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On Climate, Should Congress Override The States?

So… anyone who's fretting about the fate of the climate bill will just have to wait and see whether John Kerry and Joe Lieberman can drag Lindsey Graham back into negotiations—they're all meeting this afternoon. But if anyone needs a wonky way to pass the time, Harvard economist Robert Stavins has a nice post on an issue that's likely to be particularly contentious if/when the climate bill ever hits. Namely, state preemption. (Try to contain your excitement, people.)

Here's some background: As I've written before, plenty of states are taking their own actions to reduce greenhouse-gas emissions. Some of them are requiring electric utilities to buy up renewable power. Others are banding together and creating their own regional cap-and-trade systems. Some of these state programs are pretty ambitious: California's global-warming law, AB32, goes further in cutting emissions than anything that's likely to emerge from Congress this year. (Of course, California's law could also get scuttled by a state ballot initiative this fall—or delayed if a Republican like Meg Whitman becomes governor—so we'll have to see how that pans out.)

Anyway, the House climate bill that passed last June would override most of these state efforts. That legislation would set up a nationwide cap-and-trade system for greenhouse gases and, essentially, make state-level carbon-trading programs obsolete. Individual states would no longer be able to race ahead of what Congress is doing. (See here for a detailed breakdown of what Waxman-Markey does and doesn't do on this front.) And the Senate bill, according to all the rumors, would likely go at least as far.

Now, polluters like preemption because they don't want to deal with a patchwork system of different rules in different states. But many liberals/environmentalists have criticized this aspect of the climate bill because it would undermine, say, California's remarkably far-reaching law. And, in fact, government officials in California, New York, and New England are currently lobbying Congress to preserve their state-level systems. Yet, as Stavins argues, preemption really does make sense for carbon pricing:

This is because of the nature of the climate change problem. Greenhouse gases, including carbon dioxide, uniformly mix in the atmosphere – a unit of carbon dioxide emitted in California contributes just as much to the problem as carbon dioxide emitted in Tennessee. The overall magnitude of damages—and their location—are completely unaffected by the location of emissions. This means that for any individual jurisdiction, the benefits of action will inevitably be less than the costs.

If federal climate policy comes into force, the more stringent California policy will accomplish no additional reductions in greenhouse gases, but simply increase the state’s costs and subsidize other parts of the country. This is because under a nationwide cap-and-trade system, any additional emission reductions achieved in California will be offset by fewer reductions in other states.

Right. If there's a federal cap-and-trade system, then it doesn't make a ton of sense to let some states set up stricter targets—all that does is allow slacker states to slack off even more, and overall pollution levels will remain the same. On the other hand, there are some areas where it makes sense to let states forge ahead of Congress. If an individual state wants to tighten its building codes, or build more renewable power over and beyond whatever the federal standard calls for, or tackle emissions not covered by the cap-and-trade program (like agriculture), then those states should be able to do so, since those things aren't really zero-sum games.