Waxman-Markey: Federalism Battles

On Tuesday, March 31, House Energy and Commerce Committee Chairman Henry Waxman (D-CA) and Rep. Edward Markey (D-MA) released a "discussion draft" of the American Clean Energy and Security Act of 2009 -- a climate change bill that will serve as the starting point for long-delayed congressional action on the world's most pressing environmental program. CPRBlog asked several Center for Progressive Reform Member Scholars to examine different aspects of the 648-page Waxman-Markey bill. This entry, by William Buzbee, examines if the bill would preempt state laws.

In the Waxman-Markey bill, as in any proposed federal legislation, a key question concerns the ongoing role of the states. States have long played positive, cooperative and often innovative roles in working to accomplish environmental goals. But state activism is not met with universal applause. In the climate change area, as in other environmental law areas, one of the motivations for industry support of federal legislation is a stated concern with too many different state approaches. The state and local climate laws and several regional cap and trade schemes that are prompting calls for a single federal law, however, have already produced templates for federal law and helped identify strategies to embrace and avoid. So a key question has been how Waxman-Markey would preserve state roles, enlist the states or preempt and thereby displace their regulatory power.

The norm in federal environmental laws has long been that states and everyone else must comply with federal law because it is “Supreme” under our Constitution. Federal law can preempt contrary law expressly or by implication if conflicts arise. Most environmental laws, however, give states latitude to be more protective of the environment and their citizens. Federal law acts as a floor, not a ceiling. Ceiling preemption, in contrast, is rare and prevents states from doing anything more stringent than federal law. In a few provisions of current law, especially regulation of car emissions, federal law sets a uniform national standard unless California and other states following California adopt a different, more protective approach. States are also typically encouraged to help implement and enforce federal law under delegated program structures, an example of “cooperative federalism” in action. States thus usually are active participants in implementing federal law. States have innovated and sometimes gone beyond federal law in a range of areas. State and local governments have been especially active regarding climate change over the past eight years, while the federal government did little and the executive branch resisted calls for action.

This initial Waxman-Markey draft proves to be a mixed bag.

On the positive front, the only provision that expressly preempts state law is section 861's time-limited preclusion of state cap and trade schemes. For five years, only a federal cap and trading market would exist. Impliedly, when that period ends, states finding the federal scheme flawed or too weak could initiate or revive state or regional cap and trade programs. Some states fear a federal law might be too weak from the beginning, and hence would like to have ongoing authority to set up parallel, additional state and regional schemes. There is much to this argument, since most past analogous cap-based regimes have proven initially to be too lax and led to delay in environmental improvements. But there are counterarguments that likely explain the choice evident in this draft legislation. Practical problems can arise with several parallel markets. Shifting everyone to a focus on a federal cap and trade scheme, but allowing later state initiation of their own cap and trade schemes, strikes a decent balance. A unitary market will initially exist, but states can later act to address shortcomings and by so doing fill regulatory gaps or perhaps prompt federal legal improvement. This compromise is probably workable, but any further backtracking from preservation of state roles could prove disastrous if science or the law’s implementation reveals that more action is needed. If federal action is the only game in town, then instigating later improvements would be difficult. Monopolies in markets are a problem, as they are in designing regulatory schemes.

Other provisions in Waxman-Markey are generally good in preserving and enlisting the states, but sometimes lack the directness and clarity of express “savings” clauses found in most environmental laws. Because much of the bill is proposed as an amendment of the Clean Air Act, the Clean Air Act’s current savings clauses and case law will arguably live on (see sections 334 and 335), but that is far from certain since this bill adds a lot of new law. In addition, various portions of this massive 648-page bill quite explicitly embrace and preserve state roles regarding some areas of energy, environmental and land use regulation (see sections 101, 143, and 221, and 222(j), for example), sometimes with broad but somewhat general language (see subsections c and d of section 721), but elsewhere the status of state power is left unclear or unaddressed (see, for example, coal plant performance standards (section 116) or the energy efficiency provisions starting at section 201).

In most of these areas, no attempt to preempt the states is stated, but neither is there express language that applauds ongoing state roles or specifically mentions that states can continue with their areas of climate regulation or other areas of regulation indirectly related to greenhouse gas emissions. States should retain the ability to require major stationary sources of pollution to pollute less without facing industry arguments that their power is circumscribed by this bill. Greenhouse gases are emitted with co-pollutants and involve other activities that pose concerns to neighbors or deplete critical resources like often-scarce water. Do states, under this draft bill, have their usual retained police power to protect their citizens and apply their own possibly more protective laws? Reading these state-preserving provisions with the Clean Air Act language that they amend, there's a good argument that state turf is protected, but greater clarity would help.

Putting it all together, a fair-minded read of this bill is that there is little intent to preempt the states. But the problem is that where the regulatory and economic stakes are high, industry will use preemption arguments to knock out areas of state regulation that indirectly relate to climate change or greenhouse gases, and will also possibly seek to knock out areas of state regulation of greenhouse gases not expressly preserved. Industry will argue that state laws and actions are an “obstacle” to the balance struck by federal law. While little in this bill supports such arguments, past cases have found similar state laws and actions preempted, even with more explicit savings provisions. The bill would be improved if amendments added findings and purpose provisions that more expressly applauded and embraced state law, and also added a more complete savings clause making clear that other than areas expressly preempted (such as the five year state cap and trade moratorium), states retain the authority to go beyond federal law both in the climate area and other areas of longstanding state regulation. No one would benefit from a federal law that quickly is mired in costly litigation. The costs would be especially great if statutory uncertainties resulted in the loss of states’ ability to innovate, protect their citizens and the environment, and, if necessary, nudge the federal government to do more if current legislation proves inadequate. This bill is an excellent start, but could do better.

For previous CPRBlog pieces on the Waxman-Markey bill, see here.