Trump Seeks to Cap California’s “Cap-and-Trade”

California has long sought to be a leader in addressing climate change, often speaking internationally where the United States has been silent, or reversing course as seen in the US withdrawal from the Paris Climate Agreement.  

In an effort to help lower its aggregate greenhouse gas (GHG) emissions, America’s most populous state established a “cap-and-trade” emissions trading system (ETS) in 2013 to apply to roughly 450 businesses who generate 85% of the state’s GHGs, including power producers, large industrial facilities, and fuel distributors. The state sets an aggregate cap for the aggregate permitted GHG emissions, and then covered emitting entities are able to buy and sell emissions credits. Because of the size of the state’s economy, combined with that of its partners, the program is the fourth largest on the planet. 

According to the Center for Climate and Energy Solutions, the program was established with the goal to “reduce greenhouse gas emissions from regulated entities by more than 16 percent between 2013 and 2020, and by an additional 40 percent by 2030”, and is part of the state’s mission “to reduce total greenhouse gas emissions to 1990 levels by 2020 and 40 percent below 1990 levels by 2030.” Supporters of the program point to the state’s economic growth as evidence that ETS can be implemented without creating undue burdens on the state’s economy or residents.

In an effort to increase the size of their program and to make more trading opportunities available to participating entities, the state integrated its program with those in the Canadian provinces of Ontario and Quebec. This multinational component added scale and flexibility, but may have exposed the program to legal challenge. 

The administration of President Donald Trump has filed suit against the State of California claiming that state officials overstepped their authority when they established an international agreement with the Canadian provinces, and arguing that only the federal government has the authority to create such agreements, or to bless agreements made by states. The administration has sued the state, the state’s regulators, and the Western Climate Initiative, a 501(c)3 non-profit organization responsible for administering the emissions trading system for the state and other participants.

At its core, the lawsuit seeks to defend Presidential authority and, what it contends is the unique jurisdiction of the federal government. Assistant Attorney General Jeffrey Clark said of the suit, “The state of California has veered outside of its proper constitutional lane to enter into an international emissions agreement… California’s unlawful cap-and-trade agreement with Quebec undermines the President’s ability to negotiate competitive agreements with other nations, as the President sees fit.” California defended their actions and promised to fight the administration in court as the state contends that the program was carefully crafted “to not have key characteristics of formal international agreements.” 

California is currently suing the Trump administration over the EPA’s proposed tailpipe emissions rules for automobiles, so the two parties are no strangers to the courtroom. That seems to be where the immediate future of California’s emissions programs will be decided.