Discussion Paper

Rethinking Environmental Federalism in a Warming World

Jan 27, 2012 | William Shobe, Dallas Burtraw

Abstract

Climate change policy analysis has focused almost exclusively on national policy and even on harmonizing climate policies across countries, implicitly assuming that harmonization of climate policies at the subnational level would be mandated or guaranteed. We argue that the design and implementation of climate policy in a federal union will diverge in important ways from policy design in a unitary government. National climate policies built on the assumption of a unitary model of governance are unlikely to achieve the expected outcome because of interactions with policy choices made at the subnational level. In a federal system, the information and incentives generated by a national policy must pass through various levels of subnational fiscal and regulatory policy. Effective policy design must recognize both the constraints and the opportunities presented by a federal structure of government. Furthermore, policies that take advantage of the federal structure of government can improve climate governance outcomes.

While Congress has stalled in passing comprehensive climate change legislation, several states and localities have taken steps to reduce greenhouse gas emissions. Many authors emphasize that national standards are essential for ensuring efficient, cost-effective climate policy. And most analysis has focused almost exclusively on national policy and even on harmonizing climate policies across countries, implicitly assuming that synthesizing such policies at the subnational level would be mandated or guaranteed.

In a new discussion paper, William Shobe and RFF Senior Fellow Dallas Burtraw argue that the federal relationship between national and subnational layers of government should not be taken for granted— that it provides a crucial context for the design and implementation of cost-effective and ultimately successful climate policy. A strong policy strategy will diverge in important ways from notions that assume a unitary government and fail to recognize the interaction among the multiple layers of decisionmaking relevant to climate policy.

Rather than try to reign in the historic prerogatives of subnational entitities, comprehensive policy should take advantage of subnational autonomy, according to the authors. In a federal system, the information and incentives generated at the national level must pass through various layers of subnational fiscal and regulatory policy. Those signals are often distorted or muted before they reach actors in the public and private sectors at state and local levels of government—where planning and investment decisions build the infrastructure that society as a whole will inheret as it addresses climate policy challenges over this century. Effective policy design must recognize both the constraints and the opportunities presented by a federal structure of government; as Shobe and Burtraw point out, policies that take advantage of the federal structure of government can improve climate governance outcomes.​