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US states continue to lead on climate

Resistance is growing to federal unwinding of US environmental protections, while states are increasingly determined to take action

The US federal government has passed several regulatory rollbacks in areas such as industrial pollution over the last 12 months. But sub-national jurisdictions are resisting and, in many cases, stepping up climate and environmental action. 

States including California, a $3bn economy in its own right, are pursuing a lawsuit against the Environmental Protection Agency’s elimination of regulations protecting waterways. In turn, the Trump administration is suing California to eliminate a waiver that allows the state to set its own, stricter emissions standards for cars. 

Given the size of its economy and its progressive outlook, California dominates the US emissions trading landscape, although its carbon market also faces attacks from national authorities. In November, the federal Department of Justice issued a lawsuit against the state, alleging that the links between its trading scheme and that of Canadian province Quebec represents an international agreement requiring US congressional oversight. 

California and Quebec recognise emissions allowances issued by each other as eligible for compliance, hold joint auctions of permits, and have a largely identical market price whether expressed in US or Canadian dollars. California’s governor Gavin Newsom characterises the lawsuit as politically motivated, while the state’s lawyers say the agreement with Quebec amounts to no more than a mutual recognition of carbon allowances and cannot be seen as an international treaty. “Many states are parties to agreements with other sub-national jurisdictions, and most of them were not approved in advance by Congress,” says Nico van Aelstyn, a partner at law firm Sheppard Mullin, who is representing emissions trading advocates in the case. 

States’ progress 

To its north, Oregon and Washington have repeatedly tried over several years to set up their own state-wide markets and link them to California—each foundering on Republican opposition. Renewed efforts are underway in both states. 

On the east coast, the regional greenhouse gas initiative (RGGI), the country’s oldest carbon market, expanded from nine to 10 states in January with the return of New Jersey. The state’s previous governor, Chris Christie, took it out of the market in 2011, saying RGGI was ineffective, but under his successor, Democrat Phil Murphy, the state passed legislation in 2019 to return. 

Even if the Democrats are unsuccessful, there is only so much that a Trump second term can do to stall momentum for the adoption of carbon market mechanisms

Virginia is also moving towards joining. Last year’s election returned a Democratic majority to both houses of the Virginia legislature, and lawmakers quickly introduced a bill requiring the state to reach zero carbon electricity by 2050. The election also boosted Governor Ralph Northam’s efforts to bring the state into RGGI. A previous attempt to sign up was defeated by the previous Republican-dominated legislature, but new bills have been tabled. 

Meanwhile, Governor Tom Wolf of Pennsylvania signed an executive order last October ordering the state’s environment agency to seek admittance to the regional market. But the order is being robustly opposed by the Republican-dominated legislature, which demands the right to approve, or more likely reject, any application to join RGGI. 

Nor is there is no discussion of climate action at a federal level: Democrats in the House of Representatives have already issued proposals to achieve net zero greenhouse gas emissions by 2050. At the start of the year, the chairman of the House Energy and Commerce Committee unveiled a preliminary framework for a future climate bill, which would enshrine in law the net-zero goal and give individual states the flexibility to achieve the target however they choose. 

There is no explicit commitment to a carbon market in any federal proposals, but a trading system will likely be discussed as part of the debate. With 12 states currently operating cap-and-trade systems and more looking to participate, it is unlikely they would want to dismantle their markets and start again with a different mechanism. 

Underpinning Congress’ revived climate legislation interest is a belief that any proposal would reach its final stages only post-election, after which a Democratic victor could adopt and approve it. But, even if the Democrats are unsuccessful, there is only so much that a Trump second term can do to stall momentum for the adoption of carbon market mechanisms.

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