETITION, CITIZEN ACTION, AND CLEAN POWER (1997). For a history of the growth of state-regulated monopoly electricity utilities in the early 1900s and the shift to competition in the 1990s, see generally Robert L. Bradley, The Origins of Political Electricity: Market Failure or Political Opportunism?, 17 ENERGY L. J. 59 (1996); SMELOFF & ASMUS, supra at 7-23.
8. After nearly 90 years, the monopoly status of electric power utilities is coming to an end. As of February 1999, 16 states had enacted legislation restructuring their electricity industry to allow for retail competition in the provision of electricity to commercial and residential customers. See 1998 ARIZ. REV. STAT. ANN. § 30-803 (1998) (electric utilities shall open their service territory to competition in the sale of 20% of the 1995 retail load by Dec. 31, 1998 and 100% of their retail load by Dec. 31, 2000); CAL. PUB. UTIL. CODE. § 331-381 (WEST 1996) (retail competition to begin Jan. 1, 1998); 1998 Conn. Acts 16-244, § 4 (retail competition shall begin by July 1, 2000); IL. REV. STAT. ch. 220, §§ 5/16-101, 5/16-104 (retail competition for nonresidential consumers shall begin by Oct. 1, 1999, and for residential consumers by May 1, 2002); ME. LAWS 568 (retail competition to begin Mar. 1, 2000); MONT. CODE ANN. tit. 69 § 201 (1997) (retail competition for customers with loads greater than 1000 kWh begins July 1, 1998, and for all other customers by July 1, 2002, unless an earlier date is established by the State Public Service Commission); MASS. GEN. LAWS ch. 164, § 11F (1998) (retail competition shall begin by Mar. 1, 1998); NEV. REV. STAT. 704.970 (1997) (retail competition to begin Dec. 31, 1999, unless a later date is chosen by the State Public Utilities Commission); 1997 N. H. REV. STAT. ANN. § 374-F(xv) (retail competition is to begin as expeditiously as possible); A. 10, 208th Leg. (N.J. 1998) (enacted) (retail competition will begin on June 1, 1999); N.Y. PUB. SERV. § 77-A (McKinney 1997) (as soon as possible, but not later than Mar. 1, 2000, all customers of electric corporations, including municipal utilities, shall have the opportunity to purchase electricity services from any supplier of electricity); OKLA. STAT. tit. 17, § 190.4 (1997) (retail competition to begin by July 1, 2002); 1997 PA. LAWS 1509 (transition to retail competition began Jan. 1, 1997; all customers are to have retail access by Jan. 1, 2001); 1997 R. I. LAWS 96-H 8124 (retail access for all customers to take place no later than July 1, 1998); H.B. 1172 (Va. 1998) (enacted) (retail competition shall commence on Jan. 1, 2004); VT. STAT. ANN. tit. 89, § 8001 (1997) (retail competition to begin no later than Jan. 1, 2000). Nearly thirty other state legislatures have established special or oversight committees to study electricity restructuring with an eye toward future legislative proposals. 30 "Laboratories of Democracy" Test Electric Industry Issues, 2 LEAP LETTER 24-31 (July- Aug. 1997). The transition to competition was given a tremendous boost in 1996 when the Federal Energy Regulatory Commission required all public utilities owning or controlling facilities used for transmitting electricity in interstate commerce to offer nondiscriminatory transmission services so that power can be wheeled or transported from one utility to another across a third utility's transmission system. See Federal Energy Regulatory Commission, Promoting Wholesale Competition Through Open Access Nondiscriminatory Transmission Services by Public Utilities and Recovery of Stranded Costs by Public Utilities and Transmitting Utilities, Order No. 888, 61 Fed. Reg. 21,540 (1996) [hereinafter F.E.R.C. Order No. 888]. For a useful overview of electricity restructuring, see TIMOTHY J. BRENNAN ET AL., A SHOCK TO THE SYSTEM: RESTRUCTURING AMERICA'S ELECTRICITY INDUSTRY (1996). For an overview of the complicated federal and state regulatory jurisdictional issues involved in restructuring, see Richard J. Pierce, Jr., The State of the Transition to Competitive Markets in Natural Gas and Electricity, 15 ENERGY L. J. 323, 328-50 (1994) . For a regional perspective on the interface between electricity restructuring and environmental and consumer organizations' efforts to replace unproductive and environmentally harmful energy sources with clean technologies, see ED SMELOFF & PETER ASMUS, REINVENTING ELECTRIC UTILITIES: COMPETITION, CITIZEN ACTION, AND CLEAN POWER (1997). For a history of the growth of state-regulated monopoly electricity utilities in the early 1900s and the shift to competition in the 1990s, see generally Robert L. Bradley, The Origins of Political Electricity: Market Failure or Political Opportunism?, 17 ENERGY L. J. 59 (1996); SMELOFF & ASMUS, supra at 7-23.
9. After nearly 90 years, the monopoly status of electric power utilities is coming to an end. As of February 1999, 16 states had enacted legislation restructuring their electricity industry to allow for retail competition in the provision of electricity to commercial and residential customers. See 1998 ARIZ. REV. STAT. ANN. § 30-803 (1998) (electric utilities shall open their service territory to competition in the sale of 20% of the 1995 retail load by Dec. 31, 1998 and 100% of their retail load by Dec. 31, 2000); CAL. PUB. UTIL. CODE. § 331-381 (WEST 1996) (retail competition to begin Jan. 1, 1998); 1998 Conn. Acts 16-244, § 4 (retail competition shall begin by July 1, 2000); IL. REV. STAT. ch. 220, §§ 5/16-101, 5/16-104 (retail competition for nonresidential consumers shall begin by Oct. 1, 1999, and for residential consumers by May 1, 2002); ME. LAWS 568 (retail competition to begin Mar. 1, 2000); MONT. CODE ANN. tit. 69 § 201 (1997) (retail competition for customers with loads greater than 1000 kWh begins July 1, 1998, and for all other customers by July 1, 2002, unless an earlier date is established by the State Public Service Commission); MASS. GEN. LAWS ch. 164, § 11F (1998) (retail competition shall begin by Mar. 1, 1998); NEV. REV. STAT. 704.970 (1997) (retail competition to begin Dec. 31, 1999, unless a later date is chosen by the State Public Utilities Commission); 1997 N. H. REV. STAT. ANN. § 374-F(xv) (retail competition is to begin as expeditiously as possible); A. 10, 208th Leg. (N.J. 1998) (enacted) (retail competition will begin on June 1, 1999); N.Y. PUB. SERV. § 77-A (McKinney 1997) (as soon as possible, but not later than Mar. 1, 2000, all customers of electric corporations, including municipal utilities, shall have the opportunity to purchase electricity services from any supplier of electricity); OKLA. STAT. tit. 17, § 190.4 (1997) (retail competition to begin by July 1, 2002); 1997 PA. LAWS 1509 (transition to retail competition began Jan. 1, 1997; all customers are to have retail access by Jan. 1, 2001); 1997 R. I. LAWS 96-H 8124 (retail access for all customers to take place no later than July 1, 1998); H.B. 1172 (Va. 1998) (enacted) (retail competition shall commence on Jan. 1, 2004); VT. STAT. ANN. tit. 89, § 8001 (1997) (retail competition to begin no later than Jan. 1, 2000). Nearly thirty other state legislatures have established special or oversight committees to study electricity restructuring with an eye toward future legislative proposals. 30 "Laboratories of Democracy" Test Electric Industry Issues, 2 LEAP LETTER 24-31 (July- Aug. 1997). The transition to competition was given a tremendous boost in 1996 when the Federal Energy Regulatory Commission required all public utilities owning or controlling facilities used for transmitting electricity in interstate commerce to offer nondiscriminatory transmission services so that power can be wheeled or transported from one utility to another across a third utility's transmission system. See Federal Energy Regulatory Commission, Promoting Wholesale Competition Through Open Access Nondiscriminatory Transmission Services by Public Utilities and Recovery of Stranded Costs by Public Utilities and Transmitting Utilities, Order No. 888, 61 Fed. Reg. 21,540 (1996) [hereinafter F.E.R.C. Order No. 888]. For a useful overview of electricity restructuring, see TIMOTHY J. BRENNAN ET AL., A SHOCK TO THE SYSTEM: RESTRUCTURING AMERICA'S ELECTRICITY INDUSTRY (1996). For an overview of the complicated federal and state regulatory jurisdictional issues involved in restructuring, see Richard J. Pierce, Jr., The State of the Transition to Competitive Markets in Natural Gas and Electricity, 15 ENERGY L. J. 323, 328-50 (1994) . For a regional perspective on the interface between electricity restructuring and environmental and consumer organizations' efforts to replace unproductive and environmentally harmful energy sources with clean technologies, see ED SMELOFF & PETER ASMUS, REINVENTING ELECTRIC UTILITIES: COMPETITION, CITIZEN ACTION, AND CLEAN POWER (1997). For a history of the growth of state-regulated monopoly electricity utilities in the early 1900s and the shift to competition in the 1990s, see generally Robert L. Bradley, The Origins of Political Electricity: Market Failure or Political Opportunism?, 17 ENERGY L. J. 59 (1996); SMELOFF & ASMUS, supra at 7-23.
10. After nearly 90 years, the monopoly status of electric power utilities is coming to an end. As of February 1999, 16 states had enacted legislation restructuring their electricity industry to allow for retail competition in the provision of electricity to commercial and residential customers. See 1998 ARIZ. REV. STAT. ANN. § 30-803 (1998) (electric utilities shall open their service territory to competition in the sale of 20% of the 1995 retail load by Dec. 31, 1998 and 100% of their retail load by Dec. 31, 2000); CAL. PUB. UTIL. CODE. § 331-381 (WEST 1996) (retail competition to begin Jan. 1, 1998); 1998 Conn. Acts 16-244, § 4 (retail competition shall begin by July 1, 2000); IL. REV. STAT. ch. 220, §§ 5/16-101, 5/16-104 (retail competition for nonresidential consumers shall begin by Oct. 1, 1999, and for residential consumers by May 1, 2002); ME. LAWS 568 (retail competition to begin Mar. 1, 2000); MONT. CODE ANN. tit. 69 § 201 (1997) (retail competition for customers with loads greater than 1000 kWh begins July 1, 1998, and for all other customers by July 1, 2002, unless an earlier date is established by the State Public Service Commission); MASS. GEN. LAWS ch. 164, § 11F (1998) (retail competition shall begin by Mar. 1, 1998); NEV. REV. STAT. 704.970 (1997) (retail competition to begin Dec. 31, 1999, unless a later date is chosen by the State Public Utilities Commission); 1997 N. H. REV. STAT. ANN. § 374-F(xv) (retail competition is to begin as expeditiously as possible); A. 10, 208th Leg. (N.J. 1998) (enacted) (retail competition will begin on June 1, 1999); N.Y. PUB. SERV. § 77-A (McKinney 1997) (as soon as possible, but not later than Mar. 1, 2000, all customers of electric corporations, including municipal utilities, shall have the opportunity to purchase electricity services from any supplier of electricity); OKLA. STAT. tit. 17, § 190.4 (1997) (retail competition to begin by July 1, 2002); 1997 PA. LAWS 1509 (transition to retail competition began Jan. 1, 1997; all customers are to have retail access by Jan. 1, 2001); 1997 R. I. LAWS 96-H 8124 (retail access for all customers to take place no later than July 1, 1998); H.B. 1172 (Va. 1998) (enacted) (retail competition shall commence on Jan. 1, 2004); VT. STAT. ANN. tit. 89, § 8001 (1997) (retail competition to begin no later than Jan. 1, 2000). Nearly thirty other state legislatures have established special or oversight committees to study electricity restructuring with an eye toward future legislative proposals. 30 "Laboratories of Democracy" Test Electric Industry Issues, 2 LEAP LETTER 24-31 (July- Aug. 1997). The transition to competition was given a tremendous boost in 1996 when the Federal Energy Regulatory Commission required all public utilities owning or controlling facilities used for transmitting electricity in interstate commerce to offer nondiscriminatory transmission services so that power can be wheeled or transported from one utility to another across a third utility's transmission system. See Federal Energy Regulatory Commission, Promoting Wholesale Competition Through Open Access Nondiscriminatory Transmission Services by Public Utilities and Recovery of Stranded Costs by Public Utilities and Transmitting Utilities, Order No. 888, 61 Fed. Reg. 21,540 (1996) [hereinafter F.E.R.C. Order No. 888]. For a useful overview of electricity restructuring, see TIMOTHY J. BRENNAN ET AL., A SHOCK TO THE SYSTEM: RESTRUCTURING AMERICA'S ELECTRICITY INDUSTRY (1996). For an overview of the complicated federal and state regulatory jurisdictional issues involved in restructuring, see Richard J. Pierce, Jr., The State of the Transition to Competitive Markets in Natural Gas and Electricity, 15 ENERGY L. J. 323, 328-50 (1994) . For a regional perspective on the interface between electricity restructuring and environmental and consumer organizations' efforts to replace unproductive and environmentally harmful energy sources with clean technologies, see ED SMELOFF & PETER ASMUS, REINVENTING ELECTRIC UTILITIES: COMPETITION, CITIZEN ACTION, AND CLEAN POWER (1997). For a history of the growth of state-regulated monopoly electricity utilities in the early 1900s and the shift to competition in the 1990s, see generally Robert L. Bradley, The Origins of Political Electricity: Market Failure or Political Opportunism?, 17 ENERGY L. J. 59 (1996); SMELOFF & ASMUS, supra at 7-23.
11. After nearly 90 years, the monopoly status of electric power utilities is coming to an end. As of February 1999, 16 states had enacted legislation restructuring their electricity industry to allow for retail competition in the provision of electricity to commercial and residential customers. See 1998 ARIZ. REV. STAT. ANN. § 30-803 (1998) (electric utilities shall open their service territory to competition in the sale of 20% of the 1995 retail load by Dec. 31, 1998 and 100% of their retail load by Dec. 31, 2000); CAL. PUB. UTIL. CODE. § 331-381 (WEST 1996) (retail competition to begin Jan. 1, 1998); 1998 Conn. Acts 16-244, § 4 (retail competition shall begin by July 1, 2000); IL. REV. STAT. ch. 220, §§ 5/16-101, 5/16-104 (retail competition for nonresidential consumers shall begin by Oct. 1, 1999, and for residential consumers by May 1, 2002); ME. LAWS 568 (retail competition to begin Mar. 1, 2000); MONT. CODE ANN. tit. 69 § 201 (1997) (retail competition for customers with loads greater than 1000 kWh begins July 1, 1998, and for all other customers by July 1, 2002, unless an earlier date is established by the State Public Service Commission); MASS. GEN. LAWS ch. 164, § 11F (1998) (retail competition shall begin by Mar. 1, 1998); NEV. REV. STAT. 704.970 (1997) (retail competition to begin Dec. 31, 1999, unless a later date is chosen by the State Public Utilities Commission); 1997 N. H. REV. STAT. ANN. § 374-F(xv) (retail competition is to begin as expeditiously as possible); A. 10, 208th Leg. (N.J. 1998) (enacted) (retail competition will begin on June 1, 1999); N.Y. PUB. SERV. § 77-A (McKinney 1997) (as soon as possible, but not later than Mar. 1, 2000, all customers of electric corporations, including municipal utilities, shall have the opportunity to purchase electricity services from any supplier of electricity); OKLA. STAT. tit. 17, § 190.4 (1997) (retail competition to begin by July 1, 2002); 1997 PA. LAWS 1509 (transition to retail competition began Jan. 1, 1997; all customers are to have retail access by Jan. 1, 2001); 1997 R. I. LAWS 96-H 8124 (retail access for all customers to take place no later than July 1, 1998); H.B. 1172 (Va. 1998) (enacted) (retail competition shall commence on Jan. 1, 2004); VT. STAT. ANN. tit. 89, § 8001 (1997) (retail competition to begin no later than Jan. 1, 2000). Nearly thirty other state legislatures have established special or oversight committees to study electricity restructuring with an eye toward future legislative proposals. 30 "Laboratories of Democracy" Test Electric Industry Issues, 2 LEAP LETTER 24-31 (July- Aug. 1997). The transition to competition was given a tremendous boost in 1996 when the Federal Energy Regulatory Commission required all public utilities owning or controlling facilities used for transmitting electricity in interstate commerce to offer nondiscriminatory transmission services so that power can be wheeled or transported from one utility to another across a third utility's transmission system. See Federal Energy Regulatory Commission, Promoting Wholesale Competition Through Open Access Nondiscriminatory Transmission Services by Public Utilities and Recovery of Stranded Costs by Public Utilities and Transmitting Utilities, Order No. 888, 61 Fed. Reg. 21,540 (1996) [hereinafter F.E.R.C. Order No. 888]. For a useful overview of electricity restructuring, see TIMOTHY J. BRENNAN ET AL., A SHOCK TO THE SYSTEM: RESTRUCTURING AMERICA'S ELECTRICITY INDUSTRY (1996). For an overview of the complicated federal and state regulatory jurisdictional issues involved in restructuring, see Richard J. Pierce, Jr., The State of the Transition to Competitive Markets in Natural Gas and Electricity, 15 ENERGY L. J. 323, 328-50 (1994) . For a regional perspective on the interface between electricity restructuring and environmental and consumer organizations' efforts to replace unproductive and environmentally harmful energy sources with clean technologies, see ED SMELOFF & PETER ASMUS, REINVENTING ELECTRIC UTILITIES: COMPETITION, CITIZEN ACTION, AND CLEAN POWER (1997). For a history of the growth of state-regulated monopoly electricity utilities in the early 1900s and the shift to competition in the 1990s, see generally Robert L. Bradley, The Origins of Political Electricity: Market Failure or Political Opportunism?, 17 ENERGY L. J. 59 (1996); SMELOFF & ASMUS, supra at 7-23.
12. See The Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 (codified as amended in scattered sections of 47 U.S.C.). See generally PETER W. HUBER ET AL., THE TELECOMMUNICATIONS ACT OF 1996 (1996).
13. See Civil Aeronautics Board Sunset Act of 1984, Pub. L. No. 98-443, 98 Stat. 1703 (codified as amended in scattered sections of 49 U.S.C.); Airline Deregulation Act of 1978, Pub. L. No. 95-504, §§ 28, 30, 92 Stat. 1729, 1731 (codified as amended in scattered sections of 49 U.S.C.). See also MELVIN A. BRENNER ET AL., AIRLINE DEREGULATION (1985); STEPHEN BREYER, REGULATION AND ITS REFORM 197-204 (1982).
14. See Civil Aeronautics Board Sunset Act of 1984, Pub. L. No. 98-443, 98 Stat. 1703 (codified as amended in scattered sections of 49 U.S.C.); Airline Deregulation Act of 1978, Pub. L. No. 95-504, §§ 28, 30, 92 Stat. 1729, 1731 (codified as amended in scattered sections of 49 U.S.C.). See also MELVIN A. BRENNER ET AL., AIRLINE DEREGULATION (1985); STEPHEN BREYER, REGULATION AND ITS REFORM 197-204 (1982).
15. See Motor Carrier Act of 1980, 49 U.S.C. §§ 10706(b)(3)(B)-(D) (1994).
16. See Staggers Rail Act of 1980, Pub. L. No. 96-448, 94 Stat. 1895.
17. 2 emissions, and utilities as a whole are major contributors to ground-level ozone, acid rain, visibility impairment, particulate emissions, nitrogen deposition in waterways, and global warming); NATURAL RESOURCES DEFENSE COUNCIL ET AL., BENCHMARKING AIR EMISSIONS OF UTILITY ELECTRIC GENERATORS IN THE EASTERN U.S. (Report, 1997) (electric utility generating plants are the largest source of sulfur dioxide and carbon dioxide and the largest industrial emitters of nitrogen oxides).
18. See CENTER FOR CLEAN AIR POLICY, AIR QUALITY AND ELECTRICITY RESTRUCTURING ES2-3 (March 1997); Henry Lee & Negeen Darani, Electricity Restructuring and the Environment, (Kennedy School of Government, Harvard University, CSIA Discussion Paper 95-13, Dec. 1995); ALLIANCE TO SAVE ENERGY ET AL., ENERGY INNOVATIONS 33-34 (1997); U.S. EPA, FERC EIS, supra note 11, at 4. See also Michael E. Stern & Margaret M. Mlynczak Stern, A Critical Overview of the Economic and Environmental Consequences of The Deregulation of the U.S. Electric Power Industry, 4 ENVTL. LAW. 79, 97-104 (1997) (discussing predicted negative impacts of electricity deregulation upon the environment due to increased demand for the dirtier, cheaper energy produced by coal-fired utilities); Alan Miller & Adam Serchuk, The Promise and Peril In a Restructured Electric System, 12 NAT. RES. & ENVT. 118, (1997) (same).
19. See CENTER FOR CLEAN AIR POLICY, AIR QUALITY AND ELECTRICITY RESTRUCTURING ES2-3 (March 1997); Henry Lee & Negeen Darani, Electricity Restructuring and the Environment, (Kennedy School of Government, Harvard University, CSIA Discussion Paper 95-13, Dec. 1995); ALLIANCE TO SAVE ENERGY ET AL., ENERGY INNOVATIONS 33-34 (1997); U.S. EPA, FERC EIS, supra note 11, at 4. See also Michael E. Stern & Margaret M. Mlynczak Stern, A Critical Overview of the Economic and Environmental Consequences of The Deregulation of the U.S. Electric Power Industry, 4 ENVTL. LAW. 79, 97-104 (1997) (discussing predicted negative impacts of electricity deregulation upon the environment due to increased demand for the dirtier, cheaper energy produced by coal-fired utilities); Alan Miller & Adam Serchuk, The Promise and Peril In a Restructured Electric System, 12 NAT. RES. & ENVT. 118, (1997) (same).
20. See CENTER FOR CLEAN AIR POLICY, AIR QUALITY AND ELECTRICITY RESTRUCTURING ES2-3 (March 1997); Henry Lee & Negeen Darani, Electricity Restructuring and the Environment, (Kennedy School of Government, Harvard University, CSIA Discussion Paper 95-13, Dec. 1995); ALLIANCE TO SAVE ENERGY ET AL., ENERGY INNOVATIONS 33-34 (1997); U.S. EPA, FERC EIS, supra note 11, at 4. See also Michael E. Stern & Margaret M. Mlynczak Stern, A Critical Overview of the Economic and Environmental Consequences of The Deregulation of the U.S. Electric Power Industry, 4 ENVTL. LAW. 79, 97-104 (1997) (discussing predicted negative impacts of electricity deregulation upon the environment due to increased demand for the dirtier, cheaper energy produced by coal-fired utilities); Alan Miller & Adam Serchuk, The Promise and Peril In a Restructured Electric System, 12 NAT. RES. & ENVT. 118, (1997) (same).
21. See CENTER FOR CLEAN AIR POLICY, AIR QUALITY AND ELECTRICITY RESTRUCTURING ES2-3 (March 1997); Henry Lee & Negeen Darani, Electricity Restructuring and the Environment, (Kennedy School of Government, Harvard University, CSIA Discussion Paper 95-13, Dec. 1995); ALLIANCE TO SAVE ENERGY ET AL., ENERGY INNOVATIONS 33-34 (1997); U.S. EPA, FERC EIS, supra note 11, at 4. See also Michael E. Stern & Margaret M. Mlynczak Stern, A Critical Overview of the Economic and Environmental Consequences of The Deregulation of the U.S. Electric Power Industry, 4 ENVTL. LAW. 79, 97-104 (1997) (discussing predicted negative impacts of electricity deregulation upon the environment due to increased demand for the dirtier, cheaper energy produced by coal-fired utilities); Alan Miller & Adam Serchuk, The Promise and Peril In a Restructured Electric System, 12 NAT. RES. & ENVT. 118, (1997) (same).
22. See CENTER FOR CLEAN AIR POLICY, AIR QUALITY AND ELECTRICITY RESTRUCTURING ES2-3 (March 1997); Henry Lee & Negeen Darani, Electricity Restructuring and the Environment, (Kennedy School of Government, Harvard University, CSIA Discussion Paper 95-13, Dec. 1995); ALLIANCE TO SAVE ENERGY ET AL., ENERGY INNOVATIONS 33-34 (1997); U.S. EPA, FERC EIS, supra note 11, at 4. See also Michael E. Stern & Margaret M. Mlynczak Stern, A Critical Overview of the Economic and Environmental Consequences of The Deregulation of the U.S. Electric Power Industry, 4 ENVTL. LAW. 79, 97-104 (1997) (discussing predicted negative impacts of electricity deregulation upon the environment due to increased demand for the dirtier, cheaper energy produced by coal-fired utilities); Alan Miller & Adam Serchuk, The Promise and Peril In a Restructured Electric System, 12 NAT. RES. & ENVT. 118, (1997) (same).
23. Fossil fuel generation is the source of large quantities of carbon dioxide, the primary gas responsible for global warming. Electricity deregulation is likely to increase the United States' output of greenhouse gases at a time when the U.S. is under increased pressure to reduce its contribution to climate change. In December 1997, the United States signed an agreement in Kyoto, Japan, pledging to cut its emissions of six greenhouse gases, including carbon dioxide, by seven percent from 1990 levels between the years 2008 and 2012. The Kyoto Protocol was signed by a total of 160 nations, and includes a 5.2% reduction in total developed country emissions from 1990 levels. Although U.S. delegates signed the treaty, the measure has yet to be ratified by the United States Senate. Industrialized Nations to Cut Greenhouse Gas Emissions by 5.2%, DAILY ENVT. REP. (BNA) (Dec. 12, 1997). Strong criticism of the protocol's failure to require developing nations to reduce greenhouse gases makes it unclear whether the Senate will ultimately ratify the document. In a 95-0 vote earlier this year, the Senate called for the rejection of any international treaty on greenhouse gases that does not bind developing nations. The Clinton Administration has promised to delay submitting the accord to the Senate for ratification until it has obtained the agreement of developing nations in separate negotiations to participate in the treaty by pledging reductions in their contribution to greenhouse gas emissions.
24. See Mark Felsenthal, Climate Change: White House Seeks Developing Country Emission Cuts Before Pact is Ratified, DAILY ENVT. REP. (BNA) (Dec. 12, 1997).
25. Leaders of developing nations, environmental groups, and the EU argue, however, that it is not fair to require developing nations to cut back on greenhouse gas emissions where the existing buildup of such gases is attributable to industrialized nations and per capita consumption of energy in the developing world is still often over a hundred times lower than that in the United States. See Climate Change: UNCTAD Proposes 'Buenos Aires Mandate' to Bring Developing Nations Into Treaty, DAILY ENVT. REP. (BNA) (May 8, 1998). Without the implementation of innovative policies to reduce carbon intensive energy use, deregulation will accentuate the difficulty of meeting the Kyoto accord's ambitious, but fully supportable goal.
26. See, e.g., TELLUS INSTITUTE, ES-3, SUSTAINABLE ELECTRICITY FOR NEW ENGLAND: A REPORT TO THE NEW ENGLAND GOVERNORS' CONFERENCE, INC. (Jan. 1997) (recommending New England states "emphasize market transformation strategies in their support for both energy efficiency and renewable technologies"); CENTER FOR CLEAN AIR POLICY, supra note 12, at 108-09 (concluding that state decisionmakers reduce the risk of adverse environmental impacts from electricity restructuring by adopting emissions trading, access charges, emissions fee and rebate programs, and tradable portfolio requirements for renewable energy).
27. See, e.g., Richard B. Collins, Economic Union as a Constitutional Value, 63 N.Y.U. L. REV. 43, 63-64 (1988) (economic efficiency is important in defining the doctrine's boundaries because doctrine arrays local lawmaking efficiencies against national market, but focus of framers' concerns was interstate commercial harmony rather than market efficiency); Donald Regan, The Supreme Court and State Protectionism: Making Sense of the Dormant Commerce Clause, 84 MICH. L. REV. 1091, 1119-1122 (1986) (although framers did have some efficiency-related objections to interstate protectionism, their objections were much milder than the claims made by modern apostles of efficiency; some concern with efficiency underlies traditional concern in preventing states from engaging in purposeful economic protectionism).
28. See, e.g., Richard B. Collins, Economic Union as a Constitutional Value, 63 N.Y.U. L. REV. 43, 63-64 (1988) (economic efficiency is important in defining the doctrine's boundaries because doctrine arrays local lawmaking efficiencies against national market, but focus of framers' concerns was interstate commercial harmony rather than market efficiency); Donald Regan, The Supreme Court and State Protectionism: Making Sense of the Dormant Commerce Clause, 84 MICH. L. REV. 1091, 1119-1122 (1986) (although framers did have some efficiency-related objections to interstate protectionism, their objections were much milder than the claims made by modern apostles of efficiency; some concern with efficiency underlies traditional concern in preventing states from engaging in purposeful economic protectionism).
29. See R.G. Lipsey & K. Lancaster, The General Theory of Second Best, 24 REVIEW OF ECONOMIC STUDIES 11 (1956-57). For applications of the theory of the second best to legal problems, see Peter B. McCutchen, Mistakes, Precedent and the Rise of the Administrative State: Toward a Constitutional Theory of the Second Best, 80 CORNELL L. REV. 1, 3 (1994); Kathryn L. Moore, State and Local Taxation of Interstate and Foreign Commerce: The Second Best Solution, 42 WAYNE L. REV. 1425, 1468 (1996).
30. See R.G. Lipsey & K. Lancaster, The General Theory of Second Best, 24 REVIEW OF ECONOMIC STUDIES 11 (1956-57). For applications of the theory of the second best to legal problems, see Peter B. McCutchen, Mistakes, Precedent and the Rise of the Administrative State: Toward a Constitutional Theory of the Second Best, 80 CORNELL L. REV. 1, 3 (1994); Kathryn L. Moore, State and Local Taxation of Interstate and Foreign Commerce: The Second Best Solution, 42 WAYNE L. REV. 1425, 1468 (1996).
31. See R.G. Lipsey & K. Lancaster, The General Theory of Second Best, 24 REVIEW OF ECONOMIC STUDIES 11 (1956-57). For applications of the theory of the second best to legal problems, see Peter B. McCutchen, Mistakes, Precedent and the Rise of the Administrative State: Toward a Constitutional Theory of the Second Best, 80 CORNELL L. REV. 1, 3 (1994); Kathryn L. Moore, State and Local Taxation of Interstate and Foreign Commerce: The Second Best Solution, 42 WAYNE L. REV. 1425, 1468 (1996).
32. See WALTER NICHOLSON, MICROECONOMIC THEORY 521 (5th ed. 1992).
33. There is widespread agreement among scholars that interstate harmony is at the heart of the dormant Commerce Clause. See, e.g., Collins, supra note 15, at 64 (focus of framers' concern was interstate commercial harmony to prevent strong states from exploiting weak states); Regan, supra note 15, at 1113 (state protectionism is unacceptable because it is "inconsistent with the very idea of political union"); Jonathan D. Varat, State "Citizenship" and Interstate Equality, 48 U. CHI. L. REV. 487, 493 (1981) (the interstate equality principle, which limits state power to discriminate against nonresidents and thus encourages friendship and intercourse among the states, is embodied in both the dormant Commerce Clause and the Article IV Privileges and Immunities Clause).
34. See Hughes v. Alexandria Scrap, 426 U.S. 794 (1976); Reeves v. Stake, 447 U.S. 429 (1980); White v. Massachusetts Council of Constr. Employers, Inc., 460 U.S. 204, 214-15 (1983).
35. See Varat, supra note 15, at 523 ("[P]olitical communities, including states, have a prima facie justification for limiting distribution of their public goods to those who combined to provide them."); Mark P. Gergen, The Selfish State and the Market, 66 TEX. L. REV. 1097, 1112 (1988) (arguing that utility is maximized when states are able to internalize the benefits of their actions and thus supporting some, though not all, of the Court's market participant case law).
36. See WILLIAM J. BAUMOL & WALLACE E. OATES, THE THEORY OF ENVIRONMENTAL POLICY 76-79 (1988).
37. See id.
38. See Robert W. Hahn & Robert N. Stavins, Incentive-Based Environmental Regulation: A New Era from an Old Idea?, 18 ECOLOGY L. Q. 1, 7-15 (1991) (describing and critiquing various incentive-based environmental regulatory mechanisms).
39. See R.H. Coase, The Problem of Social Cost, 3 J.L. & ECON. 1 (1960).
40. Garret Hardin, Tragedy of the Commons, 168 SCIENCE 1243 (1968).
41. For example, under the sulfur credit trading program enacted as part of the federal Clean Air Act Amendments of 1990, the sum total of sulfur dioxide emissions from electric utilities is capped at 8.9 million tons, an amount roughly 10 million tons less than sulfur dioxide emissions in 1990. This figure was not derived from an examination of the efficient level of sulfur dioxide because it was only loosely based upon scientific studies of the damage caused by sulfur emissions and their corresponding costs. Rather, the figures appear to have been the result of a political determination by the Bush Administration as to what level of control would be politically feasible. See 136 CONG. REC. S3257 (daily ed. Mar. 27, 1990) (statement of Sen. Chafee) ("[H]ere we have the administration, on its own, coming up with a 10-million-ton reduction. That was not us. That was them. We concurred with them. We, perhaps, could have gone with 12 or 8, but we went with 10 to have the horses in harness together."); see also Christopher S. Hooper, Comment, Limiting the Use of Emissions Allowances: A Statutory Analysis of Title IV of the 1990 Amendments to the Clean Air Act, 5 N.Y.U. ENVTL. L.J. 566, 589-92 (1996).
42. For example, under the sulfur credit trading program enacted as part of the federal Clean Air Act Amendments of 1990, the sum total of sulfur dioxide emissions from electric utilities is capped at 8.9 million tons, an amount roughly 10 million tons less than sulfur dioxide emissions in 1990. This figure was not derived from an examination of the efficient level of sulfur dioxide because it was only loosely based upon scientific studies of the damage caused by sulfur emissions and their corresponding costs. Rather, the figures appear to have been the result of a political determination by the Bush Administration as to what level of control would be politically feasible. See 136 CONG. REC. S3257 (daily ed. Mar. 27, 1990) (statement of Sen. Chafee) ("[H]ere we have the administration, on its own, coming up with a 10- million-ton reduction. That was not us. That was them. We concurred with them. We, perhaps, could have gone with 12 or 8, but we went with 10 to have the horses in harness together."); see also Christopher S. Hooper, Comment, Limiting the Use of Emissions Allowances: A Statutory Analysis of Title IV of the 1990 Amendments to the Clean Air Act, 5 N.Y.U. ENVTL. L.J. 566, 589-92 (1996).
43. See J.H. DALES, POLLUTION, PROPERTY AND PRICES 107 (1968)
44. Marketable permit schemes are also being implemented in programs that allow license holders to exploit a natural resource. Perhaps the most significant example of this is wetlands mitigation banking. See, e.g., William W. Sapp, The Supply-Side and Demand-Side of Wetlands Mitigation Banking, 74 OR. L. REV. 951 (1995); Michael Rolland, The Systemic Assumptions of Wetlands Mitigation: A Look at Louisiana's Proposed Wetland Mitigation and Mitigation Banking Regulations, 7 TUL. ENVTL. L.J. 497 (1994). For other examples of the use of the tradable permit approach to introduce efficiency into the allocation of natural resources, see Ransom E. Davis, Individually Transferable Quotas and the Magnuson Act: Creating Economic Efficiency in Our Nation's Fisheries, 5 DICK. J. ENVTL. L. & POL'Y 267, 305-09 (1996); David Sohn & Madeline Cohen, Note, From Smokestacks to Species: Extending the Tradable Permit Approach From Air Pollution to Habitat Conservation, 15 STAN. ENVTL. L.J. 405 (1996).
45. Marketable permit schemes are also being implemented in programs that allow license holders to exploit a natural resource. Perhaps the most significant example of this is wetlands mitigation banking. See, e.g., William W. Sapp, The Supply-Side and Demand-Side of Wetlands Mitigation Banking, 74 OR. L. REV. 951 (1995); Michael Rolland, The Systemic Assumptions of Wetlands Mitigation: A Look at Louisiana's Proposed Wetland Mitigation and Mitigation Banking Regulations, 7 TUL. ENVTL. L.J. 497 (1994). For other examples of the use of the tradable permit approach to introduce efficiency into the allocation of natural resources, see Ransom E. Davis, Individually Transferable Quotas and the Magnuson Act: Creating Economic Efficiency in Our Nation's Fisheries, 5 DICK. J. ENVTL. L. & POL'Y 267, 305-09 (1996); David Sohn & Madeline Cohen, Note, From Smokestacks to Species: Extending the Tradable Permit Approach From Air Pollution to Habitat Conservation, 15 STAN. ENVTL. L.J. 405 (1996).
46. Marketable permit schemes are also being implemented in programs that allow license holders to exploit a natural resource. Perhaps the most significant example of this is wetlands mitigation banking. See, e.g., William W. Sapp, The Supply-Side and Demand-Side of Wetlands Mitigation Banking, 74 OR. L. REV. 951 (1995); Michael Rolland, The Systemic Assumptions of Wetlands Mitigation: A Look at Louisiana's Proposed Wetland Mitigation and Mitigation Banking Regulations, 7 TUL. ENVTL. L.J. 497 (1994). For other examples of the use of the tradable permit approach to introduce efficiency into the allocation of natural resources, see Ransom E. Davis, Individually Transferable Quotas and the Magnuson Act: Creating Economic Efficiency in Our Nation's Fisheries, 5 DICK. J. ENVTL. L. & POL'Y 267, 305-09 (1996); David Sohn & Madeline Cohen, Note, From Smokestacks to Species: Extending the Tradable Permit Approach From Air Pollution to Habitat Conservation, 15 STAN. ENVTL. L.J. 405 (1996).
47. Marketable permit schemes are also being implemented in programs that allow license holders to exploit a natural resource. Perhaps the most significant example of this is wetlands mitigation banking. See, e.g., William W. Sapp, The Supply-Side and Demand-Side of Wetlands Mitigation Banking, 74 OR. L. REV. 951 (1995); Michael Rolland, The Systemic Assumptions of Wetlands Mitigation: A Look at Louisiana's Proposed Wetland Mitigation and Mitigation Banking Regulations, 7 TUL. ENVTL. L.J. 497 (1994). For other examples of the use of the tradable permit approach to introduce efficiency into the allocation of natural resources, see Ransom E. Davis, Individually Transferable Quotas and the Magnuson Act: Creating Economic Efficiency in Our Nation's Fisheries, 5 DICK. J. ENVTL. L. & POL'Y 267, 305-09 (1996); David Sohn & Madeline Cohen, Note, From Smokestacks to Species: Extending the Tradable Permit Approach From Air Pollution to Habitat Conservation, 15 STAN. ENVTL. L.J. 405 (1996).
48. See, e.g., Federal Water Pollution Control Act § 202, 33 U.S.C. § 1282 (1994) (authorizing federal grants for construction of wastewater treatment plants); FWPCA § 105, 33 U.S.C. § 1255 (1994) (grants for research and development).
49. See Dieter Helm & David Pearce, Economic Policy Towards the Environment: An Overview, in ECONOMIC POLICY TOWARD THE ENVIRONMENT 1 (Dieter Helm ed., 1991).
50. See id.
51. One of the problems with pollution taxes is that government regulators generally lack sufficient information regarding the effects of a given charge upon a firm's incentives to reduce pollution (as opposed to paying the tax) to set the tax at a level that will ensure efficient pollution levels. See SANFORD E. GAINES & RICHARD A. WESTIN, TAXATION FOR ENVIRONMENTAL PROTECTION 73 (1991).
52. For additional information on environmental incentive-based controls, see Hahn & Stavins, supra note 23, at 7-20.
53. Clean Air Act §§ 401-416, 42 U.S.C. §§ 7651-7651o (1994).
54. See Findings of Significant Contribution and Rulemaking on Section 126 Petitions for Purposes of Reducing Interstate Ozone Transport, 64 Fed. Reg. 28,250 (May 25, 1999) (granting the § 126 Clean Air Act petition of eight Northeastern states requesting that EPA make a finding that certain major stationary sources of criteria pollutants in upwind states contribute significantly to nonattainment conditions, or interfere with the maintenance of attainment, in the petitioning states).
55. See id. at 28,308.
56. See id. at 28,309.
57. RECLAIM stands for "Regional Clean Air Incentives Market." See South Coast Air Quality Management District (SCAQMD), Regional Clean Air Incentives Market, Summary Recommendations (Spring 1991); Vivien Foster & Robert W. Hahn, Designing More Efficient Markets: Lessons from Los Angeles Smog Control, 38 J. L. & ECON. 19, 24 (1995); Evan Goldenberg, Comment, The Design of an Emissions Permit Market for RECLAIM: A Holistic Approach, 11 UCLA J. ENVTL. L. & POL'Y 297, 298 (1993). RECLAIM has been highly successful. The program is expected to cut nitrogen oxide emissions in Southern California by 80% over 10 years, and save about $58 million annually compared to traditional forms of regulatory controls. See Open Market Trading Rule for Ozone Smog Precursors, 60 Fed. Reg. 39,668, 39,670 (U.S. EPA, 1995).
58. RECLAIM stands for "Regional Clean Air Incentives Market." See South Coast Air Quality Management District (SCAQMD), Regional Clean Air Incentives Market, Summary Recommendations (Spring 1991); Vivien Foster & Robert W. Hahn, Designing More Efficient Markets: Lessons from Los Angeles Smog Control, 38 J. L. & ECON. 19, 24 (1995); Evan Goldenberg, Comment, The Design of an Emissions Permit Market for RECLAIM: A Holistic Approach, 11 UCLA J. ENVTL. L. & POL'Y 297, 298 (1993). RECLAIM has been highly successful. The program is expected to cut nitrogen oxide emissions in Southern California by 80% over 10 years, and save about $58 million annually compared to traditional forms of regulatory controls. See Open Market Trading Rule for Ozone Smog Precursors, 60 Fed. Reg. 39,668, 39,670 (U.S. EPA, 1995).
59. RECLAIM stands for "Regional Clean Air Incentives Market." See South Coast Air Quality Management District (SCAQMD), Regional Clean Air Incentives Market, Summary Recommendations (Spring 1991); Vivien Foster & Robert W. Hahn, Designing More Efficient Markets: Lessons from Los Angeles Smog Control, 38 J. L. & ECON. 19, 24 (1995); Evan Goldenberg, Comment, The Design of an Emissions Permit Market for RECLAIM: A Holistic Approach, 11 UCLA J. ENVTL. L. & POL'Y 297, 298 (1993). RECLAIM has been highly successful. The program is expected to cut nitrogen oxide emissions in Southern California by 80% over 10 years, and save about $58 million annually compared to traditional forms of regulatory controls. See Open Market Trading Rule for Ozone Smog Precursors, 60 Fed. Reg. 39,668, 39,670 (U.S. EPA, 1995).
60. See In the Matter of: Emission Reduction Market System, Adoption of 35 Ill. Admin. Code 205 and Amendments to 35 Ill. Admin. Code 106, No. R97-13, 1996 Ill. Env. LEXIS 848 (Dec. 5, 1996).
61. See Alexandra Teitz, Assessing Point Source Discharge Permit Trading: Case Study in Controlling Selenium Discharges to the San Francisco Bay Estuary, 21 ECOLOGY L.Q. 79, 87 (1994). For example, Wisconsin's Fox River program allows companies to trade the right to discharge pollutants to increase biological oxygen demand. See id.
62. The Ozone Transport Commission was created by Congress in the 1990 Amendments to the Clean Air Act. 42 U.S.C. § 7511(c) (1994).
63. NORTHEAST STATES FOR COORDINATED AIR USE MANAGEMENT (NESCAUM), ISSUES IN THE DEVELOPMENT OF AN EMISSION TRADING PROGRAM (1992); see also Michael C. Naughton, Establishing Interstate Markets for Emissions Trading of Ozone Precursors: The Case of the Northeast Ozone Transport Commission and the Northeast States For Coordinated Air Use Management Emissions Trading Proposals, 3 N.Y.U. ENVTL. L.J. 195, 233 (1994).
64. See U.S. CONST. art. I, § 10, cl. 3.
65. I reach this conclusion only because I am convinced that the territoriality process must apply to state choices as to what it will recognize as a protected property right or else "states could evade their constitutional obligations by refusing to recognize that protected property interests even existed"); id. at 359-62; Jack M. Beermann, Government Official Torts and the Takings Clause: Federalism and State Sovereign Immunity, 68 B.U. L. REV. 277, 307-08 (1988) ("It would be fundamentally at odds with the principles underlying the takings clause to allow states to condition entitlements on the right to destroy the entitlement . . . . If states were allowed to build immunities into the definition of property, then no takings claim could ever succeed without the state's consent.").
66. This is because pollution permits are best viewed as state licenses that authorize a particular activity - the discharge of pollution. Such permits, which, depending upon the state's program, may be issued by the state or by a polluting entity, constitute a right to be exempted from a government enforcement action for having exceeded permissible emission levels; the bearer of the credit is entitled to a pass from a government compliance action. Indeed, a polluter cannot pollute more than some allowable level without this license or pass to pollute more.
67. One of the best known marketable obligation programs is New Jersey's incentive-based program for the provision of housing for those with low and moderate incomes. Under this program, a municipality is allowed to transfer to another municipality up to 50% of its obligation, imposed under a series of now-famous New Jersey Supreme Court decisions, Southern Burlington County N.A.A.C.P. v. Township of Mount Laurel 336 A.2d 713, 727-28 (1975), to provide a fair share of the affordable housing needed in the State. See Brent Haddad, Putting Markets to Work: The Design and Use of Marketable Permits and Obligations, 6 OECD SERVICE DE LA GESTION PUBLIQUE 6, 37-40 (Apr. 15, 1997). Between 1988 and 1995, 40 fair share transfers have occurred, representing an investment of $8.5 million to refurbish 4,180 units of substandard housing. See id. at 40. In most of the trades, a wealthier suburban neighborhood has paid a poorer urban neighborhood to fulfill its fair share obligation by transferring cash to the urban neighborhood to pay for the refurbishment of substandard or abandoned rental units in apartment complexes. See id. at 38.
68. Useful explanations of how a renewable portfolio standard works can be found in RENEWABLES WORKING GROUP, RENEWABLES WORKING GROUP REPORT TO THE CPUC, No. 500-96-008 (Aug. 1996); ALLIANCE TO SAVE ENERGY ET AL., supra note 12, at 39-40; Proposed Policies Governing Restructuring California's Electric Services Industry and Reforming Regulation, 161 PUB. UTIL. REP. 4TH (PUR) 217, 258 (1995) (opinion by California Public Utilities Commission proposing adoption of a renewable portfolio standard in California); SMELOFF & ASMUS, supra note 6, at 195-98 (explaining issues governing the implementation of an RPS in California); Nancy A. Rader & Richard B. Norgaard, Efficiency and Sustainability in Restructured Electricity Markets: The Renewables Portfolio Standard, ELEC. J. 37, 43-46; RYAN WISER ET AL., CALIFORNIA RENEWABLE ENERGY POLICY AND IMPLEMENTATION ISSUES: AN OVERVIEW OF RECENT REGULATORY AND LEGISLATIVE ACTION 3-4 (Ernest Orlando Lawrence Berkeley National Laboratory LBNL-39247; UC-1321, Sept. 1996); American Wind Assn., The Mechanics of a Renewables Portfolio Standard Applied at the State Level (Nov. 1997)
69. Useful explanations of how a renewable portfolio standard works can be found in RENEWABLES WORKING GROUP, RENEWABLES WORKING GROUP REPORT TO THE CPUC, No. 500-96-008 (Aug. 1996); ALLIANCE TO SAVE ENERGY ET AL., supra note 12, at 39-40; Proposed Policies Governing Restructuring California's Electric Services Industry and Reforming Regulation, 161 PUB. UTIL. REP. 4TH (PUR) 217, 258 (1995) (opinion by California Public Utilities Commission proposing adoption of a renewable portfolio standard in California); SMELOFF & ASMUS, supra note 6, at 195-98 (explaining issues governing the implementation of an RPS in California); Nancy A. Rader & Richard B. Norgaard, Efficiency and Sustainability in Restructured Electricity Markets: The Renewables Portfolio Standard, ELEC. J. 37, 43-46; RYAN WISER ET AL., CALIFORNIA RENEWABLE ENERGY POLICY AND IMPLEMENTATION ISSUES: AN OVERVIEW OF RECENT REGULATORY AND LEGISLATIVE ACTION 3-4 (Ernest Orlando Lawrence Berkeley National Laboratory LBNL-39247; UC-1321, Sept. 1996); American Wind Assn., The Mechanics of a Renewables Portfolio Standard Applied at the State Level (Nov. 1997) .
70. Useful explanations of how a renewable portfolio standard works can be found in RENEWABLES WORKING GROUP, RENEWABLES WORKING GROUP REPORT TO THE CPUC, No. 500-96-008 (Aug. 1996); ALLIANCE TO SAVE ENERGY ET AL., supra note 12, at 39-40; Proposed Policies Governing Restructuring California's Electric Services Industry and Reforming Regulation, 161 PUB. UTIL. REP. 4TH (PUR) 217, 258 (1995) (opinion by California Public Utilities Commission proposing adoption of a renewable portfolio standard in California); SMELOFF & ASMUS, supra note 6, at 195-98 (explaining issues governing the implementation of an RPS in California); Nancy A. Rader & Richard B. Norgaard, Efficiency and Sustainability in Restructured Electricity Markets: The Renewables Portfolio Standard, ELEC. J. 37, 43-46; RYAN WISER ET AL., CALIFORNIA RENEWABLE ENERGY POLICY AND IMPLEMENTATION ISSUES: AN OVERVIEW OF RECENT REGULATORY AND LEGISLATIVE ACTION 3-4 (Ernest Orlando Lawrence Berkeley National Laboratory LBNL-39247; UC-1321, Sept. 1996); American Wind Assn., The Mechanics of a Renewables Portfolio Standard Applied at the State Level (Nov. 1997) .
71. Useful explanations of how a renewable portfolio standard works can be found in RENEWABLES WORKING GROUP, RENEWABLES WORKING GROUP REPORT TO THE CPUC, No. 500-96-008 (Aug. 1996); ALLIANCE TO SAVE ENERGY ET AL., supra note 12, at 39-40; Proposed Policies Governing Restructuring California's Electric Services Industry and Reforming Regulation, 161 PUB. UTIL. REP. 4TH (PUR) 217, 258 (1995) (opinion by California Public Utilities Commission proposing adoption of a renewable portfolio standard in California); SMELOFF & ASMUS, supra note 6, at 195-98 (explaining issues governing the implementation of an RPS in California); Nancy A. Rader & Richard B. Norgaard, Efficiency and Sustainability in Restructured Electricity Markets: The Renewables Portfolio Standard, ELEC. J. 37, 43-46; RYAN WISER ET AL., CALIFORNIA RENEWABLE ENERGY POLICY AND IMPLEMENTATION ISSUES: AN OVERVIEW OF RECENT REGULATORY AND LEGISLATIVE ACTION 3-4 (Ernest Orlando Lawrence Berkeley National Laboratory LBNL-39247; UC-1321, Sept. 1996); American Wind Assn., The Mechanics of a Renewables Portfolio Standard Applied at the State Level (Nov. 1997) .
72. See Haddad, supra note 46, at 43 (One benefit of the RPS is that it treats renewable-resource generators, whose electricity is currently above the market price, not as charity cases, but as competitive enterprises striving to lower their costs and make the RPS unnecessary.).
73. See, e.g., NEV. REV. STAT. § 704.989(3) (Michie 1998) ("A system of credits must provide that: (a) Credits are issued for renewable energy resources for each kilowatt hour of energy which it produces."); Rader & Norgaard, supra note 47, at 43.
74. Hence, for example, if a renewable portfolio standard is established at five percent and a retailer sells 100,000 kWhs in a given year, the retailer would need to possess 5,000 renewable energy credits at the end of the year. See American Wind Ass'n, supra note 47, at 3.
75. Where an energy retailer purchases renewable energy credits together with the actual kilowatt hours that the credits represent (also known as a "bundled" sale), the number of credits held by the retailer will reflect the amount of renewable kilowatt hours in the retailer's energy portfolio. However, where an energy retailer purchases credits separate from kilowatt hours (known as an "unbundled" sale), the number of credits held by the retailer will not necessarily correspond to the actual amount of renewable kilowatt hours in the retailer's fuel mix. Nevertheless, even where credits sales are unbundled, the number of credits held by all of the state's retail energy suppliers will, in the aggregate, equal or exceed the amount of renewable kilowatt hours of power sold by renewables generators to the retail suppliers in the aggregate.
76. The role of state government under a renewable portfolio standard is limited to certifying renewable energy credits, monitoring compliance, and imposing penalties, if necessary. See Rader & Norgaard, supra note 47, at 43-44. Thus the renewable portfolio standard is extremely similar to a marketable emissions credit program. The primary difference is that the renewable portfolio standard rests upon a tradable certificate of proof demonstrating partial satisfaction of an obligation to generate one kilowatt hour of renewable power, as opposed to a tradable license to pollute a ton of a particular pollutant. Both presuppose government regulators will define the relevant environmental parameter, be it that emissions should not exceed current levels or that ten percent of the state's total electrical supply should consist of renewable energy.
77. See id. In its Annual Energy Outlook 1998, the Department of Energy's Information Administration estimates that a national renewable portfolio standard would have a minimal impact upon the price of energy. Taking into consideration the speculative nature of any prediction of the future cost of energy, the Department predicts that a national 5% renewable portfolio standard would increase the cost of energy by 0.1 cent per kilowatt hour and a 10% standard by 0.2 cent per kilowatt hour. See Climate Change: DOE Estimates Carbon Reductions from Renewable Energy Mandates, DAILY ENV'T REP. (BNA) (Dec. 19, 1997).
78. See ME. REV. STAT. ANN. tit. 35, § 3210 (West 1998). The Maine renewable portfolio standard requires 30% renewable energy, the highest percentage of renewable power found in any state's standard thus far. However, this is probably because Maine includes as renewable resources biomass and hydroelectric power, either or both of which is omitted from the definition of renewables in the standards enacted by other states.
79. See NEV. REV. STAT. § 704.989(3)(Michie 1998) (establishing a renewable portfolio standard starting at 0.2% of the total amount of electricity annually consumed by Nevada customers starting in 2001 and increasing by 0.2% on a biannual basis until the standard reaches a total of 1.0%).
80. See ARIZ. ADMIN. CODE. § R14-2-1609 (1996) (establishing a standard of 0.5% renewables in 1999, increasing by 0.2% each subsequent year until the standard reaches 1% and maintaining the 1% standard from 2003 to 2012).
81. See 1997 Mass. Acts, Ch. 164, § 11F(a) (establishing a standard, effective Dec. 31, 1999, equal to the existing percentage of kilowatt-hour sales to Massachusetts consumers from renewable resources and increasing 1% of sales by December, 2003, and increasing an additional 0.5% of sales per year in each subsequent year until December 31, 2009).
82. See 1998 Conn. Acts 98-28, § 25 (establishing a 1999 renewable mandate of between 1 and 5.5% of a retailer's portfolio, depending on the class of renewables and increasing to between 6 and 7% in 2009). Two other states have had near misses in terms of enacting a renewable portfolio standard. In 1997, the Vermont Senate passed a renewable portfolio standard, but the Act failed to pass the State House. Electric Industry Restructuring and Electric Price Stabilization Act, S.62, § 8026 (Vt., 1997). A 1996 Order of the California Public Utilities Commission called for the adoption of a State RPS. See Order Instituting Rulemaking on the Commission's Proposed Policies Governing Restructuring California's Electric Services Industry and Reforming Regulation, D. 95-12-063 (December 20, 1995), modified by D. 96-01-009 (January 10, 1996), 166 P.U.R. 4th 1 (1996). However, the California legislature rejected the RPS in favor of a subsidy-like mechanism for promoting renewable power within the state. See CAL. PUB. UTIL. CODE. § 331-381 (WEST 1996). The workings of this subsidy-like mechanism, properly termed a "system benefits charge" is discussed infra Part I.D.
83. See New Jersey Electric Discount & Energy Competition Act § 38(b)(2) (bill text available at ) (establishing a beginning renewable portfolio standard of 2.5% of the total of all renewable kilowatt hours sold to New Jersey customers and increasing the standard to 4% by 2012).
84. The renewable portfolio standards enacted by Nevada, New Jersey, Connecticut, and Arizona all authorize, either explicitly or implicitly, state regulators to implement the standard through a tradable credit scheme. See NEV. REV. STAT. § 704.989(3) (Michie 1998) ("In establishing the portfolio pursuant to this section, the commission may establish a system of credits pursuant to which an electric utility and alternative seller may comply with the provisions of this section."). See New Jersey Electric Discount and Energy Competition Act §38(b)(2) ("An electric power supplier or basic generation service provider may satisfy the requirements of this subsection by participating in a renewable energy trading program approved by the board in consultation with the Department of Environmental Protection."); 1998 Conn. Acts 98-28, § 25(a) ("An electric supplier may satisfy the requirements of this subsection by participating in a renewable energy trading program approved by the state."); ARIZ. ADMIN. CODE R14-2-1609 (providing that retailers who produce or purchase solar kilowatt hours in excess of its portfolio requirement may save or bank the excess kilowatts for use in future years and providing that any eligible solar kilowatt hour may be "sold or traded to any Electric Service Provider" subject to the state's solar portfolio standard).
85. See Comprehensive Electricity Competition Act (submitted to Congress on April 15, 1999) . This latest Clinton Administration electricity restructuring bill establishes a sizable federal minimum energy portfolio standard: by 2010, 7.5% of electricity sales must be generated from nonhydroelectric renewable resources. States may establish more stringent portfolio standards if they wish, but energy retailers must comply with the federal standard at a minimum. See id. § 402. As with many of the state renewable portfolio standards, an energy supplier may comply the federal standard by purchasing renewable energy credits from renewable energy producers or from other suppliers. See id.
86. See H.R. 4798, 105th Cong. § 115 (1998) (introduced by Rep. Kucinich) (the percentage of renewable power in each energy retail supplier's fuel mix must, by the year 2000, equal the amount of renewable energy dispatched in the United States as of December 1997 - roughly 2% - and must increase by roughly 1% each succeeding year); S. 2287, 105th Cong. § 302 (1998) (introduced by Sens. Murkowski and Bumpers) (the percentage of renewable power in each energy retail supplier's fuel mix must, starting in 2002-04, equal the total amount of renewable power dispatched in the United States as of that date, and in no case may be less than 5.5% between 2010 and 2015); S. 687, 105th Cong. (1997) (introduced by Sen. Jeffords) (requiring a graduated national renewables portfolio standard for nonhydro renewables that rises at 1% per year to 20% by the year 2020); S. 237, 105th Cong. § 110 (1997) (introduced by Sen. Dale Bumpers) (requiring retail energy suppliers to comply with a tradable obligation scheme requiring that 5% of their portfolios consist of renewable power starting in 2003); H.R. 655, 105th Cong. § 113 (1997) (introduced by Rep. Dan Shaefer) (requiring a renewables portfolio standard that mandates retail supplier's portfolio's consist of 2% renewable power starting in 2001 and increasing to 3% in 2005 and 4% in 2010).
87. See Rader & Norgaard, supra note 47, at 39-40; BRENNAN ET AL, supra note 6, at 125; Ralph Cavanagh, Electricity Shopping Can Be a Bad Deal, N. Y. TIMES, June 12, 1994, at C11; Lee & Darani, supra note 12, at 28-37 (analyzing the effect of competition upon the portion of the future energy demand supplied by renewable power).
88. See ALLIANCE TO SAVE ENERGY ET AL. supra note 12, at 2-4, 38-40 (increased reliance upon renewable energy one of several recommendations for reducing local pollution as well as global warming); JOHN J. BERGER, CHARGING AHEAD: THE BUSINESS OF RENEWABLE ENERGY AND WHAT IT MEANS FOR AMERICA 16-17 (1997) ("If global warming is indeed the menace that the vast majority of scientists believe, then efficiency and renewables are not just our best hope; they are the world's only hope.").
89. The primary localized environmental benefit of tapping renewable resources for energy is cleaner air. Power generation from hydro-electric, geothermal, solar and wind resources produces few or no emissions of nitrogen and sulfur oxides. Even biomass produces regional air benefits due to the low sulfur content of the woody waste used as fuel. Biomass may also produce local air quality benefits if open (uncontrolled) burning of wastes is avoided. Where renewable power is substituted for fossil fuels, smog and acid rain are correspondingly reduced. See, e.g., BERGER, supra note 73, at 3-4. To capture this air quality benefit, what matters is the location of the displaced fossil fuel sources. As long as the renewable power used to satisfy the renewable portfolio standard is located somewhere within the physical, multistate market in which polluting fossil fuel generators that would otherwise satisfy this energy demand are located, the standard should result in a net benefit in regional air quality.
90. Investments in renewable power provide protection against energy price fluctuations, especially those that might affect the market in fossil fuels. Where energy retailers hold a diverse portfolio of fuel sources, the consuming public is protected against the price risks associated with any particular fuel type. Price risks can result from direct fuel price increases or from indirect price increases that result from strengthened environmental regulations (such as a carbon tax). See Rader & Norgaard, supra note 47, at 40; BERGER, supra note 73, at 3 (Because renewables do not use fossil fuels - most are entirely fuel free - they are largely immune to the threat of future oil or gas shortages and fossil fuel price hikes.). A resource that is somewhat more expensive in the short run, but which has little or no risk of future price volatility, may be more valuable than a resource that is less expensive in the short run but which has a greater risk of price volatility. For example, the value of the price stability benefits that would be attributable to a renewables portfolio standard in California, were California to enact a RPS, was estimated to be $137 million annually. See RENEWABLES WORKING GROUP, supra note 47, at 57.
91. See ALLIANCE TO SAVE ENERGY ET AL., supra note 12, at 23. Domestic renewable energy now accounts for approximately 10% of domestic primary energy supply, or 8% of consumption. Approximately 45% of this supply comes from hydroelectric power, while the rest consists of wind, solar, and biomass. The largest growth in renewable energy since 1973 has come from biomass facilities. See id. 68. See Rader & Norgaard, supra note 47.
92. See, e.g., TOM TIETENBERG, NATURAL RESOURCE ECONOMICS 51 (4th ed. 1996).
93. Two initiatives deserve the most credit for building the renewable power base that currently exists in the United States. One is the Public Utility Regulatory Policies Act (PURPA) of 1978, Pub. L. No. 95-617, 92 Stat. 3117 (codified in scattered sections of 15 U.S.C. and 16 U.S.C.). Under PURPA, utilities were required to purchase electricity produced by small nonutility cogeneration and renewable energy facilities, also known as qualifying facilities (QFs). PURPA required that utilities enter into long term contracts for the purchase of QF power at the utility's avoided cost level which, at the time the contracts were agreed upon, reflected the high prices that characterized the energy crisis. Largely due to PURPA, the percentage contribution of nonutility generating facilities (including renewables) to total electric capacity rose from 5% in 1984 to 50% in 1993. See Nancy A. Rader & Ryan H. Wiser, Strategies for Promoting Wind Power: A Review and Analysis of State-Level Policy Options 3 (Aug. 1997 draft) (Prepared for the National Wind Coordinating Committee). The second major initiative was the advent of Integrated Resource Planning (IRP) by state utility commissions during the late 1980s and early 1990s. Under IRP planning, state public utility commissions were required to look at the direct and indirect costs of various supply, as well as demand-side (energy efficiency), options to meeting local energy needs. Because of the focus upon social costs of energy choices, including environmental costs, IRP processes tended to favor additional investments by utilities in energy from renewable energy sources. See id. at 4.
94. Other market barriers to renewable power are the capital-intensive nature of renewables and the unevenness of the energy resource playing field after decades of monopoly-based support of other types of energy. Renewable power demands high upfront costs attributable to equipment and construction (though lower down-the-road fuel costs). See, e.g., MICHAEL BROWER, COOL ENERGY: RENEWABLE SOLUTIONS TO ENVIRONMENTAL PROBLEMS (1994), at 27 (noting that while a solar power plant may cost $2,500 to $3,000 per kilowatt of capacity to build, a conventional power plant may cost from $400 to $1,200 per kilowatt; similarly, while a solar water heater may cost $2,500 to purchase and install, a conventional water heater costs no more than $800. Solar technologies, however, cost very little to operate, whereas conventional technologies require fuel, which is paid for throughout the life of the product). As a result, the risk premiums placed upon capital presently and certainly in a more competitive market will disproportionately disadvantage renewables. See Rader & Norgaard, supra note 47, at 40, col. 3. See also BRENNAN ET AL., supra note 6, at 125 (Companies using renewable resources may be paying twice as much in taxes as those using fossil fuel technologies, because capital and construction are taxed heavily relative to operating and maintenance expenses.); BROWER, supra at 27 (our tax system tends to penalize capital-intensive renewable energy investments because, while businesses must pay sales tax on capital equipment as well as taxes on investment profits, operating expenses, including fuel costs, can be wholly deducted). Yet another market barrier facing renewables in deregulation is the unevenness of the playing field facing renewables vis-à-vis other energy sources. To take just one example, experience with the deregulation of the telephone industry demonstrates that advertising will be the key to gaining market share. Yet renewable power faces an immediate disadvantage in this regard vis-à-vis traditional energy sources since traditional energy sources have had the support of local energy providers who already have tremendous name recognition. See id.
95. Despite legislative provisions authorizing tradable renewable power credits, it appears that only one state, Arizona, is currently implementing its renewable portfolio standard through such a scheme. See ARIZ. ADMIN. CODE R14-2-1609(I) (1998) (providing that electricity retailers may save, bank, or trade solar kwh purchased in excess of the state's solar portfolio standard for use in future years). State implementation of tradable credit schemes has thus far been stymied by two related concerns: (1) the consistency of a tradable credit scheme with emerging rules for the supplier's disclosure, or tracking, of the environmental and other characteristics of the energy in its fuel mix, and (2) fear that a tradable credit scheme will allow suppliers to use the same renewable-generated kilowatt hours to satisfy more than one state's renewable portfolio standard, essentially "double-counting" the renewable resources that they possess. However, methods exist to overcome both of these concerns and hence they should not pose barriers to state adoption of renewable credit trading schemes. To understand the first issue, consistency of tradable credits and tracking schemes, one must first understand what tracking is and how it is performed. "Tracking" refers to methods of disclosing, to consumers, the source of the kilowatt hours they purchase from retail electricity suppliers along with other pertinent information related to the environmental, labor, and other impacts resulting from the electricity's generation. See THE NATIONAL COUNCIL ON COMPETITION AND THE ELECTRIC INDUSTRY SYNTHESIS REPORT: A SUMMARY OF RESEARCH ON INFORMATION DISCLOSURE Section 2(D). (Draft April 1998) (last updated 6/22/98) ; William Spratley, Using Tradable Tags for Resource Disclosure (May 30, 1997) . There are two basic methods for tracking electrons: the energy contract, or "transactions" approach, and the tagging approach. Under a transactions approach, information about the characteristics of the energy is generated at the same time the energy is generated and such information is passed along with the kilowatts as they are bought and sold by successive entities. See id. Under the tagging approach, information about the characteristics of the power is provided through the tradable credit exclusively and does not accompany the purchase and sale of the power itself. While a tagging approach is consistent with a scheme of tradable credits, the transactions approach is less so (though it might be made consistent with a tradable credit scheme). Although the tracking system endorsed by the New England Governor's Conference does not presently contemplate states' use of a tradable credit program to implement a renewable portfolio standard, with additional work, the system could be modified to be compatible with such a scheme. See New England Governor's Conference, Inc., New England Tracking System (Oct. 1998) . The second barrier to state adoption of marketable renewable credit systems, the double-counting problem, is also capable of resolution, although not without cooperation among the states adopting a renewable portfolio standard. The double- counting problem arises where states adopt different rules for demonstrating compliance with their renewable portfolio standard. Where one state allows compliance through submission of tradable credits and another through the retailer's possession of a requisite percentage of renewable kilowatt hours in its fuel mix, a retailer who buys bundled credits and power from a renewables generator might use the credits to satisfy one state's renewable portfolio standard and use the actual kilowatt hours to comply with the other state's standard. (The same double-counting could occur when power and credits are not bundled.) States could avoid this problem by requiring that retailers comply with their renewable portfolio standard exclusively through the possession of credits. Barring this perhaps unlikely agreement, states could raise their renewable portfolio standard to take into account the possibility that retailers can use both credits and power to satisfy renewable standards.
96. Despite legislative provisions authorizing tradable renewable power credits, it appears that only one state, Arizona, is currently implementing its renewable portfolio standard through such a scheme. See ARIZ. ADMIN. CODE R14-2-1609(I) (1998) (providing that electricity retailers may save, bank, or trade solar kwh purchased in excess of the state's solar portfolio standard for use in future years). State implementation of tradable credit schemes has thus far been stymied by two related concerns: (1) the consistency of a tradable credit scheme with emerging rules for the supplier's disclosure, or tracking, of the environmental and other characteristics of the energy in its fuel mix, and (2) fear that a tradable credit scheme will allow suppliers to use the same renewable-generated kilowatt hours to satisfy more than one state's renewable portfolio standard, essentially "double-counting" the renewable resources that they possess. However, methods exist to overcome both of these concerns and hence they should not pose barriers to state adoption of renewable credit trading schemes. To understand the first issue, consistency of tradable credits and tracking schemes, one must first understand what tracking is and how it is performed. "Tracking" refers to methods of disclosing, to consumers, the source of the kilowatt hours they purchase from retail electricity suppliers along with other pertinent information related to the environmental, labor, and other impacts resulting from the electricity's generation. See THE NATIONAL COUNCIL ON COMPETITION AND THE ELECTRIC INDUSTRY SYNTHESIS REPORT: A SUMMARY OF RESEARCH ON INFORMATION DISCLOSURE Section 2(D). (Draft April 1998) (last updated 6/22/98) ; William Spratley, Using Tradable Tags for Resource Disclosure (May 30, 1997) . There are two basic methods for tracking electrons: the energy contract, or "transactions" approach, and the tagging approach. Under a transactions approach, information about the characteristics of the energy is generated at the same time the energy is generated and such information is passed along with the kilowatts as they are bought and sold by successive entities. See id. Under the tagging approach, information about the characteristics of the power is provided through the tradable credit exclusively and does not accompany the purchase and sale of the power itself. While a tagging approach is consistent with a scheme of tradable credits, the transactions approach is less so (though it might be made consistent with a tradable credit scheme). Although the tracking system endorsed by the New England Governor's Conference does not presently contemplate states' use of a tradable credit program to implement a renewable portfolio standard, with additional work, the system could be modified to be compatible with such a scheme. See New England Governor's Conference, Inc., New England Tracking System (Oct. 1998) . The second barrier to state adoption of marketable renewable credit systems, the double-counting problem, is also capable of resolution, although not without cooperation among the states adopting a renewable portfolio standard. The double- counting problem arises where states adopt different rules for demonstrating compliance with their renewable portfolio standard. Where one state allows compliance through submission of tradable credits and another through the retailer's possession of a requisite percentage of renewable kilowatt hours in its fuel mix, a retailer who buys bundled credits and power from a renewables generator might use the credits to satisfy one state's renewable portfolio standard and use the actual kilowatt hours to comply with the other state's standard. (The same double-counting could occur when power and credits are not bundled.) States could avoid this problem by requiring that retailers comply with their renewable portfolio standard exclusively through the possession of credits. Barring this perhaps unlikely agreement, states could raise their renewable portfolio standard to take into account the possibility that retailers can use both credits and power to satisfy renewable standards.
97. Despite legislative provisions authorizing tradable renewable power credits, it appears that only one state, Arizona, is currently implementing its renewable portfolio standard through such a scheme. See ARIZ. ADMIN. CODE R14-2-1609(I) (1998) (providing that electricity retailers may save, bank, or trade solar kwh purchased in excess of the state's solar portfolio standard for use in future years). State implementation of tradable credit schemes has thus far been stymied by two related concerns: (1) the consistency of a tradable credit scheme with emerging rules for the supplier's disclosure, or tracking, of the environmental and other characteristics of the energy in its fuel mix, and (2) fear that a tradable credit scheme will allow suppliers to use the same renewable-generated kilowatt hours to satisfy more than one state's renewable portfolio standard, essentially "double-counting" the renewable resources that they possess. However, methods exist to overcome both of these concerns and hence they should not pose barriers to state adoption of renewable credit trading schemes. To understand the first issue, consistency of tradable credits and tracking schemes, one must first understand what tracking is and how it is performed. "Tracking" refers to methods of disclosing, to consumers, the source of the kilowatt hours they purchase from retail electricity suppliers along with other pertinent information related to the environmental, labor, and other impacts resulting from the electricity's generation. See THE NATIONAL COUNCIL ON COMPETITION AND THE ELECTRIC INDUSTRY SYNTHESIS REPORT: A SUMMARY OF RESEARCH ON INFORMATION DISCLOSURE Section 2(D). (Draft April 1998) (last updated 6/22/98) ; William Spratley, Using Tradable Tags for Resource Disclosure (May 30, 1997) . There are two basic methods for tracking electrons: the energy contract, or "transactions" approach, and the tagging approach. Under a transactions approach, information about the characteristics of the energy is generated at the same time the energy is generated and such information is passed along with the kilowatts as they are bought and sold by successive entities. See id. Under the tagging approach, information about the characteristics of the power is provided through the tradable credit exclusively and does not accompany the purchase and sale of the power itself. While a tagging approach is consistent with a scheme of tradable credits, the transactions approach is less so (though it might be made consistent with a tradable credit scheme). Although the tracking system endorsed by the New England Governor's Conference does not presently contemplate states' use of a tradable credit program to implement a renewable portfolio standard, with additional work, the system could be modified to be compatible with such a scheme. See New England Governor's Conference, Inc., New England Tracking System (Oct. 1998) . The second barrier to state adoption of marketable renewable credit systems, the double-counting problem, is also capable of resolution, although not without cooperation among the states adopting a renewable portfolio standard. The double-counting problem arises where states adopt different rules for demonstrating compliance with their renewable portfolio standard. Where one state allows compliance through submission of tradable credits and another through the retailer's possession of a requisite percentage of renewable kilowatt hours in its fuel mix, a retailer who buys bundled credits and power from a renewables generator might use the credits to satisfy one state's renewable portfolio standard and use the actual kilowatt hours to comply with the other state's standard. (The same double-counting could occur when power and credits are not bundled.) States could avoid this problem by requiring that retailers comply with their renewable portfolio standard exclusively through the possession of credits. Barring this perhaps unlikely agreement, states could raise their renewable portfolio standard to take into account the possibility that retailers can use both credits and power to satisfy renewable standards.
98. Renewable power generation does not produce carbon emissions that cause global climate change. Because renewable power can displace fossil fuel generation whose emissions are a primary cause of global warming, renewable power helps reduce further warming. Although biomass resources must be regrown to create a net carbon benefit, biomass generation can displace rotting biomass which produces methane, a more destructive greenhouse gas. The global benefit of renewables in terms of reducing emissions that contribute to global warming accrues irrespective of the location of the renewable or the fossil fuel generator since global warming is a product of the aggregate amount of carbon emitted by anthropogenic sources into the atmosphere and hence is not affected by the exact location of renewables generators or the fossil fuel plants whose energy it is replacing.
99. Many people do, of course, derive personal satisfaction from having done something good for the environment in supporting a clean energy technology. While this is no doubt a sufficient payback for some voters, and indeed is the motivation behind green marketing programs, economic theory dictates that it is not a sufficient payback for many others and hence cannot be relied upon to ensure the provision of a public good, such as clean air, in sufficient (or in economic jargon, efficient) amounts. For a more detailed discussion of green marketing, see infra Part II.
100. Even if an in-state credit generation requirement results in renewables generators displacing some of the power that would otherwise be supplied to state residents by nearby fossil-fuel plants, this will only translate into environmental benefits if the fossil-fuel plants reduce their generating capacity rather than simply generating the same amount of energy (and hence emissions) and selling a larger portion of their energy output to out-of-state customers.
101. See NEV. REV. STAT. § 704.989(7) (Michie 1998) (defining "renewable energy resources" under the state renewable portfolio standard to mean "wind, solar, geothermal and biomass energy resources in this state that are naturally regenerated"; defining "renewable energy system" to mean "an energy system in this state that utilizes renewable energy resources to produce electricity") (emphasis added). A California legislative committee debated, but ultimately rejected, such a requirement. See Senate Conference Committee on Electric Industry Restructuring and PUC/CEC Reform (Aug. 10-12, 1996).
102. The significance of the burden would be analyzed under the Court's test for facially neutral burdens upon interstate commerce. See Pike v. Bruce Church, 397 U.S. 137, 145 (1970).
103. See Philadelphia v. New Jersey, 437 U.S. 617, 624 (1978). The Court now treats Philadelphia v. New Jersey as the flagship case referring to state regulations that discriminate against interstate commerce on their face and Pike v. Bruce Church, 397 U.S. at 145 as the leading case for facially nondiscriminatory regulations that nevertheless burden interstate commerce. The Court has been quite virulent in its attacks upon facially-discriminatory state legislation. See, e.g., Wyoming v. Oklahoma, 502 U.S. 437, 455 (1992) (invalidating Oklahoma statute requiring that Oklahoma coal-fired utilities burn a mixture of coal containing at least 10% Oklahoma-mined coal for discriminating to protect Oklahoma's coal industry); New Energy Co. of Indiana v. Limbach, 486 U.S. 269, 274, 278-81 (1988) (invalidating Ohio's provision of a tax credit against the Ohio motor fuel sales tax for each gallon of Ohio ethanol (or ethanol from a state granting a reciprocal tax advantage) as a facially discriminatory measure designed to protect Ohio ethanol producers); Bacchus Imports, Ltd. v. Dias, 468 U.S. 263, 270-73 (1984) (invalidating a 20% excise tax imposed on sales of liquor at wholesale, but exempting certain Hawaii-produced alcoholic beverages as a discriminatory measure designed to aid the Hawaii liquor industry); Boston Stock Exch. v. State Tax Comm'n, 429 U.S. 318, 330-31 (1977) (striking down a New York statute imposing a higher tax on transfers of stock occurring outside the state than on transfers involving a sale within the State as discriminatory and protectionist of New York stockbrokers); Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 511, 524 (1935) (striking down a New York statute excluding out-of-state milk purchased at levels below the New York mandated price as blatant protectionism of New York dairy farmers); Alliance for Clean Coal v. Bayh, 72 F.3d 556, 560 (7th Cir. 1995) (invalidating nearly identical Indiana statute); Alliance for Clean Coal v. Miller, 44 F.3d 591, 596 (7th Cir. 1995) (invalidating Illinois statute providing incentives to electric utilities who provide for compliance with 1990 federal Clean Air Act without decreasing use of Illinois coal); Fort Gratiot Sanitary Landfill, Inc. v. Michigan Dep't of Natural Resources, 504 U.S. 353, 361 (1992) (striking down as facially discriminatory a Michigan law authorizing counties who complied with solid waste planning requirements to ban disposal of out-of-state waste); Chemical Waste Management, Inc. v. Hunt, 504 U.S. 334, 342 (1992) (invalidating Alabama statute imposing an additional fee solely upon imported hazardous waste as facially discriminatory). Ironically and somewhat inconsistently, the Court does permit a state to promote its own industry through general revenue subsidies, though such subsidies also constitute facial discrimination for the purpose of economic protectionism. See, e.g., New Energy, 486 U.S. at 278. The subject of permissible subsidies under the dormant Commerce Clause will be discussed infra at Part I.E.1.
104. See Philadelphia v. New Jersey, 437 U.S. at 627; see also id. at 626 (the evil of protectionism can reside in legislative means as well as legislative ends). There are several direct analogies between an in-state energy credit generation restriction and New Jersey's ban upon the importation of out-of-state garbage that was struck down in Philadelphia v. New Jersey. First, both legislative acts halt interstate trade altogether, and are thus as disruptive to interstate commerce as discriminatory tariffs. See West Lynn Creamery, Inc. v. Healy, 512 U.S. 186, 193 (1994) ("In fact, tariffs against the products of other States are so patently unconstitutional that our cases reveal not a single attempt by any State to enact one. Instead, the cases are filled with state laws that aspire to reap some of the benefits of tariffs by some other means."); cf. Regan supra note 15, at 1094-95 (noting that the quintessential instrument of protectionism is the protective tariff, a duty on imports of a certain good imposed for the purpose of securing a greater share of the home market for domestic producers of the good). Second, and more importantly, the state is employing facial discrimination to achieve a particular legislative end: guaranteeing the totality of the environmental and economic benefits associated with increased production of renewable power.
105. 502 U.S. at 452-55.
106. See Bacchus, 468 U.S. at 272 ("[W]e perceive no principle of Commerce Clause jurisprudence supporting a distinction between thriving and struggling enterprises under these circumstances. . . In either event, the legislation constitutes 'economic protectionism' in every sense of the phrase.").
107. In Bacchus, the Court also rejected as irrelevant the State's argument that its intent in exempting locally produced alcoholic beverages from a state tax was not to discriminate against foreign products, but rather only to promote a local industry. See id. ("[I]t is irrelevant to the Commerce Clause inquiry that the motivation of the legislature was the desire to aid the makers of the locally produced beverage rather than to harm out-of-state producers.").
108. See, e.g., Richard J. Pierce, The Anti-Trust Implications of Energy Restructuring, 12 NAT. RES. & ENVT. 269, 272 (Spring 1998) (discussing factors affecting the distances that electricity may be cost-effectively transmitted within each one of the nation's ten electricity grids).
109. The Court has repeatedly advertised the existence of this exception for legitimate health and safety regulation. See, e.g., Philadelphia v. New Jersey, 437 U.S. at 624 ("The crucial inquiry, therefore, must be directed to determing whether [the law at issue] is basically a protectionist measure, or whether it can fairly be viewed as a law directed to legitimate local concerns, with effects upon interstate commerce that are only incidental."); Oregon Waste Systems v. Department of Environmental Quality, 511 U.S. 92, 101 (1994) (substantially the same); Hughes v. Oklahoma, 441 U.S. 321, 337 (1979) (substantially the same); C & A Carbone v. Town of Clarkstown, 511 U.S. 383, 394 (1994) (substantially the same). But only in one case, Maine v. Taylor, has the Court actually applied this exception to uphold a facially discriminatory regulation. 477 U.S. 131, 149 (1986) (state ban upon the import of out-of-state baitfish was justified by the need to protect native baitfish species from parasite infestation).
110. 477 U.S. at 141 (upholding a Maine ban enacted for the alleged purpose of protecting native baitfish species from contamination by parasites prevalent in non-native species and protecting the State's aquatic ecology from the unpredictable effects resulting from the introduction of nonnative baitfish species). A state might attempt to use Maine to argue that the geographic-based discrimination in the in-state credit generation requirement is simply a shortcut for distinguishing between two different articles of commerce. In Maine v. Taylor, Maine successfully argued that its facial discrimination against imported baitfish simply recognized that baitfish contaminated by parasites (nearly all nonnative species) were different from baitfish not contaminated by parisites (all native species) and hence Maine was not really discriminating against out-of-state baitfish, but rather only contaminated baitfish. See id. Under this interpretation, the "no less discriminatory alternatives" prong of the Court's facial discrimination test is simply a more probing analysis of whether the state law is really discriminatory. Nevertheless, this argument is not open to a state attempting to justify an in-state credit generation requirement because the state's use of geography to distinguish between valid and invalid energy credits cannot be seen as a proxy for some nongeographic distinguishing characteristic such as infection. In contrast to baitfish, which comes in at least two varieties - infected and uninfected - renewable energy credits come in just one. Cf. Philadelphia v. New Jersey, 437 U.S. at 629 ("The harms caused by waste are said to arise after its disposal in landfill sites, and at that point, as New Jersey concedes, there is no basis to distinguish out-of-state waste from domestic waste."). A state might also try to use Maine v. Taylor to argue that no alternative exists that realizes both the state's goals of increasing renewable resouce-based energy and its desire to implement that goal through a flexible tradable credit scheme. In Maine, the state successfully argued that no nondiscriminatory methods existed to effectuate its legitimate goal of protecting native baitfish from parasite contamination. See 477 U.S. at 146. But a nondiscriminatory alternative to a state's in-state credit generation requirement arguably does exist - a state can garner many of the benefits of increased reliance upon renewable power and employ a market-based tradable energy credit scheme if it restricts qualifying credits to those representing power sold to in-state consumers. This nondiscriminatory alternative is discussed infra Part I.B.3.b.
111. For example, Maine restricts the renewable resources that a retailer may count toward the state's renewable portfolio standard to renewable power that can physically be delivered to the New England Power Pool from which Maine receives its electricity. ME. REV. STAT. ANN. tit. 35, § 3210 (West 1998) ("As used in this section, the term 'renewable resource' means a source of electrical generation that generates power that can physically be delivered to . . . the New England Power Pool."). A similar in-state sale restriction can be found in an electricity restructuring bill pending before the Vermont legislature. See An Act Relating to Electric Utility Regulatory Reform, H. 663, § 219f (Vt. 1998) (availabe at: ) (renewable portfolio standard is satisfied by utility sales in Vermont that are generated by renewable technologies) (emphasis added).
112. To get a better understanding of how an in-state sales restriction would work, consider the following example. Suppose three states, A, B, and C, adopt a renewable portfolio standard applicable to all energy retailers selling power within their respective jurisdictions and furthermore implement the standard through a system of tradable energy credits. Suppose further that State A has adopted an in-state sale restriction. Suppose a retailer who provides electricity to State A approaches a wind power generator located in State C to purchase renewable energy credits necessary to satisfy State A's renewable mandate. Suppose the wind generator offers the retailer credits representing electricity sold by the wind company to a customer in State A as well as credits representing electricity sold to customers in State B. Under State A's in-state sales restriction, only the credits representing power sold to customers in State A will satisfy the energy retailer's obligations under State A's renewable portfolio standard.
113. Of course, advances in technology could eliminate the degree to which the in-state sales restriction limits the outflow of a state's renewable portfolio standard when implemented through a tradable credit regime. As transmission technology improves, generators will be able to service end-use customers located further away. Thus, despite the restriction, a state that implements its renewables mandate through a tradable credit system would still risk losing the economic and environmental benefits of the mandate to distant states
114. ALLIANCE TO SAVE ENERGY ET AL., supra note 12, at 42-43.
115. See, e.g., Brown-Forman Distillers Corp. v. New York State Liquor Auth., 476 U.S. 573, 580 (1986) ("Economic protectionism is not limited to attempts to convey advantages on local merchants; it may include attempts to give local consumers an advantage over consumers in other States."). See also New England Power Co. v. New Hampshire, 455 U.S. 331, 339 (1982) (striking down a New Hampshire order "designed to gain an economic advantage for New Hampshire citizens at the expense of New England Power's customers in neighboring states"); Pennsylvania v. West Virginia, 262 U.S. 553, 590-93 (1923) (striking down a West Virginia law that would curtail the supply of gas into neighboring states in part because of the effects of such a law upon gas consumers in other states). But cf. Sporhase v. Nebraska, 458 U.S. 941, 957 (1982) (public ownership of ground water supports a limited preference for state residents over nonresidents in the utilization of the ground water resource).
116. Brown-Forman, 476 U.S. at 580 (emphasis added).
117. See Brown-Forman, 476 U.S. at 583 (emphasis added) (striking down a New York price statute that required distillers to affirm that they would not make future sales of liquor in any other state at a price lower than the sale price posted in New York).
118. See ARIZ. ADMIN. CODE R14-2-1609(D) - (K) (1998). Arizona requires that, as of Jan. 1, 1999, any electric service provider selling electricity within Arizona must derive .2% of the total retail electricity the retailer sells competitively, from solar energy resources installed on or after Jan. 1, 1997. However, a retailer is eligible for an "extra credit multiplier" that it may use to meet the .2% mandate if it (1) installs a solar electric power plant in Arizona; (2) uses Arizona-manufactured items in installing a solar electric power plant; (3) contributes to the installation of a solar electric generator on the premises of an Arizona electricity customer; or (4) owns or makes a significant investment in a solar electric manufacturing plant located in Arizona. See id. 94. See generally Peter D. Enrich, Saving the States From Themselves: Commerce Clause Constraints on State Tax Incentives for Business, 110 HARV. L. REV. 377, 382-89 (1996) (describing various innovations in state tax policy designed to encourage business to locate within the state).
119. See id. at 131; Dan T. Coenen & Walter Hellerstein, Suspect Linkage: The Interplay of State Taxing and Spending Measures in the Application of Constitutional Antidiscrimination Rules, 95 MICH. L. REV. 2167 (1997); Walter Hellerstein, Commerce Clause Restraints on State Tax Incentives, 82 MINN. L. REV. 413 (1997); Philip M. Tatarowicz & Rebecca F. Mims-Velarde, An Analytical Approach to State Tax Discrimination Under the Commerce Clause, 39 VAND. L. REV. 879 (1986).
120. See id. at 131; Dan T. Coenen & Walter Hellerstein, Suspect Linkage: The Interplay of State Taxing and Spending Measures in the Application of Constitutional Antidiscrimination Rules, 95 MICH. L. REV. 2167 (1997); Walter Hellerstein, Commerce Clause Restraints on State Tax Incentives, 82 MINN. L. REV. 413 (1997); Philip M. Tatarowicz & Rebecca F. Mims-Velarde, An Analytical Approach to State Tax Discrimination Under the Commerce Clause, 39 VAND. L. REV. 879 (1986).
121. See id. at 131; Dan T. Coenen & Walter Hellerstein, Suspect Linkage: The Interplay of State Taxing and Spending Measures in the Application of Constitutional Antidiscrimination Rules, 95 MICH. L. REV. 2167 (1997); Walter Hellerstein, Commerce Clause Restraints on State Tax Incentives, 82 MINN. L. REV. 413 (1997); Philip M. Tatarowicz & Rebecca F. Mims-Velarde, An Analytical Approach to State Tax Discrimination Under the Commerce Clause, 39 VAND. L. REV. 879 (1986).
122. Very few Supreme Court cases address the constitutionality of state tax or other location incentives under the Commerce Clause. One commentator believes this is attributable, among other things, to the fact that challenging a state location incentive places the natural plaintiff for such a suit - a multistate business that chooses to locate someplace other than the state offering the incentive - in an awkward position because it may be the beneficiary of a similar incentive program in another state. See Enrich, supra note 125, at 409-12. Supreme Court cases that are nonetheless relevant to parsing the constitutionality of state location incentives include: Boston Stock Exchange v. State Tax Commission, 429 U.S. 318 (1977), which invalidated a provision of the New York securities transfer tax for transfers of shares made on a New York stock exchange; Bacchus Imports, LTD. v. Dias, 468 U.S. 263 (1984), which invalidated an exemption from a Hawaiian liquor excise tax for certain alcoholic beverages distilled in Hawaii from native fruits; and Westinghouse Electric Corp. v. Tully, 466 U.S. 388 (1984), which invalidated a New York income tax credit for products shipped from New York that increased or decreased depending upon whether New York's share of the company's exports grew or shrank.
123. Thus state location incentives would appear to violate the Court's prohibition upon state laws that facially discriminate against interstate commerce. See supra Part I.B.3.a. (concerning facial discrimination under in-state credit generation restriction).
124. See infra text accompanying notes 181-82.
125. See, e.g., Hughes v. Alexandria Scrap, 426 U.S. 794, 816 (1967) (Stevens, J., concurring) ("Whether [a state's] encouragement takes the form of a cash subsidy, a tax credit, or a special privilege intended to attract investment capital, it should not be characterized as a 'burden' on commerce."); Chemical Waste Management, Inc. v. Hunt, 504 U.S. 334, 349-52 (1992) (Rehnquist, C.J., dissenting) (suggesting that a state may provide tax breaks to domestic industries that generate hazardous wastes).
126. See Enrich, supra note 125, at 446-47 (concluding that "any tax incentive that reduces a tax imposed only on account of the very in-state activity that triggers the benefit" is constitutionally valid); Walter Hellerstein & Dan T. Coenen, Commerce Clause Restraints on State Business Development Incentives, 81 CORNELL L. REV. 789, 806-07, 829-34 (1996) (concluding that tax incentives, such as property and sales tax exemptions, that are framed as exemptions from additional state tax liability, rather than exemptions from existing state tax liability, constitute a significant category of tax incentives that should escape invalidation under the Commerce Clause).
127. See Boston Stock Exchange, 429 U.S. at 335 (Commerce Clause prohibits state tax laws that discriminate between two types of interstate transactions so as to favor local commercial interests over out-of-state interests); Westinghouse Electric, 466 U.S. at 404-07 (New York franchise tax unconstitutionally discriminates against out-of-state sales by promoting intrastate transactions); see also Hellerstein & Coenen, supra note 100, at 825-34 (concluding that state sales and similar transaction tax exemptions, credits, or refunds are constitutionally suspect when they are tied to an in-state activity that is separate from the in-state purchase of property or services on which the tax is levied).
128. See infra Part I.D.2.
129. See generally UNITED STATES GENERAL ACCOUNTING OFFICE, GAO/RCED-95-187, ELECTRICITY SUPPLY: CONSIDERATION OF ENVIRONMENTAL COST IN SELECTING FUEL SOURCES (1995) (hereinafter GAO Report); Karen Palmer & Hadi Dowlatabadi, Implementing Social Costing in the Electric Utility Industry, 4 ENERGY & ENVT. 197 (1993); Timothy J. Brennan & Karen Palmer, Comparing Costs and Benefits of Diversification by Regulated Firms, 6 J. REG. ECON. 115 (1994); Dallas Burtraw et al., 'Second-Best' Adjustments to Externality Estimates in Electricity Planning with Competition, Resources for the Future, Discussion Paper No. 96-04 (Oct. 1995); Richard Rosen et al., Promoting Environmental Quality in a Restructured Electric Industry (Tellus Institute Report No. 95-056, Dec. 15, 1995); Stephen S. Bernow et al., Valuation of Environmental and Human Health Risks Associated With Electric Power Generation: A Discussion of Methods and a Review of Greenhouse Gas Studies (Tellus Institute Report No. 94-202, Nov. 14, 1994); Bernard S. Black & Richard J. Pierce, Jr., The Choice Between Markets and Central Planning in Regulating the U.S. Electricity Industry, 93 COLUM. L. REV. 1339, 1400 (1993); Eugene M. Trisko, Environmental Externalities: Thinking Globally, Taxing Locally, 131 PUB. UTIL. FORT. 52 (1993).
130. See generally UNITED STATES GENERAL ACCOUNTING OFFICE, GAO/RCED-95- 187, ELECTRICITY SUPPLY: CONSIDERATION OF ENVIRONMENTAL COST IN SELECTING FUEL SOURCES (1995) (hereinafter GAO Report); Karen Palmer & Hadi Dowlatabadi, Implementing Social Costing in the Electric Utility Industry, 4 ENERGY & ENVT. 197 (1993); Timothy J. Brennan & Karen Palmer, Comparing Costs and Benefits of Diversification by Regulated Firms, 6 J. REG. ECON. 115 (1994); Dallas Burtraw et al., 'Second-Best' Adjustments to Externality Estimates in Electricity Planning with Competition, Resources for the Future, Discussion Paper No. 96-04 (Oct. 1995); Richard Rosen et al., Promoting Environmental Quality in a Restructured Electric Industry (Tellus Institute Report No. 95-056, Dec. 15, 1995); Stephen S. Bernow et al., Valuation of Environmental and Human Health Risks Associated With Electric Power Generation: A Discussion of Methods and a Review of Greenhouse Gas Studies (Tellus Institute Report No. 94-202, Nov. 14, 1994); Bernard S. Black & Richard J. Pierce, Jr., The Choice Between Markets and Central Planning in Regulating the U.S. Electricity Industry, 93 COLUM. L. REV. 1339, 1400 (1993); Eugene M. Trisko, Environmental Externalities: Thinking Globally, Taxing Locally, 131 PUB. UTIL. FORT. 52 (1993).
131. See generally UNITED STATES GENERAL ACCOUNTING OFFICE, GAO/RCED-95- 187, ELECTRICITY SUPPLY: CONSIDERATION OF ENVIRONMENTAL COST IN SELECTING FUEL SOURCES (1995) (hereinafter GAO Report); Karen Palmer & Hadi Dowlatabadi, Implementing Social Costing in the Electric Utility Industry, 4 ENERGY & ENVT. 197 (1993); Timothy J. Brennan & Karen Palmer, Comparing Costs and Benefits of Diversification by Regulated Firms, 6 J. REG. ECON. 115 (1994); Dallas Burtraw et al., 'Second-Best' Adjustments to Externality Estimates in Electricity Planning with Competition, Resources for the Future, Discussion Paper No. 96-04 (Oct. 1995); Richard Rosen et al., Promoting Environmental
132. See generally UNITED STATES GENERAL ACCOUNTING OFFICE, GAO/RCED-95- 187, ELECTRICITY SUPPLY: CONSIDERATION OF ENVIRONMENTAL COST IN SELECTING FUEL SOURCES (1995) (hereinafter GAO Report); Karen Palmer & Hadi Dowlatabadi, Implementing Social Costing in the Electric Utility Industry, 4 ENERGY & ENVT. 197 (1993); Timothy J. Brennan & Karen Palmer, Comparing Costs and Benefits of Diversification by Regulated Firms, 6 J. REG. ECON. 115 (1994); Dallas Burtraw et al., 'Second-Best' Adjustments to Externality Estimates in Electricity Planning with Competition, Resources for the Future, Discussion Paper No. 96-04 (Oct. 1995); Richard Rosen et al., Promoting Environmental Quality in a Restructured Electric Industry (Tellus Institute Report No. 95-056, Dec. 15, 1995); Stephen S. Bernow et al., Valuation of Environmental and Human Health Risks Associated With Electric Power Generation: A Discussion of Methods and a Review of Greenhouse Gas Studies (Tellus Institute Report No. 94-202, Nov. 14, 1994); Bernard S. Black & Richard J. Pierce, Jr., The Choice Between Markets and Central Planning in Regulating the U.S. Electricity Industry, 93 COLUM. L. REV. 1339, 1400 (1993); Eugene M. Trisko, Environmental Externalities: Thinking Globally, Taxing Locally, 131 PUB. UTIL. FORT. 52 (1993).
133. See generally UNITED STATES GENERAL ACCOUNTING OFFICE, GAO/RCED-95- 187, ELECTRICITY SUPPLY: CONSIDERATION OF ENVIRONMENTAL COST IN SELECTING FUEL SOURCES (1995) (hereinafter GAO Report); Karen Palmer & Hadi Dowlatabadi, Implementing Social Costing in the Electric Utility Industry, 4 ENERGY & ENVT. 197 (1993); Timothy J. Brennan & Karen Palmer, Comparing Costs and Benefits of Diversification by Regulated Firms, 6 J. REG. ECON. 115 (1994); Dallas Burtraw et al., 'Second-Best' Adjustments to Externality Estimates in Electricity Planning with Competition, Resources for the Future, Discussion Paper No. 96-04 (Oct. 1995); Richard Rosen et al., Promoting Environmental Quality in a Restructured Electric Industry (Tellus Institute Report No. 95-056, Dec. 15, 1995); Stephen S. Bernow et al., Valuation of Environmental and Human Health Risks Associated With Electric Power Generation: A Discussion of Methods and a Review of Greenhouse Gas Studies (Tellus Institute Report No. 94-202, Nov. 14, 1994); Bernard S. Black & Richard J. Pierce, Jr., The Choice Between Markets and Central Planning in Regulating the U.S. Electricity Industry, 93 COLUM. L. REV. 1339, 1400 (1993); Eugene M. Trisko, Environmental Externalities: Thinking Globally, Taxing Locally, 131 PUB. UTIL. FORT. 52 (1993).
134. See generally UNITED STATES GENERAL ACCOUNTING OFFICE, GAO/RCED-95- 187, ELECTRICITY SUPPLY: CONSIDERATION OF ENVIRONMENTAL COST IN SELECTING FUEL SOURCES (1995) (hereinafter GAO Report); Karen Palmer & Hadi Dowlatabadi, Implementing Social Costing in the Electric Utility Industry, 4 ENERGY & ENVT. 197 (1993); Timothy J. Brennan & Karen Palmer, Comparing Costs and Benefits of Diversification by Regulated Firms, 6 J. REG. ECON. 115 (1994); Dallas Burtraw et al., 'Second-Best' Adjustments to Externality Estimates in Electricity Planning with Competition, Resources for the Future, Discussion Paper No. 96-04 (Oct. 1995); Richard Rosen et al., Promoting Environmental Quality in a Restructured Electric Industry (Tellus Institute Report No. 95-056, Dec. 15, 1995); Stephen S. Bernow et al., Valuation of Environmental and Human Health Risks Associated With Electric Power Generation: A Discussion of Methods and a Review of Greenhouse Gas Studies (Tellus Institute Report No. 94-202, Nov. 14, 1994); Bernard S. Black & Richard J. Pierce, Jr., The Choice Between Markets and Central Planning in Regulating the U.S. Electricity Industry, 93 COLUM. L. REV. 1339, 1400 (1993); Eugene M. Trisko, Environmental Externalities: Thinking Globally, Taxing Locally, 131 PUB. UTIL. FORT. 52 (1993).
135. See generally UNITED STATES GENERAL ACCOUNTING OFFICE, GAO/RCED-95- 187, ELECTRICITY SUPPLY: CONSIDERATION OF ENVIRONMENTAL COST IN SELECTING FUEL SOURCES (1995) (hereinafter GAO Report); Karen Palmer & Hadi Dowlatabadi, Implementing Social Costing in the Electric Utility Industry, 4 ENERGY & ENVT. 197 (1993); Timothy J. Brennan & Karen Palmer, Comparing Costs and Benefits of Diversification by Regulated Firms, 6 J. REG. ECON. 115 (1994); Dallas Burtraw et al., 'Second-Best' Adjustments to Externality Estimates in Electricity Planning with Competition, Resources for the Future, Discussion Paper No. 96-04 (Oct. 1995); Richard Rosen et al., Promoting Environmental Quality in a Restructured Electric Industry (Tellus Institute Report No. 95-056, Dec. 15, 1995); Stephen S. Bernow et al., Valuation of Environmental and Human Health Risks Associated With Electric Power Generation: A Discussion of Methods and a Review of Greenhouse Gas Studies (Tellus Institute Report No. 94-202, Nov. 14, 1994); Bernard S. Black & Richard J. Pierce, Jr., The Choice Between Markets and Central Planning in Regulating the U.S. Electricity Industry, 93 COLUM. L. REV. 1339, 1400 (1993); Eugene M. Trisko, Environmental Externalities: Thinking Globally, Taxing Locally, 131 PUB. UTIL. FORT. 52 (1993).
136. See generally UNITED STATES GENERAL ACCOUNTING OFFICE, GAO/RCED-95- 187, ELECTRICITY SUPPLY: CONSIDERATION OF ENVIRONMENTAL COST IN SELECTING FUEL SOURCES (1995) (hereinafter GAO Report); Karen Palmer & Hadi Dowlatabadi, Implementing Social Costing in the Electric Utility Industry, 4 ENERGY & ENVT. 197 (1993); Timothy J. Brennan & Karen Palmer, Comparing Costs and Benefits of Diversification by Regulated Firms, 6 J. REG. ECON. 115 (1994); Dallas Burtraw et al., 'Second-Best' Adjustments to Externality Estimates in Electricity Planning with Competition, Resources for the Future, Discussion Paper No. 96-04 (Oct. 1995); Richard Rosen et al., Promoting Environmental Quality in a Restructured Electric Industry (Tellus Institute Report No. 95-056, Dec. 15, 1995); Stephen S. Bernow et al., Valuation of Environmental and Human Health Risks Associated With Electric Power Generation: A Discussion of Methods and a Review of Greenhouse Gas Studies (Tellus Institute Report No. 94-202, Nov. 14, 1994); Bernard S. Black & Richard J. Pierce, Jr., The Choice Between Markets and Central Planning in Regulating the U.S. Electricity Industry, 93 COLUM. L. REV. 1339, 1400 (1993); Eugene M. Trisko, Environmental Externalities: Thinking Globally, Taxing Locally, 131 PUB. UTIL. FORT. 52 (1993).
137. See GAO Report, supra note 103, at 10.
138. See id. States employing externality values on a qualitative basis generally list the types and rates of emissions and pollutants from the various energy resource options being considered, distinguish them on the basis of categories ranging from "no" to "substantial impact," and then subjectively factor this information into the resource planning process. See id. at 12. States that currently use a quantitative approach, or have used such an approach in the past, include California, Minnesota, Nevada, New York, Oregon, Vermont, Wisconsin, and Iowa. See id. at 14-15.
139. This is the approach currently followed by Vermont and Nevada. See VT. STAT. ANN. tit. 30, § 218C; Black & Pierce, supra note 103, at 1423 (Nevada's adders use values developed by the Tellus Institute, which are based upon marginal compliance costs). New York first adopted a compliance cost approach, though it later abandoned this approach (and ultimately, its use of adders) in favor of a damage approach. See GAO Report, supra note 103, at 23, 25. Prior to a Commonwealth Supreme Court decision striking down the State PUC's use of adders, Massachusetts had adopted and was in the process of implementing, compliance cost-based adders. See DEPARTMENT OF ENERGY, ENERGY INFORMATION ADMINISTRATION, ELECTRICITY GENERATION AND ENVIRONMENTAL EXTERNALITIES: CASE STUDIES vi, 33, 37, 44 (Sept. 1995).
140. This is the approach followed by Minnesota, Oregon and Nevada. See Re Quantification of Environmental Costs, 174 PUR (4th) 516, *14 (Minn. Pub. Util. Comm'n 1996); 119 Pub. Util. Rep. 4th (PUR) 257, 268 (Nev. Pub. Serv. Comm'n 1991); 142 Pub. Util. Rep. 4th (PUR) 465, 474-75 (Or. Pub. Util. Comm'n 1993); see also Margaret Tortorella, Note, Will The Commerce Clause "Pull the Plug" on Minnesota's Quantification of the Environmental Externalities of Electricity Production?, 79 MINN. L. REV. 1547 (1995). Prior to setting aside its use of externality values in the wake of a rapid movement toward restructuring, California applied adders to five pollutants, all of which were calculated using a damage approach. See GAO Report, supra note 103, at 19 (adders for nitrogen oxide, sulfur oxide, particulate matter, reactive organic gases and carbon).
141. This is the approach followed by Minnesota, Oregon and Nevada. See Re Quantification of Environmental Costs, 174 PUR (4th) 516, *14 (Minn. Pub. Util. Comm'n 1996); 119 Pub. Util. Rep. 4th (PUR) 257, 268 (Nev. Pub. Serv. Comm'n 1991); 142 Pub. Util. Rep. 4th (PUR) 465, 474-75 (Or. Pub. Util. Comm'n 1993); see also Margaret Tortorella, Note, Will The Commerce Clause "Pull the Plug" on Minnesota's Quantification of the Environmental Externalities of Electricity Production?, 79 MINN. L. REV. 1547 (1995). Prior to setting aside its use of externality values in the wake of a rapid movement toward restructuring, California applied adders to five pollutants, all of which were calculated using a damage approach. See GAO Report, supra note 103, at 19 (adders for nitrogen oxide, sulfur oxide, particulate matter, reactive organic gases and carbon).
142. This is the approach followed by Minnesota, Oregon and Nevada. See Re Quantification of Environmental Costs, 174 PUR (4th) 516, *14 (Minn. Pub. Util. Comm'n 1996); 119 Pub. Util. Rep. 4th (PUR) 257, 268 (Nev. Pub. Serv. Comm'n 1991); 142 Pub. Util. Rep. 4th (PUR) 465, 474-75 (Or. Pub. Util. Comm'n 1993); see also Margaret Tortorella, Note, Will The Commerce Clause "Pull the Plug" on Minnesota's Quantification of the Environmental Externalities of Electricity Production?, 79 MINN. L. REV. 1547 (1995). Prior to setting aside its use of externality values in the wake of a rapid movement toward restructuring, California applied adders to five pollutants, all of which were calculated using a damage approach. See GAO Report, supra note 103, at 19 (adders for nitrogen oxide, sulfur oxide, particulate matter, reactive organic gases and carbon).
143. This is the approach followed by Minnesota, Oregon and Nevada. See Re Quantification of Environmental Costs, 174 PUR (4th) 516, *14 (Minn. Pub. Util. Comm'n 1996); 119 Pub. Util. Rep. 4th (PUR) 257, 268 (Nev. Pub. Serv. Comm'n 1991); 142 Pub. Util. Rep. 4th (PUR) 465, 474-75 (Or. Pub. Util. Comm'n 1993); see also Margaret Tortorella, Note, Will The Commerce Clause "Pull the Plug" on Minnesota's Quantification of the Environmental Externalities of Electricity Production?, 79 MINN. L. REV. 1547 (1995). Prior to setting aside its use of externality values in the wake of a rapid movement toward restructuring, California applied adders to five pollutants, all of which were calculated using a damage approach. See GAO Report, supra note 103, at 19 (adders for nitrogen oxide, sulfur oxide, particulate matter, reactive organic gases and carbon).
144. See Alan Krupnick et al., The Social Benefits of Social Costing Research, RESOURCES FOR THE FUTURE 9 ("A major lesson learned from the recent social costing research is that the damage function approach can provide reasonable, internally valid, transparent, and replicable estimates of many important site-specific damages along environmental and nonenvironmental pathways and is superior to other approaches."); Trisko, supra note 103, at 52 ("Most economists agree that marginal control costs are not suitable proxies for sound estimates of marginal environmental damages. Control costs say nothing about the environmental effects of an additional pound of emissions.").
145. One methodology frequently cited for deriving harm-based environmental adders is found in a 1990 study by the Pace University Center for Environmental and Legal Studies. PACE UNIV. CENTER FOR ENVTL. LEGAL STUD., ENVIRONMENTAL COSTS OF ELECTRICITY (1990). But see Black & Pierce, supra note 103, at 1422-24 (criticizing the Pace methodology).
146. For a scathing critique of environmental adders, see Black & Pierce, supra note 103, at 1398-1425.
147. See BRENNAN ET AL., supra note 6, at 121; see also Black & Pierce, supra note 103, at 1403. Consequently, some have suggested that states should adopt "social cost dispatching," a method by which the social and environmental costs of electricity would be taken into account even under competitive conditions within the electricity industry. See BRENNAN ET AL., supra note 6, at 121-22. Under the dispatching variation, the power dispatcher adjusts the wholesale cost of power, depending upon specific information provided by the generator concerning the environmental impacts of that form of power generation. Because generators could enter contracts for power independently of a system operator, this form of social costing could only work under the "Poolco" approach, under which a centralized dispatcher regulates the sales of power between wholesalers and consumers.
148. See id. at 13.
149. See Black & Pierce, supra note 103, at 1403; see also BRENNAN ET AL., supra note 6, at 121 ("The relatively modest nature of the adders relative to the cost of generation has not led to a dramatic reordering of investment plans."). Also, adders will raise the cost of electric power supplied by utility relative to that provided by other energy sources. This may induce consumers to switch from electric power to direct burning of fuel, a shift that some claim will generally reduce the environmental gains from adders. See Black & Pierce, supra note 103, at 1406.
150. See supra note 70 (describing PURPA).
151. See FERC Order No. 888, supra note 6.
152. While doubtless unpopular with the in-state utility, a state might have an incentive to structure its adders in this manner if the state's own plants are highly polluting and the state wishes to export the pollution generated by its own electricity needs to other states. The state would benefit from the loss of pollution, discounted by any positive economic benefits also lost from reduced in-state power production. See Black & Pierce, supra note 103, at 1415. This discriminatory use of adders to export pollution would appear antithetical to the whole idea of internalizing the environmental impacts of a state's energy resource supply decisions and, in any case, would invite retaliatory adders by other states. See id. at 1415 (noting that other states might retaliate if a state, in an effort to export pollution, employs adders that favor out-of-state producers).
153. States which apply adders to imported power, or did at one time, include California, Minnesota, Vermont, and Wisconsin. See CALIFORNIA ENERGY COMMISSION, P104-92-001, ELECTRICITY REPORT, 58-60 (Jan. 1993); Re Quantification of Environmental Costs, 174 PUR at *14; Telephone interview with David Iliff, Senior Energy Analyst, State of Wisconsin, on Sept. 25, 1997. Both Minnesota and California (when it applied adders) use a damage approach to calculate the adders applicable to importer power. This may strain the already-thin capacity of science and economics to correlate environmental impacts with various electricity resource options. See E-mail message from Steve Bernow, Tellus Institute, to the author, Aug. 11, 1997 ("Regarding tracking the social costs of imported power, . . . [i]t is easiest for carbon emissions, which are just fuel dependent, as opposed to other pollutants which also depend on plant-specific control equipment. It is even more complex if you wish to then track the air dispersion, deposition and impacts of the incremental pollution. . . . This is all possible in principle, difficult in practice. . . ."); Telephone interview with Jim Hofsis, Senior Electricity Specialist, California Energy Commission, Electricity Resource Assessment Office, Aug. 12, 1997 (concluding essentially the same). Cf. Oliver A. Houck, The Regulation of Toxic Pollutants Under the Clean Water Act, ENVT. L. REP. (Envtl. L. Inst.) 248-250 (1991) (scientific uncertainty regarding the environmental effects of toxic pollutants led to agency paralysis in establishing damage-based air and water discharge standards which ultimately convinced Congress to abandon the damage approach in favor of technology-based standards).
154. Interview with Jim Hofsis, California Energy Commission, Aug. 12, 1997.
155. This issue was raised in the context of California's effort to apply environmental adders to imported power. See id.
156. This is the approach followed by the State of Minnesota. See Re Quantification of Environmental Costs, 174 PUR (4th) 516, WL pg. 14 (1996) (applying adders to sources between 0 and 200 miles from the Minnesota borders and basing the adders for such sources upon the source's impact on the Minnesota environment).
157. Emissions portfolio standards sometimes referred to as "generation performance standards."
158. See, e.g., An Act Concerning Electric Restructuring § 24, Conn. Pub. Acts 98-28 (enacted April 29, 1998); New Jersey Electric Discount & Energy Competition Act § 38(b)(2 (establishing a beginning renewable portfolio standard of 2.5% of the total of all renewable kilowatt hours sold to New Jersey customers and increasing the standard to 4% by 2012); see also, e.g., Justin M. Nesbit, Commerce Clause Implications of Massachusetts' Attempt to Limit the Importation of "Dirty" Power in the Looming Competitive Retail Market for Electricity Generation, 38 B.C. L. REV. 811, 832-33 (1997) (discussing Commerce Clause issues related to Massachusetts' then-proposed emissions portfolio standard).
159. Massachusetts' legislation specifies that its emission portfolio standard is to apply to electrical generating facilities on a portfolio basis. See Mass Act § 142N.
160. See Conn. Act § 24.
161. See BRENNAN ET AL., supra note 6, at 117-18.
162. See Nesbit, supra note 122, at 827. For instance, New Jersey's average electricity rate is 10.5 cents a kilowatt hour, nearly 50% higher than the national average. See Anthony S. Twyman, State Hammering Out Deregulation Details: Law's Passage Still Leaves Rates Up in the Air, THE STAR-LEDGER, Feb. 3, 1999, available in 1999 WL 2952424.
163. See ALLIANCE TO SAVE ENERGY, supra note 12, at 38.
164. Thus although a damage adder may raise the cost of power generated by out-of-state coal plants, it is the use of coal rather than biomass, for instance, that is responsible for the power's higher cost. Nevertheless, if a state, knowing that all out-of-state power came from dirty sources and all in-state power came from clean sources, decided as a shorthand measure to raise the cost of all out-of-state power, the adder would be facially discriminatory. Indeed, under a charitable reading, this is precisely the scenario in Maine v. Taylor. See supra notes 84-88 and accompanying text. However, if the state could demonstrate that the difference between clean and dirty power sources corresponded to the in-state and out-of-state categories used in its regulation, the state's adder law would probably be upheld under the logic of Maine. 129. See, e.g., Minnesota v. Clover Leaf Creamery Co., 449 U.S. 456, 473 (1981) (upholding state ban upon the sale of milk in plastic containers based upon state's purpose of reducing solid waste despite fact that ban would result in diverting business from out-of-state plastic container manufacturers to in-state pulp-based cardboard manufacturers).
165. 511 U.S. at 393.
166. See id. In a second, non-environmental case, Edgar v. MITE Corporation, 457 U.S. 624 (1982), the Court struck down an Illinois law requiring that any takeover bid of a multinational corporation having a certain minimal connection with the state be first registered with a state official. Corporations covered by the Act were those (1) of which 10% of the class of equity securities subject to the offer were owned by shareholders located in Illinois; or (2) for which any two of the following three conditions were met: the corporation had its principal executive office in Illinois, was organized under the laws of Illinois, or had at least 10% of its stated capital and paid-in surplus represented within the state. See id. at 627. The Court held that, in comparison to the burden imposed by the registration requirement upon interstate commerce (a burden capable of blocking a nationwide tender offer) Illinois' purported interest was weak. Although recognizing the legitimacy of the state's interest in protecting Illinois' investors, the Court stated that "the State has no legitimate interest in protecting nonresident shareholders." Id. at 644. Thus in MITE Corp., the Court concluded that, "[i]nsofar as the Illinois law burdens out-of-state transactions, there is nothing to be weighed in the balance to sustain the law." Id.; see also Clover Leaf Creamery, 449 U.S. at 456. Echoes of the Supreme Court's localism are also found in international trade law, where at least one international panel has exhibited a similar reluctance to interpret an international trade agreement to tolerate trade barriers resulting from state protection of the extraterritorial environment. In the course of deciding a challenge to a United States' dolphin protection law, a General Agreements on Tariffs and Trade (GATT) panel rejected the United States' argument that the law's burden upon international trade in tuna was justified by the United States' concern for the dolphins in the eastern tropical Pacific Ocean. GATT DISPUTE SETTLEMENT PANEL REPORT ON U.S. RESTRICTIONS ON IMPORTS OF TUNA, Aug. 16, 1991, 30 I.L.M. 1594, 1619-20 (1991). Not long after the first panel rendered this decision, a second GATT panel, reviewing a challenge to a different aspect of the same United States' law, held that the same GATT exception was not limited to the environment encompassed within the acting nation's territorial jurisdiction. See GATT DISPUTE SETTLEMENT PANEL REPORT ON U.S. RESTRICTIONS ON IMPORTS OF TUNA, June, 1994, 33 I.L.M. 839, 890-95 (1994). Nevertheless, because the second panel ended up concluding that the United States' extraterritorial protective acts were invalid under both exceptions because they were ineffective in the absence of the enforcement of similar trade-burdening measures by other nations, id. at 894, 898, its decision was nearly as disapproving of extraterritorial environmental protection as that of the first panel. In and of themselves, unilateral environmental protection measures will seldom result in the protection of a common international resource, but may constitute an important first step in achieving international protection.
167. Minnesota's environmental adder is an example of how a state might apply its environmental adder to electricity imported from out-of-state and yet be consistent with the Court's apparent insistence that state environmental regulation be based upon the protection of the state's own territorial environment. Minnesota calculates its adder based only upon environmental damage to the State of Minnesota. Minnesota quantifies the costs of the most significant byproducts of generation of EPA's six criteria pollutants plus mercury and carbon dioxide. See Re Quantification of Environmental Costs, 174 Pub. Util. Rep. (PUR) (4th) 516, *14 (1996). In 1993, Minnesota enacted an environmental externalities statute that required its Public Utilities Commission to quantify and establish a range of environmental costs associated with each method of electricity generation "to the extent practicable." MINN. STAT. § 216B.2422 (1994). With the exception of the values adopted for carbon dioxide, the Minnesota Public Utilities Commission decided to quantify only the costs of environmental damage that occurred within Minnesota itself and that which occurred close to the State's borders. Accordingly, the Commission quantified the values of emissions emanating from within Minnesota and within 200 miles of Minnesota's boundaries. Emissions originating from generating facilities beyond the 200 miles are deemed to be zero. See id. Although it recognized that emissions generated within another state can do environmental damage in Minnesota, the PUC determined that, because the level and amount of such damage was a function of distance, at some point generating facilities located outside Minnesota would fail to cause damage to the Minnesota environment. The PUC chose 200 miles as a reasonable cutoff point for facilities whose emissions were unlikely to have an impact on Minnesota. See Re Quantification of Environmental Costs, 174 Pub. Util. Rep. (4th) at *14. Minnesota's approach will result in internalizing the costs of both imported and in-state power in states which do not import power from location further distant than some minimal radius from the state's borders (such as 200 miles). Where a state receives power from locations beyond this range, however, the Minnesota scheme would still place in-state generators at a competitive disadvantage vis-à-vis in-state generators.
168. Minnesota's environmental adder is an example of how a state might apply its environmental adder to electricity imported from out-of-state and yet be consistent with the Court's apparent insistence that state environmental regulation be based upon the protection of the state's own territorial environment. Minnesota calculates its adder based only upon environmental damage to the State of Minnesota. Minnesota quantifies the costs of the most significant byproducts of generation of EPA's six criteria pollutants plus mercury and carbon dioxide. See Re Quantification of Environmental Costs, 174 Pub. Util. Rep. (PUR) (4th) 516, *14 (1996). In 1993, Minnesota enacted an environmental externalities statute that required its Public Utilities Commission to quantify and establish a range of environmental costs associated with each method of electricity generation "to the extent practicable." MINN. STAT. § 216B.2422 (1994). With the exception of the values adopted for carbon dioxide, the Minnesota Public Utilities Commission decided to quantify only the costs of environmental damage that occurred within Minnesota itself and that which occurred close to the State's borders. Accordingly, the Commission quantified the values of emissions emanating from within Minnesota and within 200 miles of Minnesota's boundaries. Emissions originating from generating facilities beyond the 200 miles are deemed to be zero. See id. Although it recognized that emissions generated within another state can do environmental damage in Minnesota, the PUC determined that, because the level and amount of such damage was a function of distance, at some point generating facilities located outside Minnesota would fail to cause damage to the Minnesota environment. The PUC chose 200 miles as a reasonable cutoff point for facilities whose emissions were unlikely to have an impact on Minnesota. See Re Quantification of Environmental Costs, 174 Pub. Util. Rep. (4th) at *14. Minnesota's approach will result in internalizing the costs of both imported and in-state power in states which do not import power from location further distant than some minimal radius from the state's borders (such as 200 miles). Where a state receives power from locations beyond this range, however, the Minnesota scheme would still place in-state generators at a competitive disadvantage vis-à-vis in-state generators.
169. Connecticut has done an admirable job in specifying that the purpose of its emissions portfolio standard is to protect the state's own territorial environment. See Conn. Acts § 24 ("Such standards shall, to the greatest extent possible, be designed to improve air quality in this state and to further the attainment of the National Ambient Air Quality Standards promulgated by the United States Environmental Protection Agency.").
170. See Healy v. Beer Inst., 491 U.S. 324, 336 (1989) (Commerce Clause precludes application of a state statute to commerce taking place wholly outside the state's borders); Cotto Waxo Co. v. Williams, 46 F.3d 790, 793, 793 n.3 (8th Cir. 1995) (stating that a state regulation is per se invalid when it has an "extraterritorial reach" and positing that "extraterritorial reach" may be a special example of "directly" regulating interstate commerce in the same manner as facially discriminatory regulation, though the Supreme Court has not clarified the point). Nevertheless, one noted dormant Commerce Clause scholar, Donald Regan, contends that extraterritorial regulation is not a dormant Commerce Clause issue. See Donald H. Regan, Siamese Essays: (I) CTS Corp. v. Dynamics Corp. of America and Dormant Commerce Clause Doctrine; (II) Extraterritorial State Legislation, 85 MICH. L. REV. 1865, 1869, 1873 (1987).
171. See Healy v. Beer Inst., 491 U.S. 324, 338, 338 (1989); Brown-Forman Distillers Corp. v. New York State Liquor Auth., 476 U.S. 573, at 582 (1986); Edgar v. MITE Corp., 457 U.S. 624, 644 (1982); Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 511, 522 (1935).
172. See Cotto Waxo Co., 46 F.3d at 794 (Minnesota statute prohibiting the in-state sale of petroleum-based sweeping compounds does not constitute extraterritorial regulation because the Act governs only in-state sales and is indifferent to sales occurring out-of-state). Neither the Connecticut nor the Massachusetts emissions portfolio standard is completely unambiguous on this point. The Massachusetts provision states that its department of telecommunications and energy is to "promulgate rules and regulations to adopt and implement for fossil fuel-fired electric generation facilities uniform generation performance standards of emissions. . . ." Mass. Acts § 142N. Connecticut's legislation is similarly ambiguous. Its legislation reads that the standard "shall apply to electric suppliers' generation facilities located in North America and shall limit the amount of air pollutants. . . ." Conn. Acts § 24. The scope of both acts is sufficiently broad to authorize the regulation of the actual emissions of out-of-state electrical generating plants. While only the actual exercise of such authority should be considered cause for challenge, a state is obviously safer if it limits its emission standard to the in-state sale or transfer of power, whether produced in-state or out-of-state.
173. See Tortorella, supra note 107, at 1574-75 (arguing that, in quantifying the costs of pollution generated by out-of-state electrical utilities within Minnesota's territory, Minnesota's environmental externality regulations constitute prohibited extraterritorial regulation). Although I believe the application of a state's adders to out-of-state electricity generators that results in burdening interstate commerce presents a risk of being held invalid under the Pike test, for the reasons discussed in the text I disagree that the simple application of the state's adders to out-of-state generators constitutes prohibited extraterritorial state regulation.
174. 476 U.S. 573 (1986).
175. Id. at 576. The New York law required that distillers doing business in the state file a schedule of their prices a month in advance and that they commit to not sell liquor to any wholesaler in any other state at a price less than the price appearing on the schedule during the month covered by the filed schedule.
176. 491 U.S. 324 (1989).
177. See MITE, 457 U.S. at 640-43.
178. Compare Joseph E. Seagram & Sons, Inc. v. Hostetter, 384 U.S. 35 (1966) (upholding New York law requiring distillers to affirm that prices during a given month were no higher than the lowest price at which the liquor had been sold anywhere else during the previous month), with Brown-Forman, 476 U.S. at 582 (striking down New York law forbidding distillers from selling liquor, in the future anywhere else at a price higher than the price the distiller posted as its future price in New York). In Brown-Forman, the Court stated that it did not necessarily attach constitutional significance to the distinction between prospective and retrospective statutes, though it declined to consider the issue further. See 476 U.S. at 584 n.6. As Donald Regan has noted, this does not necessarily mean that retrospective price affirmation laws are legal, but just that they do not constitute unconstitutional extraterritorial regulation. See Regan, supra note 15, at 1905-06. The case of Baldwin v. G.A.F. Seelig, 294 U.S. 511 (1935), concerned a retrospective price affirmation law and it was struck down as unconstitutional. In Baldwin, New York conditioned the sale of milk upon the milk's being previously purchased (whether in-state or out-of-state) at the New York minimum price. This law was struck down, not because it regulated extraterritorially, but because it was clearly enacted for the purpose of protecting in-state milk producers from out-of-state competition. See Baldwin, 294 U.S. at 527.
179. See Brown-Forman, 476 U.S. at 584.
180. See id. at 580 ("While a State may seek lower prices for its consumers, it may not insist that producers or consumers in other States surrender whatever competitive advantages they may possess."); New England Power Co. v. New Hampshire, 455 U.S. 331, 338 (1982); Schwegmann Brothers Giant Super Markets v. Louisiana Milk Comm'n, 365 F. Supp. 1144 (M.D. La. 1973), aff'd, 416 U.S. 922 (1974).
181. See, e.g., ALLIANCE TO SAVE ENERGY ET AL., supra note 12, at 38-39; Rader & Wiser, supra note 70, at 22.
182. See David Nichols, SBC's With Restructuring and Without, 7 Energy Perspectives: Newsletter of the Energy Group at Tellus Institute 4-5 (March 1999) ; William A. Spratley, Solar Mandate? Like It or Not, Consumers Pay, 136 FORTNIGHT 54, 56 (1998) (updated description of the size of state system benefit charges and the planned uses for the money collected). Because it supports environmentally beneficial goods and services through a publicly administered subsidy, the systems benefit charge is a less desirable method of funding renewables, from an efficiency perspective, than the renewables portfolio standard discussed earlier. See Rader and Norgaard, supra note 47, at 46-47 ("Publicly administered programs are not likely to foster the kind of 'ingenuity dynamic' that is created with a market standard."). The renewables portfolio standard provides renewables generators with an incentive to operate as efficiently as possible. The more cheaply they generate electricity, the more energy credits they will have to sell to energy retailers. No such incentive accompanies the system benefits charge.
183. See David Nichols, SBC's With Restructuring and Without, 7 Energy Perspectives: Newsletter of the Energy Group at Tellus Institute 4-5 (March 1999) ; William A. Spratley, Solar Mandate? Like It or Not, Consumers Pay, 136 FORTNIGHT 54, 56 (1998) (updated description of the size of state system benefit charges and the planned uses for the money collected). Because it supports environmentally beneficial goods and services through a publicly administered subsidy, the systems benefit charge is a less desirable method of funding renewables, from an efficiency perspective, than the renewables portfolio standard discussed earlier. See Rader and Norgaard, supra note 47, at 46-47 ("Publicly administered programs are not likely to foster the kind of 'ingenuity dynamic' that is created with a market standard."). The renewables portfolio standard provides renewables generators with an incentive to operate as efficiently as possible. The more cheaply they generate electricity, the more energy credits they will have to sell to energy retailers. No such incentive accompanies the system benefits charge.
184. In California, moneys received from the surcharge are to be used to provide "in-state benefits," including the "[i]n-state operation and development of existing and new and emerging renewable resource technologies." CAL. PUB. UTIL. 1890 § 383(b)(3) (West 1996). Prior to being distributed, the moneys received are to be placed in a special subaccount of the Energy Resources Programs Account of the California Energy Resources Conservation and Development Commission. See id.
185. See CAL. PUB. UTIL. CODE. (AB 1890) § 383(a).
186. 512 U.S. 186 (1994).
187. See New Energy Co. of Ind. v. Limbach, 486 U.S. 269, 278 (1988) ("The Commerce Clause does not prohibit all state action designed to give its residents an advantage in the marketplace, but only action of that description in connection with the State's regulation of interstate commerce. Direct subsidization of domestic industry does not ordinarily run afoul of that prohibition; discriminatory taxation . . . does."); Camps Newfound/Owatonna, Inc. v. Town of Harrison, Maine, 520 U.S. 564, 593 (1997) (quoting same); C & A Carbone, 511 U.S. at 384 (suggesting that the respondent Town could have ensured the long term survival of its recycling facility through a subsidy derived from general taxes or municipal bonds).
188. See Coenen & Hellerstein, Suspect Linkage, supra note 95.
189. 512 U.S. at 193-96.
190. See id. In a similar case, Bacchus Imports v. Dias, 468 U.S. 263, 272 (1984), the Court struck down a Hawaii liquor tax that exempted from its scope certain locally-produced alcoholic beverages. With the exception of two alcoholic beverages, the tax, imposed upon sales of liquor at wholesale, applied to liquors produced both in-state and out-of-state. The Court held that both the purpose and effect of the tax was discriminatory because the legislature had intended to aid the fledgling Hawaii liquor industry and the effect of the tax was to advantage the exempted liquors vis-à-vis their competitors produced in other states.
191. Id. at 2214 ("The pricing order in this case, however, is funded principally from taxes on the sale of milk produced in other States. . . . The pricing order thus violates the cardinal principle that a State may not 'benefit in-state economic interests by burdening out-of-state competitors.'"); see also Hellerstein & Coenen, supra note 100, at 838 (arguing that "courts should strike down only those subsidies that operate, like the program in West Lynn Creamery, as discriminatory de facto rebates of an identifiable state tax"); cf. Peter D. Enrich, Sauing the States From Themselves: Commerce Clause Constraints on State Tax Incentives for Business, 110 HARV. L. REV. 377, 442 (1996) (agreeing with Court's practice of applying harsher scrutiny to tax-related benefits for industry and its indication that cash subsidies should receive little or no scrutiny). Not all Justices, however, nor all commentators display as much comfort with the Court's distinction between general revenue subsidies and the industry-specific tax and subsidy schemes. See West Lynn Creamery, 512 U.S. at 208-09 (Scalia, J., joined by Thomas, J., concurring) (claiming that almost all subsidies funded from general revenues are unconstitutional according to the majority's formula since they "almost invariably include monies from use taxes on out-of-state products");
192. see also Note, Functional Analysis, Subsidies, and the Dormant Commerce Clause, 110 HARV. L. REV. 1537, 1539-40 (1977) (disagreeing with the Court's criteria for valid and invalid subsidies and arguing that subsidies should generally not be held to violate the Commerce Clause "unless accompanied by an industry-specific tax unjustified by the negative externalities that the industry imposes on the state");
193. Christopher R. Drahozal, On Tariffs v. Subsidies in Interstate Trade: A Legal and Economic Analysis, 74 WASH. U. L.Q. 1127, 1168 (1996) (agreeing with the Court's criteria for valid and invalid subsidies but arguing that it would be better justified if founded on the Import-Export Clause of the Constitution rather than the Commerce Clause).
194. For this reason, the system benefits charge is distinguishable from the waste management tax upheld in Zenith/Kremer Waste Systems, Inc. v. Western Lake Superior Sanitary District, 572 N.W. 2d 300 (Minn. 1997). In Zenith/Kremer Waste Systems, the Minnesota Supreme Court upheld a scheme whereby a municipal waste disposal firm imposed a waste management tax upon waste district residents in order to subsidize its waste disposal activities and thereby charge reduced tipping fees. The tax allowed the facility to win business away from out-of-state waste processors through its subsidized tipping fees. See id. at 303.
195. See Regan supra note 15, at 1092-93.
196. See Bacchus, 468 U.S. at 270; Minnesota v. Clover Leaf Creamery Co., 449 U.S. 456, 471 n.15 (1981) ( "A court may find that a state law constitutes 'economic protectionism' on proof either of discriminatory effect . . . or of discriminatory purpose."); see also Enrich, supra note 154, at 457-58 n.444 (arguing state business location incentives should be struck down under the Commerce Clause whenever their purpose or effect is to distort the decisions of economic actors in favor of in-state expenditures and eschewing attempts to corner the Court into finding that the Commerce Clause is violated only by laws manifesting a discriminatory intent).
197. See General Motors Corp. v. Tracy, 419 U.S. 278, 299 (1997) (tax exemption provided by state to local gas distribution companies and not to gas producers and independent marketers did not violate Commerce Clause because the two types of entities serve different markets and hence do not compete with one another); State of Alaska v. Arctic Maid, 366 U.S. 199, 204 (1961) (imposition of higher tax on salmon taken from territorial waters by freezer ships and frozen for canning outside the state than tax on same salmon frozen by on-shore cold storage facilities and sold on domestic fresh-frozen market upheld upon finding that freezer ships and cold storage facilities served different markets and hence did not compete with one another); see also Paul E. McGreal, The Flawed Economics of the Dormant Commerce Clause, 39 WILLIAM & MARY L. REV. 1191, 1216-22 (1998) (arguing that competition between in-state and out-of-state commerce constitutes a "first principle" of dormant Commerce Clause jurisprudence). In West Lynn Creamery, however, the Court departed from the competition principle because the nondiscriminatory tax at issue was levied against milk dealers, while the subsidy with which it was coupled was given to milk producers, neither of which are in direct competition with one another. See 512 U.S. at 214-16 (Rehnquist, C.J. and Blackmun, J., dissenting). The Court ignored this distinction, maintaining that the important point was that the choice of dairy farmers ensured that in-state producers would benefit from the subsidy and thus posed a danger to the national market. See id. at 197.
198. Bacchus, 468 U.S. at 271.
199. See id. at 269 ("Neither the small volume of sales of exempted liquor nor the fact that the exempted liquors do not constitute a present 'competitive threat' to other liquors is dispositive of the question whether competition exists between the locally produced beverages and foreign beverages; instead they go only to the extent of such competition."). Given that the in-state renewables receiving the system benefits charge are likely to compete at least somewhat with renewables and other forms of energy generated out-of-state, perhaps the more important distinguishing aspect of the system benefits charge scenario is the minimal nature of the advantage given to in-state renewables. In many states the majority of the energy consumed is generated within the state and thus the majority of the funds raised by the systems benefit surcharge will come from charges on power originating within the state and will be transferred to only a subset of the in-state industry consisting of renewables generators. Also, unlike the broadscale effect of subsidizing Massachusetts dairy farmers, benefiting in-state renewables is unlikely to disadvantage much more of the out-of-state power market than the subset of out-of-state renewables.
200. See West Lynn Creamery, 512 U.S. at 203; see also Bacchus, 468 U.S. at 272.
201. See West Lynn Creamery, 512 U.S. at 203 ("This argument, if accepted, would undermine almost every discriminatory tax case. State taxes are ordinarily paid by in-state businesses and consumers, yet if they discriminate against out-of-state products, they are unconstitutional.").
202. See id. at 204. The First Circuit has applied West Lynn Creamery to strike down a tax and rebate scheme involving a tax collected from in-state consumers. See Cumberland Farms v. LaFaver, 33 F.3d 1 (1st Cir. 1994) (striking down a Maine statute imposing a consumer tax upon all packaged fluid milk sold in-state regardless of the origin of the milk and distributing the proceeds of the tax solely to in-state dairy farmers). Furthermore, as if to underscore the absurdity of according any distinction to the significance of the particular party who pays the surcharge (as opposed to who bears the economic burden of the surcharge), the West Lynn Court posed the following rhetorical question in dicta: "Is it possible to doubt that if Massachusetts imposed a higher sales tax on milk produced in Maine than milk produced in Massachusetts that the tax would be struck down, in spite of the fact that the sales tax was imposed on consumers, and consumers do not compete with dairy farmers?" West Lynn Creamery, 512 U.S. at 203. But cf. Zenith/Kremer Waste Systems, 572 N.W.2d at 305 ("It is constitutionally significant that the waste management tax is levied on residents and occupants of the district rather than the waste haulers because it demonstrates that the focus, purpose, and reach of the tax is entirely local.").
203. See text accompanying notes 273-297.
204. See Dan T. Coenen & Hellerstein, Suspect Linkage, supra note 95, at 2195.
205. See id.
206. See id. at 2198.
207. See id.
208. See id. at 2198. Of all of Coenen and Hellerstein's criteria, this is the least well-explained, though perhaps the most initutive.
209. See id. at 2199.
210. Hence the system benefits charges and in-state renewables subsidies would be considered "under-universal" according to Coenen and Hellerstein's criteria because the subsidy is provided to only a portion of the in-state residents subject to the charge.
211. See id. at 2200-01.
212. See id.
213. See id. at 2215.
214. See, e.g., Southern Pac. Co. v. Arizona, 325 U.S. 761, 768 n.2 (1945) ("[T]he Court has often recognized that to the extent . . . the burden of state regulation falls on interests outside the state, it is unlikely to be alleviated by the operation of those political restraints normally exerted when interests within the state are affected."); Minnesota v. Clover Leaf Creamery Co., 449 U.S. 456, 473 n.17 (1981) ("The existence of major in-state interests adversely affected . . . is a powerful safeguard against legislative abuse."); see also Raymond Motor Transportation, Inc. v. Rice, 434 U.S. 429, 444 n.18 (1978) (noting that deference is properly accorded state highway regulations because "their burden usually falls on local economic interests as well as other States' economic interests, thus insuring that a State's own political processes will serve as a check against unduly burdensome regulations"); South Carolina State Highway Dep't v. Barnwell Bros., 303 U.S. 177, 185 n.2 (1938).
215. See 512 U.S. at 200.
216. See South Carolina State Highway, 303 U.S. at 187 (1938) ("The fact that [the regulations] affect alike shippers in interstate and intrastate commerce in large numbers within as well as without the state is a safeguard against their abuse."); Kassel v. Consolidated Freightways Corp., 450 U.S. 662, 676-78 (1981) (invalidating state regulations banning double tractor trailers from highways where ban contained exemptions for intrastate commerce to the advantage of domestic trucking companies).
217. See 468 U.S. at 265.
218. See Camps Newfound/Owatonna, Inc. v. Town of Harrison, 520 U.S. 564, 593 (1997); West Lynn Creamery, 512 U.S. at 210-11 (Scalia, J., concurring in judgment); C & A Carbone, 511 U.S. at 384; New Energy Co. v. Limbach, 486 U.S. 269, 278 (1988); see also Enrich, supra note 154, at 442-43 (1996); Hellerstein & Coenen, supra note 100, at 846-48.
219. See New Energy Co., 486 U.S. at 278 (remarking that a state's cash subsidy program was "no less discriminatory" and "no less effective in conferring a commercial advantage over out-of-state competitors" than a prohibited sales tax exemption).
220. See BAUMOL & OATES, supra note 21, at 348.
221. See GAINES & WESTIN, TAXATION FOR ENVIRONMENTAL PROTECTION, supra note 32.
222. See Helm & Pearce, supra note 30.
223. See supra Part I.C. 1.
224. See BRENNAN ET AL., supra note 6, at 121.
225. See Hahn & Stavins, supra note 23, at 7.
226. In 1993, the Clinton Administration proposed a broad-based BTU tax. The proposal met strong opposition, however, and was modified before a bill was introduced in Congress. The House of Representatives passed the Administration's bill with modifications as the Omnibus Budget Reconciliation Act. H.R. 2264, 103rd Cong., 1st Sess. (1993). The Senate passed a version of the same bill, but replaced the BTU tax with a 4.3 cent per gallon motor fuels tax. S. 1134, 103rd Cong., 1st Sess. (1993). The Conference Committee adopted the Senate version and it was this version that passed both Houses of Congress in August, 1993. See Richard L. Ottinger & William B. Moore, The Case for State Pollution Taxes, 12 PACE ENVTL. L. REV. 103, 112 (1994); Dawn Erlandson, The BTU Tax Experience: What Happened and Why It Happened, 12 PACE ENVTL. L. REV. 173, 176 (1990).
227. In 1993, the Clinton Administration proposed a broad-based BTU tax. The proposal met strong opposition, however, and was modified before a bill was introduced in Congress. The House of Representatives passed the Administration's bill with modifications as the Omnibus Budget Reconciliation Act. H.R. 2264, 103rd Cong., 1st Sess. (1993). The Senate passed a version of the same bill, but replaced the BTU tax with a 4.3 cent per gallon motor fuels tax. S. 1134, 103rd Cong., 1st Sess. (1993). The Conference Committee adopted the Senate version and it was this version that passed both Houses of Congress in August, 1993. See Richard L. Ottinger & William B. Moore, The Case for State Pollution Taxes, 12 PACE ENVTL. L. REV. 103, 112 (1994); Dawn Erlandson, The BTU Tax Experience: What Happened and Why It Happened, 12 PACE ENVTL. L. REV. 173, 176 (1990).
228. Maryland and Minnesota have considered adopting a carbon tax, though neither state ultimately enacted such a measure. See Frank Muller & J. Andrew Hoerner, Greening State Energy Taxes: Carbon Taxes for Revenue and the Environment, 12 PACE ENVTL. L. REV. 5, 44, 53 (1994). Recently, New York approved a tax credit to promote the residential use of solar energy. See New York: Legislature Approves Tax Credit to Promote Residential Solar Energy Use, 160 DAILY ENVT. REP. A- 4 (Aug. 19, 1997). See generally New England: Regional Inventory of Green Taxes Shows Diverse Policies, Objectives, 9 DAILY ENVT. REP. B-2 (Jan. 14, 1997). Energy taxes are being given more serious consideration in Europe than in the United States, though proposals for such taxes have met substantial resistance in Europe as well. See Commission Proposal for a Council Directive Introducing a Tax on Carbon Dioxide Emissions and Energy, 1992 O.J. (C 196) 1; see also European Union: European Commission Delays Plans to Introduce New Energy Tax Directive, 30 DAILY ENVT. REP. A-9 (Feb. 13, 1997).
229. Maryland and Minnesota have considered adopting a carbon tax, though neither state ultimately enacted such a measure. See Frank Muller & J. Andrew Hoerner, Greening State Energy Taxes: Carbon Taxes for Revenue and the Environment, 12 PACE ENVTL. L. REV. 5, 44, 53 (1994). Recently, New York approved a tax credit to promote the residential use of solar energy. See New York: Legislature Approves Tax Credit to Promote Residential Solar Energy Use, 160 DAILY ENVT. REP. A-4 (Aug. 19, 1997). See generally New England: Regional Inventory of Green Taxes Shows Diverse Policies, Objectives, 9 DAILY ENVT. REP. B-2 (Jan. 14, 1997). Energy taxes are being given more serious consideration in Europe than in the United States, though proposals for such taxes have met substantial resistance in Europe as well. See Commission Proposal for a Council Directive Introducing a Tax on Carbon Dioxide Emissions and Energy, 1992 O.J. (C 196) 1; see also European Union: European Commission Delays Plans to Introduce New Energy Tax Directive, 30 DAILY ENVT. REP. A-9 (Feb. 13, 1997).
230. Maryland and Minnesota have considered adopting a carbon tax, though neither state ultimately enacted such a measure. See Frank Muller & J. Andrew Hoerner, Greening State Energy Taxes: Carbon Taxes for Revenue and the Environment, 12 PACE ENVTL. L. REV. 5, 44, 53 (1994). Recently, New York approved a tax credit to promote the residential use of solar energy. See New York: Legislature Approves Tax Credit to Promote Residential Solar Energy Use, 160 DAILY ENVT. REP. A- 4 (Aug. 19, 1997). See generally New England: Regional Inventory of Green Taxes Shows Diverse Policies, Objectives, 9 DAILY ENVT. REP. B-2 (Jan. 14, 1997). Energy taxes are being given more serious consideration in Europe than in the United States, though proposals for such taxes have met substantial resistance in Europe as well. See Commission Proposal for a Council Directive Introducing a Tax on Carbon Dioxide Emissions and Energy, 1992 O.J. (C 196) 1; see also European Union: European Commission Delays Plans to Introduce New Energy Tax Directive, 30 DAILY ENVT. REP. A-9 (Feb. 13, 1997).
231. Maryland and Minnesota have considered adopting a carbon tax, though neither state ultimately enacted such a measure. See Frank Muller & J. Andrew Hoerner, Greening State Energy Taxes: Carbon Taxes for Revenue and the Environment, 12 PACE ENVTL. L. REV. 5, 44, 53 (1994). Recently, New York approved a tax credit to promote the residential use of solar energy. See New York: Legislature Approves Tax Credit to Promote Residential Solar Energy Use, 160 DAILY ENVT. REP. A- 4 (Aug. 19, 1997). See generally New England: Regional Inventory of Green Taxes Shows Diverse Policies, Objectives, 9 DAILY ENVT. REP. B-2 (Jan. 14, 1997). Energy taxes are being given more serious consideration in Europe than in the United States, though proposals for such taxes have met substantial resistance in Europe as well. See Commission Proposal for a Council Directive Introducing a Tax on Carbon Dioxide Emissions and Energy, 1992 O.J. (C 196) 1; see also European Union: European Commission Delays Plans to Introduce New Energy Tax Directive, 30 DAILY ENVT. REP. A-9 (Feb. 13, 1997).
232. See Muller & Hoerner, supra note 188, at 50 n.111.
233. See id. at 34. To reduce administrative costs, a state might structure a carbon consumption tax upon the good's incorporation of particular goods for which the associated carbon emissions is generally known or could be readily obtained. One simple way of constructing a carbon consumption tax would be to impose a per-pound or per-ton tax on the most energy-intensive materials used widely in the manufacture of goods. Thus a state might establish a per pound tax for cement, aluminum, or steel, based upon national and regional data on the carbon fuels used to create such goods. See id. 191. See Henneford v. Silas Mason Co., 300 U.S. 577, 584 (1937) (Cardozo, J.) (rejecting the claim that a state's imposition of a use tax upon goods purchased out-of-state and a sales tax upon goods purchased in-state constituted discriminatory taxation under the Commerce Clause); Oregon Waste Systems, Inc. v. Dep't of Envtl. Quality, 511 U.S. 93, 102 (1994) ("Though our cases sometimes discuss the concept of the
234. See Interstate Busses Corp. v. Blodgett, 276 U.S. 245 (1928) (gross receipts tax and mileage tax deemed complementary); Hinson v. Lott, 75 U.S. (8 Wall.) 148 (1868) (same for a tax on bringing liquor into the state and tax on manufacturing); see also Philip M. Tatarowicz & Rebecca F. Mims-Velarde, An Analytical Approach to State Tax Discrimination Under the Commerce Clause, 39 VAND. L. REV. 879, 909 (1986).
235. See Maryland v. Louisiana, 451 U.S. 725, 759-60 (1981) (tax on first use of natural gas brought into state not considered complementary to state's severance tax on natural gas); Armco, 467 U.S. at 642-43 (wholesale gross receipts tax not considered a compensating tax for a manufacturing tax); Tyler Pipe Indus. Inc. v. Washington State Dep't of Revenue, 483 U.S. 232, 242-44 (1987) (wholesale tax and manufacturing tax not complementary); Oregon Waste Systems, 511 U.S. at 102-06 (general tax revenues collected from residents not a complementary tax to specific surcharge imposed on imported solid waste).
236. Armco, 467 U.S. at 644.
237. See Muller & Hoerner, supra note 188, at 38.
238. As Justice Scalia has pointed out, however, this problem is not limited to noncomplementary taxes but applies even where a state imposes a consistent tax which clashes with the consistent tax imposed by another state. See Tyler Pipe Indus., Inc. v. Washington State Dep't of Revenue 483 U.S. 232, 258-59 (Scalia, J., concurring in part and dissenting in part). So, for example, an internal consistency problem would arise if State A imposed a tax on manufacturing and State B imposed a tax upon wholesales; a company manufacturing only in State A would pay just the manufacturing tax while a company manufacturing in State A and selling in State B would pay both a manufacturing and a wholesaling tax. See id.
239. See Muller & Hoerner, supra note 188, at 39.
240. General sources on green marketing include WALTER CODDINGTON, ENVIRONMENTAL MARKETING: POSITIVE STRATEGIES FOR REACHING THE GREEN CONSUMER (1993); KEN PEATTIE, GREEN MARKETING (1992); ENVIRONMENTAL LABELING IN OECD COUNTRIES, OECD 1991 UNIPUB.
241. General sources on green marketing include WALTER CODDINGTON, ENVIRONMENTAL MARKETING: POSITIVE STRATEGIES FOR REACHING THE GREEN CONSUMER (1993); KEN PEATTIE, GREEN MARKETING (1992); ENVIRONMENTAL LABELING IN OECD COUNTRIES, OECD 1991 UNIPUB.
242. General sources on green marketing include WALTER CODDINGTON, ENVIRONMENTAL MARKETING: POSITIVE STRATEGIES FOR REACHING THE GREEN CONSUMER (1993); KEN PEATTIE, GREEN MARKETING (1992); ENVIRONMENTAL LABELING IN OECD COUNTRIES, OECD 1991 UNIPUB.
243. Under green pricing programs, consumers pay a premium to support a utility's purchase of renewable power, which it simply adds to its total energy portfolio.
244. See Steve Pickle & Ryan Wiser, Green Power Marketing Boosting Demand for Renewables, 132 PUB. UTIL. FORT. 30, 31 (1997); see also Edward A. Holt, Green Pricing and Lessons Learned 3-9 (Prepared for 1996 ACEEE Summer Study, Pacific Grove, California, Aug. 25-31) (describing various green pricing programs and their implementation, including green tariffs, fixed monthly payments, green shares, green equity, green wheeling, and shared savings); Rader & Wiser, supra note 70, at 92.
245. See Steve Pickle & Ryan Wiser, Green Power Marketing Boosting Demand for Renewables, 132 PUB. UTIL. FORT. 30, 31 (1997); see also Edward A. Holt, Green Pricing and Lessons Learned 3-9 (Prepared for 1996 ACEEE Summer Study, Pacific Grove, California, Aug. 25-31) (describing various green pricing programs and their implementation, including green tariffs, fixed monthly payments, green shares, green equity, green wheeling, and shared savings); Rader & Wiser, supra note 70, at 92.
246. See Pickle & Wiser, supra note 200, at 31.
247. See id.
248. See generally Nancy A. Rader & William P. Short III, Competitive Retail Markets: Tenuous Ground for Renewable Energy, 11 ELECTRICITY J. 72 (1998).
249. See Pickle & Wiser, supra note 200, at 30; see also Utilities Hope It's Easy Being Green in State, S.F. CHRON., Mar. 25, 1997 (reporting that a national survey by Cambridge Reports/Research International indicates that 60% of consumers would be willing to spend $6 or more extra per month for electricity from less harmful sources; similarly a 1996 California survey by Fairbank, Maslin, Maullin & Associates found that 30% of residents said that they would be very willing to pay 10% more for energy from clean sources other than nuclear or coal).
250. See Rader & Wiser, supra note 70, at 98. The authors point out that, because the respondents were self-selected, the 31% subscription rate probably represents an exaggerated green response. See id.
251. See Rader & Short, supra note 264, at 75.
252. See Leslie Lamarre, Utility Customers Go For The Green, 22 EPRI J. 6 (1997) (critics of green pricing programs for electricity are concerned about the free-rider problem inherent in relying upon customer preferences to support clean energy investments).
253. See, e.g., ROBERT V. PERCIVAL ET AL., ENVIRONMENTAL REGULATION: LAW, SCIENCE AND POLICY 47-48 (2d ed. 1996).
254. See Nancy Rader, GREEN BUYERS BEWARE: A CRITICAL REVIEW OF "GREEN ELECTRICITY" PRODUCTS (Public Citizen Critical Mass Energy Project, Oct. 1998) (arguing that the purchase of most green electricity products on the market will have no positive impact on the environment because they consist primarily of renewable energy products that are already being provided by regulated utilities and paid for by captive ratepayers).
255. See The Regulatory Assistance Project et al., Full Environmental Disclosure for Electricity: Tracking and Reporting Key Information, Report Prepared for the National Council on Competition and the Electric Industry, Table 1 (May 1997 Draft).
256. For instance, Synapse Energy Economics, Inc. downplays the significant negative impacts of hydroelectric power upon fishery resources and river ecology, stating: "There's no perfect way to produce electricity. There's always an impact on the earth's resources. That's why [we] rel[y] heavily on renewable energy sources, like hydroelectric power, that offer the environmentally sound form of electric generation." Memorandum from Michael Stoddard, Esq. to Lew Milford, Joe Chaisson, Conservation Law Foundation, 18 (Feb. 28, 1997) (on file with author).
257. See Elliot Burg, Power Play: Environmental Marketing by Deregulated Electric Companies - Risks and Opportunities, 1998 NAAG CONSUM. PROTEC. REP. 1, 4 (1998). Advocates of full disclosure claim that the characteristic of the energy purchased by an individual consumer can be tracked despite the complexity of the modern electricity system (which often collects power into pools that are then distributed to customers) by following the flow of dollars into the system. The Regulatory Assistance Project, supra note 210, at Attachment B; Rader & Wiser, supra note 70, at 107. For an overview of the role of government in the protection of the consumer, see Richard J. Barber, Government and the Consumer, 64 MICH. L. REV. 1203 (1966); IAIN RAMSAY, CONSUMER PROTECTION TEXT AND MATERIALS (1989).
258. See Elliot Burg, Power Play: Environmental Marketing by Deregulated Electric Companies - Risks and Opportunities, 1998 NAAG CONSUM. PROTEC. REP. 1, 4 (1998). Advocates of full disclosure claim that the characteristic of the energy purchased by an individual consumer can be tracked despite the complexity of the modern electricity system (which often collects power into pools that are then distributed to customers) by following the flow of dollars into the system. The Regulatory Assistance Project, supra note 210, at Attachment B; Rader & Wiser, supra note 70, at 107. For an overview of the role of government in the protection of the consumer, see Richard J. Barber, Government and the Consumer, 64 MICH. L. REV. 1203 (1966); IAIN RAMSAY, CONSUMER PROTECTION TEXT AND MATERIALS (1989).
259. See Elliot Burg, Power Play: Environmental Marketing by Deregulated Electric Companies - Risks and Opportunities, 1998 NAAG CONSUM. PROTEC. REP. 1, 4 (1998). Advocates of full disclosure claim that the characteristic of the energy purchased by an individual consumer can be tracked despite the complexity of the modern electricity system (which often collects power into pools that are then distributed to customers) by following the flow of dollars into the system. The Regulatory Assistance Project, supra note 210, at Attachment B; Rader & Wiser, supra note 70, at 107. For an overview of the role of government in the protection of the consumer, see Richard J. Barber, Government and the Consumer, 64 MICH. L. REV. 1203 (1966); IAIN RAMSAY, CONSUMER PROTECTION TEXT AND MATERIALS (1989).
260. See 16 C.F.R. Pt. 260 (Guides for Use of Environmental Marketing Claims). To give an example, the FTC's guidelines consider it "deceptive" within the meaning of the Federal Trade Commission Act (FTCA), to "misrepresent, directly or by implication, that a product or package offers a general environmental benefit" and thus, to survive challenge, any broad assertion of an environmental benefit must be substantiated. 16 C.F.R. § 260.7(a). Section 5 of the FTCA declares unlawful all "unfair deceptive acts or practices in or affecting commerce." 15 U.S.C. § 45(a)(1).
261. See CAL. PUB. UTIL. CODE §§ 398.1, 398.3 (West 1997) (effective Jan 1, 1998, requiring that each generator "shall report to the system operator electricity generated in kilowatt hours by hour by generator, the fuel type or fuel types and fuel consumption by fuel type by month on an historical recorded quarterly basis"); id. § 398.4 (requiring that "every retail supplier that makes an offering to sell electricity that is consumed in California shall disclose its electricity sources" and specifying the information that must be provided).
262. Id. § 398.4(b).
263. See Attorneys General Endorse Principles on Electric Industry Restructuring, 6 ANDREW'S ELECTROMAGNETIC FIELD LITIG. 9 (May 1998).
264. Green seal programs in areas other than electricity have been widely adopted, is as demonstrated by popular familiarity with the dolphin-safe tuna icon on cans of tunafish. For an overview of domestic and international green certification programs, see Eric W. Orts, Reflexive Environmental Law, 89 NW. U. L. REV. 1227 (1995).
265. See Rader & Wiser, supra note 70, at 107. Rader and Wiser suggest an innovative mechanism to ease the administrative burdens associated with a certification system. They propose that certification of renewable power be based upon a system of tradable credits which are generated when a renewable power producer sells energy into a power pool. These credits can be sold by renewable power producers to retail marketers who purchase generic power from the pool. The possession of the credit constitutes a certification of the green power claims of the retail seller without the retail seller having to contract with particular sources of power for some or all of their renewable power purchases. See id. at 107-08.
266. See Deregulated Power: Cheaper But Dirtier?, 100 TECH. REV. 17, 18 (1997) (Massachusetts, Rhode Island, and Vermont have all endorsed a plan to provide customers with information on the emissions potential of various energy supply options).
267. See CAL. PUB. UTIL. § 383(b)(2) (West 1996).
268. See id.
269. State regulation of green marketing claims does have a downside, however. Such regulation can provide a forum for states to discriminate against interstate commerce. States are naturally loathe to spend funds certifying green power generated in other states. Restricting state funds and efforts to the certification only of in-state renewable power should not violate the Commerce Clause, because such certification is best considered a type of state subsidy. States are allowed to favor their own residents with such subsidies. See supra Part I.D. and infra Part III.A.2. Nevertheless, the Commerce Clause would seem to prohibit a state from bestowing preferential treatment upon the customers of certified renewables when that preferential treatment discriminates against or burdens out-of-state producers. At least one state, California, has used its certification program to bestow precisely such a preference. Under the law, direct access to retail electricity suppliers is phased in, with all customers receiving direct access by January 1, 2002. Customers who purchase half of their electricity supply from "certified" in-state renewables, however, are preferentially "bumped to the head of the line" and receive direct access to retail suppliers before Jan 1, 2002. CAL. PUB. UTIL. § 383(b)(2) (West 1996). State green marketing regulations have also been attacked for violating First Amendment guarantees of free speech, though this challenge is weak and was rejected in one case expressly considering the claim.
270. See Association of Nat'l Advertisers v. Lungren, 44 F.3d 726 (9th Cir. 1994) (upholding, against a First Amendment attack, the constitutionality of a state law prohibiting manufacturer or distributor from falsely representing that its products are "ozone friendly," "biodegradable," "photodegradable," "recyclable," or "recycled"). A panel of the Ninth Circuit Circuit rejected the First Amendment claim on a 2-1 vote, though, with dissenting Judge John Noonan Jr. arguing the law should be struck down as an intrusion into the free speech rights of manufacturers and distributors. See id. at 737. The California general green marketing law challenged in Ass'n of Nat'l Advertisers, CAL. BUS. & PROF. CODE § 17508.5, was authored by Stanford law professor Byron Sher.
271. In this view, I have high-ranking company. See, e.g., Tyler Pipe Indus., Inc. v. Washington State Dep't of Revenue, 483 U.S. 232, 263 (1987) (Scalia, J., concurring in part and dissenting in part) ("The historical record provides no grounds for reading the Commerce Clause to be other than what it says - an authorization for Congress to regulate [c]ommerce."). Justice Scalia has since stated that he will enforce, on the basis of stare decisis, the dormant Commerce Clause in two situations: where a state regulation facially discriminates against interstate commerce and where a state law is indistinguishable from a state law previously struck down on dormant Commerce Clause grounds. See West Lynn Creamery, 512 U.S. at 210 (Scalia, J., concurring in judgment). Recently, Justice Thomas also announced that he is prepared to abandon the "failed jurisprudence" of the negative Commerce Clause and resort to the Article I, § 10 Import-Export Clause for authority to check discriminatory state taxes upon interstate commerce. Camps Newfound/Owatonna, Inc. v. Town of Harrison, 520 U.S. 564, 609 (1997). See also Martin H. Redish & Shane V. Nugent, The Dormant Commerce Clause and The Constitutional Balance of Federalism, 1987 DUKE L.J. 569, 573 ("[N]ot only is there no textual basis to support recognition of [the dormant Commerce Clause], but . . . the dormant Commerce Clause actually contradicts, and therefore directly undermines, the Constitution's carefully established textual structure for allocating power between federal and state sovereigns.").
272. For a summary of which market-based regulatory mechanisms would likely be considered constitutionally suspect under the Court's current dormant Commerce Clause jurisprudence, see Table 2, supra. 225. See Regan, supra note 15, at 1092 ("In the central area of dormant commerce clause jurisprudence, comprising what I shall call "movement of goods" cases . . . [the] Court has been concerned exclusively with preventing states from engaging in purposeful economic protectionism.").
273. 437 U.S. 617, 626 (1978).
274. The modern Court's reliance upon the distinction between discriminatory and nondiscriminatory regulations dates back to the leading case of Baldwin v. G.A.F. Seelig, 294 U.S. 511 (1935), in which the Court dispensed with doctrines that distinguished regulations based on the subject matter of the activity being regulated. See Michael E. Smith, State Discriminations Against Interstate Commerce, 74 CALIF. L. REV. 1203, 1205 (1986).
275. Regan, supra note 15, at 1112-13.
276. See id. at 1113.
277. Id. (state protectionism "takes away from the foreigners in order to give to local residents exactly what has been taken away").
278. See Kitch, Regulation and the American Common Market in REGULATION, FEDERALISM, AND INTERSTATE COMMERCE 17-19 (A. Tarlock ed., 1981) (arguing that there was little actual experience of protectionism by states under the Articles of Confederation); Regan, supra note 15, at 1114 n.55 (agreeing with Kitch after a "superficial survey of the standard and easily accessible primary and secondary sources"). But cf. Collins, supra note 15, at 57-58 (agreeing with Kitch that the framers' complaints of interstate exploitation cannot be verified by historical records, but arguing that Kitch's thesis is not well-supported and, in any case, abolition of the dormant Commerce Clause now would necessitate greater justification than a scanty historical record).
279. See Baldwin, 294 U.S. at 522 (Cardozo, J.) (stating that distinctions between direct and indirect burdens - a distinction preceding the Court's reliance upon discriminatory and nondiscriminatory burdens - are irrelevant "when the avowed purpose of the obstruction, as well as its necessary tendency, is to suppress or mitigate the consequences of competition between the states"); id at 527 ("Neither the power to tax nor the police power may be used by the state of destination with the aim and effect of establishing an economic barrier against competition with the products of another state or the labor of its residents. Restrictions so contrived are an unreasonable clog upon the mobility of commerce."); H.P. Hood & Sons v. DuMond, 336 U.S. 525, 538-39 (1949) ("The material success that has come to inhabitants of the states which make up this federal free trade unit has been the most impressive in the history of commerce, but the established interdependence of the states only emphasizes the necessity of protecting interstate movement of goods against local burdens and repressions. We need only consider the consequences if each of the few states that produce copper, lead, high-grade iron ore, timber, cotton, oil or gas should decree that industries located in that state shall have priority. What fantastic rivalries and dislocations and reprisals would ensue if such practices were begun!").
280. For commentators who argue efficiency is now an important value potentially furthered by the Court's reviewing role under the dormant Commerce Clause, see generally Collins, supra note 15, at 63-64 (economic efficiency is important in defining the doctrine's boundaries because doctrine arrays local lawmaking efficiencies against national market, but focus of framers' concerns was interstate commercial harmony rather than market efficiency); Julian N. Eule, Laying the Dormant Commerce Clause to Rest, 91 YALE L.J. 425, 434-35 (1982) (although Commerce Clause did not establish free trade as a fundamental constitutional value, free trade has persisted in judicial decisions as a result of the perceived necessity of a uniform system of commercial regulations for the preservation of national unity and tranquility); Donald Regan, The Supreme Court and State Protectionism: Making Sense of the Dormant Commerce Clause, 84 MICH. L. REV. 1091, 1122 (1986) (although framers did have some efficiency-related objections to interstate protectionism, their objections were much milder than the claims made by modern apostles of efficiency; some concern with efficiency underlies traditional concern in preventing states from engaging in purposeful economic protectionism); Dan T. Coenen, State User Fees and the Dormant Commerce Clause, 50 VAND. L. REV. 795, 826 (1997) ("[I]n keeping with the efficiency-driven concerns about the location of productive activity - the Court repeatedly has used the Commerce Clause to nullify state laws that 'neutralize advantages belonging to the place of origin.'"); Mark P. Gergen, The Selfish State and the Market, 66 TEX. L. REV. 1097, 1107 (1988) (favoring dormant Commerce Clause principles that encourage efficient exploitation of natural resources). Commentators are split in their assessment of whether the principles used by the Court to guide its review of state laws under the dormant Commerce Clause are best constructed so as to further economic efficiency. Compare Lisa Heinzerling, The Commercial Constitution, 1995 SUP. CT. REV. 217, 220 (1995) (goal of economic efficiency has begun to play the dominant role in the Court's dormant Commerce Clause decisions though Court's nondiscrimination principle does not promote economic efficiency in individual cases because Court does not attempt a serious accounting of the benefits and costs of laws that discriminate against interstate commerce), and Edward P. Lazarus, The Commerce Clause Limitation on the Power to Condemn a Relocation, 96 YALE L.J. 1343, 1362 n.33 (1987) (acceptability of inefficient state subsidy programs under the dormant Commerce Clause market participant doctrine demonstrates that doctrine does not require or accomplish efficiency), and Mark Tushnet, Rethinking the Dormant Commerce Clause, 1979 WIS. L. REV. 125, 142 (judicial concern for efficiency demonstrated in review of even nondiscriminatory burdens upon interstate trade should be expressed through revived substantive due process doctrine rather than dormant Commerce Clause), with Winkfield F. Twyman, Jr., Losing Face But Gaining Power: State Taxation of Interstate Commerce, 16 VA. TAX REV. 347, 434 (1997) (noting the net efficiency gains resulting from the enforcement of economic unionism through judicial review of state tax codes under the dormant Commerce Clause), and Daniel J. Gifford, Federalism, Efficiency, The Commerce Clause, and the Sherman Act: Why We Should Follow a Consistent Free-Market Policy, 44 EMORY L.J. 1227, 1228 (1995) (dormant Commerce Clause and Sherman Act share a common concern with furthering efficient allocation of society's resources and should thus be construed in a similar manner).
281. For commentators who argue efficiency is now an important value potentially furthered by the Court's reviewing role under the dormant Commerce Clause, see generally Collins, supra note 15, at 63-64 (economic efficiency is important in defining the doctrine's boundaries because doctrine arrays local lawmaking efficiencies against national market, but focus of framers' concerns was interstate commercial harmony rather than market efficiency); Julian N. Eule, Laying the Dormant Commerce Clause to Rest, 91 YALE L.J. 425, 434-35 (1982) (although Commerce Clause did not establish free trade as a fundamental constitutional value, free trade has persisted in judicial decisions as a result of the perceived necessity of a uniform system of commercial regulations for the preservation of national unity and tranquility); Donald Regan, The Supreme Court and State Protectionism: Making Sense of the Dormant Commerce Clause, 84 MICH. L. REV. 1091, 1122 (1986) (although framers did have some efficiency-related objections to interstate protectionism, their objections were much milder than the claims made by modern apostles of efficiency; some concern with efficiency underlies traditional concern in preventing states from engaging in purposeful economic protectionism); Dan T. Coenen, State User Fees and the Dormant Commerce Clause, 50 VAND. L. REV. 795, 826 (1997) ("[I]n keeping with the efficiency-driven concerns about the location of productive activity - the Court repeatedly has used the Commerce Clause to nullify state laws that 'neutralize advantages belonging to the place of origin.'"); Mark P. Gergen, The Selfish State and the Market, 66 TEX. L. REV. 1097, 1107 (1988) (favoring dormant Commerce Clause principles that encourage efficient exploitation of natural resources). Commentators are split in their assessment of whether the principles used by the Court to guide its review of state laws under the dormant Commerce Clause are best constructed so as to further economic efficiency. Compare Lisa Heinzerling, The Commercial Constitution, 1995 SUP. CT. REV. 217, 220 (1995) (goal of economic efficiency has begun to play the dominant role in the Court's dormant Commerce Clause decisions though Court's nondiscrimination principle does not promote economic efficiency in individual cases because Court does not attempt a serious accounting of the benefits and costs of laws that discriminate against interstate commerce), and Edward P. Lazarus, The Commerce Clause Limitation on the Power to Condemn a Relocation, 96 YALE L.J. 1343, 1362 n.33 (1987) (acceptability of inefficient state subsidy programs under the dormant Commerce Clause market participant doctrine demonstrates that doctrine does not require or accomplish efficiency), and Mark Tushnet, Rethinking the Dormant Commerce Clause, 1979 WIS. L. REV. 125, 142 (judicial concern for efficiency demonstrated in review of even nondiscriminatory burdens upon interstate trade should be expressed through revived substantive due process doctrine rather than dormant Commerce Clause), with Winkfield F. Twyman, Jr., Losing Face But Gaining Power: State Taxation of Interstate Commerce, 16 VA. TAX REV. 347, 434 (1997) (noting the net efficiency gains resulting from the enforcement of economic unionism through judicial review of state tax codes under the dormant Commerce Clause), and Daniel J. Gifford, Federalism, Efficiency, The Commerce Clause, and the Sherman Act: Why We Should Follow a Consistent Free-Market Policy, 44 EMORY L.J. 1227, 1228 (1995) (dormant Commerce Clause and Sherman Act share a common concern with furthering efficient allocation of society's resources and should thus be construed in a similar manner).
282. For commentators who argue efficiency is now an important value potentially furthered by the Court's reviewing role under the dormant Commerce Clause, see generally Collins, supra note 15, at 63-64 (economic efficiency is important in defining the doctrine's boundaries because doctrine arrays local lawmaking efficiencies against national market, but focus of framers' concerns was interstate commercial harmony rather than market efficiency); Julian N. Eule, Laying the Dormant Commerce Clause to Rest, 91 YALE L.J. 425, 434-35 (1982) (although Commerce Clause did not establish free trade as a fundamental constitutional value, free trade has persisted in judicial decisions as a result of the perceived necessity of a uniform system of commercial regulations for the preservation of national unity and tranquility); Donald Regan, The Supreme Court and State Protectionism: Making Sense of the Dormant Commerce Clause, 84 MICH. L. REV. 1091, 1122 (1986) (although framers did have some efficiency-related objections to interstate protectionism, their objections were much milder than the claims made by modern apostles of efficiency; some concern with efficiency underlies traditional concern in preventing states from engaging in purposeful economic protectionism); Dan T. Coenen, State User Fees and the Dormant Commerce Clause, 50 VAND. L. REV. 795, 826 (1997) ("[I]n keeping with the efficiency-driven concerns about the location of productive activity - the Court repeatedly has used the Commerce Clause to nullify state laws that 'neutralize advantages belonging to the place of origin.'"); Mark P. Gergen, The Selfish State and the Market, 66 TEX. L. REV. 1097, 1107 (1988) (favoring dormant Commerce Clause principles that encourage efficient exploitation of natural resources). Commentators are split in their assessment of whether the principles used by the Court to guide its review of state laws under the dormant Commerce Clause are best constructed so as to further economic efficiency. Compare Lisa Heinzerling, The Commercial Constitution, 1995 SUP. CT. REV. 217, 220 (1995) (goal of economic efficiency has begun to play the dominant role in the Court's dormant Commerce Clause decisions though Court's nondiscrimination principle does not promote economic efficiency in individual cases because Court does not attempt a serious accounting of the benefits and costs of laws that discriminate against interstate commerce), and Edward P. Lazarus, The Commerce Clause Limitation on the Power to Condemn a Relocation, 96 YALE L.J. 1343, 1362 n.33 (1987) (acceptability of inefficient state subsidy programs under the dormant Commerce Clause market participant doctrine demonstrates that doctrine does not require or accomplish efficiency), and Mark Tushnet, Rethinking the Dormant Commerce Clause, 1979 WIS. L. REV. 125, 142 (judicial concern for efficiency demonstrated in review of even nondiscriminatory burdens upon interstate trade should be expressed through revived substantive due process doctrine rather than dormant Commerce Clause), with Winkfield F. Twyman, Jr., Losing Face But Gaining Power: State Taxation of Interstate Commerce, 16 VA. TAX REV. 347, 434 (1997) (noting the net efficiency gains resulting from the enforcement of economic unionism through judicial review of state tax codes under the dormant Commerce Clause), and Daniel J. Gifford, Federalism, Efficiency, The Commerce Clause, and the Sherman Act: Why We Should Follow a Consistent Free-Market Policy, 44 EMORY L.J. 1227, 1228 (1995) (dormant Commerce Clause and Sherman Act share a common concern with furthering efficient allocation of society's resources and should thus be construed in a similar manner).
283. For commentators who argue efficiency is now an important value potentially furthered by the Court's reviewing role under the dormant Commerce Clause, see generally Collins, supra note 15, at 63-64 (economic efficiency is important in defining the doctrine's boundaries because doctrine arrays local lawmaking efficiencies against national market, but focus of framers' concerns was interstate commercial harmony rather than market efficiency); Julian N. Eule, Laying the Dormant Commerce Clause to Rest, 91 YALE L.J. 425, 434-35 (1982) (although Commerce Clause did not establish free trade as a fundamental constitutional value, free trade has persisted in judicial decisions as a result of the perceived necessity of a uniform system of commercial regulations for the preservation of national unity and tranquility); Donald Regan, The Supreme Court and State Protectionism: Making Sense of the Dormant Commerce Clause, 84 MICH. L. REV. 1091, 1122 (1986) (although framers did have some efficiency-related objections to interstate protectionism, their objections were much milder than the claims made by modern apostles of efficiency; some concern with efficiency underlies traditional concern in preventing states from engaging in purposeful economic protectionism); Dan T. Coenen, State User Fees and the Dormant Commerce Clause, 50 VAND. L. REV. 795, 826 (1997) ("[I]n keeping with the efficiency-driven concerns about the location of productive activity - the Court repeatedly has used the Commerce Clause to nullify state laws that 'neutralize advantages belonging to the place of origin.'"); Mark P. Gergen, The Selfish State and the Market, 66 TEX. L. REV. 1097, 1107 (1988) (favoring dormant Commerce Clause principles that encourage efficient exploitation of natural resources). Commentators are split in their assessment of whether the principles used by the Court to guide its review of state laws under the dormant Commerce Clause are best constructed so as to further economic efficiency. Compare Lisa Heinzerling, The Commercial Constitution, 1995 SUP. CT. REV. 217, 220 (1995) (goal of economic efficiency has begun to play the dominant role in the Court's dormant Commerce Clause decisions though Court's nondiscrimination principle does not promote economic efficiency in individual cases because Court does not attempt a serious accounting of the benefits and costs of laws that discriminate against interstate commerce), and Edward P. Lazarus, The Commerce Clause Limitation on the Power to Condemn a Relocation, 96 YALE L.J. 1343, 1362 n.33 (1987) (acceptability of inefficient state subsidy programs under the dormant Commerce Clause market participant doctrine demonstrates that doctrine does not require or accomplish efficiency), and Mark Tushnet, Rethinking the Dormant Commerce Clause, 1979 WIS. L. REV. 125, 142 (judicial concern for efficiency demonstrated in review of even nondiscriminatory burdens upon interstate trade should be expressed through revived substantive due process doctrine rather than dormant Commerce Clause), with Winkfield F. Twyman, Jr., Losing Face But Gaining Power: State Taxation of Interstate Commerce, 16 VA. TAX REV. 347, 434 (1997) (noting the net efficiency gains resulting from the enforcement of economic unionism through judicial review of state tax codes under the dormant Commerce Clause), and Daniel J. Gifford, Federalism, Efficiency, The Commerce Clause, and the Sherman Act: Why We Should Follow a Consistent Free-Market Policy, 44 EMORY L.J. 1227, 1228 (1995) (dormant Commerce Clause and Sherman Act share a common concern with furthering efficient allocation of society's resources and should thus be construed in a similar manner).
284. For commentators who argue efficiency is now an important value potentially furthered by the Court's reviewing role under the dormant Commerce Clause, see generally Collins, supra note 15, at 63-64 (economic efficiency is important in defining the doctrine's boundaries because doctrine arrays local lawmaking efficiencies against national market, but focus of framers' concerns was interstate commercial harmony rather than market efficiency); Julian N. Eule, Laying the Dormant Commerce Clause to Rest, 91 YALE L.J. 425, 434-35 (1982) (although Commerce Clause did not establish free trade as a fundamental constitutional value, free trade has persisted in judicial decisions as a result of the perceived necessity of a uniform system of commercial regulations for the preservation of national unity and tranquility); Donald Regan, The Supreme Court and State Protectionism: Making Sense of the Dormant Commerce Clause, 84 MICH. L. REV. 1091, 1122 (1986) (although framers did have some efficiency-related objections to interstate protectionism, their objections were much milder than the claims made by modern apostles of efficiency; some concern with efficiency underlies traditional concern in preventing states from engaging in purposeful economic protectionism); Dan T. Coenen, State User Fees and the Dormant Commerce Clause, 50 VAND. L. REV. 795, 826 (1997) ("[I]n keeping with the efficiency-driven concerns about the location of productive activity - the Court repeatedly has used the Commerce Clause to nullify state laws that 'neutralize advantages belonging to the place of origin.'"); Mark P. Gergen, The Selfish State and the Market, 66 TEX. L. REV. 1097, 1107 (1988) (favoring dormant Commerce Clause principles that encourage efficient exploitation of natural resources). Commentators are split in their assessment of whether the principles used by the Court to guide its review of state laws under the dormant Commerce Clause are best constructed so as to further economic efficiency. Compare Lisa Heinzerling, The Commercial Constitution, 1995 SUP. CT. REV. 217, 220 (1995) (goal of economic efficiency has begun to play the dominant role in the Court's dormant Commerce Clause decisions though Court's nondiscrimination principle does not promote economic efficiency in individual cases because Court does not attempt a serious accounting of the benefits and costs of laws that discriminate against interstate commerce), and Edward P. Lazarus, The Commerce Clause Limitation on the Power to Condemn a Relocation, 96 YALE L.J. 1343, 1362 n.33 (1987) (acceptability of inefficient state subsidy programs under the dormant Commerce Clause market participant doctrine demonstrates that doctrine does not require or accomplish efficiency), and Mark Tushnet, Rethinking the Dormant Commerce Clause, 1979 WIS. L. REV. 125, 142 (judicial concern for efficiency demonstrated in review of even nondiscriminatory burdens upon interstate trade should be expressed through revived substantive due process doctrine rather than dormant Commerce Clause), with Winkfield F. Twyman, Jr., Losing Face But Gaining Power: State Taxation of Interstate Commerce, 16 VA. TAX REV. 347, 434 (1997) (noting the net efficiency gains resulting from the enforcement of economic unionism through judicial review of state tax codes under the dormant Commerce Clause), and Daniel J. Gifford, Federalism, Efficiency, The Commerce Clause, and the Sherman Act: Why We Should Follow a Consistent Free-Market Policy, 44 EMORY L.J. 1227, 1228 (1995) (dormant Commerce Clause and Sherman Act share a common concern with furthering efficient allocation of society's resources and should thus be construed in a similar manner).
285. For commentators who argue efficiency is now an important value potentially furthered by the Court's reviewing role under the dormant Commerce Clause, see generally Collins, supra note 15, at 63-64 (economic efficiency is important in defining the doctrine's boundaries because doctrine arrays local lawmaking efficiencies against national market, but focus of framers' concerns was interstate commercial harmony rather than market efficiency); Julian N. Eule, Laying the Dormant Commerce Clause to Rest, 91 YALE L.J. 425, 434-35 (1982) (although Commerce Clause did not establish free trade as a fundamental constitutional value, free trade has persisted in judicial decisions as a result of the perceived necessity of a uniform system of commercial regulations for the preservation of national unity and tranquility); Donald Regan, The Supreme Court and State Protectionism: Making Sense of the Dormant Commerce Clause, 84 MICH. L. REV. 1091, 1122 (1986) (although framers did have some efficiency-related objections to interstate protectionism, their objections were much milder than the claims made by modern apostles of efficiency; some concern with efficiency underlies traditional concern in preventing states from engaging in purposeful economic protectionism); Dan T. Coenen, State User Fees and the Dormant Commerce Clause, 50 VAND. L. REV. 795, 826 (1997) ("[I]n keeping with the efficiency-driven concerns about the location of productive activity - the Court repeatedly has used the Commerce Clause to nullify state laws that 'neutralize advantages belonging to the place of origin.'"); Mark P. Gergen, The Selfish State and the Market, 66 TEX. L. REV. 1097, 1107 (1988) (favoring dormant Commerce Clause principles that encourage efficient exploitation of natural resources). Commentators are split in their assessment of whether the principles used by the Court to guide its review of state laws under the dormant Commerce Clause are best constructed so as to further economic efficiency. Compare Lisa Heinzerling, The Commercial Constitution, 1995 SUP. CT. REV. 217, 220 (1995) (goal of economic efficiency has begun to play the dominant role in the Court's dormant Commerce Clause decisions though Court's nondiscrimination principle does not promote economic efficiency in individual cases because Court does not attempt a serious accounting of the benefits and costs of laws that discriminate against interstate commerce), and Edward P. Lazarus, The Commerce Clause Limitation on the Power to Condemn a Relocation, 96 YALE L.J. 1343, 1362 n.33 (1987) (acceptability of inefficient state subsidy programs under the dormant Commerce Clause market participant doctrine demonstrates that doctrine does not require or accomplish efficiency), and Mark Tushnet, Rethinking the Dormant Commerce Clause, 1979 WIS. L. REV. 125, 142 (judicial concern for efficiency demonstrated in review of even nondiscriminatory burdens upon interstate trade should be expressed through revived substantive due process doctrine rather than dormant Commerce Clause), with Winkfield F. Twyman, Jr., Losing Face But Gaining Power: State Taxation of Interstate Commerce, 16 VA. TAX REV. 347, 434 (1997) (noting the net efficiency gains resulting from the enforcement of economic unionism through judicial review of state tax codes under the dormant Commerce Clause), and Daniel J. Gifford, Federalism, Efficiency, The Commerce Clause, and the Sherman Act: Why We Should Follow a Consistent Free-Market Policy, 44 EMORY L.J. 1227, 1228 (1995) (dormant Commerce Clause and Sherman Act share a common concern with furthering efficient allocation of society's resources and should thus be construed in a similar manner).
286. For commentators who argue efficiency is now an important value potentially furthered by the Court's reviewing role under the dormant Commerce Clause, see generally Collins, supra note 15, at 63-64 (economic efficiency is important in defining the doctrine's boundaries because doctrine arrays local lawmaking efficiencies against national market, but focus of framers' concerns was interstate commercial harmony rather than market efficiency); Julian N. Eule, Laying the Dormant Commerce Clause to Rest, 91 YALE L.J. 425, 434-35 (1982) (although Commerce Clause did not establish free trade as a fundamental constitutional value, free trade has persisted in judicial decisions as a result of the perceived necessity of a uniform system of commercial regulations for the preservation of national unity and tranquility); Donald Regan, The Supreme Court and State Protectionism: Making Sense of the Dormant Commerce Clause, 84 MICH. L. REV. 1091, 1122 (1986) (although framers did have some efficiency-related objections to interstate protectionism, their objections were much milder than the claims made by modern apostles of efficiency; some concern with efficiency underlies traditional concern in preventing states from engaging in purposeful economic protectionism); Dan T. Coenen, State User Fees and the Dormant Commerce Clause, 50 VAND. L. REV. 795, 826 (1997) ("[I]n keeping with the efficiency-driven concerns about the location of productive activity - the Court repeatedly has used the Commerce Clause to nullify state laws that 'neutralize advantages belonging to the place of origin.'"); Mark P. Gergen, The Selfish State and the Market, 66 TEX. L. REV. 1097, 1107 (1988) (favoring dormant Commerce Clause principles that encourage efficient exploitation of natural resources). Commentators are split in their assessment of whether the principles used by the Court to guide its review of state laws under the dormant Commerce Clause are best constructed so as to further economic efficiency. Compare Lisa Heinzerling, The Commercial Constitution, 1995 SUP. CT. REV. 217, 220 (1995) (goal of economic efficiency has begun to play the dominant role in the Court's dormant Commerce Clause decisions though Court's nondiscrimination principle does not promote economic efficiency in individual cases because Court does not attempt a serious accounting of the benefits and costs of laws that discriminate against interstate commerce), and Edward P. Lazarus, The Commerce Clause Limitation on the Power to Condemn a Relocation, 96 YALE L.J. 1343, 1362 n.33 (1987) (acceptability of inefficient state subsidy programs under the dormant Commerce Clause market participant doctrine demonstrates that doctrine does not require or accomplish efficiency), and Mark Tushnet, Rethinking the Dormant Commerce Clause, 1979 WIS. L. REV. 125, 142 (judicial concern for efficiency demonstrated in review of even nondiscriminatory burdens upon interstate trade should be expressed through revived substantive due process doctrine rather than dormant Commerce Clause), with Winkfield F. Twyman, Jr., Losing Face But Gaining Power: State Taxation of Interstate Commerce, 16 VA. TAX REV. 347, 434 (1997) (noting the net efficiency gains resulting from the enforcement of economic unionism through judicial review of state tax codes under the dormant Commerce Clause), and Daniel J. Gifford, Federalism, Efficiency, The Commerce Clause, and the Sherman Act: Why We Should Follow a Consistent Free-Market Policy, 44 EMORY L.J. 1227, 1228 (1995) (dormant Commerce Clause and Sherman Act share a common concern with furthering efficient allocation of society's resources and should thus be construed in a similar manner).
287. For commentators who argue efficiency is now an important value potentially furthered by the Court's reviewing role under the dormant Commerce Clause, see generally Collins, supra note 15, at 63-64 (economic efficiency is important in defining the doctrine's boundaries because doctrine arrays local lawmaking efficiencies against national market, but focus of framers' concerns was interstate commercial harmony rather than market efficiency); Julian N. Eule, Laying the Dormant Commerce Clause to Rest, 91 YALE L.J. 425, 434-35 (1982) (although Commerce Clause did not establish free trade as a fundamental constitutional value, free trade has persisted in judicial decisions as a result of the perceived necessity of a uniform system of commercial regulations for the preservation of national unity and tranquility); Donald Regan, The Supreme Court and State Protectionism: Making Sense of the Dormant Commerce Clause, 84 MICH. L. REV. 1091, 1122 (1986) (although framers did have some efficiency-related objections to interstate protectionism, their objections were much milder than the claims made by modern apostles of efficiency; some concern with efficiency underlies traditional concern in preventing states from engaging in purposeful economic protectionism); Dan T. Coenen, State User Fees and the Dormant Commerce Clause, 50 VAND. L. REV. 795, 826 (1997) ("[I]n keeping with the efficiency-driven concerns about the location of productive activity - the Court repeatedly has used the Commerce Clause to nullify state laws that 'neutralize advantages belonging to the place of origin.'"); Mark P. Gergen, The Selfish State and the Market, 66 TEX. L. REV. 1097, 1107 (1988) (favoring dormant Commerce Clause principles that encourage efficient exploitation of natural resources). Commentators are split in their assessment of whether the principles used by the Court to guide its review of state laws under the dormant Commerce Clause are best constructed so as to further economic efficiency. Compare Lisa Heinzerling, The Commercial Constitution, 1995 SUP. CT. REV. 217, 220 (1995) (goal of economic efficiency has begun to play the dominant role in the Court's dormant Commerce Clause decisions though Court's nondiscrimination principle does not promote economic efficiency in individual cases because Court does not attempt a serious accounting of the benefits and costs of laws that discriminate against interstate commerce), and Edward P. Lazarus, The Commerce Clause Limitation on the Power to Condemn a Relocation, 96 YALE L.J. 1343, 1362 n.33 (1987) (acceptability of inefficient state subsidy programs under the dormant Commerce Clause market participant doctrine demonstrates that doctrine does not require or accomplish efficiency), and Mark Tushnet, Rethinking the Dormant Commerce Clause, 1979 WIS. L. REV. 125, 142 (judicial concern for efficiency demonstrated in review of even nondiscriminatory burdens upon interstate trade should be expressed through revived substantive due process doctrine rather than dormant Commerce Clause), with Winkfield F. Twyman, Jr., Losing Face But Gaining Power: State Taxation of Interstate Commerce, 16 VA. TAX REV. 347, 434 (1997) (noting the net efficiency gains resulting from the enforcement of economic unionism through judicial review of state tax codes under the dormant Commerce Clause), and Daniel J. Gifford, Federalism, Efficiency, The Commerce Clause, and the Sherman Act: Why We Should Follow a Consistent Free-Market Policy, 44 EMORY L.J. 1227, 1228 (1995) (dormant Commerce Clause and Sherman Act share a common concern with furthering efficient allocation of society's resources and should thus be construed in a similar manner).
288. For commentators who argue efficiency is now an important value potentially furthered by the Court's reviewing role under the dormant Commerce Clause, see generally Collins, supra note 15, at 63-64 (economic efficiency is important in defining the doctrine's boundaries because doctrine arrays local lawmaking efficiencies against national market, but focus of framers' concerns was interstate commercial harmony rather than market efficiency); Julian N. Eule, Laying the Dormant Commerce Clause to Rest, 91 YALE L.J. 425, 434-35 (1982) (although Commerce Clause did not establish free trade as a fundamental constitutional value, free trade has persisted in judicial decisions as a result of the perceived necessity of a uniform system of commercial regulations for the preservation of national unity and tranquility); Donald Regan, The Supreme Court and State Protectionism: Making Sense of the Dormant Commerce Clause, 84 MICH. L. REV. 1091, 1122 (1986) (although framers did have some efficiency-related objections to interstate protectionism, their objections were much milder than the claims made by modern apostles of efficiency; some concern with efficiency underlies traditional concern in preventing states from engaging in purposeful economic protectionism); Dan T. Coenen, State User Fees and the Dormant Commerce Clause, 50 VAND. L. REV. 795, 826 (1997) ("[I]n keeping with the efficiency-driven concerns about the location of productive activity - the Court repeatedly has used the Commerce Clause to nullify state laws that 'neutralize advantages belonging to the place of origin.'"); Mark P. Gergen, The Selfish State and the Market, 66 TEX. L. REV. 1097, 1107 (1988) (favoring dormant Commerce Clause principles that encourage efficient exploitation of natural resources). Commentators are split in their assessment of whether the principles used by the Court to guide its review of state laws under the dormant Commerce Clause are best constructed so as to further economic efficiency. Compare Lisa Heinzerling, The Commercial Constitution, 1995 SUP. CT. REV. 217, 220 (1995) (goal of economic efficiency has begun to play the dominant role in the Court's dormant Commerce Clause decisions though Court's nondiscrimination principle does not promote economic efficiency in individual cases because Court does not attempt a serious accounting of the benefits and costs of laws that discriminate against interstate commerce), and Edward P. Lazarus, The Commerce Clause Limitation on the Power to Condemn a Relocation, 96 YALE L.J. 1343, 1362 n.33 (1987) (acceptability of inefficient state subsidy programs under the dormant Commerce Clause market participant doctrine demonstrates that doctrine does not require or accomplish efficiency), and Mark Tushnet, Rethinking the Dormant Commerce Clause, 1979 WIS. L. REV. 125, 142 (judicial concern for efficiency demonstrated in review of even nondiscriminatory burdens upon interstate trade should be expressed through revived substantive due process doctrine rather than dormant Commerce Clause), with Winkfield F. Twyman, Jr., Losing Face But Gaining Power: State Taxation of Interstate Commerce, 16 VA. TAX REV. 347, 434 (1997) (noting the net efficiency gains resulting from the enforcement of economic unionism through judicial review of state tax codes under the dormant Commerce Clause), and Daniel J. Gifford, Federalism, Efficiency, The Commerce Clause, and the Sherman Act: Why We Should Follow a Consistent Free-Market Policy, 44 EMORY L.J. 1227, 1228 (1995) (dormant Commerce Clause and Sherman Act share a common concern with furthering efficient allocation of society's resources and should thus be construed in a similar manner).
289. See Eule, supra note 233, at 438 (advocating alternative role of reinforcing political representation of affected groups); Jonathan D. Varat, State "Citizenship" and Interstate Equality, 48 U. CHI. L. REV. 487, 518 (1981) (arguing that the Framers adopted the Privileges and Immunities Clause and the Commerce Clause "primarily as an instrument of national unification").
290. See Regan, supra note 15, at 1122.
291. See R. G. Lipsey & K. Lancaster, The General Theory of Second Best, 24 REVIEW OF ECONOMIC STUDIES 11 (1956-57); see also WALTER NICHOLSON, MICROECONOMIC THEORY 521 (5th ed. 1992).
292. See R. G. Lipsey & K. Lancaster, The General Theory of Second Best, 24 REVIEW OF ECONOMIC STUDIES 11 (1956-57); see also WALTER NICHOLSON, MICROECONOMIC THEORY 521 (5th ed. 1992).
293. Although not labeling his argument as such, Donald Regan essentially argues for the application of the theory of the second best when he states that a state law is inefficient only when it diverts business away from low-cost out-of-state producers without a "colorable cost-based justification." Regan, supra note 15, at 1117. The term "cost-based justification" is imprecise, however, and might easily apply to regulations for which there is no colorable efficiency argument. For example, a state regulation that prohibits entry of foreign goods is arguably cost based but may not increase social welfare. To his credit, Regan partially solves this problem later by expanding the scope of the justification for state regulation that affects business diversions beyond economic concerns to those which are justified in terms of a "federally cognizable benefit." Id. at 1118; see also id. at 1116 (arguing that the Oregon bottle law case, American Can Co. v. Oregon Liquor Control Comm'n, 517 P.2d 691 (Or. Ct. App. 1974), discussed infra, was not, despite its effect, inefficient in diverting business from low-cost foreign bottling companies to higher-cost in-state bottlers, because "the object of the law was to improve productive efficiency by correcting an inefficiency [litter from nonreturnable cans] that resulted from an external cost of the existing productive processes").
294. The Pike test can be applied in a manner that is consistent with the theory of the second best. For example, in Minnesota v. Clover Leaf Creamery, 449 U.S. 456 (1981), the likely effect of Minnesota's ban upon the retail sale of milk in plastic, nonreturnable, nonrefillable containers was to divert business from out-of-state manufacturers of plastic resin to in-state pulpwood processors. Id. at 728 ("Respondents point out that plastic resin, the raw material for making plastic nonreturnable milk jugs, is produced entirely by non-Minnesota firms, while pulpwood, used for making paperboard, is a major Minnesota product."). The Court upheld the law under the Pike test, however, stating that the burden upon interstate commerce was not "clearly excessive" in comparison to the state's interest in "promoting conservation of energy and other natural resources and easing solid waste disposal problems." Id. at 729. Minnesota's ban upon plastic containers can be understood as a state effort to correct for the negative externalities accompanying the use of such containers - litter and excessive energy use. Although Minnesota's action in barring the sale of milk in such containers is itself inefficient (the law forced packaging companies to use higher-cost cardboard cartons instead of lower-cost plastic jugs), the theory of the second best asserts that this second inefficiency may correct the inefficiency caused by the negative externalities of litter and excessive energy use. Seen in this context, Pike's prohibition upon the imposition of excessive burdens upon interstate commerce provides the Court with the necessary flexibility to apply the theory of the second best and to uphold some state burdens upon interstate commerce that are designed to counter preexisting market failures. Another case demonstrating the suitability of the Pike test to a second best efficiency analysis is a state court decision upholding an Oregon bottle bill. The bill required bottlers to package their drinks in returnable, multiple-use deposit bottles and was upheld upon a showing that the State's intent was to reduce litter. See American Can Co., 517 P.2d at 702 ("Economic loss restricted to certain elements of the beverage industry must be viewed in relation to the broader loss to the general public of the state of Oregon which the legislature sought, by enactment of the bottle bill, to avoid. The availability of land and revenues for solid waste disposal, the cost of litter collection on our highways and in our public parks, the depletion of mineral and energy resources, the injuries to humans and animals caused by discarded pull tops, and the esthetic blight on our landscape, are all economic, safety and esthetic burdens of great consequence which must be borne by every member of the public.").
295. Cf. Heinzerling, supra note 233, at 242-51. Heinzerling argues that, because the Court "ignores benefits that an impartial efficiency analysis would take into account . . . it is impossible to conclude that in any given case the Court has promoted efficiency by invalidating a discriminatory law."
296. 437 U.S. 617, 626 (1978).
297. See id. at 625.
298. See id. at 630-31 (Rehnquist, J. and Burger, C.J., dissenting).
299. For instance, 22% of the 850 sites on the Superfund National Priorities List in 1986 were formerly municipal solid waste landfills. See Solid Waste Disposal Facility Criteria, 53 Fed. Reg. 33,314, 33,319 (1988).
300. See Philadelphia v. New Jersey, 437 U.S. at 624.
301. The theory of the second best applies similarly to state restrictions on interstate trades in emission credits. In the absence of such restrictions, one state might end up with an excessive number of pollution permits, while another state might end up with an emission credit shortage. The result would be inefficiency in both jurisdictions. In the state with an excessive number of credits, the hot spot state, the costs of the resulting high amounts of polluting emissions may exceed the economic benefits gained through their use. Similarly, in the state with a shortage of emissions credits, the cold spot state, the lack of pollution credits may inefficiently limit economic activities within the state. Consequently, the theory of the second best counsels that a state may enhance efficiency by barring or restricting interstate trade in emissions credits. As discussed in Part II.A., however, a constitutional problem is unlikely to arise when a state restricts interstate trade in emissions
302. In the traditional story that illustrates this principle of noncooperative game theory, two prisoners who are both accused of committing a crime are separately interrogated by the prosecutor. Each faces the same two choices during the interview: cooperate with each other by maintaining a silence about the crime, or defect by confessing joint involvement in the crime. Each prisoner is unable to consult with the other prisoner in determining what choice of action to follow. If both remain silent, the prosecutor will only have sufficient evidence to convict the two of a lesser crime for which there is a light sentence; however, if both confess, each is given a sentence of moderate severity. If one confesses but the other does not, the one who confesses is rewarded with release while the silent prisoner is punished with the harshest possible sentence. In the classic prisoner's dilemma, the punishments are arranged such that overall time served (the sum of the two jail terms) is the least severe if neither confesses. Because each has the possibility of getting a better deal - full release - if she confesses, and because each risks getting the most severe sentence if she remains silent, each follows her own self-interest and confesses. See SHAUN P. HARGREAVES HEAP & YANIS VAROUFAKIS, GAME THEORY: A CRITICAL INTRODUCTION 146-66 (1995); ERIC RASMUSEN, GAMES AND INFORMATION 17-18 (2d ed. 1994) (for explorations of the theoretical aspects of the Prisoner's Dilemma and its application in economics and the social sciences); ROBERT AXELROD, THE EVOLUTION OF COOPERATION 7-11 (1984); R. DUNCAN LUCE & HOWARD RAIFFA, GAMES AND DECISIONS: INTRODUCTION AND CRITICAL SURVEY 95 (1967). For a recent application of the Prisoner's Dilemma to state decision making, see Scott R. Saleska & Kirsten H. Engel, "Facts are Stubborn Things": An Empirical Reality Check In the Theoretical Debate Over the Race-to-the-Bottom in State Environmental Standard-Setting, CORNELL J. L. & PUB. POL'Y (forthcoming 1999).
303. In the traditional story that illustrates this principle of noncooperative game theory, two prisoners who are both accused of committing a crime are separately interrogated by the prosecutor. Each faces the same two choices during the interview: cooperate with each other by maintaining a silence about the crime, or defect by confessing joint involvement in the crime. Each prisoner is unable to consult with the other prisoner in determining what choice of action to follow. If both remain silent, the prosecutor will only have sufficient evidence to convict the two of a lesser crime for which there is a light sentence; however, if both confess, each is given a sentence of moderate severity. If one confesses but the other does not, the one who confesses is rewarded with release while the silent prisoner is punished with the harshest possible sentence. In the classic prisoner's dilemma, the punishments are arranged such that overall time served (the sum of the two jail terms) is the least severe if neither confesses. Because each has the possibility of getting a better deal - full release - if she confesses, and because each risks getting the most severe sentence if she remains silent, each follows her own self-interest and confesses. See SHAUN P. HARGREAVES HEAP & YANIS VAROUFAKIS, GAME THEORY: A CRITICAL INTRODUCTION 146-66 (1995); ERIC RASMUSEN, GAMES AND INFORMATION 17-18 (2d ed. 1994) (for explorations of the theoretical aspects of the Prisoner's Dilemma and its application in economics and the social sciences); ROBERT AXELROD, THE EVOLUTION OF COOPERATION 7-11 (1984); R. DUNCAN LUCE & HOWARD RAIFFA, GAMES AND DECISIONS: INTRODUCTION AND CRITICAL SURVEY 95 (1967). For a recent application of the Prisoner's Dilemma to state decision making, see Scott R. Saleska & Kirsten H. Engel, "Facts are Stubborn Things": An Empirical Reality Check In the Theoretical Debate Over the Race-to-the-Bottom in State Environmental Standard-Setting, CORNELL J. L. & PUB. POL'Y (forthcoming 1999).
304. In the traditional story that illustrates this principle of noncooperative game theory, two prisoners who are both accused of committing a crime are separately interrogated by the prosecutor. Each faces the same two choices during the interview: cooperate with each other by maintaining a silence about the crime, or defect by confessing joint involvement in the crime. Each prisoner is unable to consult with the other prisoner in determining what choice of action to follow. If both remain silent, the prosecutor will only have sufficient evidence to convict the two of a lesser crime for which there is a light sentence; however, if both confess, each is given a sentence of moderate severity. If one confesses but the other does not, the one who confesses is rewarded with release while the silent prisoner is punished with the harshest possible sentence. In the classic prisoner's dilemma, the punishments are arranged such that overall time served (the sum of the two jail terms) is the least severe if neither confesses. Because each has the possibility of getting a better deal - full release - if she confesses, and because each risks getting the most severe sentence if she remains silent, each follows her own self-interest and confesses. See SHAUN P. HARGREAVES HEAP & YANIS VAROUFAKIS, GAME THEORY: A CRITICAL INTRODUCTION 146-66 (1995); ERIC RASMUSEN, GAMES AND INFORMATION 17-18 (2d ed. 1994) (for explorations of the theoretical aspects of the Prisoner's Dilemma and its application in economics and the social sciences); ROBERT AXELROD, THE EVOLUTION OF COOPERATION 7-11 (1984); R. DUNCAN LUCE & HOWARD RAIFFA, GAMES AND DECISIONS: INTRODUCTION AND CRITICAL SURVEY 95 (1967). For a recent application of the Prisoner's Dilemma to state decision making, see Scott R. Saleska & Kirsten H. Engel, "Facts are Stubborn Things": An Empirical Reality Check In the Theoretical Debate Over the Race-to-the-Bottom in State Environmental Standard-Setting, CORNELL J. L. & PUB. POL'Y (forthcoming 1999).
305. In the traditional story that illustrates this principle of noncooperative game theory, two prisoners who are both accused of committing a crime are separately interrogated by the prosecutor. Each faces the same two choices during the interview: cooperate with each other by maintaining a silence about the crime, or defect by confessing joint involvement in the crime. Each prisoner is unable to consult with the other prisoner in determining what choice of action to follow. If both remain silent, the prosecutor will only have sufficient evidence to convict the two of a lesser crime for which there is a light sentence; however, if both confess, each is given a sentence of moderate severity. If one confesses but the other does not, the one who confesses is rewarded with release while the silent prisoner is punished with the harshest possible sentence. In the classic prisoner's dilemma, the punishments are arranged such that overall time served (the sum of the two jail terms) is the least severe if neither confesses. Because each has the possibility of getting a better deal - full release - if she confesses, and because each risks getting the most severe sentence if she remains silent, each follows her own self-interest and confesses. See SHAUN P. HARGREAVES HEAP & YANIS VAROUFAKIS, GAME THEORY: A CRITICAL INTRODUCTION 146-66 (1995); ERIC RASMUSEN, GAMES AND INFORMATION 17-18 (2d ed. 1994) (for explorations of the theoretical aspects of the Prisoner's Dilemma and its application in economics and the social sciences); ROBERT AXELROD, THE EVOLUTION OF COOPERATION 7-11 (1984); R. DUNCAN LUCE & HOWARD RAIFFA, GAMES AND DECISIONS: INTRODUCTION AND CRITICAL SURVEY 95 (1967). For a recent application of the Prisoner's Dilemma to state decision making, see Scott R. Saleska & Kirsten H. Engel, "Facts are Stubborn Things": An Empirical Reality Check In the Theoretical Debate Over the Race-to-the-Bottom in State Environmental Standard-Setting, CORNELL J. L. & PUB. POL'Y (forthcoming 1999).
306. In the traditional story that illustrates this principle of noncooperative game theory, two prisoners who are both accused of committing a crime are separately interrogated by the prosecutor. Each faces the same two choices during the interview: cooperate with each other by maintaining a silence about the crime, or defect by confessing joint involvement in the crime. Each prisoner is unable to consult with the other prisoner in determining what choice of action to follow. If both remain silent, the prosecutor will only have sufficient evidence to convict the two of a lesser crime for which there is a light sentence; however, if both confess, each is given a sentence of moderate severity. If one confesses but the other does not, the one who confesses is rewarded with release while the silent prisoner is punished with the harshest possible sentence. In the classic prisoner's dilemma, the punishments are arranged such that overall time served (the sum of the two jail terms) is the least severe if neither confesses. Because each has the possibility of getting a better deal - full release - if she confesses, and because each risks getting the most severe sentence if she remains silent, each follows her own self-interest and confesses. See SHAUN P. HARGREAVES HEAP & YANIS VAROUFAKIS, GAME THEORY: A CRITICAL INTRODUCTION 146-66 (1995); ERIC RASMUSEN, GAMES AND INFORMATION 17-18 (2d ed. 1994) (for explorations of the theoretical aspects of the Prisoner's Dilemma and its application in economics and the social sciences); ROBERT AXELROD, THE EVOLUTION OF COOPERATION 7-11 (1984); R. DUNCAN LUCE & HOWARD RAIFFA, GAMES AND DECISIONS: INTRODUCTION AND CRITICAL SURVEY 95 (1967). For a recent application of the Prisoner's Dilemma to state decision making, see Scott R. Saleska & Kirsten H. Engel, "Facts are Stubborn Things": An Empirical Reality Check In the Theoretical Debate Over the Race-to-the-Bottom in State Environmental Standard-Setting, CORNELL J. L. & PUB. POL'Y (forthcoming 1999).
307. "Net Benefit" = net welfare benefit resulting from the implementation of the market-based regulation.
308. "Free-Ride Benefit" = benefit obtained by state free-riding on the public goods created by another state's incentive-based regulation.
309. The leading market participant cases are Hughes v. Alexandria Scrap, 426 U.S. 794 (1976), Reeves v. Stake, 447 U.S. 429 (1980), and White v. Massachusetts Council of Constr. Employers, Inc., 460 U.S. 204 (1983).
310. In two of the market participant cases, Reeves, 447 U.S. at 429 and Alexandria Scrap, 426 U.S. at 794, the state poured its public capital into the existing private market only after the private market failed to adequately serve the needs of local residents. Thus in Reeves, South Dakota built the cement plant only after the only other in-state cement plant closed down and it became obvious that no other private cement producers had an incentive to build a plant in South Dakota. (All of the private producers were located out-of-state and were exploiting the scarcity of cement producers to make large profits.) See 447 U.S. at 432 n.1. Similarly, in Alexandria Scrap, the State developed the complicated legislative scheme of penalty and bounty provisions only after a legislative study determined that the growing aesthetic problem of abandoned automobiles was attributable to bottlenecks in the "scrap cycle." 426 U.S. at 796-97. Such bottlenecks could be cleared up only if wrecking companies were given an incentive to deliver abandoned vehicles to scrap processors. See id.
311. This toleration is clearly revealed in Hughes v. Alexandria Scrap. 426 U.S. at 794. In Alexandria Scrap, Maryland's participation in the private market consisted of distributing a subsidy to auto scrap processors in the form of a bounty payable upon their processing of an abandoned auto hulk. The Court upheld a Maryland law that channeled a disproportionate share of the state-funded bounties for the processing of abandoned vehicles to in-state metal scrap processors. See id. at 803-04. The law upheld rendered it more burdensome for out-of-state metal scrap processors to prove that the vehicle was actually abandoned, a condition imposed by the State for receipt of the bounty. Under the Maryland law, a scrap processor, regardless of its location in-state or out-of-state, was eligible for a bounty of $16 upon its destruction of an abandoned vehicle formerly titled under Maryland law and its presentation to state authorities of documentation obtained from wreckers and other suppliers, demonstrating that the vehicle was truly abandoned. See id. at 798. Because the scrap processors shared the bounty with the suppliers, the bounty functioned as an incentive for suppliers to seek out abandoned vehicles and deliver them to processors for scrap metal, thus fulfilling Maryland's purpose of ridding the State of abandoned automobiles. Under an amendment to the law, the State imposed more exacting documentation requirements for receipt of the bounty upon out-of-state processors than in-state processors, with the effect that suppliers preferred to deliver their abandoned vehicles to in-state processors as opposed to out-of-state processors. See id. at 801-03. In rejecting the Commerce Clause challenge to the law, the Court held that the disadvantage experienced by the out-of-state processors vis-à-vis in-state processors in their competition for abandoned auto hulks was not a disadvantage that mattered since it was a consequence of Maryland's own preference for in-state processors when it entered the market for auto hulks as a purchaser. See id. at 809-10 (Nothing in the purposes animating the Commerce Clause prohibits a State, in the absence of congressional action, from participating in the market and exercising the right to favor its own citizens over others.). The Court thus turned to the age-old distinction between the state as regulator and the state as proprietor to distinguish between prohibited and nonprohibited discrimination against interstate commerce.
312. 447 U.S. 429 (1980).
313. 460 U.S. 204 (1983).
314. Reeves involved a state's preferences for residents when determining the priority to be given customers of the cement produced by a state-owned and operated cement plant. See 447 U.S. 429 (1980). The burden upon interstate commerce occasioned by the priority given residents by the South Dakota policy was justified, according to the Court, by numerous factors, among them being respect for state sovereignty, evenhandedness (affording states the same freedoms as private sellers in the marketplace), the difficulty of analyzing the subtle, complex, and politically-charged considerations raised by state proprietary action under the Commerce Clause, see id. at 438, and the desire to channel state benefits to the residents of the state supplying them. See id. at 442. In Reeves, the Court stated that striking down the resident preference for cement manufactured at the state-owned facility would discourage similar state projects and would deprive the state of the intended benefit of its foresight, risk, and industry. See id. at 446. In White, the city government discriminated in its position as a purchaser of construction labor; the case involved a local ordinance requiring that construction firms hired by the city employ a work force, half of which consist of city residents. See 460 U.S. at 204.
315. The importance of this factor is underscored in Alexandria Scrap, where the plaintiff out-of-state scrap processor argued in support of its equal protection claim that the state's purpose of ridding its own territory of abandoned hulks would be better served by conditioning the payment of the bounty upon proof of abandonment in Maryland while imposing the same standards of documentation for proof of abandonment upon both in-state and out-of-state processors. Where the location of the abandoned vehicle was equidistant, or closer, to an out-of-state processor, however, such a condition would not have had the additional benefit of directing most of the bounty money to in-state processors.
316. Thus in Alexandria Scrap, Maryland argued that its imposition of more burdensome documentation requirements upon out-of-state processors was necessary to ensure that the state's funds were used primarily to reduce the number of Maryland-titled hulks abandoned in Maryland, as opposed to other states. See 426 U.S. at 804. Although the state's interest in ridding its own territory of Maryland-titled hulks would be more directly served by amending the statute to condition the bounty upon a hulk's abandonment in Maryland, id. at 811, it would do so only at the cost of directing much of the state's bounty payments to out-of-state processors, which are more conveniently located to the suppliers who recover the hulks. By upholding the bounty law despite the existence of this less discriminatory and more efficacious alternative method of ridding the state of abandoned hulks, the Court recognized the right of states to channel the benefit of tax dollars devoted to improving the local environment to residents and in-state businesses. Thus the Court dispensed with its usual requirement that the state demonstrate the absence of nondiscriminatory alternatives for achieving the State's objectives. See, e.g., Philadelphia v. New Jersey, 437 U.S. at 626; Pike, 397 U.S. at 142. Although the Court did hold the relationship between the state's discrimination and its environmental purpose relevant to the out-of-state processors' Equal Protection Clause challenge, the Court held that the relationship that did exist satisfied a rational relationship test, all that applied in view of the fact that no fundamental interest was at stake.
317. See Hellerstein & Coenen, supra note 100, at 845-46 ("This 'return of capital' rationale applies no less strongly to outright cash subsidies than to resident-favoring disposals of state resources in more orthodox 'marketplace' transactions.").
318. LAURENCE H. TRIBE, CONSTITUTIONAL CHOICES 146 (1985) (distinguishing the market participant doctrine as applying where a state creates a new market). But cf. Dan T. Coenen, Untangling the Market-Participant Exemption to the Dormant Commerce Clause, 88 MICH. L. REV. 395, 422 (1988) (criticizing Tribe's description of the principle underlying the market participant exception).
319. LAURENCE H. TRIBE, CONSTITUTIONAL CHOICES 146 (1985) (distinguishing the market participant doctrine as applying where a state creates a new market). But cf. Dan T. Coenen, Untangling the Market-Participant Exemption to the Dormant Commerce Clause, 88 MICH. L. REV. 395, 422 (1988) (criticizing Tribe's description of the principle underlying the market participant exception).
320. See Varat, supra note 15, at 529; Regan, supra note 15, at 1193-94; Coenen, supra note 258, at 421-25. Although Coenen takes issue with Varat's sole reliance upon this rationale, he agrees that this is a central justification for the market participant rule. As articulated by Tribe, this theory holds that a state has greater freedom to shape the beneficiaries of commerce when the state is creating commerce that would not otherwise exist than when it is intruding into a previously existing private market. In a similar fashion, Varat argues that state residents may, as a group, steer state resources back to themselves because they constitute the group responsible for creating the benefit in the first place. Regan asserts that market participant programs are, in fact, justified because they are usually in the nature of spending programs as opposed to tariffs or other discriminatory regulations. Coenen, who has written perhaps the most comprehensive analysis of the market participant exception, describes sowing and reaping as the "first and most basic" rationale for the market-participant rule. According to Coenen's common-sense explanation of this rationale, the exception is nothing more than a judicial recognition of the state as a trustee of the citizen's property, and the fact that one of the basic attributes of property is the right to exclude others. Hence, "it seems sensible that when a state government distributes state resources, it may - on behalf of all its citizens - pick and choose among proper recipients." Coenen, supra note 258, at 409; see also Hellerstein & Coenen, supra note 100, at 789. As Coenen himself notes, however, the "sowing and reaping" rationale is not foolproof. The chief difficulty stems from the fact nonresidents often pay state taxes and thus are arguably entitled to a share of the state's largess in the same manner as residents. As Coenen argues, however, nonresidents must take the "bitter with the sweet." Having escaped most of the state's taxes by eschewing residency, the nonresident can hardly complain when she is excluded from her full share of state benefits as to one particular program. See Coenen, supra note 258, at 425 (providing list of reasons why this is not a problem). Thus this underinclusiveness of the sowing and reaping rationale does not seriously undermine it as the most basic of the rationales for the market participant doctrine.
321. Coenen, supra note 258, at 463.
322. See White, 460 U.S. at 214. This distinction complicates the analysis of the strength of any Commerce Clause challenge to any of a number of conditions being imposed by American cities upon their contractors that arguably impose an undue burden upon interstate commerce. Take, for example, San Francisco's attempt to condition receipt of city contracts upon a company's provision of the same benefits to domestic partners as currently enjoyed by the spouses of company employees. See Going Beyond City Limits?, BUS. WK. 98-99 (July 7, 1997). Under White, the condition would appear to fall within the exception with respect to city building or other contracts requiring the expenditure of city funds. With respect to the use of existing publicly-owned resources, such as a city-owned airport, however, the restriction would appear invalid.
323. South-Central Timber, Inc. v. Wunnicke, 467 U.S. 82 (1984).
324. Cf. LAURENCE H. TRIBE, AMERICAN CONSTITUTIONAL LAW 433-34 (2d ed. 1988) (distinguishing Wunnicke from White, Reeves, and Alexandria Scrap on the basis that "[t]he state legislation struck down in Wunnicke did not expend community tax revenues to create new commerce; rather, like the previously invalidated local-hire statute, the law sought to exploit existing commerce in natural resources that happened to be situated on state lands").
325. See Hinklin v. Orbeck, 437 U.S. 518 (1978).
326. Thus the Court upheld a ban upon the shipment of game birds out of state in Geer v. Connecticut, 161 U.S. 519 (1896), and a ban upon the planting of oysters in a state's tidelands by nonresidents in McCready v. Virginia, 94 U.S. 391 (1877).
327. See Hughes v. Oklahoma, 426 U.S. 794 (1976).
328. 458 U.S. 941 (1982).
329. 435 U.S. 371, 389 (1978) (finding the disparity in hunting fees between residents and nonresidents not irrational where "Montana, as a State, has made sacrifices in its economic development, and therefore in its tax base, in order to preserve the elk and other wildlife within the State"). But cf. Oregon Waste Systems, 511 U.S. at 99-102 (holding that the higher surcharge imposed upon the disposal of trash generated out-of-state than trash generated in-state violated the virtually per se rule against facial discrimination against interstate commerce despite Oregon's arguments that the respective contribution of residents and nonresidents were equivalent once taxpayer's contributions to land disposal services through general revenue taxes were taken into account).
330. 447 U.S. at 431-32
331. 460 U.S. at 209; see also Wyoming v. Oklahoma, 502 U.S. 437, 461 (1992) (rejecting Oklahoma's argument that its ownership of one utility in the state qualified it as a market participant and thus justified its regulation requiring private utilities to burn Oklahoma coal); Chance Management v. South Dakota, 97 F.3d 1107 (8th Cir. 1996) (state residency requirement justified by fact that State of South Dakota had a considerable ownership interest in the State lottery).
332. Indeed, the very fact that the legality of discriminatory consumer preference legislation is nearly compelled by the Court's current subsidy and market-participant precedents reveals that those cases only avoid undermining the anti-protectionism principle by the infrequency with which states distribute cash subsidies. See Regan, supra note 15, at 1194 (arguing that, because spending programs are a relatively expensive method of securing local benefits, they are less likely to proliferate and thus discriminatory state spending programs are less troublesome than discriminatory regulations).
333. It could also be argued that a location restriction is not necessary to ensure that the legislating states receive the public goods benefits of a renewable portfolio standard. What matters in ensuring that residents receive such benefits is that the renewable power that now makes up a portion of local energy retailers' portfolios displaces dirtier, or more polluting, power, the environmental effects of which local residents are exposed to. Requiring that the renewable power that satisfies the portfolio requirement be located within the state will not assure this displacement. Indeed, it can be argued that the best that can be done is to require that the power that forms the basis of tradable credits is sold into the legislating state, since that will at least tend to force a location change in types of power plants that reflects the portfolio standard.
334. See Edgar v. MITE Corp., 457 U.S. 624, 642-43 (1982) (extraterritoriality principle prevents the application of a state statute "to commerce that takes place wholly outside of the State's borders").
335. Shaffer v. Heitner, 433 U.S. 186, 197 (1977).
336. See Regan, supra note 134, at 1887 (1987) ("The extraterritoriality principle should not be regarded as grounded in any particular clause of the Constitution, . . . it should be regarded as an inference from the structure of our system as a whole.").
337. Thus the extraterritoriality principle would seem to underlie both the "minimum contacts" requirement of the Due Process Clause of the Fourteenth Amendment, which limits the regulatory reach of state government to ensure "fundamental fairness." See International Shoe Co. v. Washington, 326 U.S. 310 (1945) (minimum contacts for in personam jurisdiction); Shaffer v. Heitner, 433 U.S. 186, 212 (1977) (applying same minimum contacts requirements to in rem jurisdiction). The extraterritoriality principle would also seem to underlie the "substantial nexus" requirement of the dormant Commerce Clause, which limits a state's taxing authority to those activities having more than minimum contacts with the taxing jurisdiction in order to minimize state burdens upon interstate commerce. See Quill Corp. v. North Dakota, 504 U.S. 298, 313 (1992).
338. See infra text accompanying notes 135-144 (discussing Baldwin v. G. A. F. Seelig, 294 U.S. 511 (1935); Brown-Forman v. New York Liquor Auto., 476 U.S. 573, 579 (1986); United States Brewers Assn. v. Healy, 692 F.2d 275 (2d Cir. 1982), aff'd without opinion, 464 U.S. 909 (1983)).
339. See MITE Corp., 457 U.S. at 642. There may exist yet a third category consisting of cases in which the Court has struck down state taxes where the state lacks a sufficient nexus to the activity being taxed. See Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 279 (1977) (upholding state tax upon business of transporting motor vehicles in-state in view of plaintiff's failure to claim that activity lacked a substantial nexus with the taxing state); Quill Corp. v. North Dakota, 504 U.S. 298 (1992) (out-of-state mail order company which merely shipped products to state lacked a sufficient nexus with taxing state to justify tax); Tyler Pipe Indus., Inc. v. Washington State Dep't of Revenue, 483 U.S. 232, 249-50 (1987) (pipe company which shipped items manufactured elsewhere into state for sale sufficient to constitute "substantial nexus" with state to justify wholesale tax when augmented by the solicitation of in-state business by company's independent contractor); see also Muller & Hoerner, supra note 188, at 36-37 (discussing nexus requirement).
340. See MITE Corp., 457 U.S. at 643-44; C & A Carbone, 511 U.S. at 392-93.
341. 294 U.S. at 527 (Cardozo, J.).
342. See id. at 527 ("Neither the power to tax nor the police power may be used by the state of destination with the aim and effect of establishing an economic barrier against competition with the products of another state or the labor of its residents. . . They set up what is equivalent to a rampart of customs duties designed to neutralize advantages belonging to the place of origin.").
343. 476 U.S. at 575.
344. See id. at 583-84; see also United States Brewers Ass'n v. Healy, 692 F.2d 275 (2d Cir. 1982), aff'd without opinion, 464 U.S. 909 (1983) (striking down similar Connecticut law).
345. See Seelig, 294 U.S. at 524 ("One state may not put pressure of that sort upon others to reform their economic standards.").
346. 457 U.S. at 642 ("Yet the Illinois law, unless complied with, sought to prevent MITE from making its offer and concluding interstate transactions not only with Chicago Rivet's stockholders living in Illinois, but also with those living in other States and having no connection with Illinois.").
347. Id. at 643 (citing Southern Pac. Co. v. Arizona, 325 U.S. 761, 775 (1945)).
348. See MITE Corp., 457 U.S. at 643 ("The effects of allowing the Illinois Secretary of State to block a nationwide tender offer are substantial."); Southern Pac., 325 U.S. at 775 (Arizona law restricting the length of trains crossing its territory made train operation more dangerous).
349. See Tushnet, supra note 11, at 126-27.
350. See Regan, supra note 15, at 1182 (Court goes beyond merely suppressing protectionism in transportation cases).
351. See supra note 147.
352. For discussions of the central importance of promoting interstate harmony under the dormant Commerce Clause, see Regan, supra note 15, at 1113-14. See also Collins, supra note 15, at 64.
353. For example, smog in the northeast was so severe during the summer of 1997 that Maine, Massachusetts, New York and other states downwind of electric utilities located in the Midwest filed a petition with the Environmental Protection Agency under § 126(b) of the Clean Air Act, 42 U.S.C. § 7426(b), asking the agency to find that the utilities illegally interfere with their attempts to comply with the Clean Air Act. See John H. Cushman, Jr., Northeast States Pressuring E.P.A. to Move on Smog, N. Y. TIMES, Aug. 8, 1997, at Al. If EPA makes such a finding, the Act requires that the source or sources involved shut down within three months unless EPA requires them to comply with new, lower emissions. See CAA § 126(c); 42 U.S.C. § 7426(c). To say the least, Midwestern states were not pleased with the petition.
354. See, e.g., Margaret A. Walls & David Edelstein, Dirty Words: Regional Conflicts in the Interstate Transport of Municipal Solid Waste, RESOURCES FOR THE FUTURE 11 (1992).
355. See City of Milwaukee v. Illinois, 451 U.S. 304 (1981) (Illinois' federal common law nuisance action against the City of Milwaukee for the discharge of inadequately treated sewage preempted by the federal Clean Water Act).
356. Missouri v. Illinois, 200 U.S. 496, 518 (1906) (Holmes, J.); see also Georgia v. Tennessee Copper Co., 206 U.S. 230 (1907).
357. See Heinzerling, supra note 15, at 240-42 (Supreme Court ignores the environmental cost-internalization benefits of allowing states to consider the impacts of their actions upon outsiders).
358. See supra text accompanying notes 65-67 for a discussion of emission portfolio standards and environmental adders.
359. The implications of freeing states to value the extraterritorial impacts of their regulatory actions extends beyond the interstate context and applies to the global environment as well. In the long term, the most harmful emissions resulting from fossil fuel electricity production are greenhouse gases such as carbon dioxide. The global warming problem produced by carbon dioxide emmissions demonstrates the extraterritorial impacts of carbon intensive production processes. Without the freedom to consider the extraterritorial effects of regulatory measures that burden interstate commerce in an effort to reduce global warming, states might be discouraged from enacting market-based measures to reduce global warming, such as applying environmental adders to greenhouse gases.