A cooperative federalism proposal for climate change legislation: The value of state autonomy in a federal system

Denver University Law Review

Volumn 85, Issue 4, 2008, Pages 791-839

  Kaswan, Alice ^a  

^a UNIVERSITY OF SAN FRANCISCO   (United States)

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EID: 47849104929     PISSN: 08839409     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Conference Paper

References (427)

1. See Alice Kaswan, The Domestic Response to Global Climate Change: What Role for Federal, State, and Litigation Initiatives?, 42 U.S.F.L. REV. 39, 42-45 (2007) (describing weak federal initiatives).
2. See Randall S. Abate, Kyoto or Not: Here We Come: The Promise and Perils of the Piecemeal Approach to Climate Change Regulation in the United States, 15 CORNELL J.L. & PUB. POL'Y 369, 372 (2006) (describing a wide range of state programs);
3. J.R. DeShazo & Jody Freeman, Timing and Form of Federal Regulation: The Case of Climate Change, 155 U. PA. L. REV. 1499, 1521-30 (2007) (same);
4. Kirsten Engel, State and Local Climate Change Initiatives: What is Motivating State and Local Governments to Address a Global Problem and What Does This Say About Federalism and Environmental Law?, 38 URB. LAW. 1015, 1016-29 (2006) (same);
5. Robert B. McKinstry, Jr. & Thomas D. Peterson, The Implications of the New "Old" Federalism in Climate-Change Legislation: How to Function in a Global Marketplace when States Take the Lead, 20 PAC. MCGEORGE GLOBAL Bus. & DEV. L.J. 61, 76-84 (2007) (listing state programs).
6. CAL. HEALTH & SAFETY CODE §§ 38500-99 (West 2007).
7. See REGIONAL GREENHOUSE GAS INITIATIVE, MEMORANDUM OF UNDERSTANDING (Dec. 20, 2005), available at http://www.rggi.org/docs/mou_final_12_20_05.pdf [hereinafter MEMORANDUM].
8. See Abate, supra note 2, at 372;
9. DeShazo & Freeman, supra note 2, at 1521-30;
10. Engel supra note 2, at 1016-29 (listing sources that describe state programs). The Pew Center for Global Climate Change provides up-to-date information on state programs.
11. See Pew Center on Global Climate Change, What's Being Done . . . in the States, http://www.pewclimate.org/what_s_ beingdone/inthestates/ (last visited Mar. 27, 2008).
12. See Kirsten H. Engel & Scott R. Saleska, Subglobal Regulation of the Global Commons: The Case of Climate Change, 32 ECOLOGY L.Q. 183, 220-23 (2005);
13. Jonathon B. Wiener, Think Globally, Act Globally: The Limits of Local Climate Policies, 155 U. PA. L. REV. 1961, 1966-67 (2007).
14. See Henry N. Butler & Jonathan R. Macey, Externalities and the Matching Principle: The Case for Reallocating Federal Authority, 14 YALE. L. & POL'Y REV. 23, 25 (1996);
15. see, e.g., Engel & Saleska, supra note 6, at 191-92 (describing "matching principle").
16. See Wiener, supra note 6, at 1964.
17. See DeShazo & Freeman, supra note 2, at 1518;
18. Barry G. Rabe, Mikacl Roman & Arthur N. Dobelis, State Competition as a Source Driving Climate Change Mitigation, 14 N.Y.U. ENVTL. L.J. 1, 7 (2005);
19. Wiener, supra note 6, at 1965. Similarly, Professor Engel notes that, where pollution crosses state boundaries, states will pollute too much because they can externalize the environmental costs while retaining economic benefits.
20. See Kirsten H. Engel, Harnessing the Benefits of Dynamic Federalism in Environmental Law, 56 EMORY L.J. 159, 164 (2006).
21. See Kaswan, supra note 1, at 72;
22. Wiener, supra note 6, at 1965.
23. See DeShazo & Freeman, supra note 2, at 1532 (describing leakage risk in the context of state renewable energy requirements);
24. Wiener, supra note 6, at 1967-73. Professor Wiener notes that leakage could take several forms. Under the "price effect," regulation could lead to higher prices, prices which would shift consumer demand to products made in states or countries lacking controls.
25. Id. at 1967-68. The "slack off" effect is a form of the free rider problem: If states see other states taking aggressive measures, they might slack off their own efforts.
26. Id. at 1968. The "capital relocation" effect could occur if industries respond to regulation by relocating to unregulated states or countries.
27. Id. at 1968. Professor Wiener provides a thoughtful analysis of the factors that could influence the potential net emissions consequences of these forms of leakage.
28. Id. at 1969-73.
29. See DeShazo & Freeman, supra note 2, at 1518-19;
30. Wiener, supra note 6, at 1965. Academics have debated the validity of the race-to-the-bottom theory.
31. See Kaswan, supra note 1, at 62 n.122. Professor Revesz has argued that states engage in competition for both businesses and citizens that allows them to choose the balance of environmental and economic amenities that best suits their preferences.
32. See Richard L. Revesz, Rehabilitating Interstate Competition: Rethinking the "Race-to-the-Bottom" Rationale for Federal Environmental Regulation, 67 N.Y.U. L. REV. 1210, 1211 (1992). The dynamics of interstate competition in any given instance are complicated, but it is conceivable that, at least in some instances, the fear of losing business would deter a state from enacting desired environmental regulation.
33. See Kirsten H. Engel, State Environmental Standard-Setting: Is There a "Race" and Is It "To the Bottom"?, 48 HASTINGS L.J. 271, 303-04 (1997) (providing empirical data suggesting that states fear that their environmental regulations could deter economic investment).
34. In California, regulators confront the risk of economic flight as they develop their climate change regulations. Entities likely to be subject to the state's climate change regulation have stated that they will move their operations outside the state if the state's regulations are too onerous. See Matthew Yi, Dems, Governor Spar over Road to Clean Air, S.F. CHRON., July 17, 2007, at Al.
35. Kaswan, supra note 1, at 66-67.
36. See CALIFORNIA CLIMATE CHANGE CENTER, OUR CHANGING CLIMATE: ASSESSING THE RISKS TO CALIFORNIA (2006), http://www.energy.ca.gov/ 2006publications/CEC-500-2006-077/CEC-500-2006-077.PDF.
37. See Kaswan, supra note 1, at 66 (describing California's expectation of economic benefits arising from its climate change legislation);
38. Rabe, Roman & Dobelis, supra note 9, at 37-41 (describing states' interest in economic development opportunities associated with climate change regulation).
39. See CALIFORNIA ENERGY COMMISSION, INTEGRATED ENERGY POLICY REPORT 2007 (EXECUTIVE SUMMARY) 11 (2007) (indicating, in Figure 6, that only 8 percent of California's energy comes from coal), available at http://www.energy.ca.gov/2007publications/CEC-100-2007-008/CEC-100-2007-008-CMF- ES.PDF.
40. See McKinstry & Peterson, supra note 2, at 92 (observing that some states are likely to experience greater costs from climate change regulation than others).
41. See Rabe, Roman, & Dobelis, supra note 9, at 11 (observing that states with significant economic investments in carbon-producing industries are reluctant to address climate change);
42. cf. Zachary Coile, Energy Bill Draft Splits House Dems: It's Pelosi's Greens Against Industry Protectionists, S.F. CHRON., June 8, 2007, at A7 (noting, in the context of support for federal legislation, that lawmakers from coastal states have favored deep emissions cuts while those "from states producing automobiles, coal and oil favor a go-slow approach."). States may also fail to act due to agency capture. Powerful interests within a state could influence state policy in a manner ultimately deemed inconsistent with that state's best interests.
43. See Robert L. Glicksman, From Cooperative to Inoperative Federalism: The Perverse Mutation of Environmental Law and Policy, 41 WAKE FOREST L. REV. 719, 734-35 (2006) (discussing potential for "capture" of state government).
44. This is not to say that the states do not have any motivation for taking action; the presence of so many significant state initiatives demonstrates that states have found sufficient political, economic, and environmental justifications for action. See Kirsten Engel, State and Local Climate Change Initiatives: What Is Motivating State and Local Governments to Address a Global Problem and What Does This Say About Federalism and Environmental Law, 38 URB. LAW. 1015, 1016-21 (2006);
45. Kaswan, supra note 1, at 65-68. That said, however, the states' collective efforts are unlikely to be sufficient.
46. See Engel & Saleska, supra note 6, at 186.
47. A federal approach would not, however, address the risk of international leakage: the risk that federal domestic legislation could shift emissions to countries that are not regulating greenhouse gas emissions. See Wiener, supra note 6, at 1967-68 (describing leakage caused by single-country regulation in the absence of a global agreement).
48. See generally Daniel C. Esty, Revitalizing Environmental Federalism, 95 MICH. L. REV. 570, 614-15 (1996) (describing greater efficiency of federal regulation).
49. Id. at 585-86.
50. See McKinstry & Peterson, supra note 2, at 105 (suggesting that minimum federal standards would establish floors that would lead to more uniform standards than a purely state-based approach).
51. Lower costs are beneficial if they allow regulatory authorities to set higher emissions caps than they would if reductions were more expensive. See ENVTL. PROT. AGENCY, TOOLS OF THE TRADE: A GUIDE TO DESIGNING AND OPERATING A CAP-AND-TRADE PROGRAM FOR POLLUTION CONTROL (2003), http://www.epa.gov/airmarkets/ resource/docs/tools.pdf. Lower costs could also alleviate the economic costs of addressing climate change. That said, however, lower costs are beneficial only to a point. If costs are too low, then regulated entities and the technology sector will not receive a sufficient price signal to invest in alternative emission-reducing technologies.
52. See Engel & Saleska, supra note 6, at 228.
53. Scholars have historically focused on dual federalism: the respective roles of the states versus the federal government. See Engel, supra note 9, at 163-66, 175. Recent scholarly attention has focused on the idea of cooperative federalism, which embodies shared powers and, at times, overlapping federal and state roles.
54. Id. at 175-76 (noting scholarly literature on "dynamic federalism," "empowerment federalism," "polyphonic federalism," "interactive federalism," and "vertical regulatory competition").
55. See William W. Buzbee, Asymmetrical Regulation: Risk, Preemption, and the Floor/Ceiling Distinction, 82 N.Y.U. L. REV. 1547, 1604-06 (2007).
56. See id. at 1604-05, 1617 (critiquing the matching principle for its heavy focus on the location of pollution, and arguing that other factors, including the benefits and harms of regulation, should influence jurisdictional choice).
57. See McKinstry & Peterson, supra note 2, at 87-88 (observing that states can better devise climate change programs to address their particular regional characteristics and industries).
58. See MARKET ADVISORY COMMITTEE TO THE CALIFORNIA AIR RESOURCES BOARD, RECOMMENDATIONS FOR DESIGNING A GREENHOUSE GAS CAP AND TRADE SYSTEM FOR CALIFORNIA 13 (2007) (observing that production changes that reduce greenhouse gases tend to reduce co-pollutant emissions as well) [hereinafter MKT. ADVISORY COMM. TO THE CAL. AIR RES. BD.].
59. See Esty, supra note 22, at 609-10 (describing democratic theory in favor of decentralized decision making).
60. Engel, supra note 9, at 184.
61. See Esty, supra note 22, at 610 (stating democratic justification for state-level jurisdiction);
62. Richard B. Stewart, Pyramids of Sacrifice? Problems of Federalism in Mandating State Implementation of National Environmental Policy, 86 YALE L.J. 1196, 1210 (1976-77) (same);
63. see also DeShazo & Freeman, supra note 2, at 1519-20 (observing that state climate change initiatives have been a response to their citizens' fears about climate change);
64. Engel, supra note 2, at 1025;
65. Glicksman, supra note 18, at 779 (noting that recent state environmental initiatives have been a response to state citizen desires for environmental protection).
66. See Buzbee, supra note 28, at 1581, 1586.
67. Id. at 1580 (noting that federal minimums help states meet their preferences by dampening the race to the bottom).
68. See Butler & Macey, supra note 7, at 33 (observing that, in the case of interstate pollution spillovers, pure state regulation would lead to political failure since the victim state would have no capacity to control the polluting state's pollution);
69. Stewart, supra note 35, at 1227 (stating that "a state should not be entitled to invoke the principle of local self-determination against federal controls where that state generates significant spillovers which impair the corresponding ability of sister states to determine the environmental quality they shall enjoy.").
70. See McKinstry & Peterson, supra note 2, at 73, 87.
71. Id.
72. See Glicksman, supra note 18, at 734-35 (discussing risk of agency capture at the state level).
73. See Engel, supra note 9, at 182-83.
74. Under the Clean Air Act, for example, California is allowed to adopt vehicle emission standards that differ from federal requirements, so long as EPA waives the normally-applicable federal preemption provision. See 42 U.S.C.A. § 7543(b) (West 2008). The differing requirements have prompted technological innovation.
75. See Ann E. Carlson, Federalism, Preemption, and Greenhouse Gas Emissions, 37 DAVIS L. REV. 281, 313-18 (2003).
76. See Buzbee, supra note 28, at 1619;
77. Engel, supra note 9, at 182.
78. Buzbee, supra note 28, at 1619.
79. See id. at 1597;
80. Engel, supra note 9, at 178-81.
81. See Buzbee, supra note 28, at 1597.
82. Id. at 1594-95.
83. Id. at 1595, 1608-09.
84. Id. at 1588-89, 1597;
85. Butler & Macey, supra note 7, at 53 (observing that centralized decision making impedes the detection of policymaking errors);
86. Engel, supra note 9, at 170-73 (describing the dynamic innovation encouraged by the interplay of state and federal standard-setting);
87. see also infra notes 239 to 248 and accompanying text (describing the dynamic tension between state and federal appliance efficiency and vehicle emission standards).
88. See Buzbee, supra note 28, at 1594-95;
89. Engel, supra note 9, at 161, 178-81.
90. See Buzbee, suppra note 28, at 1590-91, 1609.
91. See Butler & Macey, supra note 7, at 53;
92. Engel, supra note 9, at 163.
93. In theory, there is also the risk of agency capture by environmentalists, leading to overly restrictive regulation at the federal or state level. For example, if environmentalists captured the federal legislative process, then arguably states should be allowed to set standards below the federal level to provide an antidote to environmentalists' control at the federal level. In light of the relative power of the interest groups, and the diffuse nature of the public's concern about climate change in comparison to the intense interest of the regulated community, this risk appears less compelling than the risk of industry capture.
94. See John P. Dwyer, The Practice of Federalism Under the Clean Air Act, 54 MD. L. REV. 1183, 1218(1995)
95. See Buzbee, supra note 28, at 1600.
96. See Carlson, supra note 42, at 313-14;
97. DeShazo & Freeman, supra note 2, at 1530-31.
98. See Engel, supra note 9, at 181 (noting that most interest groups would prefer federal policies so that they could avoid having to lobby in all 50 states);
99. cf. Stewart, supra note 35, at 1213-15 (noting that, relative to industry, environmental groups are likely to have more power at the federal level, given their relative lack of resources).
100. See Buzbee, supra note 28, at 1603-04 (arguing that the nature of the regulatory target is a key factor in determining whether preemption-and its accompanying consistency - is appropriate).
101. See id. at 1603; Kaswan, supra note 1, at 82-83. Federal statutes addressing product standards are more likely to preempt state approaches than other federal regulatory statutes.
102. See Buzbee, supra note 28, at 1561-64;
103. Engel & Saleska, supra note 6, at 224-26.
104. Kaswan, supra note 1, at 82.
105. See Buzbee, supra note 28, at 1603-04;
106. Kaswan supra note 1, at 81-83 (discussing the benefits and drawbacks to preemption for a number of types of regulatory efforts).
107. Some states have gone so far as to pass legislation preventing their states from exceeding federal standards. See Jerome M. Organ, Limitations on State Agency Authority to Adopt Environmental Standards More Stringent than Federal Standards: Policy Considerations and Interpretive Problems, 54 MD. L. REV. 1373, 1375-95 (1995).
108. In other words, states could engage in a form of "cost externalization" by imposing constraints on out-of-state interests for the benefit of in-state interests. See Butler & Macey, supra note 7, at 45-47 (describing cost externalization risk of state-level regulatory action). More broadly, this theory suggests that states imposing external costs might fail to comprehensively analyze the costs and benefits of regulation. Using the example of a non-coal state imposing restrictions on the use of coal, the theory posits that states might impose restrictions that provide them with environmental benefits but whose costs they do not have to endure.
109. See id. at 45, n.45
110. (quoting E. Donald Elliott et al., Toward a Theory of Statutory Evolution: The Federalization of Environmental Law, 1 J.L. ECON. & ORG. 313, 329 (1985)). As Butler and Macey go on to note, however, the restricting state's consumers generally experience higher costs from the regulation, even if its industries are not directly affected.
111. See Butler & Macey, supra note 7, at 47. In many situations, costs are not, in fact, "externalized" in a manner that would lead to political failure.
112. Id.
113. Butler & Macey, supra note 7, at 45-48.
114. See Patricia Weisselberg, Shaping the Energy Future in the American West: Can California Curb Greenhouse Gas Emissions from Out-of-State, Coal-Fired Power Plants Without Violating the Dormant Commerce Clause?, 42 U.S.F. L. REV. 185 (2007).
115. See id. at 213 (describing utility argument that the burden of the California standard will fall heavily on out-of-state coal-fired power plants).
116. See Butler & Macey, supra note 7, at 47.
117. Engel, supra note 9, at 163.
118. Several northeastern states preceded California. See Abate, supra note 2, at 377-81. But California's size and influence gave California's legislation greater national and international significance.
119. CAL. HEALTH & SAFETY CODE §§ 38500-99 (West 2007).
120. Id. § 38550.
121. See infra notes 75 to 111 and accompanying text.
122. See Mark Martin, Nunez Slams Governor on Emission Law, S.F. CHRON., Oct. 17, 2006, at Bl (describing legislature's rejection of the Governor's proposal to mandate a cap-and-trade program).
123. CAL. HEALTH & SAFETY CODE § 38570(a).
124. See Alice Kaswan, Distributive Justice and the Environment, 81 N.C.L.REV. 1031, 1045-47 (2003) (describing claims in terms of "political justice").
125. See Stephen M. Johnson, Economics v. Equity: Do Market-Based Environmental Reforms Exacerbate Environmental Injustice?, 56 WASH. & LEE L. REV. 111, 159 (1999).
126. By "disadvantaged," I am referring to disadvantages such as disproportionate exposure to undesirable land uses, to poverty, and to a lack of political power, conditions that are often correlated with race and income.
127. CAL. HEALTH & SAFETY CODE § 38501(f) (West 2007).
128. CAL. HEALTH & SAFETY CODE § 38591(a) (West 2007). The Environmental Justice Advisory Committee has been constituted and includes representatives from a range of environmental justice organizations around the state.
129. See Cal. Evtl. Prot. Agency Air Res. Bd., Global Warming Environmental Justice Committee, http://www.arb.ca.gov/cc/ejac/ejac.htm (last visited Mar. 27, 2008) (committee website, listing members).
130. CAL. HEALTH & SAFETY CODE § 38561(g) (West 2007).
131. See Kaswan, supra note 75, at 1043-44.
132. Id. at 1037-39 (summarizing theories of distributive justice).
133. Id. at 1069-77.
134. Maps indicating the California regions that are in and out of attainment for particular criteria pollutants are available on the following website: ENVTL. PROT. AGENCY, REGION 9, AIR QUALITY MAPS, (Mar. 7, 2008), http://www.epa.gov/region09/air/ maps/maps_top.html.
135. See A. DENNY ELLERMAN ET AL., EMISSIONS TRADING IN THE U.S.: EXPERIENCE, LESSONS, AND CONSIDERATIONS FOR GREENHOUSE GASES 40-41 (2003), available at http://www.pewclimate.org/global-warming-in-depth/ all_reports/ernissions_trading/.
136. See Alice Kaswan, Environmental Justice and Domestic Climate Change Policy, ENVTL. L. REP. NEWS & ANALYSIS 10287, 10298 (forthcoming May 2008).
137. See MKT. ADVISORY COMM. TO THE CAL. AIR RES. BD., supra note 31 and accompanying text.
138. CAL. HEALTH & SAFETY CODE § 38562(b)(2) (West 2007).
139. The public health consequences of renewable fuels, and ethanol in particular, are contested. A recent study suggests that, notwithstanding some environmental benefits, high ethanol use could lead to a net increase in respiratory illnesses and deaths in certain regions due to synergistic effects between ethanol-related emissions and existing pollutants. See Mark Z. Jacobson, Effects of Ethanol (E85) Versus Gasoline Vehicles on Cancer and Mortality in the United States, 41 ENVIRON. SCI. & TECH'Y 4150 (2007). Switching from gasoline to diesel, due to diesel's lower carbon content, could also create environmental concerns due to the health risks associated with diesel's high particulate emissions.
140. See CAL. AIR RES. BD., FACT SHEET: HEALTH EFFECTS OF DIESEL EXHAUST PARTICULATE MATTER 4-5 (2006), http://www.arb.ca.gov/research/diesel/dpm_draft_3-01-06.pdf.
141. If additional vehicle emission controls are needed to address pollutants created by ethanol, California would once again have to assert its unique authority under the Clean Air Act to adopt mobile source standards that diverge from federal standards, and would once again have to request an EPA waiver of the Clean Air Act's customary preemption provision. 42 U.S.C.A. § 7543(b) (West 2008).
142. Under a cap-and-trade program, a cap on total emissions for the regulated sector would be set and pollution allowances would be distributed, for free or by auction, to regulated facilities. In a traditional cap-and-trade program, facilities that reduced emissions could trade excess allowances to facilities that did not receive enough allowances to cover their emissions.
143. CAL. HEALTH & SAFETY CODE § 38570(b)(1) (West 2007).
144. Id. § 38570(b)(2).
145. See Kaswan, supra note 86, at 10299-301.
146. Under the Clean Air Act, the new source-related standards, like the New Source Performance Standards, Lowest Achievable Emission Rate standard for new sources in nonattainment areas, and Best Available Control Technology Standards for new sources in attainment areas, are all presumptively emission rate standards. Id. at 10300 n.131. Hazardous air pollutants standards are also presumptively emission rate standards.
147. Id. The standards are often framed in terms of emissions per unit of production, pollutant concentrations per unit of emissions, or a rate of pollution over time.
148. Id. at 10300 n.132. Where smaller facilities seek to avoid being designated as "major" sources subject to stringent pollution control regulation, however, they sometimes accept an absolute cap on emissions so that their emissions will not exceed the "major" threshold.
149. Id. at 10300 n.129.
150. See id. at 10299-300.
151. See, e.g., DAVID WOOLEY & ELIZABETH MORSS, CLEAN AIR HANDBOOK §1:111 (2007) (providing general description of NSR program for modified facilities).
152. The threshold for triggering NSR requirements differs by pollutant and by an air district's degree of nonattainment. See id. § 1:113 (indicating threshold for criteria pollutants). Thresholds from 15 to 40 tons per year are common.
153. See id. Increases of this magnitude could, depending upon local circumstances and the number of facilities engaging in increases, create local concerns. Moreover, the increases can be more dramatic than the rule suggests. In determining the baseline from which to measure an emissions increase, facilities can choose the average emissions during any two year period within the preceding ten years, even if recent emissions were considerably lower.
154. See 40 C.F.R. § 52.21(b)(48)(ii)(c) (2008). As a practical matter, facilities could therefore increase their emissions considerably more than the threshold amount if their recent emissions have been lower than they were during the preceding ten years.
155. NSR applies only to "modifications" to existing facilities that result in a significant increase. See, e.g., 42 U.S.C.A. § 7501(4) (West 2008) (defining modification for facilities in nonattainment areas by reference to the standard used for the New Source Performance Standards, which defines modifications by reference to physical changes that significantly increase emissions). If the emissions increase does not result from a physical change in the facility, it is not subject to NSR. See 40 C.F.R. § 51.166(b)(2)(iii)(f) (2008) (stating that an increase in hours of operation or in the production rate does not equal a physical change in operation).
156. See MKT. ADVISORY COMM. TO THE CAL. AIR RES. BD., supra note 31, at 13.
157. See id. ("It is conceivable that . . . the flexibility afforded by trading could cause a firm to shift production from one facility to another in order to reduce GHG emissions at a lower overall cost and that, because of differences in the industrial processes involved, this could lead to an increase in emissions of a local pollutant at one facility.").
158. In addition, new power plant technologies are reportedly being developed that would reduce greenhouse gas emissions but increase harmful particulate emissions.
159. See Kaswan, supra note 86, at 10301.
160. MKT. ADVISORY COMM. TO THE CAL. AIR RES. BD., supra note 31, at 10 (stating that the Committee intended to recommend a system that was responsive to environmental justice concerns).
161. The Market Advisory Committee was created by Executive Order shortly after AB 32 was adopted. See Exec. Order No. S-20-06 ¶ 3 (Oct. 18, 2006), available at http://gov.ca.gov/index.php?/executive-order/4484.
162. MKT. ADVISORY COMM. TO THE CAL. AIR RES. BD., supra note 31, at 11;
163. see also id. at 16 (noting that, since some greenhouse gas mitigation strategies could implicate co-pollutant emissions, CARB should "anticipate and address concerns about emissions hotspots.").
164. See Kaswan, supra note 86, at 10302.
165. See supra note 88 and accompanying text.
166. CAL. HEALTH & SAFETY CODE § 38501(h) (West 2007);
167. see also CAL. HEALTH & SAFETY CODE § 38562(b)(6) (West 2007) (requiring CARB to consider the implementing regulations' "overall societal benefits, including reductions in other air pollutants . . . and other benefits to the economy, environment, and public health.").
168. CAL. HEALTH & SAFETY CODE § 38570(b)(3) (West 2007).
169. Id. § 38562(b)(4).
170. MKT. ADVISORY COMM. TO THE CAL. AIR RES. BD., supra note 31, at 11.
171. Id.
172. Id. at 55.
173. See Kaswan, supra note 86, at 10294.
174. I have elaborated more fully on these potential mechanisms in other scholarship. See id. at 10304-08.
175. See id. at 10304-05 (discussing approach). Others have addressed this combination of trading and traditional approaches in the context of trading programs for non-greenhouse gas pollutants.
176. See Richard Toshiyuki Drury et al., Pollution Trading and Environmental Injustice: Los Angeles' Failed Experiment in Air Quality Policy, 9 DUKE ENVTL. L. & POL'Y F. 231, 284-85 (1999);
177. Johnson, supra note 76, at 162, 165;
178. ENVTL. PROT. AGENCY, supra note 25, at 3-22, 3-25.
179. Kaswan, supra note 86, at 10304.
180. Id.
181. This approach could serve goals in addition to distributional justice. Trading programs to date have experienced difficulty in generating emission reduction incentives, since they have frequently set caps too high or distributed too many allowances. See id. at 10295-96. A traditional approach would ensure that all feasible reductions are undertaken, without waiting for the market to incentivize such steps. A market-based system could, thereafter, be used to create incentives for facilities to reduce emissions in new and innovative ways.
182. Id. at 10304-05.
183. See id. at 10305-06. In considering mechanisms for limiting the adverse distributional impacts of a cap-and-trade program, others have noted the possibility of geographic limitations.
184. See Drury et al., supra note 117, at 284;
185. Johnson, supra note 75, at 162;
186. ENVTL. PROT. AGENCY, supra note 25, at 3-22.
187. Regulatory agencies could also address adverse distributional impacts by reviewing and conditioning individual trades. See Kaswan, supra note 86 at 10305 (describing option). However, the additional administrative resources required for that approach would likely cause a significant interference with the market system's efficiency. Limiting trades based upon predetermined geographic boundaries would provide a more efficient mechanism for increasing distributional fairness.
188. Id.
189. Id. at 10306. The Clean Air Act requires new or modified sources in nonattainment areas to obtain offsets for their emissions. 42 U.S.C.A. § 7503(c) (West 2008). The offsets generally exceed the proposed emissions, and, for ozone nonattainment areas, the ratio depends upon the severity of the nonattainment area.
190. See, e.g., 42 U.S.C.A. § 7511a(a)(4) (West 2008) (setting offset ratio for a marginal ozone nonattainment area). In that way, new facilities lead to a net benefit in air quality.
191. See Kaswan, supra note 86, at 10306;
192. MKT. ADVISORY COMM. TO THE CAL. AIR RES. BD., supra note 31, at 57.
193. See Kaswan, supra note 86, at 10306.
194. See id. at 10307.
195. See id.
196. See id. at 10308.
197. The state is just beginning to develop its scoping plan for implementing AB 32, and held its first public workshop on potential policy mechanisms, such as direct regulation and market mechanisms, on January 16, 2008. The agency must adopt the scoping plan by January 1, 2009. CAL. HEALTH & SAFETY CODE § 38561(a) (West 2007).
198. See CAL. ENVTL. PROT. AGENCY, AIR RES. BD., CLIMATE CHANGE EARLY ACTION ITEMS, http://www.arb.ca.gov/cc/ccea/ ccea.htm (last visited Mar. 27, 2008) (describing initial regulatory measures to achieve AB 32's goals). In its workshops on developing a scoping plan for AB 32 implementation, agency officials have emphasized direct regulation as an important component of the scenarios it is likely to consider.
199. See Overview of Compliance Mechanisms for Emissions Reductions, http://www.arb.ca.gov/cc/scopingplan/meetings/1_16slides/ session3mechanismsoverview. pdf (last visited Mar. 27, 2008) (stating that "[d]irect regulations are a major part of AB 32 implementation.").
200. See MKT. ADVISORY COMM. TO THE CAL. AIR RES. BD., supra note 31, at 57.
201. See Press Release, Office of the Governor, Gov. Schwarzenegger Signs Landmark Legislation to Reduce Greenhouse Gas Emissions (Sept. 27, 2006), http://gov.ca.gov/index.php?/print-version/press-release/4111/.
202. See generally Maxine Burkett, Just Solutions to Climate Change: A Climate Justice Proposal for a Domestic Clean Development Mechanism, 56 BUFF. L. REV. (forthcoming 2008) (describing need for green jobs in disadvantaged communities).
203. CAL. HEALTH & SAFETY CODE § 38565 (West 2007).
204. See generally Burkett, supra note 133, at 33-39 (proposing mechanisms for creating green jobs in disadvantaged communities).
205. David R. Baker, State Has Serious Green-Collar Labor Shortage, Summit Attendees Say, S.F. CHRON., Jan. 15, 2008, at C1.
206. See Burkett, supra note 133, at 37-38.
207. See DeShazo & Freeman, supra note 2, at 1536 n.135 (discussing debate over preemption clause in cap-and-trade bill).
208. See Buzbee, supra note 28, at 1569-70;
209. DeShazo & Freeman, supra note 2, at 1533-36.
210. See DeShazo & Freeman, supra note 2, at 1536 n.135 (observing that a preemption provision in draft federal climate change legislation was dropped due to lobbying from California officials trying to preserve their legislation).
211. See Glicksman, supra note 18, at 787-92 (describing courts' tendency to find implicit preemption).
212. At least six significant bills have been introduced in the Senate, and two in the House of Representatives. See LARRY PARKER & BRENT D. YACOBUCCI, GREENHOUSE GAS REDUCTION: CAP-AND-TRADE BILLS IN THE 110TH CONGRESS 2 (Cong. Research Serv. 2007), available at http://ncseonline.org/NLE/CRSreports/07Nov/RL33846.pdf. The Pew Center for Global Climate Change's website provides up-to-date information on proposed federal legislation.
213. See Pew Center on Global Climate Change, Climate Action in Congress, http://www.pewclimate.org/what_s_ being_done/in_the_congress/ (last visited Mar. 27, 2008).
214. S. 2191, 110th Cong. (2007).
215. Id. § 1201(d).
216. Id. § 9004(a) (any state can "adopt or enforce - (1) any standard, cap, limitation, or prohibition relating to emissions of greenhouse gas; or (2) any requirement relating to control, abatement, or avoidance of emissions of greenhouse gas") and § 9004(b) (stating, as an exception, that the states cannot adopt any such standards or requirements if they are
217. Id. § 3402. The states are entitled to use the proceeds from the sale of these allowances for a variety of designated purposes.
218. Id. § 3403(c)(1).
219. See id. §§ 1101-3504 (outlining the federal cap-and-trade program).
220. Id. § 1201 (establishing allowances to be allocated each year, effectively establishing each year's cap);
221. id. § 1202 (requiring facilities to demonstrate compliance to EPA).
222. Id. §§ 2401-11 (Title II, Subtitle D, on offsets).
223. Id. §§ 2501-02 (Title II, Subtitle E, on international credits).
224. Id. §§ 2201-02 (Title II, Subtitle B, on banking).
225. Id. §§ 2301-03 (Title II, Subtitle C, on borrowing).
226. See id. § 9004 (outlining states' authority to set more stringent standards).
227. Id. § 3201 (listing the percentage of allowances to be auctioned each year from 2012 through 2050, referred to as "Allocation for Annual Auctions").
228. See, e.g., id. § 4302 (specifying the distribution of proceeds from the federal government's annual auction). Although the bill does allocate some allowances to states and provide them with a wide range of choices over how to spend the revenue from the sale of those allowances
229. id. §§ 3401-03, the vast majority of the allowances are controlled by the federal government.
230. Nor have any of the other bills proposed in the 110th Congress addressed the state role. See Robert B. McKinstry, Jr., John C. Dernbach & Thomas D. Peterson, Federal Climate Change Legislation as if the States Matter, 22 NAT. RESOURCES & ENV'T 3, 3-4 (2008).
231. See MEMORANDUM, supra note 4;
232. see also EUROPA, EMISSION TRADING SCHEME (EU ETS), http://ec.europa.eu/environment/climat/emission.htm (last visited Mar. 27, 2008).
233. See MEMORANDUM, supra note 4.
234. Id. § 3(C).
235. See id. § 2(B).
236. Id. § 2(C).
237. 2 Budget Trading Program 3 (Oct. 2007), available at http://www.rggi.org/docs/program_summary_10_07.pdf (observing that the state caps embodied in the MOU were negotiated among the states).
238. See Regional Greenhouse Gas Initiative Model Rule (Jan. 5, 2007), available at http://www.rggi.org/docs/model_rule_corrected_1_5_07.pdf
239. MEMORANDUM, supra note 4, § 2(G)(1).
240. 2 Budget Program, supra note 161, at 3.
241. MEMORANDUM, supra note 4, § 2(1).
242. Id. §2(E)(1). In other words, every three years, sources must prove that they had enough allowances during the preceding three-year period to cover their emissions.
243. The MOU establishes "minimum," not final, offset eligibility requirements. Id. § 2(F)(1)(a). It indicates the type of offset projects that "may," not "must" be approved by a state, and indicates the terms under which offset allowances "may" be obtained from elsewhere within the United States, not that they "must" be accepted.
244. Id. §§ 2(F)(1)(b), (2). The MOU also appears to give the states the authority to allow greater use of offsets as a "safety valve"-that is, to allow states to use more offsets if allowance prices increase past a certain point, rather than requiring them to allow the greater use of offsets.
245. Id. § 2(F)(3)-(4).
246. Regional Greenhouse Gas Initiative, Goals and Guiding Principles, available at http://www.rggi.org/goals.htm (last visited Mar. 27, 2008).
247. Personal communication with Peter Iwanowicz, Director, Climate Change Office, New York State Department of Environmental Conservation (March 28, 2008).
248. MEMORANDUM, supra note 4, § 6(C).
249. Personal communication, Peter Iwanowicz, supra note 169.
250. LARRY PARKER, CONG. RESEARCH SERV., CLIMATE CHANGE: THE EU EMISSIONS TRADING SCHEME (ETS) GETS READY FOR KYOTO 2 (2007).
251. See PEW CTR. ON GLOBAL CLIMATE CHANGE, THE EUROPEAN UNION EMISSIONS TRADING SCHEME (EU-ETS) INSIGHTS AND OPPORTUNITIES 4-5 (2005), http://www.pewclimate.org/ docUploads/EU-ETS%20White%20Paper.pdf. The percentage reductions for each country differ considerably, reflecting underlying economic and political circumstances in each state.
252. PARKER, supra note 172, at 1.
253. Id.
254. See JOSEPH KRUGER, WALLACE E. OATES, AND WILLIAM A. PIZER, DECENTRALIZATION IN THE EU EMISSIONS TRADING SCHEME AND LESSONS FOR GLOBAL POLICY 5 (Feb. 2007) (Resources for the Future Discussion Paper, RFF DP 07-02).
255. See id.
256. See PARKER, supra note 172, at 3.
257. Id.
258. Id. at 18. The practice of imposing threshold technology-based requirements has been termed "benchmarking." Given the difficulties of determining appropriate technologies, however, states have not generally pursued this option.
259. Id. at 18. There is also some evidence that states have manipulated the technology requirements to favor in-state resources. For example, Germany imposed technology requirements that favor domestic coal and provide no incentive to switch to less-polluting fuels.
260. Id. at 18-19.
261. The states can also set their own policies regarding how to allocate allowances to new sources, id. at 15, and on the marketability of emissions from facilities that have shut down.
262. Id. at 17-18.
263. Id. at 3.
264. See id. at 13-14. States have varied in their use of auctions, with only a few choosing to auction any allowances in Phase 1 or Phase 2.
265. Id.
266. Id. at 19.
267. See id. at 19-20;
268. KRUGER, OATES, & PLZER, supra note 176.
269. See PARKER, supra note 172, at 6.
270. Id. at 5-6. Thus, the cause of the ETS' initial failure could be partially attributable to inaccurate data, not the system's decentralized nature.
271. See Press Release, Europa, Questions and Answers on the Commission's Proposal to Revise the EU Emissions Trading System 2 (noting competitive distortions from state allocations) and 3 (noting that the decentralized approach led states to favor their own industries) (Jan. 23, 2008), http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/08/ 35&format=HTML&aged=0&1anguage=EN&guiLanguage=en [hereinafter Europa].
272. See id.
273. SEE COMMISSION OF THE EUROPEAN COMMUNITIES, COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE, AND THE COMMITTEE OF THE REGIONS 7 (Jan. 23, 2008), http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2008:0030:FIN:EN:PDF.
274. See Europa, supra note 188, at 3.
275. See COMMISSION OF THE EUROPEAN COMMUNITIES, supra note 190, at 6.
276. See id. at 7.
277. See id.
278. Id.
279. Id. The European Council has articulated the importance of letting member states decide their own energy policy.
280. Cf. KRUGER, ET AL., supra note 176, at 7 (indicating the complexity of determining the relative economic efficiency of having the Member States or the European Union establish each state's trading-sector cap).
281. See Robert V. Percival, Environmental Federalism: Historical Roots and Contemporary Models, 54 MD. L. REV. 1141, 1174 (1995).
282. The Clean Air Act is, of course, not just a model for future climate change legislation, but a potential vehicle for current greenhouse gas controls. See McKinstry et al., supra note 155, at 3 (arguing that, with a few modifications, the existing Clean Air Act could be used to address climate change);
283. McKinstry & Peterson, supra note 2, at 98-104 (same). Since it is an imperfect vehicle for a global, as compared with a local, pollutant, Congress is likely to choose a new approach to address climate change. I therefore treat the Clean Air Act as a model for future legislation.
284. The CAA requires EPA to establish National Ambient Air Quality Standards to protect the public health and the environment from the most pervasive and ubiquitous pollutants. 42 U.S.C.A. § 7409(b)(1) (West 2008).
285. EPA establishes New Source Performance Standards, minimum technology-based standards for certain categories of new sources. 42 U.S.C.A. § 7411(b)(1)(B) (West 2008).
286. The Clean Air Act establishes additional criteria for permits for new sources, including requiring the Lowest Achievable Emissions Rate in nonattainment areas, 42 U.S.C.A. § 7503(a)(2) (West 2008), and installation of the Best Available Control Technology in attainment areas.
287. U.S.C.A. § 7475(a)(4) (West 2008).
288. 42 U.S.C.A. § 7412(d)(3) (West 2008).
289. 42 U.S.C.A. § 7416 (West 2008) (savings clause).
290. 42 U.S.C.A. § 7410(a)(1) (West 2008).
291. See Dwyer, supra note 54, at 1198.
292. § 7410(k)(1)(C).
293. 42 U.S.C.A. § 7651 (West 2008).
294. See Mack McGuffey & Gary R. Sheehan, Jr., Taking Care of CAIR, 20 NAT. RESOURCES & ENV'T 67 (2005).
295. Id.
296. Id. The trading program for sulfur oxides is integrated with the nationally run Acid Rain Program.
297. Id.
298. Id.
299. See Dwyer, supra note 54, at 1199-1216 (describing state resistance to EPA's requiring states to address land use, transportation, and automobile inspection and maintenance programs in their SIPs);
300. Percival, supra note 198, at 1161.
301. The extent to which many areas of the country continue to fail to attain air quality goals testifies to the states' failure to meet air quality goals. See supra note 84 (providing website showing the nation's nonattainment areas).
302. See Dwyer, supra note 54, at 1199-1216.
303. A renewable portfolio standard is a legislative mandate which requires utilities to provide a minimum percentage of electricity from renewable energy sources. See DeShazo & Freeman, supra note 2, at 1523.
304. Many other implementation issues must, of course, be resolved, including permitting enforcement, and the like. I have focused on two of the most controversial issues in this article.
305. For example, the Warner-Lieberman bill, discussed above, establishes the goal of reducing emissions sufficiently to "avert the catastrophic impact of global climate change," S. 2191, 110th Cong. § 3(1) (2007), but it does not set a national reduction goal; it simply sets a cap on allowances for the following facilities covered under the cap-and-trade program: large facilities in the electric power sector, industrial sector, transportation fuel sector, and nonfuel chemical sector.
306. See id. §§ 4(7) (defining "covered facility"), 1201(d) (establishing progressively declining cap for the covered facilities). A bill proposed by Senator Feinstein is even more limited, focusing solely on a cap-and- trade program for the electricity sector. The Electric Utility Cap and Trade Act of 2007, S. 317, 110th Cong. (2007).
307. For example, the bills introduced by Senators Kerry and Snowe, on the one hand, and by Senators Boxer and Sanders, on the other, both seek to stabilize atmospheric concentrations of carbon dioxide at 450 parts per million. See Global Warming Reduction Act of 2007, S. 485, 110th Cong. § 702(a)(1)(A) (2007) (Kerry-Snowe bill);
308. Global Warming Pollution Reduction Act of 2007, S. 309, 110th Cong. § 702(1)(B) (2007) (Sanders-Boxer bill).
309. However, the Sanders-Boxer bill assumes that emissions must be reduced to eighty percent below 1990 levels to achieve that goal, S. 309, § 704(c)(3), while the Kerry-Snowe bill assumes that goal can be achieved by reducing emissions only sixty-two percent below 1990 levels.
310. S. 485, § 702(a)(1)(B) (establishing a goal of reducing to sixty-five percent below 2000 levels). The Pew Center on Global Climate Change has concluded that a sixty-five percent reduction below 2000 levels in equivalent to a sixty-five percent reduction below 1990 levels.
311. See PEW CTR. ON GLOBAL CLIMATE CHANGE, ECONOMY-WIDE CAP-AND-TRADE PROPOSAL IN THE 110TH CONGRESS, http://www. pewclimate.org/doc-Uploads/110th%20Congress%20Economy- wide%20Cap&Trade%20Proposals%2001-30-2008%20%20Chart.pdf (last visited Mar. 27, 2008).
312. S. 2191, § 3402 (providing that states that set more stringent reduction goals could receive additional allowances).
313. See DeShazo & Freeman, supra note 2, at 1523.
314. See supra notes 17 to 18 and accompanying text (discussing likelihood that some states might find that the short-term costs of addressing climate change exceed its benefits).
315. See supra notes 11 to 12 and accompanying text.
316. See supra note 34 and accompanying text.
317. See supra notes 45 to 53 and accompanying text.
318. Vehicle emission standards are already addressed under the federal Clean Air Act, which preempts all states except California from adopting their own state standards, Clean Air Act, 42 U.S.C.A. § 7543(a) (West 2008), although it gives other states the choice of adopting the national or the California standard.
319. U.S.C.A. § 7507 (West 2008). California must, however, obtain a waiver of preemption from EPA before it can implement its own standards, §7543(b), a waiver request that was rejected when California attempted to establish carbon dioxide emissions limits for mobile sources.
320. See Zachary Coile et al., EPA Blocks California Bid to Limit Greenhouse Gases from Cars, S.F. CHRON., Dec. 20, 2007, at A1.
321. See John C. Dernbach, U.S. Policy, in GLOBAL CLIMATE CHANGE AND U.S. LAW 61, 69-71 (Michael B. Gerrard ed., 2007);
322. APPLIANCE STANDARDS AWARENESS PROJECT, APPLIANCE EFFICIENCY STANDARDS IN THE 2007 ENERGY BILL: KEY FACTS (Dec. 2007), http://www.standardsasap.org/documents/2007EnergyBill_Standardsfactsheet. pdf.
323. APPLIANCE STANDARDS AWARENESS PROJECT, LEADING THE WAY: CONTINUED OPPORTUNITIES FOR NEW STATE APPLIANCE AND EQUIPMENT EFFICIENCY STANDARDS iv (2006) (observing that states can develop standards for products not governed by federal efficiency standards), available at http://www.standardsasap.org/ documents/a062execsum.pdf.
324. See Dernbach, supra note 226, at 70;
325. David Hodas, State Initiatives, in GLOBAL CLIMATE CHANGE AND U.S. LAW 343, 363 (Michael B. Gerrard ed., 2007). The state must demonstrate that its more stringent regulation is needed to meet "unusual and compelling State or local energy" needs.
326. See id. at 363-64.
327. Clean Air Act, 42 U.S.C.A. § 7543(a).
328. Id. § 7543(b).
329. See supra notes 9 to 19 and accompanying text.
330. See supra note 23 and accompanying text.
331. See supra note 22 and accompanying text.
332. See supra note 56 and accompanying text.
333. See Rabe, Roman & Dobelis, supra note 9, at 32-33 (discussing potential for state fuel standards to serve protectionist purposes). Mixed motives are, of course, possible. A state that promotes efficiency is likely to generate industries that achieve it. The issue would be whether the standard is a pretext that fails to achieve efficiency, not whether the standard would incidentally favor state industry.
334. See supra notes 47 to 49 and accompanying text.
335. For example, U.S. automakers face a variety of vehicle emissions standards in the global marketplace.
336. See McKinstry & Peterson, supra note 2, at 90.
337. See Engel, supra note 9, at 170-72.
338. See U.S. Gov't Accountability Office, Energy Efficiency: Long-Standing Problems with DOE's Program for Setting Efficiency Standards Continue to Result in Forgone Energy Savings, GAO Rep. No. 07-42, at 9 (2007), available at http://www.gao.gov/new.items/d0742.pdf;
339. see also Engel & Saleska, supra note 6, at 225 (observing that the federal government did not set any efficiency standards because it did not believe they were economically justified);
340. APPLIANCE EFFICIENCY STANDARDS IN THE 2007 ENERGY BILL, supra note 226 (noting that the first federal appliance efficiency standards were not set until 1987).
341. APPLIANCE STANDARDS AWARENESS PROJECT, supra note 227, at iii.
342. See Engel, supra note 9, at 170-72.
343. See APPLIANCE STANDARDS AWARENESS PROJECT, supra note 227, at iii;
344. Engel & Saleska, supra note 6, at 225-26.
345. APPLIANCE STANDARDS AWARENESS PROJECT, supra note 227, at iv.
346. See Carlson, supra note 42, at 311-18 (discussing the value of California's autonomy to develop its own vehicle emission standards);
347. Engel, supra note 9, at 187.
348. See CAL. ENVTL. PROT. AGENCY, AIR RESOURCES BOARD, FREQUENTLY ASKED QUESTIONS: EMISSION REDUCTION STANDARDS FOR VEHICLES, http://www.arb.ca.gov/cc/factsheets/ ccfaq.pdf (last visited Mar. 27, 2008).
349. California has set more stringent standards many times, and has almost always received a waiver from EPA to do so. Id.
350. Engel, supra note 9, at 187.
351. See Zachary Coile, Behind EPA 's Rejection of State Emission Rules, S.F. CHRON., Jan. 24, 2008, at A-1. The recent motor vehicle saga suggests that waiver provisions should clearly set forth the circumstances in which waivers must be granted, rather than leaving the decision to pure federal administrative discretion. Otherwise, the states have no recourse against federal capture or inertia.
352. See Exec. Order No. S-01-07 (Jan. 18, 2007), available at http://gov.ca.gov/index.php?/print-version/executive-order/5172.
353. Energy Independence and Security Act of 2007, Pub. L. No. 110-140, 121 Stat. 1492. At present, the federal renewable fuels requirements and California's low-carbon fuel standard are quite different, since California's standard is intended to reduce lifecycle carbon emissions and the renewable fuels standards do not directly address carbon emissions. In fact, given the carbon intensity associated with generating corn ethanol, the federal standard might not be a low-carbon standard. See BRIAN T. TURNER ET AL., CREATING MARKETS FOR BIOFUELS 38 (2007), available at http://repositories.cdlib.org/its/tsrc/UCB-ITS-TSRC-RR-2007- 1/ (concluding that ethanol from coal-fired facilities generates the same or more greenhouse gases as gasoline).
354. Massachusetts v. EPA, 127 S. Ct. 1438, 1460 (2007).
355. See McKinstry & Peterson, supra note 2, at 101 (regarding new source performance standards).
356. Clean Air Act, 42 U.S.C.A. § 7416(b) (West 2008).
357. For example, an early version of a bill to create a cap-and-trade program for the electricity sector would have explicitly exempted state regulation of that industry. DeShazo & Freeman, supra note 2, at 1536 n.135. Although deleted, the issue is likely to arise again.
358. Id.
359. Unlike the federal Clean Air Act, federal legislation should direct EPA to set standards for all existing facilities, avoiding the federal loophole for existing facilities in attainment areas. See supra note 201 and accompanying text. In that respect, climate legislation could thus be modeled more on the Clean Water Act, which sets federal minimum standards for all existing sources. Clean Water Act, 42 U.S.C.A. § 1311 (West 2008).
360. See McKinstry & Peterson, supra note 2, at 101.
361. The primary prudential concern is that the market would be ineffective at prompting facilities to take already-feasible steps to reduce emissions. See Kaswan, supra note 86, at 10295-96.
362. The equity concerns raised by a cap-and-trade program are those discussed supra notes 88 to 114 and accompanying text.
363. See supra note 56 and accompanying text.
364. See DeShazo & Freeman, supra note 2, at 1508.
365. See PEW CTR. ON GLOBAL CLIMATE CHANGE, supra note 224.
366. Cf. Rabe, Roman, & Dobelis, supra note 9, at 11 (discussing some states' unwillingness to address climate change generally).
367. See supra note 187 and accompanying text (discussing excess allowances issued by European states).
368. The states have recognized this reality. More than half the states have agreed to participate in an emissions registry. Janet Wilson, 31 States to Track Warming: They Form a Climate Registry that Will Measure and Compile Greenhouse Gas Emissions by Industry, L.A. TIMES, May 9,2007, at A23.
369. In the event that federal legislation establishes weak monitoring protocols or does not require transparent information on trading, however, I would argue that states should have the authority to establish more rigorous requirements.
370. States could, alternatively, achieve more stringent state goals by requiring their facilities to obtain or purchase a higher ratio of allowances for each ton of emissions. That would effectively "retire" the excess allowances. It is also theoretically possible that reductions to be achieved as a consequence of more stringent state goals, or reductions achieved through state standards rather than trading, could be subtracted from the national cap rather than retired by individual states. See McKinstry et al., supra note 155, at 4 (observing that reductions achieved outside of a cap-and-trade program must be subtracted from the cap). Such an effort would, however, raise a number of complex practical and policy questions that would render it difficult to administer.
371. California, for one, is already engaging in regulatory efforts. See supra notes 93-99 (describing role of regulation in California's implementation of AB 32). While it may ultimately adopt a cap-and-trade program, the reductions to be achieved through the cap-and-trade program are likely to be less than would have been necessary had the state not combined the program with a regulatory effort.
372. Unless a state has a strong technology sector that hopes to benefit from such an approach, interstate competitiveness concerns are likely to render this approach unlikely. Ideally, the national cap would be low enough to set an appropriate nationwide price signal.
373. See supra note 11 and accompanying text (discussing risk of leakage).
374. See Kaswan, supra note 86, at 10295. Complaints about "windfall profits" have tainted the European Union's trading system.
375. See PARKER, supra note 172, at 14.
376. In the European Union's trading program, for example, few states have auctioned even the minimum five percent allowable in Phase 1, and few plan to auction up to the minimum ten percent in Phase 2. See PARKER, supra note 172, at 13-14. One of the innovations in Phase 3's more centralized program is to establish progressively increasing auction levels for the EU trading program.
377. See Europa, supra note 188, at 3.
378. See MEMORANDUM, supra note 4, § 2(G)(1).
379. See America's Climate Security Act, S. 2191,110th Cong. § 3201 (2007).
380. 2 Budget Program, supra note 161, at 4.
381. See, e.g., Kaswan, supra note 86, at 10312 (describing certain environmental justice goals that could be met with auction revenues).
382. See, e.g., America's Climate Security Act, S. 2191, 110th Cong. § 3403.
383. See discussion supra Part II.B. States might couple trading with direct regulation, limit trading into heavily-polluted areas, or take other measures to maximize the co-pollutant reduction benefits of climate change regulation.
384. Id.
385. In order to encourage actual reductions within the regulated sector, the RGGI program places limits on the use of offsets. See Regional Greenhouse Gas Initiative, supra note 168.
386. Since the restrictions would likely reduce the cost-savings from trading, they could be found to conflict with a national goal of facilitating the lowest-cost reductions.
387. Clean Air Mkts. Group v. Pataki, 338 F.3d 82, 89 (2d Cir. 2003). State restrictions on national trades could also be found invalid under the dormant commerce clause. The district court in Clean Air Markets addressed this issue.
388. Clean Air Mkts. Group v. Pataki, 194 F. Supp. 2d 147, 160 (N.D.N.Y. 2002). This constitutional question deserves attention but is beyond the scope of this article.
389. Clean Air Act, 42 U.S.C.A. § 7401 (West 2008);
390. C.F.R. § 70.1 (2006).
391. See supra notes 185 to 188 and accompanying text.
392. Of course, if state-centered trading created control over auction revenues, it might provide states with a strong incentive to adopt their own programs. Those programs could use minimum federal guidelines, however, so state control over auctioning would not necessarily result in a multiplicity of inconsistent state rules. See supra note 192 and accompanying text (describing European Union's Phase 3 centralized rules coupled with decentralized auctions). This is not to advocate for centralizing rules to the extent proposed in the EU. But if minimum federal rules are adopted, then most states are likely to follow the federal rules, reducing the multiplicity of approaches that full decentralization could engender.
393. See McKinstry et al., supra note 155, at 4-6.
394. See id. ; McKinstry & Peterson, supra note 2, at 100-01.
395. See McKinstry et al., supra note 155, at 6 (describing market imperfections that are likely to prevent a cap-and-trade program from sending sufficient market signals to induce changes in consumer demand).
396. See id. (discussing why a cap-and-trade program is unlikely to be sufficient to reduce consumer demand).
397. Arguably, a cap-and-trade program that drives up energy costs could provide a private incentive for green buildings, without requiring a regulatory approach. However, operational costs are often less significant than capital costs in design decisions, dampening the impact of rising energy prices on building design.
398. See McKinstry et al., supra note 155, at 7. The agriculture and landfill sectors could conceivably be addressed by allowing facilities in a cap-and-trade program to purchase offsets from these sectors to meet their emission reduction targets. However, such programs are likely to be beset by significant permanence and verification issues that could preclude the use of offsets from the agricultural sector.
399. See Oliver A. Pollard, III, Smart Growth and Sustainable Transportation: Can We Get There from Here? 29 FORDHAM URB. L.J. 1529, 1531-32 (2002) (observing the role of post-World-War-II suburban sprawl in increasing motor vehicle use).
400. U.S. DEP'T OF TRANSP., CTR. FOR CLIMATE CHANGE AND ENVTL. FORECASTING, PERCENTAGE OF U.S. GREENHOUSE GAS EMISSIONS, 2005, http://www.climate.dot.gov.
401. See ROBERT PATERSON ET AL., TECHNIQUES FOR MITIGATING URBAN SPRAWL 10 (2003) http://www.utexas.edu/research/ctr/pdf_reports/0_4420_2.pdf (stating that VMT increased by almost 100 percent between 1969-1989, while population increased by only 22.5 percent);
402. U.S. DEP'T OF TRANSP., RESEARCH AND INNOVATIVE TECHNOLOGY ADMINISTRATION, BUREAU OF TRANSP. STATISTICS, http://www.transtats.bts.gov/ DL_SelectFields.asp?Table_ID=507&DB_Short_Name= VMT (last visited Mar. 27, 2008) (observing that national VMT increased almost 30 percent from 1990 to 2001).
403. Cf. Pollard, supra note 290, at 1549-50 (proposing denser development to reduce driving and its associated environmental impact).
404. See, e.g., Dwyer, supra note 54, at 1217 (observing the need for a state role in areas like land use and natural resources law that have long been under state and local controls).
405. A federal law imposing a state planning requirement would have to avoid the constitutional limits on the federal government's ability to require the states to act. See New York v. United States, 505 U.S. 144, 175 (1992) (invalidating a state law that "commandeers" states to carry out federal statutes). The legislation could condition state funding on the completion of state plans, or as in the Clean Air Act, it could provide the states with the alternative of having the federal government prepare their plans for them.
406. See Dwyer, supra note 54, at 1198-99 (observing that a state that failed to follow state requirements retains the "exit option" of having EPA assume responsibility).
407. See 42 U.S.C.A. § 7410 (West 2008).
408. Kenneth A. Manaster & Daniel P. Sehni, Federal Standards and State Implementation - State Implementation Plans, 1 STATE ENVTL. L. § 6.5 (2007) (providing a basic description of state implementation plans).
409. McKinstry et al., supra note 155, at 7-8 (describing numerous potential variables for determining state reduction obligations). The process could be similar to the development of the "burden-sharing agreement" developed within the European Union, in which the European nations determined emissions goals for each state in light of the collective European goal established under the Kyoto Protocol.
410. See PEW CENTER ON GLOBAL CLIMATE CHANGE, THE EUROPEAN UNION EMISSIONS TRADING SCHEME (EU-ETS): INSIGHTS AND OPPORTUNITIES 4-5 (describing burden-sharing agreement) (2005), available at http://www.pewclimate.org/docUploads/ EU%2DETS%20White%20Paper%2Epdf.
411. See McKinstry et al., supra note 155, at 7 (suggesting that, in allocating emission reduction responsibilities to the states, states should receive early action credit);
412. cf. Nicholas DiMascio, Credit Where Credit Is Due: The Legal Treatment of Early Greenhouse Gas Emissions Reductions, 56 DUKE L.J. 1587, 1593-98 (2007) (in the context of industry early action, discussing the general benefits and attributes of credit for early action of emissions reductions).
413. Many states are already creating climate action plans. See, e.g., PEW CTR. ON GLOBAL CLIMATE CHANGE, STATES WITH CLIMATE ACTION PLANS, http://www.pewclimate.org/what_s_ being_done/in_the_states/action_plan_map.cfm (last visited Mar. 27, 2008) (map indicating states with climate action plans).
414. See McKinstry et al., supra note 155, at 6 (emphasizing the importance of state implementation plans because "as is often the case, uniform national standards are not sufficient to achieve the needed reductions and additional reduction measures need to be undertaken.").
415. See, e.g., Dwyer, supra note 54, at 1198 (stating that decisions about how to reduce air pollutants implicate significant political and economic issues);
416. Brent Yarnal & Rob Neff, Primary Sources of Greenhouse Gases: A Cross-Scale Comparison, 12 PENN. ST. ENVTL. L. REV. 173, 178 (2004) (using the state of Pennsylvania as an example of how states can vary in their sources of emissions and concluding that a national "mitigation strategy must take into account regional and local differences in emissions.").
417. In California, for example, transportation accounts for 39 percent of emissions and in-state electricity-generation for only 14 percent. CAL. ENERGY COMM'N, CALIFORNIA'S GROSS GHG EMISSIONS IN 2004, http://www.energy.ca.gov/global_climate_change/ inventory/index.html (last visited Mar. 27, 2008).
418. In contrast, the national averages are 27.7 percent for transportation and 33.5 percent for electricity-generation. U.S. DEP'T OF TRANSP., CTR. FOR CLIMATE CHANGE AND ENVTL. FORECASTING, PERCENTAGE OF U.S. GREENHOUSE GAS EMISSIONS, 2005, http://climate.dot. gov/ (last visited Mar. 27, 2008).
419. Also, the future of California's greenhouse gas emissions standards for vehicles is in limbo, since California did not receive the necessary waiver of preemption from the U.S. Environmental Protection Agency. See Coile, supra note 240. However, the state has challenged EPA's waiver denial.
420. See Bob Egelko, State Sues EPA to Force Waiver over Greenhouse Gas Emissions, S.F. CHRON., Jan. 3, 2008, at A-1.
421. See Dwyer, supra note 54, at 1206-08 (describing state resistance to including land use and transportation in their SIPs).
422. Ideally, federal legislation would create a less cumbersome bureaucratic process than the Clean Air Act's SIP review process. See Manaster & Selmi, supra note 296, § 6.5 (describing SIP process).
423. See, e.g., Kaswan, supra note 1, at 79-85 (discussing the merits of a cooperative federalist approach).
424. See McKinstry & Peterson, supra note 2, at 87-88.
425. See Dwyer, supra note 54, at 1198 (indicating the political significance of air pollution control implementation decisions and their impact on land use and economic development);
426. id. at 1218 (stating that local political support and involvement is essential to the success of national environmental goals).
427. See supra note 139 and accompanying text.