States' role in climate policy

Jack Dirmann passed along an interesting paper arguing for a bigger role for states in setting federal climate policy.

This article explains why states and localities need to be full partners in a national climate change effort based on federal legislation or the existing Clean Air Act. A large share of reductions with the lowest cost and the greatest co-benefits (e.g., job creation, technology development, reduction of other pollutants) are in areas that a federal cap-and-trade program or other purely federal measures will not easily reach. These are also areas where the states have traditionally exercised their powers – including land use, building construction, transportation, and recycling. The economic recovery and expansion will require direct state and local management of climate and energy actions to reach full potential and efficiency.

This article also describes in detail a proposed state climate action planning process that would help make the states full partners. 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 non-economic co-benefits, and would mean that the national program is more economically and environmentally sustainable.

Some excerpts:

The current focus on the federal government as the means for managing climate change responses departs from the way Congress proceeded in the 1970s in response to environmental improvement needs. The “cooperative federalism” legislation of that period—the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, and the Surface Mining Control and Reclamation Act, 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.

A national role is needed:

… a federal program, either through legislation or regulation, is necessary for several reasons in order to achieve a full level of national effort that addresses economic and energy needs. To begin with, a serious effort requires national goals for greenhouse gas emissions reduction to guide that effort. National goals cannot be set by states, whether they act individually or regionally. In addition, a serious effort to address climate change requires an economy-wide price on carbon through a cap and trade program or a national carbon tax that can only be achieved through federal action. A national program also is needed to prevent “leakage” or negative displacement effects — where reductions in emissions in one state are offset by corresponding increases in a second state with no cap or other regulatory program. Finally, because climate change is a global problem, because the United States is a party to the United Nations Framework Convention on Climate Change, and because the United States is expected to play an international leadership role in addressing this issue, a national program is needed to give the U.S. a credible foundation for its negotiating position.

… On many issues (such as fuel economy standards for motor vehicles, greenhouse gas emission standards from motor vehicles and stationary sources, energy efficiency standards for appliances and equipment), federal rules applicable to the entire country will be more effective and efficient than the business-as-usual alternative–of climate change rules that can vary from state to state and no rules in other states.

However, states must also play a role:

Still, even with a strong national climate change program, the states will need to play a continued and growing role on climate change. This is so for at least seven reasons:

1. To increase the effectiveness of a federal climate change program, especially in reducing greenhouse gas emissions. A great deal of climate change mitigation will need to occur in areas where the state (and local) governments have historic police power or economic development responsibilities …

2. To reduce the cost of the regulatory program for greenhouse gas emissions. …

3. To maximize the other benefits of greenhouse gas emission reductions. …

4. To provide a continued source of legal and policy innovations that could be employed at the state, regional, or national level. …

5. To prod and encourage continued improvement in the federal program. …

6. To check against possible federal regulatory failure. …

7. To foster environmentally sustainable economic development and enhance the likelihood that climate change legislation can be adopted. …

I think the compelling arguments here are #1 and #4. I think much of the progress on #1 may require regulatory change or deregulation as much as new regulation – the point being that existing regulations can be an obstacle to change, and we need a lot of change. We need experimentation, as in #4, because the scope of change needed is so extensive. Where states lack the power to predict the actions of their regulatory changes (or the will to make the needed analysis), evolutionary learning, with diffusion and imitation of successes, can fill the gap.

Dernbach et al. lay out a road map involving state implementation plans, mirrored after existing regulatory approaches, and including state control over allowance distribution. That’s an interesting idea, and might make it easier to solve some objections that arise due to the diversity of energy-economy mixes across states.

One thing this approach would enable is a fairly minimalist climate bill, focused on emissions pricing and free of much of the ancillary regulation that bloats current drafts to 900+ pages. Also, there would be an obvious complementarity: with a federal price on emissions, suddenly the benefit (public and private) of many state measures would be much clearer.

One thing I’d add is a market approach to #3. Command-and-control measures for capturing cobenefits don’t play well together. Why not carry emissions pricing a bit further, and replace local air and water quality regulations and the like with adaptive pricing as well? Then the whole system could be simpler and more flexible.

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