On June 23, 2014, the U.S. Supreme Court endorsed the authority of the U.S. Environmental Protection Agency (EPA) to regulate greenhouse gas (GHG) emissions as a “permissible interpretation” of the Clean Air Act. Unless Congress intervenes, the EPA may now continue to issue standards that seek to mitigate climate change, in line with President Obama’s Climate Action Plan. In determining these standards, the EPA undertakes cost-benefit analyses that count the benefits of the restrictions for the entire world, not just the U.S. This policy decision is based on a 2010 report issued by a U.S. Government Interagency Working Group on Social Cost of Carbon, which concluded that “a global measure of the benefits from reducing U.S. emissions is preferable.”
Why should a national agency decide to take the global effects of climate change into account and thereby impose burdens domestically? Why would the U.S. Supreme Court indirectly acknowledge that such a policy might be legally required?
We are witnessing a real-life experiment on a global scale: incrementally, sub-national and national entities are unilaterally opting to cut back on their own GHG emissions in an effort to fight a collective battle against climate change. In the U.S., cities, states, and other sub-national actors have been taking several initiatives to limit GHG emissions (see, e.g., here and here). They are being joined by initiatives by other sub-national and national actors globally, as well as by the EU. They are doing so despite the worry that they are burdening primarily themselves, enjoying only a fraction of the benefits, and allowing others to free ride on their efforts (here and here). Indeed, if the solution of this global collective-action problem eludes nations, action by municipalities seems downright Quixotic.
It turns out, however, that even individual sub-national actors can make a difference. The so-called “California effect” has already shown that in highly integrated markets, the unilateral adoption of stricter regulations (in that specific case, auto emission standards) can create the impetus for the continual strengthening of national standards. Could the same happen on the global scale?
This global experiment requires the cooperation of courts. When sub-national or national actors raise emission standards they also impose restrictions on imports into their jurisdictions, and thereby raise concerns about protectionism and discrimination against out-of-state firms. For example, U.S. courts have on numerous occasions decided on whether states’ GHG and other standards comply with the Dormant Commerce Clause that protects out-of state interests from discrimination (here). The European Court of Justice is also tooled to adjudicate similar disputes between EU members, and most recently it ruled on the legality of EU measures imposed on foreign actors when it determined that the imposition of the carbon dioxide emissions trading scheme on foreign air carriers landing in Europe was lawful. WTO law is also relevant, of course, as the recent disputes related to sub-national subsidies for alternative energy sources showed.
Sub-national initiatives might need courts also in another context. The turn to sub-national regulation often reflects disagreement at the national level and a gridlock in the national legislature. But the very same gridlock will secure a court’s ruling that requires that the relevant national administrative agency side with the sub-national initiative, thereby shielding the bottom-up efforts from intervention by the deadlocked legislature. This is illustrated by the judgment of the U.S. Supreme Court in Massachusetts v. Environmental Protection Agency (2007), where several pioneering American states and cities sued the EPA to compel it to regulate GHG emissions. The Court found that the EPA had such authority, that its failure to offer a “reasoned explanation for its refusal to decide whether greenhouse gases cause or contribute to climate change [was] ‘arbitrary, capricious . . . or otherwise not in accordance with law,’” and required it to “ground its reasons for action or inaction.” The Court further stated that “[w]hile it may be true that regulating motor-vehicle emissions will not by itself reverse global warming, it by no means follows that we lack jurisdiction to decide whether EPA has a duty to take steps to slow or reduce it.” It was this decision which prompted the EPA to action and to adopt the global benefits of GHG emissions reduction as the proper measure, as described above.
Much as courts can bolster sub-national initiatives, they are also in a position to curb policies that disregard out-of-state interests or do not give them sufficient weight. That sub-national, national, and regional actors take global benefits into account does not necessarily imply that they act impartially. This is because even seemingly technical determination of the social costs of carbon and other cost-benefit analyses are not purely technical. Decisions on the choice of discount rates and discounting methodology and on how to measure the costs of climate change in low-income countries (where costs tend to be much higher) could conceal critical distributional effects across communities and generations (here). For example, while adopting the global benefits measure, the U.S. interagency group of experts decided to ignore global distributional effects, because the “development of the appropriate ‘equity weight’ is challenging.”
Therefore, while adopting “a global measure of the benefits from reducing U.S. emissions” is a laudable approach, it is not free of difficulties that require attention. Because its adoption could burden outsiders without taking full account of their costs and benefits, “processes of consultation on regulatory proposals should be open to receiving submissions from foreign and domestic interests.” Such a process is envisioned by the EU with respect to its carbon tax emissions scheme (here), it reflects the practice of the EPA and other administrative agencies in the U.S. and other OECD countries, and is mandated by the evolving law on global governance.
More on valuing foreign lives:
Arden Rowell, Foreign Impacts and Climate Change, Harvard Environmental Law Review, (forthcoming, 2015).
Arden Rowell and Lesley Wexler, Valuing Foreign Lives 48 GA. L. REV. 499 (2014).
Gregory S. McNeal, Targeted Killing and Accountability 102 Georgetown L.J. 681 (2014)