THE DORMANT COMMERCE CLAUSE THREAT TO MARKET-BASED ENVIRONMENTAL REGULATION: THE CASE OF ELECTRICITY DEREGULATION

The Commerce Clause issues raised when state regulators employ market-based approaches to environmental regulation are examined. Indeed, problems can arise when state legislators, in an effort to protect the environment, experiment with creating markets for things that were never before conceived of...

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Bibliographic Details
Published in:Ecology law quarterly 1999-01, Vol.26 (2), p.243-349
Main Author: Engel, Kirsten H.
Format: Article
Language:English
Subjects:
Commerce clause
Commercial policy
Credit
deregulation
Economic aspects
Economic regulation
Electric industries
Electric utilities
Electricity
Emission standards
Emissions trading
Energy
Environmental aspects
Environmental regulation
Green marketing
Interstate commerce
Pollutant emissions
Pollution control in industry
Regulation
Renewable energy
Renewable energy sources
United States
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Summary:The Commerce Clause issues raised when state regulators employ market-based approaches to environmental regulation are examined. Indeed, problems can arise when state legislators, in an effort to protect the environment, experiment with creating markets for things that were never before conceived of as marketable. The focus of this treatise is on the rapid deregulation of the electricity-generation industry. The generation of electricity relies heavily on fossil fuels, so it is extremely pollution-intensive. Deregulation creates incentives to use cheaper, but more polluting, coal and other fossil fuels, so investment in renewable energy and R&D may suffer in the short term. Many of the market-based regulatory mechanisms currently being adopted by states to mitigate the adverse environmental impacts of electricity deregulation are surveyed. These include: marketable permits to pollute, tradable green-product purchase obligations, environmental externality values, emissions portfolio standards, system benefits charges, and pollution taxes. For each mechanism, both the states' incentives to protect environmental and economic benefits through the erection of trade barriers and the dormant Commerce Clause issues that such barriers raise are analyzed. Some of these approaches may be unconstitutional under the current interpretation of the dormant Commerce Clause. It is argued that current dormant Commerce Clause doctrine invalidates more legislation than is justified by the principles underlying the Clause, thereby stifling innovation. Three principles are proposed for reforming the facial discrimination and extraterritoriality tests under the Commerce Clause.
ISSN:0046-1121