Environmental Federalism?
State Activism on Cleaning the Air
About This Event

For most of the environmental era, business groups (seconded by many economists) criticized environmental regulation as overly centralized and rigid. Environmental advocates, for their part, insisted on tough national regulation as the only means of remedying pollution that crosses state boundaries and of preventing a "race to the bottom" among the states. In recent years, however, states have come to "think globally" and "act locally." Even on issues that plainly transcend state and even national boundaries, such as air pollution and global warming, many states have taken measures far in excess of federal requirements. This marked shift has forced scholars, business groups, and environmentalists to reexamine their positions and strategies.

An AEI panel will review state activities on such issues as global warming, power plant permitting, and car emission standards. The panel will discuss the desirable role and scope of national, state, and local regulation and the need, if any, for legal and regulatory reforms.

Agenda

12:45 p.m.

Registration

1:00

Panelists:

Barry Rabe, University of Michigan

Robert Gasaway, Kirkland & Ellis
Marlo Lewis, Competitive Enterprise Institute

Christopher Schroeder, Duke Law School

Moderator:

Michael S. Greve, AEI Federalism Project

3:00

Adjournment

Event Summary

May 2003
Environmental Federalism? State Activism on Cleaning the Air

For most of the environmental era--the last few decades of heightened environmental awareness--business groups (seconded by many economists) criticized environmental regulation as overly centralized and rigid. Environmental advocates, for their part, insisted on tough national regulation as the only means of remedying pollution that crosses state boundaries and of preventing a "race to the bottom" among the states-competition for the most minimal regulations. In recent years, however, states have come to "think globally" and "act locally." Even on issues that plainly transcend state and even national boundaries, such as air pollution and global warming, many states have taken measures far in excess of federal requirements. This marked shift has forced scholars, business groups, and environmentalists to reexamine their positions and strategies.

On May 13, an AEI Federalism Project panel reviewed state activities on global warming, power plant permitting, and car emission standards. The panel discussed the desirable role and scope of national, state, and local regulation and the need, if any, for legal and regulatory reforms.

Barry Rabe
University of Michigan

The states’ role in making environmental policy has changed drastically over the last five years. No longer are the states playing the role of experimental laboratories for the benefit of the federal government. Instead they are taking center stage, regulating and legislating for the benefit of their own citizens. Faced with the Kyoto Protocol, the European Union acted like a federation, allowing each sovereign body to have its say. In contrast, the United States acted as one body, ignoring significant state differences. If all of the states seceded individually, twenty-five of them would rank in the top sixty nations for emission of greenhouse gases, with Texas ranked sixth in the world. Acting in concert, little has been done to remedy state problems; but acting individually, the states have shown remarkable interest and ingenuity in defense of the environment.

Individual states have implemented environmental policies. Texas pulled itself out of last place in the use of renewable energy by implementing a renewable portfolio standard with a great deal of flexibility. Wisconsin became a model of information disclosure. New Jersey made pledges that would bring it halfway to compliance with Kyoto, wrote covenants, implemented caps, focused on renewable energy, and conducted environmental talks with the Netherlands and Canada. States have engaged in regional collaboration, taking advantage of common goals to formulate common strategies. They see themselves as filling a void left by the federal government, and while some state policies are designed to force federal action, others ignore Washington altogether. Clearly, we must consider how to actually implement devolution and how to rearrange the balance of federal versus state power. If we are willing to leave some aspects of environmental regulation to the states, how much power are we willing to allow them to have?

Robert Gasaway
Kirkland & Ellis

Devolution of environmental policy decisions to the states is enormously problematic for both businesses and the courts. Businesses are nervous for four reasons. First, they are wary of duplicative regulations, particularly in the area of disclosure. If disclosure is a predicate to action or evaluation, multiple disclosures can become, not only burdensome, but the root of larger problems. Accounting scandals, for instance, are in part caused by multiple sets of standards. A second and related fear is that of extraterritorial action: the problem of states pushing the boundaries of policy entrepreneurialism. That eagerness to overreach can in turn lead to business’s third fear: sovereign litigation pressing unlawful legal theories that can ultimately change the policy debate. Finally, there is the profoundly undemocratic nature of the state environmental policy process. State Environmental Protection Agency directors are not elected; they are appointed. Their ties to their states are potentially quite loose, and their desire to represent the citizens of their states is unclear.

From the judiciary’s point of view, the idea of devolving environmental authority to the states is a bit of a mess. One of the central doctrines of federalism is the minimum-contacts doctrine, which provides that a defendant must have sufficient contact with or presence in a state for that state’s courts to have jurisdiction. But minimum contacts are purely a question of degree. Internationally, there are enormous problems with devolving environmental authority to the states. If the states want to negotiate agreements with other countries, they are directly threatening the president’s power over foreign relations. However, the doctrines that are most protective of that power (such as the dormant Foreign Commerce Clause) are largely structural, and thus not consistently popular with the Supreme Court. Within the current doctrines, devolution is not practically possible and it is leading less to division than to co-ownership of all policy issues. One has to wonder what has become of other matters that state and local governments once considered their primary concerns.

Marlo Lewis
Competitive Enterprise Institute

In January, three state attorneys general filed a notice of intent to sue Environmental Protection Agency administrator Christine Todd Whitman if she did not propose mandatory controls on CO2. The attorneys general of Massachusetts, Connecticut, and Maine asserted that the Clean Air Act gave Whitman the affirmative duty to regulate emissions of the gas. Examination of the CAA itself, however, yields a simple but little-known fact-that far from imposing a duty to regulate, the act gives the EPA no authority whatsoever over CO2.

For Congress to delegate a power, it has to do so specifically. The Clean Air Act establishes an ambient air quality program, a hazardous air pollutant program, and a stratospheric ozone protection program. It does not establish a program regarding global warming. When the act does mention either "global warming" or "carbon dioxide," it does so in extremely limited language, calling only for "nonregulatory" strategies and the study of potentially ozone-depleting substances. More explicit permission to regulate CO2 was rejected by the House-Senate Conference Committee when they were considering the Clean Air Act. As the Supreme Court held, "Few principles of statutory construction are more compelling than the proposition that Congress does not intend sub silentio to enact statutory language that it has earlier discarded in favor of other language."

The attorneys general are trying to sneak in under a theory of "definitional possibilities," in which they pull words out of the Clean Air Act, open a dictionary, and see what they can find. Their goal, however, is much clearer than their legal logic. States have primary responsibility for the actual enforcement of the CAA. If the regulatory reach of the act is expanded, state attorneys general will gain a new list of litigation targets almost overnight.

Christopher Schroeder
Duke University School of Law

As we have considered how to respond to environmental concerns, federalism has gone in and out of favor. In the beginning, federalism was thought to be bad, and some believed it would only bring a race to the bottom, in which states would sell out the environment to attract big business. But then opinion shifted again and federalism was good. The race to the bottom would not happen because state elected officials would actually aim at welfare maximization for their constituents-a balance of environmental and economic benefits. So the question, of course, arose-which characterization of federalism was right? The answer depends on how the incentive structure of those elected officials is defined. If they perceive that their constituents are more likely to vote for an environmentalist, federalism will be good; if they perceive that their constituents are more likely to vote for an official who brings jobs, federalism will be bad. The answer unfortunately is, "it depends."

Today, we have a situation that was not anticipated. The federal government’s environmental policies set a floor for regulation, and sometimes that floor is zero. State policies have nowhere to go but up, so now we have state policies that are tougher than federal policies, and in some cases state policies that regulate where the federal government does not. This opens up the possibility of two constitutional problems: extraterritoriality and externalities. In the first case, states with some strategic leverage (whether based on location, local economy, or sheer population) could in effect impose their regulations on other states-the classic example being a safety regulation in state A that forces a company to alter its manufacturing process for products that are sold in states A, B, and C. In the case of externalities, states could impose higher standards while externalizing the cost of meeting them. Both problems are inherently issues of federalism, and the solutions exist: preemption and the domestic dormant commerce clause (which prohibits state action even when the federal government has either failed or declined to regulate). The use of these federal solutions is, in fact, evidence that our constitution works.

AEI research assistant Kate Crawford prepared this summary.

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