1. State and Local Climate Change Initiatives: What is motivating state/locals to address a global problem and what can we expect to come of it? Kirsten Engel Univ. of Arizona College of Law

2. Highlights of state and local climate initiatives Vehicle greenhouse gas emission standards: CA + 6 copycat states (MA, CT, NY, NJ, RI, VT) (currently subject to industry court challenge); Northeastern Regional CO 2 cap-and-trade program: CT, DE, ME, NH, NJ, NY & VT (MOU on Model Rule announced 12/20/04) CO 2 emission limits for power plants: OR, MA, NH, WA State Greenhouse Gas emission reduction plans w/ targets: AZ, CA, CT, MA, ME, NC, NJ, NM, NY, OR, RI. Renewable portfolio standard legislation (RPS) – 21 states + Wash., D.C., require a percentage of energy sales come from qualifying renewable technology; Multi-state lawsuits to compel federal CO 2 regulation; 150 U.S. cites, 560 worldwide: are developing local action plans to reduce greenhouse gas emissions and implementing measures

3. “Bottom-up” as opposed to “top-down” State/local climate initiatives not driven by federal priorities or a federally-delegated program; Indeed: -- U.S. not party to Kyoto Protocol; -- U.S. party only to nonbinding targets of U.N. Framework Convention on Climate Change; -- U.S.’s climate policy consists of voluntary measures designed to reduce greenhouse gas intensity

4. Arguably, economically irrational! “Subglobal” action on a global environmental problem risks: (1) economic “leakage” as emissions intense activities move from regulating to non-regulating jurisdictions; (2) “free-riding” by subglobal govts that are not regulating Analogy to “Tragedy of the Commons” counsels no action outside context of global climate agreement

5. “Tragedy” analogy compels subglobal action only pursuant to an international agreement: “[While global governance invites higher transaction costs, f]alling back to national-scale intervention… invites free riding, holdouts, and inefficient spending of limited resources—and thus structural regulatory failure. At least from a theoretical viewpoint, inherently global problems demand concerted worldwide action.” (emphasis added) -- Daniel C. Esty, Toward Optimal Environmental Governance, 74 N.Y.U. L. Rev. 1495, 1555 (1999) (others echoing similar sentiments: Robert Stavins; Terry Anderson)

6. RICE model ( Nordhaus & Yang (1996)) Optimal greenhouse gas emissions reductions Country/ RegionCooperativeNon-cooperative (as percentage of cooperative) U.S.103.5 (35%) E.U.8.53.5 (41%) Japan7.32 (27%) China1811 World102.4 (24%) Yet basis for questioning the irrationality of climate regulation by “big” subglobal actors (e.g., the U.S.):

7. But what explains the activities of “small” subglobal actors, e.g., state and local governments?

9. More plausible explanations Many are in earliest stages – to date only lay the foundation for future regulation (e.g., state plans) Many others are being pursued primarily for local economic benefits (jobs, tax revenues) and energy price stability/ diversification (e.g., Renewable Portfolio Standard (RPS)) Others appear at least partially motivated by opportunity to show up the federal government on a “federal issue” (e.g., CA) Still others seem intent with keeping up with other states – interstate competition

10. What is the long-term significance of state / local climate change initiatives?

11. ... in terms of making a dent in U.S. greenhouse gas emissions? Not much … at least not yet. State renewable portfolio standards (RPS) would reduce emissions approximately 1 to 1.5% below “business as usual” by 2015-2020. Yet there is reason to hope: State / local governments that have adopted climate change policies represent about 24% of the U.S. population and 27% of GDP. -- Brendan Fisher and Robert Costanza, Brief Communications: Regional Commitment to reducing Emissions 438 Nature 301 (2005).

12. Long-term significance may lie in triggering action at larger geographic scales May prompt federal (preemptive) regulation ; -- E.g., proposed federal Renewable Portfolio Standards that might preempt more stringent state RPS Currently spurring regional action; regional action could increasingly function as an alternative to federal action -- E.g., RGGI. 7 state pact could expand to include more states; provide vehicle for sources to trade credits with Europe / other countries party to Kyoto

13. The “Domino Effect” Unilateral subglobal actions += “Upward” Mechanisms Regulation at “higher” jurisdiction (representing larger geographic area) Sample “upward” Mechanisms: 1)Interest groups appeal to higher regulatory jurisdiction to: (a) address environmental externalities; (b) level the competitive playing field; or (c) prevent a welfare-reducing “race-to-the-bottom”; (d) provide a larger market for substitute products 2)Regulators choose a market mechanism (e.g., tradable permits)

14. The rise of new environmental “regionalism” Conference of New England Governors and Eastern Canadian Premiers Regional Greenhouse Gas Initiatives (RGGI) (NY, NJ, CT, DE, ME, NH, VT) West Coast Governor’s Global Warming Initiative (CA, WA, OR) “Powering the Plains” (ND, SD, IA, MN, WI, Manitoba, energy industry, agricultural and renewable power interests)

15. Conclusions: Climate Change State / local climate change regulation is an unusual “grassroots” example of environmental federalism: not based on federal mandate & arguably an economically irrational response to global problem; Appears motivated by local economic opportunities associated with renewable energy and energy efficiency as well as political opportunities; Long-term significance may be degree to which spurs regional and federal climate response.

16. Conclusions: Big Picture Environmental Federalism State/ local governments, no more than federal govt., sticks to assigned “role” in environmental regulation; Rather, what level of government addresses particular problem largely determined by what economic and political opportunities available; In absence of strong federal leadership, motivated states may cooperate on regional level; Regional alliances may pose increasing alternative to federal regulation, though hampered by constitutional constraints.