Statehouse and Greenhouse: The States Are Taking the Lead on Climate Change

March 1, 2002

Washington’s role in greenhouse gas reduction remains as unclear today as it was in the late 1980s, when a convergence of research and steamy summers thrust the matter of climate change onto the national agenda. Although Vice President Al Gore personally negotiated key elements of the 1997 Kyoto Protocol, the Clinton-Gore administration never seriously pursued Senate ratification of the treaty. George W. Bush entered the White House last year voicing general support for addressing climate change, but he quickly withdrew the United States from direct involvement in ongoing post-Kyoto deliberations. It took him more than a year to offer any indication of what might follow. His Valentine’s Day 2002 recommendations may buy him some political cover but are at best a fig leaf, likely to have little impact on greenhouse gas releases even if approved and implemented.

Ironically, while Washington has continued to stumble on the global warming issue, a number of states have launched constructive efforts to lower emissions of carbon dioxide, methane, and other greenhouse gases. Independently the states have passed more than three dozen laws—many during the past two years—establishing specific strategies. These strategies involve formal commitments in virtually every sector that can influence such heat-trapping gases, including electricity generation, air pollution regulation, transportation, forestry and natural resource preservation, and agriculture. The action at the state level has received remarkably little attention from environmentalists, journalists, or scholars, yet it includes elements of a new “policy architecture” for reducing effluents that the new Bush proposals ignore.

Policy for a Different Kind of Environmental Problem

International environmental agreements have a very mixed track record, particularly when it comes to implementation. In general, the more stakeholders, the greater the difficulty of monitoring and assuring compliance; the larger the economic dislocations, the greater the likely resistance to implementation. The Kyoto Protocol’s scope of intended collective action is truly stunning, making it as complex an international agreement as has ever been negotiated in any sphere of public policy.

Protocol tinkering has continued, without input from the U.S. government, most notably in 2001 meetings in Germany and Morocco. Representatives of some 165 nations are trying to carve out rules of engagement for the much smaller subset of industrialized nations that would pledge to cut greenhouse gas emissions. Alas, American disengagement has provided a visible stage for widespread denunciation of the United States. At the same time, each round of international discussion results in more deal-cutting—on everything from more favorable measurement of “carbon sinks” to reduced targets for select nations—and exposes more potential loopholes. It also remains unclear whether, even if they ratify the agreement, many nations will take its implementation seriously.

Turning to the States: The Realm of the Possible

American states provide particularly fertile ground for policy innovation in climate change. First, many are quite large in terms of population, physical size, and resources devoted to environmental protection. They also spew a lot of harmful emissions. Indeed, if the American states were counted as sovereign nations, approximately half would rank among the top 60 national emitters of greenhouse gases around the globe. The annual carbon dioxide emissions of Texas, for example, exceed those of France. Indiana’s exceed Indonesia’s, and Georgia’s exceed Venezuela’s.

Second, states already have considerable jurisdiction over many spheres of environmental and energy policy with direct relevance to the climate change problem. State rules affect electricity rates, land use, waste management, and transportation. States also implement many federal environmental laws, issuing more than 90 percent of all environmental permits and conducting more than 75 percent of all enforcement actions.

Third, a growing body of scholarship suggests that far more innovation in American environmental and energy policy now emanates from the statehouses than from Congress. States now dominate policy formation in pollution prevention and cross-media regulatory integration, an exigency long neglected in Washington.

State governments, of course, vary markedly in their commitment to protecting the environment. The most active states in climate change policy are those along the Pacific and Atlantic coasts, but others too are redefining policy. The leading states tend not to be dominated by one political party; in fact, many of their most important initiatives have been enacted with bipartisan support, offering potential political lessons for federal policy. Often, affected industries have welcomed the opportunity to “claim credit” for early reductions and have not found adjustment costs particularly onerous.

Comprehensive Cuts: New Jersey

In 1998, then-governor of New Jersey, Christine Whitman (now chief of the Environmental Protection Agency) became the only North American political official obligated to implement the Kyoto Protocol. That year Whitman issued an executive order setting a goal of reducing the state’s greenhouse gases by 3.5 percent below 1990 levels by 2005. If New Jersey succeeds, it would be in line to reach the larger cuts pledged under Kyoto by decade’s end. To meet its commitment, New Jersey is using a comprehensive strategy coordinating every relevant state department or agency, from agriculture to transportation. Perhaps most noteworthy, the New Jersey Greenhouse Gas Registry facilitates intrastate crediting and trading of carbon dioxide emissions. The state expanded the registry in 1998 through a formal agreement with the Netherlands, sanctioning emission trading projects between an American state and a European nation. More recently, the state is trying to link more flexible approval of industrial permits with corporate pledges to reduce greenhouse gases.

Standards for New Plants: Oregon

Oregon has undertaken a decade-long search for ways of reducing its contributions to global warming. Its most important action derives from a series of laws signed by Democratic Governor John Kitzhaber establishing a formal standard for carbon dioxide releases from new electric power plants. Oregon has received many proposals for new facilities, particularly small- to moderate-sized plants that burn the most benign fossil fuel, natural gas. The new standard requires that carbon emissions from any new power plant proposed for operation in Oregon must be at least 17 percent below those of the most efficient natural gas-fired plant now operating in the United States. Proposed plants may meet this standard either by developing more efficient technologies or by purchasing carbon dioxide offsets through the Oregon Climate Trust, which is empowered to pursue carbon dioxide mitigation projects. Initial Climate Trust projects include solar rural electrification, geothermal heating, reforestation, and methane reuse from coal mines and sewage treatment plants.

Standards for Established Plants: Massachusetts

Whereas Oregon has concentrated on new energy facilities, Massachusetts has focused on some of its most established—and significant—greenhouse gas sources. In April 2001, Republican Governor Jane Swift issued regulations that establish carbon dioxide caps for six power plants that collectively produce 40 percent of the state’s electricity. Each must reduce its carbon dioxide releases 10 percent below late 1990 levels by 2004-06. Options for attaining compliance include changing fuel or generating technologies, swapping carbon dioxide reduction credits with other plants in the state, or investing in off-system reductions. Several other states, including Illinois, New Hampshire, and New York, have been actively considering their own versions of this approach.

Looking Ahead

It is possible that the federal government will soon shift gears on climate change, developing a comprehensive and creative policy. It is also possible that the Chicago Cubs will reverse a near-century of futility and win the next World Series. Neither prospect seems plausible.

In the meantime the United States would be well advised to build on the best practices emerging at the state level. Congress and the executive could begin by requiring annual reporting on greenhouse gas releases and establishing formal metrics for banking and trading projects. They might also follow the lead of Massachusetts and its counterparts, expanding the “multipollutant” definition to include greenhouse gases and emulating the most promising state reduction strategies.

It might also be desirable to link the climate change question with the question of how to divide federal and state responsibilities for environmental and energy policy. Although virtually every study on the “future of environmental policy” since the first Earth Day in 1970 has recommended finding more rational ways to allocate these responsibilities, the old hodge-podge of intergovernmental duties and tensions persists.

The Clinton administration attempted some decentralization by offering to negotiate National Environmental Performance Partnership agreements with states. The goal was to spur more innovation and measurable performance improvements by offering states greater flexibility in regulatory compliance and in spending federal grant dollars. More than 40 states participated in some fashion, although it is not clear that they or the federal government have yet devoted much energy or creativity to this process.

The Bush administration could take this tool and invite states, individually or regionally, to outline a more state-based approach to climate change policy. It could challenge groups such as the National Governors Association, Environmental Council of the States, and National Association of State Energy Officials to weave a state-based strategy on greenhouse gas reductions into a larger compact on regulatory federalism. As long as performance measures were established—and goals attained—states could receive far more latitude than under traditional regulation. They could actively engage in interstate emissions trading, possibly making expanded use of interstate compacts or even state-to-nation trading as is now being examined between New Jersey and the Netherlands as well as a cluster of New England states and Maritime provinces.

Such a devolution of leadership would, in effect, reflect the policy reality of the past decade. Tapping into the experience of the states in setting realistic climate change policy—while recognizing its current limits—might finally move us beyond the fractious debate of the past decade.