New York's CO(sub.2) cap-and-trade program: regulating climate change without climate change legislation.

AuthorShufelt, Jennie

    In 2005, New York joined six other states in announcing their plan to implement the Regional Greenhouse Gas Initiative ("RGGI"), the first ever mandatory cap-and-trade program for carbon dioxide. (1) Cap and trade refers generally to regulatory programs that set an overall emissions cap and then allocate allowances, or portions of that cap, to emitters. (2) Those emitters must hold enough allowances to cover the actual amount of C[O.sub.2] emitted during a compliance period. (3) The participating states signed a memorandum of understanding agreeing to implement the RGGI and began the rulemaking process to implement the RGGI regulations within each of their states. (4) With the exception of New York, each of the RGGI states enacted or modified legislation specifically to provide for the implementation of the RGGI. (5) In contrast, New York is implementing its RGGI program, known as the C[O.sub.2] Budget Trading Program, by the promulgation of regulations by the New York State Department of Environmental Conservation ("DEC") through its authority under the Air Pollution Control Act (the "Act"). (6) Public comments received by the DEC on the draft RGGI regulations questioned the DEC's authority to regulate carbon dioxide emissions through the proposed cap-and-trade program without authorization from the legislature. (7) Furthermore, one of the regulated entities filed suit against the DEC (among other defendants), alleging among other things that the DEC's promulgation of the RGGI regulations was ultra vires.

    This note analyzes the DEC's statutory authority to implement the C[O.sub.2] Budget Trading Program under its authority to regulate air pollution provided by the Act. The landmark case of Boreali v. Axelrod (8) provides the framework for this analysis. The outcome of the Boreali analysis turns primarily on whether or not carbon dioxide can be classified as an air pollutant. Finding that this classification is reasonable, this note concludes that the DEC does in fact have the statutory authority to implement the Regional Greenhouse Gas Initiative.

    Part I provides background information regarding the growing sense of crisis over climate change, including the development in recent years of a scientific consensus that humans are changing the earth's temperature and the increasing public pressure to take steps to address climate change. Part II provides an overview of one of the major efforts to address climate change in the United States-the Regional Greenhouse Gas Initiative--and in particular, New York's RGGI program, known as the C[O.sub.2] Budget Trading Program. In addition, Part II details the basis of the challenge to the New York State Department of Environmental Conservation's authority to implement the C[O.sub.2] Budget Trading Program. Part III provides an overview of the Boreali approach to analyzing whether an administrative agency has exceeded its statutory authority, and applies each of the four Boreali factors to the DEC's exercise of its regulatory powers to implement the C[O.sub.2] Budget Trading Program. Finally, Part IV summarizes the results of the Boreali analysis and concludes that the DEC does in fact have the statutory authority to implement the RGGI under the Air Pollution Control Act.


    Growing consensus among scientists that the earth's climate is changing has, over the past few years, resulted in great concern among policy makers and the public over the anticipated impacts of climate change and the role that humans are playing in causing or accelerating climate change. In 2007, the Intergovernmental Panel on Climate Change ("IPCC") concluded that "[w]arming of the climate system is unequivocal." (9) The United States Supreme Court echoed that concern in its landmark decision of Massachusetts v.

    EPA. (10) In fact, data suggest that climate change is already impacting the environment. According to the IPCC, research strongly indicates that climate change has already impacted both natural systems, for example, by destabilizing permafrost (soil that remains frozen for two or more years), and human systems such as agriculture. (11)

    The causes of climate change, and especially the role of human activity in causing or accelerating climate change, is somewhat more contested. According to the IPCC, the primary driver of climate change is the level of Greenhouse Gas ("GHG") emissions in the atmosphere. (12) These GHGs can be both naturally occurring and anthropogenic (i.e. caused by human activity). (13) According to the IPCC, the dramatic increase in carbon dioxide--the primary greenhouse gas that has been seen over the past century--is "due primarily to fossil fuel use, with land-use change providing another significant but smaller contribution. (14) As a result of the work of the IPCC and other scientists across the globe, most scientists agree that, at least to some extent, human activity is causing or accelerating climate change. However, some scientists dispute this conclusion. (15)

    Regardless of the continuing debate surrounding climate change, growing public sentiment and concern over the potentially devastating results of continued global warming (16) have put pressure on policy-makers at the federal and state levels to address climate change and develop and implement clean technology. One example of the political response to this public outcry has been the establishment and implementation of the Regional Greenhouse Gas Initiative ("RGGI").


    1. The Regional Greenhouse Gas Initiative

      One of the most aggressive climate change initiatives to date in the United States, the RGGI is a collaborative effort of ten states to reduce carbon dioxide emissions from power plants. (17) The ten RGGI states have agreed to a regional limit on total power plant C[O.sub.2] emissions. Each participating state is allocated a portion of the total cap, and distributes carbon dioxide allowances to power plants operating within its boundaries. (18) The allowances are similar to a permit to emit a certain amount of carbon dioxide. All of the participating RGGI states have agreed to issue at least some portion of these allowances through auctions, and to use the proceeds of those auctions to support energy efficiency and renewable energy within the state. (19) The use of allowances encourages maximum efficiency and GHG reductions, because unneeded and unused allowances can then be sold on a secondary market to other companies unable or unwilling to reduce their emissions. (20)

    2. New York State's RGGI Program: The COt Budget Trading Program

      The DEC has promulgated regulations that implement the RGGI program in New York (called the C[O.sub.2] Budget Trading Program) under its existing statutory authority. (21) Similarly, the New York State Energy Research and Development Authority ("NYSERDA") promulgated regulations establishing a C[O.sub.2] Allowance Auction process. (22) This auction process will be the primary mechanism through which C[O.sub.2] allowances will be distributed. (23) These two agencies, in collaboration with the Department of Public Service, have been charged with implementing New York's RGGI program. (24) New York has decided to auction nearly one hundred percent of its C[O.sub.2] allowances. (25) These allowances will be used "to promote and implement programs for energy efficiency, renewable or non-carbon emitting technologies, and innovative carbon emissions abatement technologies with significant carbon reduction potential." (26) NYSERDA anticipates allocating the majority of the auction proceeds for technologies and projects with the potential for near term reductions in C[O.sub.2]; however, at least twenty-five percent is expected to go towards longer-term investments. (27)

    3. The Challenge to the DEC's Statutory Authority

      All of the states participating in the RGGI, with the exception of New York, have passed legislation authorizing the implementation of the RGGI. (28) In contrast, New York is implementing the RGGI through regulatory action by the DEC under existing statutory authority. (29) Specifically, the DEC is relying on its authority under the Act "to safeguard the air resources of the state from pollution by: (1) controlling or abating air pollution ... and (2) prevent[i]ng new air pollution," (30) and the DEC's general authority to "[p]rovide for prevention and abatement of all ... air pollution." (31) Air pollution is defined by the Act as

      the presence in the outdoor atmosphere of one or more air contaminants in quantities, of characteristics and of a duration which are injurious to human, plant or animal life or to property or which unreasonably interfere with the comfortable enjoyment of life and property throughout the state or throughout such areas of the state as shall be affected thereby. (32) In essence, the New York's DEC has determined that carbon dioxide is an air pollutant subject to regulation under its existing statutory authority to regulate air pollution.

      In 2007, the DEC published the draft C[O.sub.2] Budget Trading Program regulations for public comment. The public comments received in the fall of 2007 questioned the DEC's authority to implement the RGGI. For example, one public comment received by the DEC charged that "[w]ithout any legislative expression of Statewide policy addressing global climate change, including local reductions of C[O.sub.2] emissions, the [proposed regulations] violate[] the constitutional separation of powers." (33) The commenter went on to say that "It]he Legislature has neither articulated a policy to prevent global climate change nor approved the regulatory means selected to achieve that end. (34) Therefore, "the proposed regulations represent an illegal arrogation of the Legislature's exclusive policy making authority." (35) The essence of the argument is that carbon dioxide is not an air pollutant, and that, therefore, climate change...

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