"Maladaptive" federalism: the structural barriers to coordination of state sustainability initiatives.

Author:Rossi, Jim
 
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ABSTRACT

The federal government has been slow to confront problems such as climate change, but many states have adopted innovative approaches to addressing the impacts of using natural resources to produce energy, including aggressive regulation of carbon emissions and renewable energy standards. This Article questions whether celebration of these types of state initiatives as a form of "adaptive" federalism is premature. The Article identifies an emerging challenge that subnational regulation faces in the energy and environmental context--what I will call "maladaptive" federalism--and argues that federalism discussions need to account for its possibility.

Part I highlights adaptive regulation as a form of federalism, echoing a vision for subnational regulation that many federalism scholars and policymakers have endorsed over the past two decades.

Part II argues that policy choices by subnational units of government that fail to account for or consider these coordination benefits should not be celebrated as a form of adaptive federalism merely because they are state policy choices. I identify subnational recalcitrance (on inaction by states) and backlash (or reversing course) as two potential types of maladaptation, provide examples of each, and use these to illustrate the structural features of subnational governments that make maladaptation most likely.

Part III evaluates the pro-adaptation tools that federal agencies can use to address the enactment costs of states taking maladaptive approaches. In certain contexts, such as in clean energy initiatives, focusing on enactment costs associated with the structure of state governments will be superior to federal policies that preempt subnational units of government altogether by making the policy choice for them. Such tools not only make maladaptation less likely; they also help to ensure that when a state does opt for a maladaptive policy path that it does so because it is making explicit tradeoffs in ways that are more likely to be welfare-enhancing and politically accountable.

CONTENTS INTRODUCTION I. ADAPTIVE FEDERALISM A. Policy Experimentation in Addressing Climate Change B. Inter jurisdictional Competition for Sustainable Energy C. Mediating Interstate Coordination Problems II. FEDERALISM'S POTENTIAL FOR MALADAPTATION A. Maladaptive Recalcitrance B. Maladaptive Backlash III. ADDRESSING MALADAPTATION A. Conventional Federal Tools for Discouraging Maladaptation B. State-Led Efforts to Discourage Maladaptation C. Diffusing Maladaptation by Addressing Enactment Costs CONCLUSION INTRODUCTION

This Article identifies an emerging challenge that subnational regulation faces in the energy and environmental context--what I will call "maladaptive" federalism--and argues that federalism discussions need to account for its possibility. What is known as "adaptive" federalism sees subnational units of government as effective institutions for promoting regulatory experimentation and solving regulatory problems, especially in the energy and environmental law arena. (1) While the federal government has been slow to adopt climate change initiatives, many state governments have enacted innovative approaches to addressing the impacts of using natural resources to produce energy, including aggressive approaches to regulating carbon emissions and renewable energy standards. (2) To name a few examples: more than 30 states have adopted Renewable Portfolio Standards (RPSs), requiring a certain percentage of electric power sold to come from renewable sources; (3) California has adopted comprehensive climate change legislation; (4) and several states have been leaders in promoting renewable energy and clean energy initiatives, including smart grids. (5)

Many environmental law policymakers and scholars celebrate adaptive federalism because subnational institutions can better adapt to unique geographic conditions and promote policy experimentation and its diffusion. (6) Seeing environmental law advocates look to subnational governments seems surprising, given environmental law's insistence on the superiority of national regulation in addressing jurisdictional spillover problems associated with pollution. Perhaps it is even odder to see environmental law scholars embrace subnational units of government in addressing a problem like climate change, where the harms are widely recognized to be global rather than local. (7) There is a simple pragmatism to this turn towards subnational governments in environmental law: At the subnational level it is easier to pass new initiatives, making adaptive federalism a particularly attractive approach for policy innovation.

Against the backdrop of federal legislative inaction--no doubt in part rooted in federal institutions that have held up legislation, such as the Senate--climate change policy initiatives have had more traction at the subnational level. (8) State governments are closer and more reactive to their constituent stakeholders than the U.S. Congress, do not suffer from mass geographic diversity that plagues U.S. lawmaking, and may face fewer veto points than Congress. According to some, subnational regulatory initiatives may even be superior to federal legislation, which could potentially limit the space for state initiatives or hamper innovation and experimentation. (9)

Beyond these benefits to adaptive federalism, environmental scholars have paid less attention to how subnational policies can produce coordination benefits beyond any individual state's borders and what impact this has on federalism discussions. To take an example related to renewable energy, harmonized RPS standards across individual states produce spillover benefits for renewable project developers and others in the financing and contracting process. (10) Planning for and allocating the costs of multistate project infrastructure such as transmission and power grid reliability also produces important benefits for renewable power projects, regardless of any particular jurisdiction. (11) Of course, there are always positive externalities to the policy diffusion related to subnational innovation, but the coordination benefits I describe transcend the diffusion of ideas.

This Article argues that, in many public goods contexts, that there are externalities that go beyond experimentation itself--benefits (and sometimes even costs) that receive almost no attention in the federalism literature. In contexts where adaptation produces positive policy externalities, federalism is challenged to account for the possibility that individual states can just as readily take positions that hobble or thwart the production of public goods as they can promote them. Specifically, the analysis of this Article explores whether there should be limits on a state or other subnational unit of government acting independently when this stands in the way of other states creating coordination benefits from an adaptive federalism program such as climate change or sustainable energy initiatives.

Part I highlights adaptive regulation as a form of federalism, echoing a vision for subnational regulation that many federalism scholars and policymakers have endorsed over the past two decades. As Part I suggests, adaptive federalism does not embrace subnational regulation per se, but because it advances other values, such as promoting policy experimentation and its diffusion--the core value of adaptive federalism. Diffusion itself is a spillover benefit from adaptation, albeit a benefit that is indifferent to any particular institution's policy choice. Beyond diffusion, I argue that in many contexts adaptation also produces other benefits related to the substance of policy--which can take the form of coordination benefits (positive externalities) of adaptation that spillover to the regional or national level.

Part II argues that policy choices by subnational units of government that fail to account for or consider these coordination benefits should not be celebrated as a form of adaptive federalism merely because they are state policy choices. Structural features of state governments can contribute to the possibility of subnational governments failing to recognize these coordination benefits--what I characterize as "maladaptation." I identify subnational recalcitrance (inaction by states) and backlash (reversing course) as two potential types of maladaptation, provide examples of each, and use these to illustrate the structural features of subnational governments that make maladaptation most likely.

Preserving a role for states to dissent from trends and from inchoate national or regional policies is important, even essential, to federalism. However, that does not mean that federalism must be indifferent to every substantive state policy choice. Part III maintains that to the extent the potential for maladaptation subverts welfare-enhancing coordination, it is an appropriate concern for regulators. I identify a variety of legal tools that regulators and courts can look to in order to address the decision costs of maladaptation and make it less likely, especially in contexts where national regulators have endorsed subnational trends or policy choices. These include substantive preemption by statute or regulation, explicit interstate entrenchment tools designed to promote adaptive regulatory commitments, and process preemption. Adaptive federalism may be mostly likely to flourish in situations where Congress has established direct enforcement "sticks" (such as in the context of the Clean Air Act), but it is also an important regulatory approach even where a federal agency has no direct enforcement authority.

Part III argues in favor of pro-adaptation tools that federal agencies can use to address the enactment costs of states taking maladaptive approaches. In certain contexts, focusing on enactment costs associated with the structure of state governments will be superior to federal policies that...

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