Climate Change and Federalism | Article

As the urgency for climate change action increases, governments around the world seek answers to this global challenge. A multitude of climate policy approaches now exist around the world, ranging from global to local scale. These include:

United Nations Framework Convention on Climate Change
The European Union Emissions Trading Scheme
Australia’s carbon tax
The Regional Greenhouse Gas Initiative (RGGI) in the Northeastern United States
California’s Global Warming Solutions Act (AB 32)
City, county, and state climate action plans

These varying—and sometimes overlapping—policies often spur debate on how best to implement effective climate change policy given the wide range of policy intervention points, the piecemeal nature of local efforts, and the global scale of the problem.

A recent report written by scholars at Resources for the Future and the University of Virginia, entitled Rethinking Environmental Federalism in a Warming World , focuses on the formation of climate change policy in a federal system. The paper examined the challenges and opportunities that arise when implementing climate change policy under U.S. federalism. Federalism refers to the exercise of powers, responsibilities, and constraints between different layers of government. In the United States, the main organizational differences are between national, state, and local (county and municipal) layers. Below are the main points of the paper.

Because greenhouse gases (GHGs) are a global pollutant, policies to address them belong at the national level with international coordination.
National level policies can set equal standards for all states and thereby lower the transaction costs of interstate commerce. In addition, national level policies and agencies are expected to have better information and resources to develop and implement policy than state governments.
It should not be assumed that subnational (state and local) policies will work in harmony with an optimal national policy.
A cost-effective, efficient climate policy should use the authority of states and localities within their jurisdiction. State and local governments are uniquely positioned to implement many aspects of an overall climate strategy, and it is important to ask whether the price signal alone from a cap and trade program or carbon tax would provide incentive for these governmental actors to do so.
It is widely recognized that national policy makers can benefit from policy innovation at the state level. Giving states flexibility to test policies before national adoption might quicken the development of new, cost-reducing policies. State and local policy development also encourages the accumulation of ideas and experience that can build national consensus.
In setting a national emissions goal, the federal government would weigh costs and benefits to determine a national emissions path. States would have some input on this path due to their autonomy.
Costs are dependent on the specific national program chosen, whether it’s cap-and-trade, carbon tax, etc., to regulate emissions and the incentives offered to states and localities. State level support is reliant on minimizing costs at the state level, which may increase national level costs through more regulatory oversight, nationwide incentives, etc.
If a stricter national cap and trade program is implemented, the value of emissions credits in less stringent state and regional cap and trade programs would drop. For this reason, a national cap and trade program may discourage state and local action, which is important for achieving low-cost emissions reductions.
Under a national carbon tax, a jurisdiction that is willing to pay more for reductions could reduce emissions without raising compliance costs in other jurisdictions.

The authors of the report noted that the current federalist approach to GHG regulation, through the Environmental Protection Agency (EPA), presents a flexible compliance path toward emissions reduction. Though challenges to effective and efficient progress remain.

In the United States, federal action on climate change has stagnated in Congress, and the Clean Air Act has become the central national vehicle for developing emissions reduction regulations.
The EPA is likely to give states flexibility in pursuing compliance of its emission reduction regulations, which may spur innovative methods of compliance. For example, RGGI, a cap and trade program in ten northeast states, and California’s emerging trading program, may serve as these states’ implementation plans.
Given the traditional and Constitutional allocations of governmental power in the United States, much greater attention should be given to how any national program can provide incentives to and preserve the autonomy of state and local governments.

Conclusion

While Congress has stalled in passing comprehensive climate change legislation, many states and localities have taken their own steps to reduce greenhouse gas emissions. However, the authors emphasize that national standards are essential for ensuring efficient, cost-effective climate policy. With hopes that national climate legislation will be passed in the near future, the authors remind us that effective national legislation must be accompanied by subnational autonomy and innovation. States will play critical roles in implementing climate strategies within their own jurisdictions, as well as finding innovative approaches to meeting national standards. Furthermore, in the future passage of any national legislation, it would be important to recognize the actions that states and localities have taken prior to enactment of national legislation, and to assist these states in adapting to a national plan as appropriate.

It has been common currency that there needs to be a price put on carbon. An example of a mechanism to do this is a carbon fee or carbon tax. In 2009, Sens. Maria Cantwell (D-WA) and Susan Collins (R-ME) introduced the Carbon Limits and Energy for America’s Renewal (CLEAR) Act, a cap-and-dividend bill that would place a declining cap on fossil fuel emissions and put a price on carbon through the sale of carbon permits to fossil fuel producers.

To learn more, see past EESI briefing overviews on carbon pricing: