Dream of CaliforniCarbon Border Measure

California! To my knowledge, only jurisdiction that has tried to do carbon border measure as part of its cap and trade scheme, tho only for electricity.

Here’s a fascinating study by @StefanPauer on how business power conspired to shred its efficacy. (sciencedirect.com/science/articl…) Makes perfect sense that California would want to do this. It is by far the largest net importer of electricity of any US state. Why decarbonize your state electricity sector if emissions are all going to leak over state borders? (eia.gov/todayinenergy/…)

In percent terms, that amounts to about a third of total usage. (energy.ca.gov/data-reports/e…)

Anyway, as Pauer documents, renewables producers were strongly support of the border carbon adjustment (BCA)

While the big utilities opposed.

In the “loud politics” phase, electricity cap-and-trade + BCA were included, with strong rules against “resource shuffling” — a type of carbon leakage. But, after the move to “quiet politics,” utilities were able to have the BCA eviscerated.

A study from @dcullenward and @daveregrets from around the time predicted major leakage risks from the carve outs and exemptions sought by the utilities. (law.stanford.edu/wp-content/upl…)

The laxity of the law-as-applied may be one reason there does not appear to have been a legal challenge against it. And there are numerous constitutional questions a state level restriction on interstate commerce raises, as explored here by Thomas Alcorn. (repository.law.umich.edu/cgi/viewconten…) Other aspects of California’s climate efforts have been (ultimately unsuccessfully) challenged on these grounds, including its fuel standard. See Rocky Mountain Farmers Union v. Corey (2013) (govinfo.gov/content/pkg/US…)

Somehow had totally missed that the Trump administration had also sued California over its linked cap-and-trade agreement with Quebec, calling it a treaty. The courts did not agree. (leagle.com/decision/infdc…)

Anyway, some of these constitutional considerations will rear their head if New York state imposes a form of carbon border measure, as the New York Independent System Operator has called for. (nyiso.com/documents/2014…)

(Adapted from this thread.)

I write about democracy, political economy, and trade. Fellow at the Roosevelt Institute and Roosevelt Forward.