The U.S. Supreme Court gave California a big victory recently by declining to hear a decision by the 9th Circuit Court of Appeals regarding whether the state’s Low Carbon Fuel Standard (LCFS) violates the so-called “dormant” Commerce Clause of the U.S. Constitution. A federal judge for the Eastern District of California found in December 2012 that the LCFS was unconstitutional, but the 9th Circuit reversed the district court last fall while remanding the case back to the district judge on several aspects of the case. The district court will now reexamine its earlier rulings.
The Dormant Commerce Clause does not appear in the U.S. Constitution, but it is extremely important in climate and renewable energy law because many states (especially California) have been leading the development of climate law and policy. The Commerce Clause states that the federal government shall regulate commerce among the states, which implies that the states cannot regulate interstate commerce—hence, the “dormant” Commerce Clause (DCC) is inferred by negative implication. Historically, the DCC has been used to strike down state and local laws that were designed to achieve some type of economic protectionism for local industries. In these cases, the DCC is clearly applicable and reflects the clear intent of the original Constitution. It is less clear, however, when or how the DCC should apply to state laws and policies designed to reduce greenhouse gas emissions.
The state of DCC jurisprudence in the climate law context is murky. A federal court in Colorado recently rejected a DCC challenge to Colorado’s renewable energy standard, but a federal court in Minnesota has struck down a Minnesota statute in a DCC challenge. Judge Richard Posner of the 7th Circuit also generated some blogbuzz last year when he opined in a non-DCC case that Michigan’s renewable energy standards (which favored in-state generation) were probably unconstitutional. Posner never analyzed the facts in Michigan’s case nor applied the applicable analytic standard, but his prominence constitutes an invitation for a DCC suit. Both the Colorado and Minnesota cases will also surely go up to the U.S. Courts of Appeal.
My former student Daniel Lee (now an Associate Attorney at Stoel Rives in Seattle) and I summarized the key jurisprudence as applied to state climate and renewable energy polices last year in our article in the San Diego Journal of Climate and Energy Law (here). (Note that the article appeared before the 9th Circuit, Colorado, or Minnesota decisions—so we only analyze those cases based on their status then.) Looking closely at the Colorado decision, though (which was our focus in the article), the key procedural decision was one that eliminated several of the plaintiffs’ claims on the grounds of inadequate standing. The Colorado court therefore never really got to the merits on what could have been the plaintiffs’ best fact pattern.
Our federal system allocates policy power both horizontally through the separation of powers (i.e., between the Legislative, Executive, and Judicial branches of government) and vertically (i.e., between the states and the federal government). The EPA’s recent rulemaking proposals have generated a lot of focus on the horizontal allocation of power between the Legislative and Executive branches, but I expect the battle over the vertical allocation of power between the states and the federal government will be coming to the Supreme Court sometime in the next few years: we are likely to see a Circuit split on the issue as the Colorado and Minnesota cases work their way up (and possibly a challenge to Michigan’s statute), which will then require Supreme Court intervention. The procedural posture of the California LCFS case does not (yet) warrant such intervention, and some of the Justices may prefer waiting for a fact pattern that is more favorable to overturning state statutes in this area. California’s win is therefore not necessarily a victory for state policies down the road that flirt with the limits of DCC doctrine.
These issues will be central to my work over the next few weeks, when I’ll be teaching a course on U.S. Renewable Energy Law and Policy to Chinese law students in Beijing at China University of Political Science and Law (CUPL). The American constitutional system of government is inefficient by design, with fractured policy authority and great uncertainty about the allocation of power on issues like this. I expect to learn a lot about China’s system while in Beijing and I’ll report back on that when I return.