Cross-Border Constraints on Climate Change Agreements: Legal Risks in the California-Quebec Cap-and-Trade Linkage

Date01 June 2016
Constraints on
Climate Change
Legal Risks in the
David V. Wright
David Wright holds a 2016 LL.M. from Stanford Law School.
As the world begins implementing the Paris Agree-
ment, Canada and the United States remain without
comprehensive greenhouse gas regimes at the federal
level; most action has taken place at the subnational
level. At the forefront is the California-Quebec cap-
and-trade market linkage. Close examination of this
example demonstrates that such linkages are suscep-
tible to constitutional constraints on both sides of the
border. is Article presents constitutional dimen-
sions from Canada and the United States, and shows
there is a live risk that a court could nd the linkage
constitutionally oside due to its binding eect. Con-
stitutional constraints particular to the United States
also suggest that foreseeable changes may put the Cal-
ifornia state program at variance with federal climate
policy, rekindling risks around consistency between
state action and U.S. foreign policy. e Article puts
forward two suggestions, one federal and one subna-
tional, that could be taken in Canada and the United
States to partially reduce the remaining legal risk.
Canada and the United States share a long history
of managing a ir pollution together.1 Today, atten-
tion is largely focused on reduction of greenhouse
gas (GHG) emissions. Most of the action is at the subna-
tional level, as seen in the linking of cap-and-trade regimes
between Ca lifornia and Quebec discussed in this Article.
With no comprehensive legal framework for GHG emis-
sion reductions at the federal level in both Canada and the
United States, this subnational trend is likely to continue.2
In fact, the provinces of Ontario and Manitoba conrmed
in late 2015 that they are taking steps to implement cap-
and-trade regimes, with the stated intention of linking
with California and Quebec.3
Much at tention to date ha s focused on the economic
dimensions of the issue and the rationale for linking sub-
national markets.4 Less attention has been paid to the legal
risks involved by such cross-border agreements. Legal risks
primarily take the form of constitutional barriers to cross-
border linking of subnational carbon markets. ese issues
have received some attention in the literature,5 primarily
1. Formalized cooperati on dates back to the Co nvention Between the Unit -
ed State s and Great Britain f or the Prot ection of Migratory Birds, Aug.
16, 1916, 39 U.S. Stat. 1702, T.I.A.S. No. 628. is convention is widely
recognized as the rst international conservation agreement in t he west-
ern hemisph ere.
2. Note that most consider subnational eorts to be a second-best option,
believing a comprehensive federal regime, either cap and trade or carbon
tax, to be preferable. See, e.g., Cary Coglianese & Jocelyn D’Ambrosio,
  
Change, 40 C. L. R. 1411, 1429 (2008). See also Valentina Boset-
ti & David G.    
    , 32 E J.
1, 19 (2011); Mathew Ranson & Robert Stavins, 
 (Harvard Project
on Climate Agreements, 2013); Ann Carlson, Designing Eective Climate
, 49 H J. L. 207
3. Canadian Press,     
, G  M, Dec. 07, 2015, available at http://www.the-
trade-systems/article27629453/. During the 2015 international climate
change negotiations in Paris, provinces signed a memorandum of under-
standing (MOU) on this. See Memorandum of Understanding Between the
Government of Ontario, the Government of Québec and the Government
of Manitoba Concerning Concerted Climate Change Actions and Mar-
ket-Based Mechanisms (2015),
4. See, e.g., M P  ., S P, T P
E  C  Q’ C--T S (2014),
available atles/publica-
tions/les/QuebecCalifornia%20FINAL.pdf. See also M B
 ., I I.  S D., L N
C--T S  N A (2009), available at https://
5. Douglas Kysar & Bernadette Meyler, Like a Nation State, 55 UCLA L. R.
1621 (2008); Jeremy Lawrence, e Wester n Climate Initiative: Cross-Border
Author’s Note: Sincere thanks to Michael Wara, Bernadette Meyler, Vanessa
Copyright © 2016 Environmental Law Institute®, Washington, DC. Reprinted with permission from ELR®,, 1-800-433-5120.
6-2016 NEWS & ANALYSIS 46 ELR 10479
in the period between the passing of California’s Global
Warming Solutions Act of 20066 and the 2009 interna-
tional climate change negotiations in Copenha gen. How-
ever, there ha s been less commentary in recent years despite
several signica nt changes in a climate change context.
Evolution from hypothetical to actual cross-border link-
age is the most obvious change. On January 1, 2014, Cali-
fornia and Quebec ocially linked cap-and-trade markets,
holding six joint auctions a s of Februar y 2016.7 is link-
age is part of a broader change unfolding in political, legal,
and scientic realms. For example, movement toward
more carbon pricing in Ca nada has gained momentum as
a result of recent election resu lts in A lberta, Ontario, and
at the federal level.8 Meanwhile, on the American side, the
U.S. Environmental Protection Agency (EPA) has released
the nal Clean Power Plan (CPP)9 requiring all states to
take action to reduce emissions from the United States’
largest source of em issions—the electricity sector.10 At the
international level, parties to the United Nations Frame-
work Convention on Climate Change (U NFCCC) have
adopted the Paris Agreement,11 marking a funda men-
 ,
82 S. C. L. R. 1225 (2008); Michael Barnett, 
   
Border Cooperation, 48 C. J. T’ L. 321 (2009); Shelley Wel-
ton,  
, 27 N. R  E’ 36 (2012); Han-
nah Chang, 
, 37 ELR 10771 (Oct. 2007).
6. Global Warming Solutions Act, C. H  S C §§38501-
38599 (2006), Assembly Bill 32 [hereinafter AB 32].
7. California Air Resources Board (CARB),   
 (2015), available at http://www.
8. See Jason Kroft et al., -
lowing a Liberal Majority Win, Stikeman Elliott LLP blog, Nov. 26, 2015.
A leading climate economist in Canada recently remarked, “November
2015 has likely been the busiest month for Canadian climate policy mak-
ers, ever.” Nicolas Rivers,   
, P O (Nov. 2015), http://policyoptions. 2015/11/ 24/just- what-is- canada-b ringing -to-the- table-at -the-
paris-climate-summit. In fact, on February 24, 2016, Ontario released the
Climate Change Mitigation and Low-Carbon Economy Act, 2016, which
is the province’s proposed cap-and-trade legislation. See Bill 142, 41st Leg.
(First Reading, Feb.24, 2016).
9. U.S. E’ P. A (EPA), Carbon Pollution Emission Guidelines
for Existing Stationary Sources: Electric Utility Generating Units; Final
Rule, 80 Fed. Reg. 64661-65120 (Oct. 23, 2015),
fdsys/pkg/FR-2015-10-23/pdf/2015-22842.pdf [hereinafter Clean Power
Plan (CPP)].
10. See U.S. EPA,   (2015), http://
11. e Paris Agreement was initially simply an Annex to the U.N. Framework
Convention on Climate Change (UNFCCC) Conference of the Parties
(COP) decision to adopt it; however, it became a separate formal agreement
when it opened for signature on Apr. 22, 2015. See U.N. Doc. FCCC/
CP/2015/L.9/Rev.1. See also UNFCCC,   
 (Dec 2015),
uments/advanced_s earch/items/6911 .php?priref=60000 8831.ParisAgree-
ment [hereinafter Paris Agreement].
tal shift toward a bottom-up approach to global climate
change governance t hat includes emissions reduction
targets for both developed and developing countries.12
Finally, but perhaps most signicantly, climate change
impacts have become increasingly palpable.13
Such cha nges warrant a fresh look at legal constraints
on state/province carbon market linkages. e time is a lso
ripe to consider ways t hat cu rrent a nd emergi ng reg imes
can minimize risks of legal challenge on c onstitutiona l
bases. Part I of this Article provides a snapshot of the
climate change mitigation regime with an emphasis on
subnational carbon markets in Canad a and the United
States, and the linkage between Quebec and Cal ifor-
nia in particular. Part II presents a detailed view of the
anatomy of t he Quebec-Ca lifornia lin kage. is set s up
a re visiting of constitutiona l constraints in Canad a and
the United States in Part III, with speci c reference to the
now-operationa l cross-border market l inkage. Part I V
builds on the a nalysis by explor ing t wo options available
to m anage constitutiona l constraints, one at the federal
level and one subnationa l.
It should be stated at the outset t hat th is Article does
not put forward a normative argument for proliferation
of subnational carbon market s. A legitimate debate is
ongoing about the merits of such incrementalism ver-
sus waiting for a comprehensive national or conti nental
carbon market.14 Rather, the Article takes as its start-
ing point t he fact that these subnational linkages exist,
that they are exposed to constitutional constra ints, and
that furt her cl arity is desirable in this evolving context ,
including with respect to reconcili ng tension between
linka ges and constra ints.
e analysis is broadly relevant given the international
climate regime’s direction toward the bottom-up approach,
the implementation of which is likely to include many sub-
national jurisdictions cooperating across borders. While
the California-Quebec arrangement is the rst (and so far
only) subnational cross-border carbon market linkage in
North America, the trend is likely to increase on this con-
tinent and beyond.
12. For discussion of the bottom-up approach and its relation to linking dierent
jurisdictions, see Daniel Bodanksy et al., 
national Agreement (Harvard Project on Climate Agreements, 2014), available
13. See generally I P  C C (IPCC),
S  P M: C C I 2014: I,
A,  V (C.B. Field et al. eds., 2014), available at
(providing a detailed view of impacts across the globe). See also U.S. G
C R P, C C I   U
S: T T N C A ( Jerry Melillo et al.
eds., 2014), (providing a detailed view of
impacts in the United States).
14. See, e.g., Coglianese & D’Ambrosio, supra note 2.
Copyright © 2016 Environmental Law Institute®, Washington, DC. Reprinted with permission from ELR®,, 1-800-433-5120.

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