Since Donald Trump took his oath of office in 2017, the State of California has sued his administration over 60 times. Now, the administration is suing back, targeting California’s strongest climate policy — its cap and trade policy agreement with the Canadian Province of Quebec.

The federal government has challenged the constitutionality of this program, citing the need for cohesive foreign policy across the fifty states.

California’s Cap and Trade Program

Relative to other states, California is well known as a champion against climate change. One of its most effective climate initiatives, the Golden State recently entered a cap and trade agreement with Quebec.

This cap and trade agreement began in 2013 in order to reduce greenhouse gas emissions. To do so, the policy sets a limit on how much carbon and other greenhouse gases corporations can emit.

This program encompasses several industries responsible for pollution, including oil refineries, fuel distributors, and power plants. By parceling the statewide carbon limit into tradable units among these companies, cap and trade can effectively regulate carbon emissions. Each of these units comprises one metric ton of greenhouse gas emissions.

In short, this market-based solution aims to set a hard cap on how much both California and Quebec pollute annually. If successful in the long run, the program intends to gradually lower the cap over the years.

Why Carbon Cap and Trade?

To promote green energy usage, the system rewards companies that do not use their entire allowances of emissions. If a company has extra permits, they can sell them to corporations that emit more heavily. In turn, corporations who have not transitioned towards more renewable energy sources are forced to pay for additional emissions permits.

Cap and trade would give companies a financial incentive to limit emissions — and also limit emissions altogether.

However, companies are not strictly coerced into limiting their carbon emissions. Rather, companies whose carbon emissions exceed their allowances have three options to comply with cap and trade regulations.

Of course, the most rewarding course of action is for a company to simply reduce their emissions accordingly. But for companies who cannot accomplish this task, they can either purchase permits from other corporations or invest in carbon “offsets.” These offsets essentially make up for carbon emissions by limiting pollution elsewhere, bringing a company’s net emissions back into the imposed limit.

In all, by linking California’s cap and trade program with Quebec, the program hopes to reduce carbon emissions and set a new standard for energy governance.

The Case: United States vs. California

In 2013, California sought to expand this policy by joining forces with a similar program in Quebec. And in 2018, the program again extended to include another Canadian province, Ontario. As it stands, this is now the largest carbon allowance market in North America. But it has since faced steady opposition from the Trump administration.

The Department of Justice says California has “veered outside of its proper constitutional lane to enter into an international emissions agreement.”

In October 2019, the federal government officially filed suit against the State of California. In a civil complaint, the U.S. Department of Justice argued that California’s cap and trade policy is inherently unconstitutional. By usurping the federal government’s responsibility to conduct foreign policy, the department claimed California had overstepped its state power.

“The state of California has veered outside of its proper constitutional lane to enter into an international emissions agreement,” said Jeffrey Bossert Clark, an attorney general within the Department of Justice. “The power to enter into such agreements is reserved to the federal government, which must be able to speak with one voice in the area of U.S. foreign policy.”

A press release from the Department of Justice further clarified the grounds of the lawsuit. “The Constitution prohibits states from making treaties or compacts with foreign powers, yet California entered into a complex, integrated cap-and-trade program with the Canadian province of Quebec in 2013 without congressional approval,” the report concluded.

Governor Gavin Newsom Sees a Political Vendetta at Play

Yet the true intentions of this federal government may be more opaque. Among the opposition, California’s Governor Gavin Newsom called the lawsuit part of a larger “political vendetta against California” from the Trump administration.

This vendetta certainly includes other efforts from the federal government to undermine California’s climate initiatives. In September, the Trump administration prohibited the state from setting regulations on auto emissions, leading to yet another lawsuit.

California Survives its First Federal Court on the Case

Regardless of the lawsuit’s intentions, California has stood strong against the Trump administration’s opposition to its cap and trade program.

“For years our state has proudly participated in a number of environmental partnerships that tackle the devastating effects of climate change to our health and economy,” said Governor Newsom. “This latest attack shows that the White House has its head in the sand when it comes to climate change and serves no purpose other than continued political retribution.”

California Governor Gavin Newsom calls the Trump Administration’s reaction to cap and trade “continued political retribution.” Photo Credit: Gage Skidmore

Although ongoing, the defendants show promise for success. Last week, California withstood its first federal court on the case.

Undermining the Trump administration’s key argument, Judge William Shubb of the U.S. District Court for the Eastern District of California ruled in favor of California earlier this March.

“This agreement is not a treaty creating an alliance for purposes of peace and war … nor does it constitute a treaty for ‘mutual government’ or represent a ‘cession of sovereignty,'” Shubb said.

Judge’s Decision: California is Not in the Wrong

Rather, the judge affirmed the agreement between California and Quebec is nonbinding and independently-run, thus defying the Department of Justice’s opposition.

And while the decision could still be appealed to a higher court, the legal process has not inhibited the program. Instead, cap and trade is continuing as per usual, according to California’s Air Resources Board chief, Mary Nichols.

“Nothing in this complaint changes the current operation of the cap and trade program,” she said.