Update – March 12, 2020 – District Court Rules in Favor of California in Cap-and-Trade Lawsuit

A federal district court in California granted the state’s motion for summary judgment on Treaty Clause and Compact Clause claims filed by the U.S. Government against California’s cap-and-trade program. The court did not decide claims under the Foreign Affairs Doctrine and Foreign Commerce Clause, as neither the state nor the U.S. government sought summary judgment on those claims.

In October, the U.S. Government filed a complaint alleging that California’s agreement with Quebec to link each jurisdiction’s greenhouse gas cap-and-trade program is unconstitutional. The U.S. argued that California has formed a “purely political pact” that has no “connection to a discernible local interest” and “usurp[s] part of the United States’ exclusive role in formulating this nation’s foreign policy.” It urged the court to conclude that the linkage agreement is therefore a forbidden “Treaty” under Article I. Moreover, the U.S. insisted, the agreement “requires the parties to conform their programs to the point where they are knitted into a virtually seamless regulatory apparatus” and is therefore a Compact that requires Congressional approval. Because Congress has never sanctioned the agreement, the U.S. argues that it is invalid. The court rejected both claims.

On the Treaty Clause, the court emphasized the “independence” of the California and Quebec cap-and-trade programs. Each jurisdiction independently adopted their programs, which can run independently of each other. Moreover, the agreement itself recognizes “each Party’s sovereign right and authority to adopt, maintain, modify, repeal, or revoke any of their respective program regulations or enabling legislation.” Indeed, California has modified its regulations several times without consulting Quebec. With this understanding, the court concluded that the agreement does not fit any of the examples the Supreme Court has provided of an Article I Treaty. The agreement is not “treaty for mutual government” and does not “represent a cession of sovereignty.”

The district court also concluded that the agreement does not exhibit the “classic indica of a compact” as outlined by the Supreme Court. The agreement does not require reciprocal action to take effect and it does not create an organization with regulatory authority. The court also rejected the argument that the agreement enhances California’s power with respect to the U.S. government. Critically, the court found, the agreement does not authorize California to exercise any power it would not otherwise have.

The decision is available on the California page.