Collaborative Federalism in Climate Policy?

One of the enduring questions in American federalism is whether the federal government should treat all states identically or link that treatment to performance measures.  This question takes on new dimensions as the U.S. Environmental Protection Agency (EPA) develops new source performance standards (NSPS) for existing power plants with substantial greenhouse gas emissions.

More than three years after the collapse of serious Congressional negotiations over a cap-and-trade system for carbon, this new step represents application of a durable policy tool, the multi-generational Clean Air Act, to greenhouse gases. This program is often portrayed as a national tool applied uniformly across the nation.  But many provisions of the Clean Air Act allow for creative experiments in federalism, most notably through state implementation plans that states negotiate with EPA headquarters or its regional offices.  In these negotiations, states can seek not only considerable latitude in overseeing enforcement but also experimentation with flexible compliance options.

So this means that there is tremendous precedent for EPA to offer incentives to those states that take early and constructive steps of their own.  Think about the last decade in American climate change policy.

On the one hand, a fair number of states have taken unilateral steps to develop policies designed to reduce greenhouse gas emissions, not just in the near term but over a period of time.  Some of these policies focus on the very industrial facilities to be addressed under the NSPS provisions.  In the Northeast, the Regional Greenhouse Gas Initiative (RGGI) involves nine states with a carbon cap-and-trade system for electric utilities, with an emissions cap that was lowered by more than 30 percent last year to increase its impact.  California has launched its own system and is about to begin emissions trading next January with a Canadian province, Quebec, while also expanding negotiations with other Western states on possible collaboration. Other states have taken other steps to reduce emissions in this sector.

EPA could reward this behavior and designate these state programs as equivalent to the same emission reduction goals under the Clean Air Act.  That would entail some flexible interpretation but would be sensitive to the fact that a fair number of states found ways to develop market-based emissions systems while one Congress after another has floundered.

Of course, this opens up the question of differential treatment.  There is another set of states that not only has eschewed unilateral climate policy but also has taken numerous steps to thwart federal policy implementation.  Think Texas.  In that case, lead elected officials have routinely refused to allow state staff to cooperate with federal officials, regularly denounce EPA with federalism rhetoric reminiscent of the mid-19th Century, and continually lob litigation grenades at this process.

This may be good politics, whether it involves Governor Rick Perry’s attempt to play to a national base as he contemplates a return to the presidential campaign stage in 2016 or Attorney General Greg Abbott’s attempt to build partisan support in his bid to replace Perry next year.  And they clearly have a point that the current EPA strategy is not the most cost-effective way to reduce carbon emissions, though those sorts of options are off the table in Congress for the indefinite future.

Gina McCarthy steps into this situation as a relatively new EPA Administrator but one exceptionally well-versed in both the operation of the Clean Air Act and early-state carbon programs.  Her path to the EPA leadership post ran through two states that are now part of the RGGI system and included a term as lead official for the Clean Air Act.  It is rare to hear a federal agency head in any recent administration who speaks so clearly, knowledgeably, and enthusiastically about issues of federalism and then can articulate a strong interest in engaging the states in federal policy development.

This suggests an intriguing moment whereby states may well begin to advance their case for flexible treatment based not on their federalism rhetoric but their actual performance.  Not all states operate at the Lake Wobegon level, warranting designation as “above average” and thereby uniform treatment.  Perhaps the newest chapter in the rather remarkable odyssey of the Clean Air Act should take this into account, possibly further stimulating state, local, and regional innovation at a time when Washington seems less and less capable of anything of consequence.