Climate Policy and the United States System of Divided Powers: Dealing with Carbon Leakage and Regulatory Linkage

Abstract

In the absence of comprehensive federal climate legislation, state governments and the executive branch have moved forward with efforts to reduce greenhouse gases. Two important components of effective policies are (1) tools to limit the potential for carbon emissions to shift outside a jurisdiction (carbon leakage), and (2) cross-boundary linkages to improve effectiveness and reduce costs. For instance, states may adopt life cycle analysis as part of regulations or carbon taxes, and they may link carbon trading schemes with other states or with foreign jurisdictions. The executive branch may address carbon leakage by tailoring regulations to the potential for emissions to shift abroad and may also enter into cooperative agreements with other nations through executive agreements.These important components of climate policy could easily be supplied by Congress, but efforts to supply them by states or executive branch encounter constitutional challenges. This article argues in favor of the constitutionality of such efforts. It rejects attacks on state policies based on the compact clause, dormant commerce clause, and foreign affairs preemption. It also argues in favor of EPA authority to tailor regulations to limit leakage and in favor of presidential efforts at international cooperation.