Federal court upholds California’s cap-and-trade agreement with Quebec

A federal judge has struck down a Trump administration challenge to California’s greenhouse gas emissions cap-and-trade law.

The U.S. Department of Justice in October filed a civil complaint against California, arguing that the state’s cap-and-trade agreement with the Canadian Province of Quebec is unconstitutional and sought a permanent injunction against the agreement.

The DOJ complaint, filed with the U.S. District Court of the Eastern District of California, argued that the California agreement had the effect of “undermining the ability of the federal government … and the President” of protecting of the environment, promoting economic growth, and maintaining national security.

The DOJ cited four legal grounds in its argument. It cited the Constitution’s prohibition against any state entering into a “treaty, alliance or confederation” under the Treaty Clause and the constitutional prohibition against entering into an “agreement or compact” with a foreign power under the Compact Clause.

The complaint also cited the supremacy of the president’s authority to conduct foreign affairs under the Foreign Commerce Clause of the Constitution and the Foreign Affairs Doctrine.

The complaint argued that California’s climate agreement with Quebec was interfering with the administration’s foreign policy on greenhouse gas regulation, such as its intention to withdraw from the Paris climate accord.

Despite the four-part argument, the DOJ in December sought a summary judgment from the court on the Treaty Clause and Compact Clause alone; therefore, the district court expressed no opinion on the Foreign Commerce Clause nor the Foreign Affairs Doctrine.

California established its cap-and-trade program in October 2011, using recommendations from the Western Climate Initiative, which also became the administrator of the program, a role that does not include authority over policy. The program establishes limits and issues allowances for greenhouse gas emissions for covered entities.

In an effort to increase the program’s impact and market liquidity, California also created a mechanism to link its program with other jurisdictions. Those linkages, however, do not alter the cap-and-trade program in other jurisdictions. In December 2011, Quebec created its own cap-and-trade program and, in January 2014, the California and Quebec programs were linked.

In June 2017, President Donald Trump announced that the United States would withdraw from the Paris climate accord.

In taking up the first issue, the district court delves into meaning of “treaty” and notes that there is not an explicit definition in the Constitution. Citing case law, however, the district court noted agreements that qualify as treaties are generally of a “political character” and include “treaties of alliance for purposes of peace and war,” “mutual government,” the “cession of sovereignty,” and “general commercial privileges.”

“By any metric,” the court concluded, “the Agreement between California and Quebec falls short of these consequential agreements.”

In taking up the Compact Clause, the district court noted that the Supreme Court has limited its interpretation of a “compact” to agreements that encroach upon federal sovereignty.

The district court found that the California agreement lacked the markers of a compact. For example, while California requires linking jurisdictions to have equivalent or stricter enforcement goals than its goals, “the efficacy of the program does not rise or fall with other jurisdictions adopting similar enforcement goals; indeed, the program could operate independently of any other jurisdiction,” the court found. The court also found that the California agreement does not allow the state “to exercise any power it would not normally have.”

Accordingly, the court found “the Agreement and California law as applied do not rise to the level of a ‘compact’ under the Compact Clause.”

The court also found, contrary to DOJ’s assertion, that a compact between states requires congressional approval.

In closing, U.S. District Judge William B. Shubb denied the DOJ’s motion for summary judgment and granted the motion of the defendants, the state of California and Western Climate Initiative, for summary judgment.