Making the States Full Partners in a National Climate Change Effort: A Necessary Element for Sustainable Economic Development

For at least a decade, states have exercised de facto national leadership on climate change policy development. 1 Through comprehensive planning, intensive fact-finding, and stakeholder-based consensus-building, they have developed and refined a broad range of laws and policies intended to advance climate, energy, and economic policy objectives simultaneously. The recommended portfolios of actions derived from this work, involving more than one-half of all U.S. states and regions, as well as the formal participation of more than 1,500 stakeholders and technical experts, show the potential of appropriately crafted measures to expand the economy and create jobs, reduce energy conflicts and improve energy security, build businesses and stimulate new investment, foster new technologies and management practices, protect households and businesses from high and fluctuating energy prices, and reduce emissions of greenhouse gases (GHGs) and other pollutants.

At the federal level, the United States is in the midst of a congressional debate about how to craft a national climate change program. Depending on its final resolution, this program could either displace or enhance state leadership and stakeholder consensus. Proposed federal cap-and-trade legislation, combined with other national measures, could substantially reduce GHG emissions by 2050. The U.S. House of Representatives narrowly passed a bill based on this policy architecture, the American Clean Energy and Security Act, in 2009 without Republican support. Several months later, the U.S. Senate Environment and Public Works Committee approved a similar bill along partisan lines. In May, Sens. John Kerry (D-Mass.) and Joseph I. Lieberman (I-Conn.) made public the discussion draft of a bill (that was prepared with Sen. Lindsey O. Graham (R-S.C.)) that significantly departs from previous legislation approved in the House and the Senate Environment and Public Works Committee. Moreover, Sen. Jeff Bingaman (D-N.M.) introduced comprehensive energy legislation without a cap-and-trade system.

As of this writing, the passage of any of these bills is possible. Notably, these bills share the common desire to find alternate approaches to the Waxman-Markey Bill and U.S. Environmental Protection Agency (EPA) regulation and provide a limited role (if any) for state or regional climate change policy.

The Waxman-Markey Bill and Senate bills are based on recognition that GHG emissions urgently need to be reduced, the responsibility of the United States to do its fair share, and the opportunity to capture low-cost, high gain cobenefits (benefits other than GHG reductions, such as economic, energy, and environmental security). Until 2009, this country was the major historical contributor to the increased atmospheric concentrations of GHG emissions after the preindustrial era. The United States is also expected to play a key international role in addressing this issue, as evidenced by its lead role at the December 2009 meeting of the conference of the parties to the United Nations Framework Convention on Climate Change (UNFCCC) in Copenhagen. China is now the major world emitter of GHGs, and developing nations are expected, in aggregate, to contribute 90% of the future growth in total GHG emissions under business as usual (BAU) projections. This trend heightens the perceived need in the Senate for all nations to reduce their GHG emissions and also for the United States to demonstrate leadership.

Proactive bills in the U.S. Congress, as well as actions by the president, indicate the need for a strong federal role for emissions management. However, the need to maintain and expand a meaningful role for states and localities is not nearly as evident and could be an Achilles' heel for a federal program. Under these bills, the federal government would be responsible for the management of climate change responses, which departs from congressional precedent in the 1970s in response to environmental concerns. The "cooperative federalism" legislation of that period—the Clean Air Act (CAA),2 the Clean Water Act (CWA),3 the Resource Conservation and Recovery Act,4 and the Surface Mining Control and Reclamation Act (SMCRA),5 among others—did not federalize environmental law or create a federal environmental agency with plenary authority over rulemaking, program administration, permitting, and enforcement. Rather, it crafted a balanced compromise between state and federal authority borne of the practical need for institutional cooperation. The federal government was given the authority to promulgate national standards, to provide financial incentives to the states to improve the quality of their programs, and to authorize the states to keep implementing their programs, as long as they met federal standards. Frequently, the federal statutes of this era were modeled on existing state programs and were developed to preserve those programs and expand them to cover the nation.6 As a result, states increased the number and quality of personnel enforcing their environmental programs and created a legal system in which the vast majority of permit decisions and enforcement actions are made by the states in coordination with both federal and local governments.

As we have previously demonstrated, Congress could employ a comprehensive approach to climate change that integrates all sectors of the economy and all levels of government (particularly the states), and uses a variety of price and non-price policy instruments to address climate change at the lowest possible cost and with the greatest co-benefits.7 This Article elaborates and clarifies two aspects of this observation. Part I explains why states and localities need to be full partners in a national effort to address climate change at low cost and with large co-benefits. A large share of the lowest cost and highest co-benefit reduction actions are in areas that a federal cap-and-trade program or other purely federal measures will not easily reach and areas where the states have traditionally exercised their powers—including land use, building construction, transportation, and recycling. Economic recovery and expansion will require direct state and local management of climate and energy actions to reach its full potential and efficiency. In addition, the need for continuity and flexibility in a decades-long national climate change effort will require localized innovation and implementation.

Part II describes in detail our proposed state climate action planning process. This state planning process—based on a proven template from actions taken by many states—provides an opportunity to achieve cheaper, faster, and greater emissions reductions than federal legislation or regulation alone would achieve. It would also realize macroeconomic benefits and noneconomic co-benefits and would make the national program more economically sustainable. Our proposal optimizes national commitments by transitioning from the states as leaders to the states as partners with the federal government for addressing climate change.

Comprehensive new federal legislation is not the only avenue available to the federal government on climate change. With the U.S. Supreme Court's 2007 decision in Massachusetts v. Environmental Protection Agency,8 EPA has the authority to regulate GHGs as air pollutants under the CAA. EPA has begun to use that authority for both motor vehicles9 and stationary sources.10 EPA, along with other federal agencies, could expand use of existing authority to provide assurance of broad-based GHG management, even if comprehensive federal legislation directed specifically at the issue of climate change is not passed.11 Federal agency actions, however, would not necessarily bring states and localities into full partnership with the federal government or optimize the use of jurisdictional capacity.

A national climate change program—whether it occurs through comprehensive legislation, piece-by-piece legislation, or application of the existing CAA and other federal agency authority—will occur in a context in which the most progressive states on climate change issues already exhibit greater technical sophistication and willingness to take serious action than they likely exhibited before the environmental statutes of the 1970s were adopted. The high level of state action on climate change over more than a decade is commonly explained as a response to the weak federal effort—a necessary effort to fill a vacuum. When the federal government finally intervenes in a comprehensive way, many have said, the state role can and should recede. States and localities, however, have acted to address climate change to forge federal-state cooperation, to advance their own interest in moving to the new clean energy economy, and to attain valuable co-benefits, such as human health protection. It is not clear why states should drop out of their major role in climate policy development and implementation. After all, the state role did not recede with the adoption of earlier federal environmental laws (when the states were less willing to take action, more prone to regulatory capture, and less sophisticated). It is thus difficult to see why the state role should recede with significant federal action on climate change.

1. Why States Should Continue to Play a Major Role in the National Climate Change Effort

   State actions relating to climate change are growing in sophistication and importance. States are redirecting their economies toward new energy development and job creation, using comprehensive climate change action plans to identify and implement cost-effective measures that reduce GHG emissions and create other co-benefits. Some states are requiring the direct reduction of GHG emissions, while other states achieve GHG reductions as the byproduct of other policies. California's Global Warming Solutions Act sets a goal to reduce its GHG emissions to 1990 levels by 2020,12...