Environmental Federalism:
State Activism on Cleaning the Air
May 13, 2003
Transcript prepared from a tape recording
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.
On May 13, an AEI panel reviewed state activities on such issues as 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.
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Barry Rabe, University of Michigan |
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Robert Gasaway, Kirkland & Ellis
Marlo Lewis, Competitive Enterprise Institute |
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Christopher Schroeder, Duke Law School |
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Michael S. Greve, AEI Federalism Project |
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Proceedings:
MICHAEL GREVE: Good afternoon. I feel extremely intimidated, not just by the panelists but by the audience. Among all the people in the room, I'm the person who knows least about our topic. So I'll keep my comments to a minimum and take copious notes.
The spur for this panel was an observation that I had just as an interested layman on environmental issues. The standard conservative/libertarian critique of environmental policy and regulation was that it was too centralized, too much top-down regulation. The American Enterprise Institute has propagated views along those lines. One of our books is called "Using Federalism to Improve Environmental Policy." And, a year and a half ago, the AEI Federalism Project published a paper by Jonathan Adler, which is called "Let Fifty Flowers Bloom: Transforming the States into Laboratories of Environmental Policy."
I think it's fair to say that that is no longer the standard view, or at least not the unmodified view, in the circles wherein I travel. Indeed, today you'll hear from Marlo Lewis-one of the panelists, and a colleague of Jon Adler's in a former life-the hard-core libertarian case for government centralization.
[Laughter.]
MICHAEL GREVE: We have assembled a panel of very knowledgeable observers, commentators, and participants in environmental debates, especially air pollution. I'm very grateful to all of the participants, especially our out-of-town guests. I'll introduce the speakers in the order in which they'll appear.
Barry Rabe is a professor of environmental policy at the University of Michigan School of Natural Resources. He has written widely on environmental and air pollution issues. His recent publications include "Greenhouse and Statehouse: The Evolving State Government Role in Climate Change," to be published Brookings later this year. A short version of that work is still available at the Pew Center's website.
Rob Gasaway is a partner at Kirkland & Ellis here in Washington, D.C., where he represents polluters-
[Laughter.]
MICHAEL GREVE: -of various descriptions, including General Motors, the Alliance of Automobile Manufacturers, and the United States Chamber of Commerce. Rob is a very active, energetic, and perceptive critic and observer of environmental policy.
Marlo Lewis is a senior fellow in environmental policy at the Competitive Enterprise Institute where he works on global warming, energy, and air quality issues. Prior to joining CEI, he worked for the Reason Foundation and in the House of Representatives as staff director of David McIntosh's regulatory affairs subcommittee.
Chris Schroeder is the Charles Murphy Professor of Law and Public Policy Studies at Duke Law School, Duke University School of Law, one of the nation's leading experts on environmental policy. He's the co-author of an environmental law case book, "Environmental Regulation Law, Science, and Policy.
BARRY RABE: My interest in recent years has been looking at the role of state governments in developing policies to reduce greenhouse gases, which I think has potentially substantial ramifications both for the future development of U.S. greenhouse gas policy and the future of environmental federalism. My work responds in some respects to some of the intriguing work that Michael [Greve] has done on competitive federalism. It raises the question, how serious are we about decentralization-not just letting states mix it up and experiment as kind of a warm-up act (with the presumption that the Federal Government will ultimately make the final decisions through preemption or other strategies), but possibly taking center stage in policy design and implementation?
I began to work on this issue in 1999 when there was still some likelihood or some possibility that the U.S. would have discussions on Kyoto ratification. The first time I talked about the possible role of states in climate change, I was cut off about five minutes into my remarks by a very distinguished environmental economist, who said that there's no way that a state government, acting rationally, would unilaterally reduce its greenhouse gases unless there were direct marching orders from an international regime or a national government authority. End of discussion.
I was knocked off my research project for about a year and a half because I took an administrative appointment. When I came back January of last year, I felt a bit like Rip Van Winkle. We had gone from a very small subset of policies to a set of policies that was diversifying and growing by the day-dozens of state-specific policies, and remarkably little serious analysis by journalists or scholars. By the time California passed its controversial auto emission standards for CO2 last summer, which did get a lot of attention, many accounts said that for the first time an American state has chosen to reduce greenhouse gases. That's just not the case. (We’ll be talking about the California experience and some other state initiatives that are designed not so much for intrastate reduction but to force federal action. I would put those in a somewhat different category than the state policies that I will address.) But what exactly are these policies trying to do? I will give you a few examples but I begin with a discussion of scale.
When the European Union entered into the Kyoto negotiations, it operated very much like a federated system, with different nation states in the EU having different levels of pledged reductions, operating under a bubble with a presumption of lots of emissions trading, flexible credits, and the like. The U.S. stance at Kyoto, though, and much of the discussion and writing about American greenhouse gas reductions, has addressed the U.S. as if it was a unitary system of government, not recognizing significant state-by-state differences.
There are some interesting issues of scale here. If all 50 states were to secede, to declare sovereignty-I'm not recommending that as a model for the Federalism Project-25 of the states would rank in the top 60 nations in terms of greenhouse gases. It was popular a few weeks ago in the White House exercise room to wear T-shirts that said: "Texas-it's bigger than France." That's true when it comes to greenhouse gases. In fact, Texas emits more greenhouse gases than the United Kingdom. Texas would rank sixth in the world. California, Illinois, Pennsylvania, and a number of large industrialized states eclipse many of the nations that are major sources of greenhouse gases. So we're not talking about small contributions to the overall problem.
So what are the states’ policies?
One is renewable energy. In 1999, one state ranked dead last among all 50 states in the percentage of electricity it derived from renewable sources--wind, solar, geothermal, and the like. As part of its electricity restructuring legislation (an aggressive program to sample and test what the public wanted in terms of the next generation of electricity), the state established a mechanism to steadily increase the amount of electricity from renewable sources-a renewable portfolio standard with lots of flexibility and opportunities for credit trading. The state has experienced huge growth in the last four years in the amount of electricity derived from renewables, so much so that it is now likely to reach a 4-percent level of electricity from renewables by the end of the decade, given current implementation plans.
The state is Texas. The law was signed by former Governor George Bush, who bragged about in the very latter stages of the 2000 campaign. Fifteen states have similar pieces of legislation. About 40 percent of the American population lives in a state that has a renewable portfolio standard.
Another area of state greenhouse gas policy is information disclosure. That matters especially given the ubiquity and diversity of greenhouse gas sources and substances, and because of a possible link to different kinds of regulatory innovation. Ten years ago, another large greenhouse gas state mandated disclosure of CO2 and extension of its TRI [Toxic Release Inventory] process. On an annual basis, once you surpass a threshold of emissions in that particular state, you have to report to the state government. Interestingly, the number of reporting firms now greatly exceeds those who are under the mandate. Many firms volunteer their emissions data on an annual basis, giving the state an incredible longitudinal database, to begin to look at registries, voluntary action, and negotiated compacts with large industries, including utilities, about how to enter greenhouse gases into the larger equation with conventional pollutants. That state is Wisconsin. The legislation was endorsed by former Governor Thompson, now the Secretary of HHS.
A third example. Another state more than five years ago made a formal pledge through an executive order-an administrative order-to reduce its greenhouse gases 3.5 percent below the 1990 level by 2005, basically halfway to Kyoto. As of the last year, the state was ahead of its schedule and thinking about raising the bar. This involved formal covenants-voluntary and binding in some instances-with utilities, industries, small firms, small manufacturers, universities, religious denominations, cutting across the religious landscape. It also involved aggressive capping of methane releases from solid waste landfills, aggressive pursuit of renewable energy policy (very much along the lines of Texas), and extensive discussions with international governments-the Netherlands, Canada-about common strategies. That policy was implemented in New Jersey. It was endorsed by former Governor Whitman, now the head of the Environmental Protection Agency.
A final case illustration involves regional collaboration. In the last three years, a cluster of six states and five Canadian provinces--New England, Quebec, and the four Maritimes--entered into formal agreements to set common greenhouse gas reduction goals and begin to develop common strategies for achieving them-sort of a Rio and beyond. The irony here is that Canada has now ratified the Kyoto Protocol. But one day after Prime Minister Chretien last fall announced at Johannesburg that he would, in fact, pursue ratification and got tremendous support from the environmental community for doing so, he made clear that all bets were off and everything was predicated on the assumption that Canada could rely heavily on clean energy credits that it would derive from trade with the United States. There's active North-South diplomacy-national, but especially subnational-so much so that you have a number of formal negotiations underway between states and provinces, which raises all kinds of interesting political and constitutional issues.
What explains the adoption of those policies? For the most part, these bundles of policies have had a fairly bipartisan basis of support-a mixture of Republican, Democratic, Independent support, and not a lot of controversy surrounding enactment. Many of the ideas are being generated by state agencies. Interestingly, in some cases, the strongest opposition is coming from environmental advocacy groups, especially those that are opposed to emissions credit trading, which is heavily woven into many state policies. There's a link in many states to larger economic development concerns-long-term supply of electricity, economic development issues, tourism, the insurance industry. Very interesting coalitions come together on these issues, and in many respects, they build on powers that states already have for dealing with electricity regulation and restructuring, and the issuance of permits under the Clean Air Act and other federal laws, where we know that there's enormous variation state by state, region by region.
States have had experience now in emissions trading and credits in a number of areas, not just clean air but also wetlands and other areas. The states are extending these ideas to energy and other issues related to greenhouse gases. They have also taken advantage of some of the experience that they had in the 1990s: Project XL, the National Environmental Performance Track, and other instances where some states actually were asked, if you could reinvent the wheel, how would you do it?
Having interviewed more than 100 officials at the state level, I was struck by how commonly people at the state level see themselves as filling a void, not just on greenhouse gases but on related areas where they doubt there will be new federal legislation. At the state level, these are real people who implement real policy and who take the Federal Government less and less seriously. They are less and less likely to read federal legislation, or to respond to federal legislation.
We are left with some really interesting questions. First, some state policies are clearly interstate in nature, designed to force federal action. (We'll be talking about some of the actions of the state attorneys general, for example.) But the types of activities I have discussed are a little different, and they add up to a fairly substantial body of policies. This does raise the question, how serious are we about the devolution that we so often talk about?
Virtually every major study of federalism-regulatory federalism, environmental federalism-in the last ten years endorses devolution. I taught a graduate seminar a couple of years ago and had my students read all of those studies. The reaction was: Devolution is interesting. These studies all say the same thing. But they're very vague on how to implement devolution and how to rearrange the balance of federal versus state power.
What does this mean in terms of the bottom-up approach that we often talk about but have a hard time putting into concrete terms? If clusters of states, the Environmental Council of the States, or the National Association of Energy Officials were to design a bottom-up system of air pollution control or energy regulation or a national cap-and-trade program, how would we respond? Would we accept it? Would we engage it? Or would we dismiss it as a usurpation of federal authority?
If we went back to some of the experiments of the 1990s and said that we know there are enormous inefficiencies in the command-and-control, medium-based system; and we said to individual states and individual firms, we're prepared to trade a lot of flexibility to eliminate a lot of the nonsense of medium-specific permits in exchange for an aggressive pursuit of phantom emissions, pollution prevention, cross-media transfers, and greenhouse gas reductions-would we be willing to entertain that proposal seriously and to allow that level of state-by-state or region-by-region flexibility? For that matter, if states wanted to work collaboratively on a regional basis or with their Canadian partners, would we accept that as a reasonable next step?
Clearly, there are no easy answers to these questions. But the real challenge for the next generation of those who study environmental federalism is not just to wax eloquent on behalf of devolution as a good idea, but to consider what it might actually entail. One central question is getting a lot of attention and concern by states: Are our policies ultimately going to get wiped away because of a desire to centralize or re-centralize and to develop federal preemption strategies? In other words, are the states wasting their time?
ROBERT GASAWAY: On behalf of polluters and other businesses, I will make a couple of points.
First, federalism obviously is not something that businesses are only concerned about in an environmental context. Within the last year, my firm has filed comments to federal agencies about federalism involving telecommunications, pharmaceuticals, and regulatory accounting. Federalism is a pervasive problem, as Barry suggests, throughout a whole panoply of policy activities.
Second, and most important, businesses have an advantage over either advocacy groups or even law professors in coming up with solutions to federalism problems. The dean of the federalism bar here in Washington is our [Kirkland & Ellis] partner, Ed Warren, who almost invented litigation under the Clean Air Act. He started his practice about the time the Clean Air Act was passed, and his substantive axiom of environmental practice is, "Align your client-meaning, inevitably, a business client-with the public interest." You cannot win an environmental law case unless you are arguing on behalf of the public interest. This axiom has two components. One, convince the court that what's in your client's interest is in the public interest. Two, align the substantive position of the business community with what is really in the public interest.
As I see federalism arguments playing out again and again, I hear my fellow business lawyers say: Let's admit it, we're unprincipled. Unlike the academics who favor federalism and devolution, and unlike the centralists, we're unprincipled. We like federalism sometimes and we don't like it sometimes. But if we are unprincipled, John Marshall was unprincipled and the Founders were unprincipled. Our government isn't a centralized government, and it's not a confederacy. If you peel back the layers and examine the instances in which the business community generally likes federalism and the instances in which it generally likes national regulation, business interests really are aligned with the public interest in many, many circumstances.
Barry's piece is a very interesting, well-thought-out, bird's-eye view of federalism policies that I would react favorably to and that businesses would react favorably to. But while all of these policies, if taken individually, seem to make some sense, I still sense that there could be a risk here. For businesses, there is a fourfold risk. Business is afraid of duplicative, extraterritorial, unlawful, and undemocratic actions.
Duplication: Of course, businesses have to always comply with separate regulations in every state. They have to comply with state property law, and they expect to do that. But I just talked to one polluting business firm that is subject to 37 different disclosure requirements. Now, ordinarily, we think disclosure is a great thing because it's more information, and more information is better. But if disclosure is a predicate to action or to evaluation-either evaluation of the management within a company or evaluation across companies-multiple disclosure requirements become problematic. In part, accounting scandals arise from multiple, different accounting of the financial condition of the firm.
Extraterritoriality can be viewed as a subset of duplicative regulation. (Obviously if somebody is regulating in an extraterritorial manner, they're regulating something that somebody else is already regulating.) The most prominent instance now in the courts is California's Holocaust Victims Insurance Relief Act, recently argued before the Supreme Court [Insurance Association v. Garamendi]. We don't know how it's going to come out. The brief by Ken Geller of Mayer Brown (who often represents businesses) describes the statute as extraterritorial regulation in four different ways. One, the act intrudes on the President's foreign diplomacy power. This is extraterritorial regulation, and Germany and Switzerland are going to get mad. Two, the act violates the one-voice doctrine of the Foreign Commerce Clause. Three, the act violates the extraterritoriality prong of the Commerce Clause. Four, under the Due Process Clause, there are no minimum contacts with Germany and Switzerland, and so again the statute is extraterritorial.
In the environmental and other contexts, entrepreneurial state policies look good in federalism theory: we want laboratories of democracy. The problem arises when California regulates a German insurer selling to a German citizen a life insurance policy in Germany that could not be performed on because the German Third Reich.
Lawfulness: State action is sovereign action. The perception of the business community is that sovereign actions can often lead into sovereign litigation, pressing unlawful legal theories. Here at AEI we've talked a lot about the New Source Review Program, which a lot of lawyers thought was against the spirit of the Clean Air Act. Likewise, the tobacco litigation was obviously problematic from a legal standpoint. But in terms of moving the policy debate, unlawful action has had effects on the policy debate. In short, policy entrepreneurialism implies not only sovereign states involved in things they shouldn't be involved in; it often entails bringing sovereign litigation.
Democracy: My worries go to Barry's point about different groupings of states and provinces. I cut my teeth in environmental litigation with the so-called Ozone Transport Commission almost ten years ago. The OTC’s statutory authority was reduced through litigation that challenged it on a number of constitutional dimensions. John Paul Woodley argued that case in the D.C. Circuit [Virginia v. EPA, revised], and ultimately the Ozone Transport Commission lost a lot of its power. But what was most striking to people who actually went to OTC meetings and saw it in operation was how absolutely undemocratic it was. When states get together with their EPA directors and try to set regional policy, too often the undeclared objective is to cut the state legislatures out of the picture and to have EPA directors-who were appointed-get together and make extraordinarily important policy decisions for extraordinarily important sectors of the economy (motor vehicles, energy, electric power) without much oversight.
The two types of state officials that I deal with most are state attorneys general (I've represented attorneys general, have litigated against them, and have worked alongside them) and state EPA directors. I cannot think of a single instance in which a state attorney general went and ran for state attorney general and won in another state. This just doesn't happen because those are elective offices. But EPA directors are appointed. Because environmental policy has a technical aspect-both in the scientific dimension and in the legal dimension-some of the most powerful members of any cabinet of any state are eligible to hop from state to state to state. In many cases, somebody will be environmental director in Massachusetts one day and the next day in Florida, a state with a very different environmental composition or outlook. So I do fear combinations of states on global warming or other issues.
As for the judiciary, the doctrines on extraterritorial legislation and anti-democratic state groupings are just not working properly. And I'll even give a diagnosis to that. One of the main doctrines is the minimum contacts doctrine for extraterritoriality. (In the national context, this is the main doctrine.) Obviously, "minimum contacts" are a quantitative judgment. As Justice Scalia said, every curbstone philosopher knows that everything is related to everything else. So everything contacts everything else and the question is one of degree. No test that I know-in the run-of-the-mill cases-tells us whether a given subject is something that Virginia should be legislating or something that Maryland should be legislating. So courts confront an enormous challenge, quite apart from the international dimensions of the problem. If we devolve authority to the states, we're not going to devolve authority to one state; we're going to devolve it to a number of states. Our doctrine isn't ready to handle that.
The international dimension also presents enormous problems, because the judicial doctrines that are most protective of the foreign relations power of the President are structural doctrines-the dormant Foreign Commerce Clause, the foreign relations power. Interestingly, the Justices who are most solicitous of the unitary executive also tend to be the most suspicious of structural constitutional interpretation. For example, how would Justice Scalia come out in (hypothetical) dormant Foreign Commerce Clause cases involving global warming? Would he protect a unitary executive? Or would he say, I don't like the dormant Domestic Commerce Clause, I really don't like the dormant Foreign Commerce Clause, and I don't like squishy theories of preemption by foreign relations? There haven't been a lot of cases. But if the trend towards state activism continues, cases will come up. We'll see which of those two intuitions play out.
A final note on the states. One of the things that makes Barry's paper and the programs that he describes so attractive is the cases of cross-benefits. In many instances, the political coalitions that Barry described involve significant greenhouse gas benefits, but the programs weren't billed as such. Nebraska is doing things which in a former day might be described as soil conservation, but they have greenhouse components. Minnesota has the ReLeaf Program, which might be described as forestry or forest conservation. Atlanta has transportation management to prevent gridlock. Texas wants to develop its energy sector and become a net exporter of energy. That could be described as economic development.
A common intuition is that we will not wipe out state authority over anything that affects global warming because we have seen all of the programs in which global warming issues and other policy issues are intertwined. On the other hand, programs that are strictly directed at global warming-such as the very aggressive California Motor Vehicle Program-seem to involve state governments in the business, like California is, of managing the Kyoto process, just like they're in the business of trying to get insurance relief for Holocaust victims.
Devolution does not mean things are taken off the federal agenda and added to the state agenda. It means co-ownership of almost all policy issues. Once the states own global warming policy just like the Federal Government owns global warming policy, the criticism that the government can no longer serve its core mission will also apply to the state governments. The states are worried about tobacco. They're worried about Holocaust relief. They're worried about global warming. But, what about the schools in California? Are the schools in each and every locality in such fine shape that no initiatives need to be taken there, or in other matters that state and local government have traditionally made their number one concern?
MARLO LEWIS: While I tremble to disappoint Michael Greve, my intent is not to present the hard-core libertarian case for centralization. I will, however, explain why we should learn to love the Clean Air Act. The Clean Air Act is a very expansive set of authorities, providing a great deal of discretion as to what the administrator of EPA and the various branches of EPA may do. But it is also a carefully structured statute, which limits federal authority and actually provides a very significant legal barrier to Kyoto-type policies at the federal level. Nonetheless, seven state attorneys general are attempting to force Administrator Whitman's hand and make her begin implementing Kyoto through the Clean Air Act.
Barry described how states are adopting Kyoto-type policies, creating, if you will, mini-Kyoto regimes. In some cases, this is a deliberate strategy: if you get enough Kyoto-style policies in effect in enough states, that will influence federal policy, in part because businesses will start kicking and screaming that they can't live with a regulatory patchwork and a crazy quilt of conflicting regulations; that they need the Federal Government to step in and harmonize. Also, congressional delegations will be more likely to push for Kyoto-style policies at the federal level if their corresponding governors and legislatures have embraced such policies at the state level.
In recent months, we've seen two notices (dated January 30 and February 20) of intent to sue EPA Administrator Whitman unless she agrees to begin regulating carbon dioxide under the Clean Air Act. They claim that she has a mandatory duty to regulate and that a failure to do so would be a violation of the act. Underneath all kinds of sophisticated arguments, the notices presume that the Clean Air Act compels the EPA, in effect, to implement a non-ratified treaty. On its face, this is nonsense. Far from it being EPA's duty to regulate CO2 under the Clean Air Act, it has no authority to do that. And you can see that by examining the plain language, the structure, and the legislative history of the Clean Air Act.
Last year, July 17th, 11 state attorneys general wrote to President Bush and basically threatened to Balkanize U.S. energy markets unless the national government adopted uniform controls on carbon dioxide. They also made reference to possible litigation if the Federal Government failed to take action. To fill what they call a federal "regulatory void," the AGs threatened action, both through legislation and litigation. A few months later, three of the state attorneys general filed a notice of intent to sue Administrator Whitman unless she agreed to begin the process setting a NAAQS for carbon dioxide, under Section 108 of the Clean Air Act. They wanted her to list CO2 as a pollutant that endangers public health and to establish CO2 as a criteria pollutant, to be regulated by means of setting a national ambient air quality standard. One month later, the three AGs, joined by four other AGs, filed another notice of intent to sue, this time under Section 111 of the Clean Air Act (the New Source Performance Standards Program), saying that Whitman had a mandatory duty to establish new source performance standards, emission rate standards for CO2 emissions from power plants.
These arguments go back to the Clinton administration, when two general counsels at EPA, Gary Guzy and Jonathan Cannon, made nearly identical arguments. The state attorneys general referenced those arguments heavily. But they never get to the core question of congressional intent. When Congress enacted the Clean Air Act (and when it amended it), did it ever intend to authorize EPA to regulate CO2 and to administer a greenhouse gas control program? This delegation question is paramount. If you're going to make the case that Whitman has a duty to regulate CO2, you have to show a valid delegation of legislative power from Congress to the EPA. The attorneys general haven't done that.
The Clean Air Act is a carefully structured statute. Its specific titles embody specific grants of authority for specific objectives and purposes-a National Ambient Air Quality Standards program, a Hazardous Air Pollutant Program, a Stratospheric Ozone Protection program, an Acid Deposition Control program. Nowhere, however, is there a greenhouse gas control program. Nowhere is there a climate protection program. There's no subchapter, section, or even subsection on global climate change. The terms "greenhouse gases" and "greenhouse effect" don't occur in the Clean Air Act.
The authority to regulate CO2 is conspicuously absent from the Clean Air Act. Global warming is the 800-pound gorilla of environmental issues. If any federal law were meant to address it in any way, shape, or form involving regulation, you would expect to find it in the Clean Air Act. But you don't. Also, if Congress had intended for EPA to do what the state attorneys general are asking EPA to do, we would expect to find some key terms like "carbon dioxide" or "global warming" in the regulatory provisions of the Clean Air Act. They don't appear there. When Congress wants EPA to regulate something, however, it has no trouble naming names and building lists. The Hazardous Air Pollutant program, for example, specifically lists 189 toxic for EPA control.
The terms "carbon dioxide" and "global warming" appear only once in the Clean Air Act-in non-regulatory provisions. As the Supreme Court has said, though, when Congress includes particular language in one section of a statute but omits it in another section of the same act, it is generally presumed that Congress acts "intentionally and purposely in the disparate inclusion or exclusion." CO2 is emitted in greater quantities than all the other, regulated substances combined. CO2’s potential greenhouse effect has been known since the 19th century, and Congress has been examining this issue since the late 1970s. One can conclude that the exclusion of CO2 from the regulatory provisions was intentional and purposeful.
What exactly, then, is the basis of the AGs argument? They rely on what the Supreme Court has sometimes dismissively referred to as "definitional possibilities": You take certain words out of context, see what possible meanings they may have in a dictionary, and construct a statutory meaning. (In Brown v. Williamson, the FDA made a very similar argument from definitional possibilities; the Supreme Court shot it down.) Basically, the AGs say the Clean Air Act defines a pollutant as anything emitted into the air. CO2 is emitted into the air, and, in fact, in Section 103(g), it is even called an air pollutant. Then Sections 108 and 111 require the EPA to list a pollutant for regulatory action if the administrator determines that it may endanger public health and safety. The Bush administration’s Climate Action Report 2002 predicts the end of the world from greenhouse gas emissions, and EPA contributed to that report. Consequently, EPA has made a determination that CO2 emissions endanger public health and safety. Therefore, Administrator Whitman must initiate a rulemaking.
This, though, is nothing more than a sophomoric game of "gotcha." Nothing in the definitional possibilities adds up to what the AGs think it adds up to. The fact that CO2 is an air pollutant-in the technical sense as something emitted into the air-in no way demonstrates a delegation of authority to regulate it. Oxygen and water vapor, insofar as they are released by human activity, fit the same definition. In fact, the section cited by the AGs, 103(g), warns against inferring regulatory authority from the use therein of the term "pollutant." (It says that "nothing in this subsection shall be construed to authorize the imposition on any person of air pollution control requirements.") The passing reference to CO2 as an air pollutant cannot provide a basis for regulation.
Similarly, the AGs’ attempt to tease definitional possibilities out of the phrase "endanger public health and welfare" proves too expansive. The same is true of a whole bunch of other substances that EPA could not regulate under Sections 108 and 111. These include hazardous air pollutants and ozone-depleting substances.
On another issue, hotly debated in the 106th Congress, the AGs’ position on has been torn to shreds by Peter Glaser, in a wonderful brief for the National Mining Association. The three AGs from Connecticut, Massachusetts, and Maine say that Whitman has a duty to establish a NAAQS for CO2. But there is a complete lack of fit between the NAAQS program and global atmospheric issues like ozone depletion or global warming. The NAAQS program was set up to address pollutants that vary regionally and even locally in their concentrations. Ambient air is decisively affected both by where pollution occurs and by where pollution control measures are taken. The opposite is true of the greenhouse effect or CO2's purported enhancement of the greenhouse effect: CO2 is a global gas that is well mixed throughout the atmosphere.
A NAAQS for CO2 would produce absurd consequences. There are basically three possibilities. You can either set a NAAQS for CO2 at current atmospheric concentrations; above; or below. Above current levels, the entire country would be in attainment. For the first time ever, America would be a gigantic attainment area. Even if our hydrocarbon consumption suddenly doubled, that would not make enough of a difference in global concentrations to bring the world above the standard. If the NAAQS were set below current ambient concentrations, then all of America would be out of attainment-even if we were to shut down every car factory and power plant. Finally, if the NAAQS were set exactly at current concentrations, we would be in attainment, but only temporarily. As soon as global concentrations ratcheted up even 1 percent, we'd be out of attainment-even if our emissions miraculously fell to zero. As the Supreme Court has said, though, when certain words in a statute lead to results that are absurd or futile or plainly at variance with the legislation as a whole, the Supreme Court follows the act's policy rather than the literal words.
Congress has repeatedly considered and either rejected or declined to adopt the kinds of measures the state AGs are claiming that EPA has a mandatory duty to implement. In the 1990 Clean Air Act amendment, a Senate version originally contained CO2 emission standards for automobiles. But the Senate declined to adopt it. There were other regulatory measures that the Senate did agree to, such as using global warming potential as a basis for regulating manufactured substances and a national goal to reduce CO2 emissions. But those proposals did not make it past the conference committee. The AGs don't have a leg to stand on. As the Supreme Court has stated, "Few principles of statutory construction are more compelling than the proposition that Congress does not intend by its silence to enact statutory language that it has earlier discarded in favor of other language."
So why are the state AGs, who have risen to the top of their professions in a tough, competitive industry, making such dumb arguments? One explanation is partisan politics. The AGs want to embarrass Bush. All seven are Democrats.
Regional economic warfare also has something to do with it. Coal's share of electricity is much smaller in the AGs' states on average than it is elsewhere. And so the AGs think that if they can make coal-fired electric power more costly, they'll gain a competitive advantage over other states. Most importantly, if EPA were to classify CO2 as a regulated pollutant, instantly tens of thousands of hitherto law-abiding and environmentally responsible businesses--in fact, all fossil fuel users--would become polluters. The number of firms potentially in violation of the CAA would vastly increase. And since states have primary responsibility in enforcing the Clean Air Act, the AGs' prosecutorial domain would grow by orders of magnitude.
I certainly hope that the Bush administration stands up to these lawsuits.
CHRISTOPHER SCHROEDER: I will try to situate the phenomenon of what you might call aggressive state environmental regulatory activity in the context of the intellectual debate over the political economy of environmental federalism, which has been going on for decades in one form or another.
Until recently, when attention has begun to focus on acts like state-level global warming policy or California's tougher-than-the-federal auto emission standards (and the interest in other states in adopting those tougher standards), or New Jersey's tougher-than-CERCLA laws on regulating land transfers, most of the attention with regard to the political economy of environmental federalism was focused on what was perceived to be the problem of states' being trapped in a race to the bottom. State regulatory action, if not undergirded by federal mandatory standards, would be driven down by a kind of prisoner's dilemma to very lax levels.
So the first chapter in the discussion about political economy of environmental federalism you might call "Federalism Is Bad.": state regulatory activity is bad because of the race to the bottom. If you look back at the legislative history and the debates around the Clean Air Act and the Clean Water Act, legislators and other people made this race-to-the-bottom argument. It was codified, if you will, in an important article that Richard Stewart wrote in the '70s called "Pyramids of Sacrifice," in which he laid out the critique of the dynamic that develops when states think they have to lower environmental standards in order to attract new industry or maintain the existing industrial base. Competition among states leads states collectively to a sub-optimal mix of economic growth or jobs and environmental quality. All states would be better off, the story goes, if they could agree to tougher levels of environmental standards in whatever your regulatory arena might happen to be. The most effective and efficient way to acquire that uniformity is to ask the Federal Government to do it because methods like interstate compacts have bargaining and negotiation costs. So Chapter 1, federalism is bad.
Chapter 2 is "Federalism Is Good." People around this table, like Michael [Greve], friends of Dick Stewart's like Richard Revesz, of NYU Law School, argued that the race-to-the-bottom idea is wrong. Actually, when states are allowed to set regulatory standards with more flexibility, they will be better able to match-in terms of welfare maximization for their own citizens-the mix of jobs and environmental quality that people want. Because the optimal mix varies from jurisdiction to jurisdiction, granting states or even lower levels of government flexibility and autonomy will, in fact, be welfare maximizing. And if you add that people can move around the country, over time people will gravitate towards those jurisdictions that have the mix that they prefer. So federalism is good. Chapter 2.
Chapter 3 is titled, "Who Is Right in That Debate?" It turns out, as it does with a lot of theoretical debates, that "it depends." It depends on empirical propositions. The most important one is this: What is the correct description of the incentive structure of elected officials-at the level of government you're talking about-with respect to these issues? What are officials bargaining for when they talk to industry? What are they trying to do in terms of maximizing their own agenda?
If state officials are interested in achieving the best jobs/environment mix from the point of view of the welfare of their citizens, then the competitive federalism, federalism-is-good story, is a plausible story. The theory may, in fact, be borne out in practice. Suppose, however, that politicians are interested in maximizing their own electoral advantage. They may see that it's quite likely that they will be punished by voters if they sit idly by when industry goes someplace else and the electorate sees that some other jurisdiction has offered some laxer environmental regulation. If that is what motivates officials’ behavior, then the race-to-the-bottom is a plausible story.
In the environmental literature since about the mid-'90s, the empirical debate is inconclusive on what's the best description of what state regulatory officials will do, when left to their own devices with respect to setting environmental standards. Of course, the laboratory here has been rigged because of pervasive federal regimes that set minimum standards. You can't have a lot of experimentation with lowering standards at the state level.
The latest chapter in the story about environmental federalism is the observation that now, a number of states are adopting policies that are tougher than the federal standards. Other states are moving into voids where no federal program exists, as in the global warming case. How does that phenomenon fit with the two models of behavior that were developed when the primary object of attention was a worry that states would sell out the environment if left to their own devices? Do we need a new theory? Is what's happening at the state level good or bad?
Either of the two basic theories of regulatory behavior-the race-to-the-bottom theory, which is predicated on a non-cooperative strategic game being played by the states against one another; or the competitive federalism, federalism-is-good story, which is a welfare maximization story-might explain the phenomenon. Instead of a race to the bottom, we could be viewing a race to the top: state regulators are, in fact, pursuing policies that are more environmentally protective than is optimal in terms of the right mix between jobs and the environment-because the basic incentive structure for them is still the same. Officials are worried about electoral advantage or disadvantage. But they believe that people will vote on environmental issues at the state level, and they are more concerned about losing votes because of appearing to be lenient or negligent on issues like hazardous waste in the groundwater or auto emissions that raise levels of asthma in city populations in their state than they are about job loss.
The empirical literature on the trade-off between these two commodities would give states leeway to race to the top. Everybody who has looked at the role that the stringency of environmental standards plays in industry location decisions concludes that it doesn't play much of a role. Quality of the labor force, level of unionization, closeness to natural resources, transportation, and closeness to the consumer population are much more important factors in industry location. So maybe we have a sub-optimal race to the top. But it could well be that the federalism-is-good story works for more stringent state-level regulation, too: it could be the case that the states with tougher environmental standards are states where the citizens of those states want to make that trade-off. They want the tougher standards. Their correct welfare mix of jobs and environmental standards is at the tougher end of the scale.
I haven't come up with any perfect way to test and resolve the empirical issue. One can observe, though, that the states that are developing aggressive, innovative, tougher-than-federal-standard programs in various problem areas tend to be the states in which the environmental voting record of congressional delegations is at the high end of the scale. (I’m talking about states like Vermont, Massachusetts, New Jersey, California. Texas is an interesting outlier because its delegation is pretty low on the list.) In other words, the states that are sending environmentally minded Members of Congress and Senators to the Congress are the states where one tends to see more of the aggressive attitude.
That may be consistent with the race-to-the-top story, but it also could be consistent with the competitive federalism, federalism-is-good story. Citizens of states may prefer more environmental protection for various reasons. Vermonters may prefer greater levels of environmental protection because they live in a pretty pristine state in lots of ways and they want to keep it that way. New Jerseyans know that they have a lot of problems and they are willing to invest a lot of money or resources in cleaning up those problems. No telling what the underlying motivation for this preference structure is. Still, allowing more aggressive state-level regulation-when told from the perspective of the federalism-is-good, competitive-federalism story-may be exactly what you would like if you were interested in welfare maximization.
One must add two complications of aggressive state regulation which weren't as prominent in the earlier chapters when we were concerned more about laxity. Both were mentioned by Rob [Gasaway]. One is the extraterritoriality problem, and the other is an externalities problem. The extraterritoriality problem is that one state or a collection of states, by virtue of their strategic position, may be able to leverage to the national level a policy that's only optimal for a state. The externalities problem is that a state may be able to prefer tougher environmental regulations because it can externalize a lot of the costs, or at least get lots of other people to share in the costs.
The duty-to-warn consumer products standards under Proposition 65 in California may be an externalities story-or actually a combination of extraterritoriality and externality. Since California is a big market, a manufacturer of ceramic ware may be inclined to change its product design in order to get the product below the California disclosure standard-to avoid the need for a "this is dangerous ceramic ware" label. The manufacturers might then decide to sell that same product throughout the country, so everybody gets the advantage or disadvantage of the product redesign.
Clearly, not all tough state policies pose an externality problem or an extraterritoriality problem. New Jersey's land transfer statute, which requires an investigation and a certification or remediation of industrial sites before they are bought and sold in the state, imposes a clean-up responsibility at the point of sale of real estate. As a result, sites are being cleaned up that would never be cleaned up under the Superfund program or even a state analog. Clearly, New Jersey experiences most of the cost of that imposition. It slows down land transactions in New Jersey. If anybody is affected, it's a company that's currently in New Jersey and another company that wants to be in New Jersey. It is hard to tell an undesirable externalities story about that kind of regulation. But other policies may be more vulnerable to that description where states pursue aggressive policies because they don't have to bear all the costs of those policies.
That is a classic problem in constitutional federalism. It has been around for a long time, and there is a constitutional way to handle it: federal legislation to preempt state laws; or-Justice Scalia notwithstanding-enforcement of the dormant Commerce in situations where there's enough discriminatory effect or purpose to trigger a viable legal claim under the dormant Commerce Clause. When aggressive state-level standards lead to federal responses, the constitutional structure is working the way it ought to work, the way it was designed to work, and the way it has worked in the context of other problems for as long as we have had a united economic market. Is that good or bad? It depends on what action the Federal Government takes in response to action-forcing measures at the state level. The question cannot be answered at the level of a priori theory. It depends on an analysis of the substantive result of federal action.
Aggressive state environmental policy raises a third and final problem-that of the entrepreneurial attorney general. Policymaking by attorneys general presents a problem at the level of democratic government. It is one thing if the State of California, through its Assembly and administrative structure and executive branch-the governor being given responsibility for administering programs-develops a tough program in some environmental area or another. I'm less certain that there's a solid democratic pedigree when the attorney general does the same through a litigation strategy. Those actions raise distinct problems, separate from federalism problems.
As to federalism problems, the picture requires a more finely grained analysis of specific cases, rather than a theoretical box and an unambiguous normative result that flows from the theory. Where you come down on the federalism questions depends on a set of empirical claims that have to be tested in reality.
Discussion:
BARRY RABE: The entrepreneurial attorney general issue is a very serious one. In most of the state policies that I describe, there's been no role for the attorneys general. I'm not sure that the heads of the state environmental agencies or the officials responsible for, say, Clean Air Act interpretation were consulted on these attorneys general's actions. In some respects, that supports [Robert Gasaway’s] suggestion, but it also points to a larger distinction or dichotomy in state government.
Chris [Schroeder] raised some very interesting points. But clearly, the kinds of policies that I'm looking at do have a fairly broad base of political support. They really do cut across partisan lines. We can talk about constituency base and so forth. But there is a meshing and a matching, and one of the things that may make this area interesting is this: whether it's race to the bottom or a race to the top, the lack of a federal infrastructure gives states a lot of latitude to design policy on their own. There are no minima; and, as Marlo pointed out, the Clean Air Act doesn't speak to the issue.
BOB HERSHEY [Consulting engineer]: To what extent can the attorneys’ general suits be ruled frivolous?
MARLO LEWIS: I don't think that that is likely. And although I think the cases rest on very deficient science, unfortunately the science came out of the very administration which is about to be sued.
What the administration will need to do at some point is to 'fess up that the Climate Action Report 2002, on which the AGs built their whole July 17th letter and half of their January 30th notice of intent to sue, is based on two worst-case climate models that could not reproduce past U.S. temperature trends better than a table of random numbers. (Pat Michaels, the Virginia State climatologist, discovered that fact and presented it to Thomas Karl at NOAA. Thomas Karl did a re-analysis of Michaels’ analysis and confirmed that it was exactly right.) A good case can be made that the scientific basis of the AGs' suit does not pass muster under the Federal Data Quality Act, which says that all federal information, especially major scientific reports, or anything that would support a rulemaking must meet a very high standard of objectivity and utility. In this case, even if you give the officials the benefit of the doubt, and don’t assume that they cherry-picked the models to get a pre-determined results, still, selecting those two models out of a possible 26 gave the whole Report an alarmist bias. So the Report is not objective. And since it can't replicate past U.S. temperatures better than a table of random numbers, it is useless for forecasting the future, so it has no utility.
In the case of the entrepreneurial state attorneys general, we actually have an anti-federalist campaign. The AGs are not content to let states be laboratories of greenhouse gas policy. They want a uniform national policy, and there’s a reason why they are so eager to harmonize Kyoto-style policy at the national level.
President Clinton-even though he favored the Kyoto Protocol in principle-never dared to submit it to the U.S. Senate. That is because his own Energy Information Administration said that it could cost the U.S. economy up to $338 billion a year without a totally robust emissions trading program. The National Center for Atmospheric Research found that Kyoto, fully implemented, would only avert 14 one-hundredths of a degree of global warming by 2100 if you assume the correctness of the underlying theory of global warming from CO2 emissions. In other words, we might spend $338 billion a year for a hypothetical reduction in global temperatures, which probably would be too small for anyone to detect and which certainly would not benefit people or the planet one whit.
Now, if the states were forced to take full responsibility for their own Kyoto-style programs, they would eventually arrive at a calculus very similar to President Clinton's. A study by the Heartland Institute calculates how much it will cost states, both specific states and on average, to go it alone-to try to meet the Kyoto target of 7 percent below 1990 levels within their borders. Because the opportunities for finding low-cost reductions is so much smaller on a state scale (even a state as big as California); because states would be forced much more than a national program would to rely on command and control measures; and because businesses and citizens who saw their state economies tank would be free to move out, state tax revenues would take phenomenal hits. The Heartland study suggests that the six states with the largest budget deficits would have revenue shortfalls greater than their current deficit if they seriously tried to implement Kyoto.
You can understand why Maine and its AG are all in favor of this. Maine has very little industry and little, if any, population growth. Reducing greenhouse gas emissions to the Kyoto level would not require a great deal of effort for Maine. But California would take an enormous hit. California's revenue loss, if it tried to do Kyoto by itself, would be something like $16 billion. And, California consumers would have to pay about $8 billion more in higher prices for goods and services.
If the Bush administration just says no to the state attorneys general and lets the states experiment on their own businesses and their own citizens, that will very quickly become prohibitively costly.
SANDY BOURNE [American Legislative Exchange Council]: Barry picked three states, with Republican governors who now serve in the Bush Administration. New Jersey’s OMET (Open Market Emissions Trading) program, though, has been brought to a halt, and New Jersey is going to come up with new regulations. Wisconsin is the home of PG&E, which has filed for bankruptcy. Texas is the home of Enron, which was investing in wind and which is no longer with us.
I find it fascinating that you brought up those three states and their programs as an argument for state activism. When we look at the costs across the country, the National Taxpayers Foundation estimates that utilities generate $86 billion in 1999 dollars in revenues to the states. In comparison, corporate income taxes in the states comes to $29.5 billion; motor fuel taxes, to $30 billion.
If you were to put into place some kind of carbon tax (which is what carbon dioxide legislation amounts to), where are the states-47 of which are in budget deficits right now-going to find the economic resources?
BARRY RABE: With regard to New Jersey, you're right, the McGreevey administration decided to eliminate OMET. But OMET was only a small piece of New Jersey’s policy. McGreevey has supported Whitman's approach to the covenant system and the renewable portfolio standard, and the social benefit charge under electricity restructuring is still in place. The aggressive pursuit of methane recapture and recovery, which is about 10 percent of the overall package, is still in place. All the voluntary as well as mandatory provisions are still in place-with the exception of the OMET provision, which was the emission trading system and the credit system, which had a lot of bogus elements to it. (That was part of the reason why the Netherlands backed out even before McGreevey took office.) The state is now looking at a whole series of disclosure policies, modeled after Wisconsin’s. True, OMET is gone and a couple of symbolic pieces have been pulled away. But it would be inaccurate to say that New Jersey has dismantled or pulled back its policies.
In the case of Texas, you are correct about the case of Enron. My report, however, describes all the new wind development that has come online since the 1999 legislation. It's a table as of February 2002, which I received from the state. Enron's name is not on it. It's much smaller entrepreneurs and smaller developers in West Texas. The projections suggest that Enron or not, a very active private entrepreneurial community is very interested in electricity in Texas. Of course, Texas is second only to North Dakota in North America in terms of potential for wind power.
Ironically, siting and NIMBY issues, as well as state cross-transfer because of the transmission grid, are the driving force in Texas. Given where Texas sits in the grid, it's very hard to import and export electricity. And so a driving force behind the legislation that Mr. Bush signed was the question of electricity independence.
Finally, Wisconsin. Your point with regard to the utility is absolutely right. A great frustration is that that utility went a long, long way under Project XL to looking at across-the-board reductions in greenhouse gases and in doing something equivalent to what New Jersey has been doing through its facility-wide permit program-putting the whole basket of emissions and policies together and promoting something much more flexible. That project was turned down by the regional office of EPA. Ironically, the person who now heads the New Jersey Department of Environmental Protection was central in that decision. Talk about backlash federalism.
With regard to the larger aspects of finances and state fiscal capacity, you're absolutely right. The states’ capacity to fund implementation or oversight is a very significant issue, which could have a chilling effect on further state activity. But at the same time, many of these are small programs. I wouldn't say that they're symbolic or incapable of achieving some level of greenhouse gas reduction. But I don't think the economic consequences are likely to be severe. If they were, if these really were mini-Kyoto regimes, they never would have been enacted. The states are aware of that, and they've been very careful for the most part in moving incrementally.
More generally, I think Kyoto is dead and has been for some time-not just in the United States, not just in North America, but internationally. Europe is not going to get to Kyoto targets, except for the easy cases (the U.K. with the dash to gas or the Ukraine). We're talking about a completely moved baseline, which international actors have not acknowledged. The U.S. to some extent has. We're well advised to look at a much more incremental process and path.
MICHAEL GREVE: What bothers me is this: What is now going on at the state level is not a result of a national sorting process such that we say, what is really national let Washington do; and what belongs at the state level, the states be more energetic.
Instead, New Jersey is signing a treaty with Holland-which I personally find mortifying, regardless of what's in the treaty. At the other end, there is no significant movement to recognize that what we're regulating under the Endangered Species Act or much of the Clean Water Act are local public goods, and that there's no reason in the theory of federalism or in the real world to regulate those issues at the national level. What you have, then, is continued federal micromanagement and a state reach into broader areas that, under any normal theory that I'm aware of, are national issues.
Is this far too theoretical a way to look at the problem, or should we worry about it? And if we are worried about it and there is a need for some kind of sorting, how would one go about it?
ROBERT GASAWAY: I have no idea.
[Laughter.]
ROBERT GASAWAY: I share the mortification, though. One of the most mortifying things to me about the pending Supreme Court case [Insurance Association v. Garamendi] is that it may well turn on briefs that were submitted to the United States Supreme Court by Germany and Switzerland in support of a deal that they negotiated with the United States executive branch. There were protracted negotiations, and the executive branch had an agreement with the European governments about how insurance victim compensation would be handled. That agreement was the position of the United States on what's good enough by way of regulating an issue that is, after all, centered in Europe. In order to deliver on that deal, though, the United States executive branch cannot take any action itself. It has to inform Germany and Switzerland of the possibility that states may disagree; and if they do, we-the executive branch-can't really solve the problem. We must go to the court, and it's going to be nip and tuck. You, Germany and Switzerland, will have to support us. Yes, the Solicitor General will participate, but you, Germany, must file a brief, and confirm that the states are really disrupting our external relations. What kind of credibility do we have, after all, at the Supreme Court? We need your validation.
The sorting process couldn't be more difficult because it is international to national and then national to local. The two problems are, one, doctrine and background rules by the United States Supreme Court that make no theoretical or practical sense; and, two, complete inactivity by the United States Congress. I don't know if you could ever get a political coalition together for good government to say, let's enable the states to sort out mine and thine, let's enable them to enact competitive federalism, and let's have a sorting that may not lead to good policy in year one-but in year five, good fences will make good neighbors.
The case for congressional action is that the Supreme Court can derive only a priori types of rules. Miranda was criticized because it created a bright-line rule that the Justices had no judicial power to issue. But you need a bright-line rule, even if it's wrong.
But in the federalism cases, in many contexts-whether you're talking about pharmaceuticals, telecommunications, chemicals, environmental policy, or air policy-I don't know if you can derive an a priori set of rules for distinguishing what one state should do and the other state should do. You need rough-and-ready rules of the type that only Congress can provide. I would put on our law school professors’ or political scientists’ agenda the question of how Congress could, as a practical matter, get into the act of not only improving policy but of improving the background rules and the playing field for policy.
CHRISTOPHER SCHROEDER: One reason for activism at the state level is that Congress and the Executive currently don't have any way of going at these problems. They're paralyzed-a closely divided House, a closely divided Senate, unified government but not if you count the Senate filibuster, and for most of the past 40 years, divided government.
It's hard to lay down basic operating principles in that kind of environment. In fact, we haven't opened the Pandora's box of most of our major environmental legislation in since the 1990 amendments to the Clean Air Act. (True, we've tinkered with CERCLA, and because of litigation we enacted the Food Quality Protection Act.)
Outside shocks to the system these days are the only ways to get an environmental item on the national agenda. If your interest is just kicking the issue around for political purposes and having food fights every so often on the floor and in committees but never expecting to get anything done, then the status quo is a good place to be. But if you think the science is better on climate change than several speakers have led us to believe; and if you think that the appropriate level for that problem is not, in fact, the national level, but the international level; then, states that are trying to force the issue onto the national stage-so that the national stage will then force it onto the international stage-aren't anti-federalist at all. They are trying to work the system to get the right level of government to pay attention. I don't think all is doom and gloom-treaties with Holland notwithstanding, which bother me, too.
BARRY RABE: I don't think that there's a great deal of effort by states to enter into formalized agreements with other nations. The case of New Jersey represents almost two decades of shuttle diplomacy between environmental officials in those jurisdictions and a number of technology exchanges and information exchanges. A lot of what is now New Jersey environmental policy draws heavily both in its language and its substance on ideas that were generated in that process. But there clearly are limits, and the State Department has in some instances become involved and looked over the shoulders of the participants.
We’re much more likely to see a lot of activity of a sort that could raise other kinds of constitutional questions-involving states and provinces. The NAFTA accords open up a number of avenues of free trade that really don't touch energy very effectively. States and provinces are aware of that and see the possibility for significant North-to-South energy flows, just as Vice President Cheney met very quickly with Alberta premier Klein shortly after the introduction of the Bush energy policy. You also have a very strong history of shuttle diplomacy between provincial capitals and state capitals. Ontario and Quebec are now signatories to the Great Lakes Commission, which was created through an Interstate Compact arrangement over 50 years ago, the International Joint Commission established under the 1909 Boundary Waters Treaty.
Similarly, New England governors and Eastern Canadian premiers have cooperated for over 30 years. The energy and environment ministers and a whole series of other officials meet on a regular basis. As to whether or not their agreements pose constitutional problems, I defer to my legal colleagues.
JONATHAN ADLER: Two comments. First, entrepreneurial state AGs now engage in environmental litigation that is contrary to the stated policies of the governors on environmental matters. For example, in the context of new source review, the National Governors Association adopted a unanimous resolution calling for reform. ECOS [Environmental Council of the States] adopted a resolution calling for reform. And yet several state AGs are suing to challenge reforms proposed by the administration-not necessarily on the grounds that EPA is adopting the wrong reforms, but (at least based on the statements of some of the AGs) because any reform is being proposed at all. That adds to the concern about the way state AGs operate in this context.
Second, states can certainly force things that should be dealt with nationally, to the national level. The history of automobile emission standards is a good example: when California adopted automobile emission standards, and other states looked like they were going to follow suit, that prompted in part the adoption of federal standards by Congress.
But this dynamic seems to operate only as a one-way ratchet. It's hard to identify litigation that pushes policy in the other direction. The dynamic only operates in the context of pushing something to the national level where there's extraterritorial regulation (as in the automobile emission standards), or possibly, although less frequently, in the context of environmental externalities. (As Revesz and Tom Merrill have shown, there's been too little attention in the federal environmental statutes to actual cross-boundary problems.) Project XL is a good example of states trying to push the envelope in the other direction. And the reaction has been-depending on how one characterizes it-either game-playing or stonewalling by executive agencies and Congress. If that's the case, I'm wondering how we should view state activism.
CHRISTOPHER SCHROEDER: As an empirical observation, the idea that state action-forcing has operated in predominantly one direction is dead on. But I don't think it's universal. Outside the environmental context, welfare reform is an example of action-forcing at the state level that worked in the opposite direction. It showed, through empirical experimentation in Wisconsin and other places, that you could in fact design a better welfare system.
I'm not sure that the Clinton administration’s initiatives in reinventing environmental regulation wouldn't have produced a similar kind of impetus if some of them had not been nipped in the bud, if there had been a continuity of administrations-a Gore administration or a Bush administration to push those kinds of initiatives. I do think there are examples of success stories under Project XL, or near success stories. Moreover, the instinct that more decisionmaking authority ought appropriately to reside at the state level in a number of environmental programs is not a fringe position. It's going to require a welfare-style demonstration on the ground-programs where states have been given a little latitude under experimental programs (and maybe illegal programs, given the current structure of environmental laws), to make a practical case, in addition to the theoretical case.
ROBERT GASAWAY: I was thinking, as Chris [Schroeder] was, of the welfare example. If we were having this meeting 50 years ago, we would observe a one-way ratchet in welfare reform. In the progressive era, Wisconsin and other brave states enacted welfare legislation that was later enacted nationally in the New Deal. Those were the "laboratories of democracy" Justice Brandeis was talking about. But the ratchet turned around and worked the other way later on. Perhaps when our grandchildren are having this conference 50 years from now, they'll say: We thought it was a one-way ratchet back at the turn of the millennium but, lo and behold, things sorted themselves out. It wasn't.
If that's not the case, it will be because of the pervasive EPA control over important economic and fundamental decisions over the states. That brave, hardy little state in Brandeis mythology can experiment with welfare programs that affect, after all, a discrete and insular minority of its citizens. But if the state tries to experiment with its environmental program, its water programs, its land-use programs, its brownfields programs, its toxic waste programs, its air program, and it tries to experiment in a way that is very dissatisfactory to EPA, I would want to ask the experimenting state officials about the problem of spillover effects and the fact that you just can't afford to experiment in ways that EPA disapproves-such that you really can't have that hardy state in the environmental context under current structures the way you could in the welfare context.
RALPH COLLELI [American Petroleum Institute]: Have the AGs who have given their notices of intent been acting independently, or have they already lined up their ducks in their own states? If the three AGs who have been free to file their suit under Section 108 for the past several weeks haven't done so yet, that might be because they are still trying to get some support within their states before they follow through.
MARLO LEWIS: I don't have any inside information on AG-gubernatorial relations, but it is curious because they're passed their 60-day period. But I'm told by a source inside the administration that the AGs are likely to actually file the suits. They haven’t just gone away.
CHRISTOPHER SCHROEDER: The National Association of Attorneys General, NAAG, is sometimes called the National Association of Aspiring Governors. In the New York case, I would suspect that those two individuals don't have real close, harmonious working relationships on some issues. This might well be one of them.
This litigation is the kind of significant policy decision where the attorneys general are going to think very carefully about the political calculation. But that's different from having a highly coordinated strategy with the governors or even with their statehouses. Because of the nature of the office in many states, attorneys general are to some degree policy entrepreneurs these days because they have in mind running for another statewide office after they get done with their attorney generalships.
MICHAEL. GREVE: Some people in this town like to say the American Enterprise Institute is the south wing of the White House. Meetings start and end on time. We've come to an end. Please join me in thanking the panel for a very interesting and stimulating discussion.
[Applause.]
