Trump administration sues California over cap-and-trade agreement with Canada

Cap and Trade
California’s cap-and-trade program requires companies to reduce their emissions or buy permits allowing them to continue to pollute.
(Christina House / For The Times)

The Trump administration took aim Wednesday at one of California’s premier climate change policies, suing the state for entering into a cap-and-trade agreement with the Canadian province of Quebec to lower fossil fuel emissions.

The lawsuit filed by the Department of Justice argues that California overstepped its legal authority by forging an agreement with another country designed to limit air pollution and climate-warming greenhouse gases. Only the federal government has this power, according to the suit. Also named as defendants are state’s top air quality regulator and the Western Climate Initiative, a nonprofit group California created with neighboring states to promote similar policies.

“The state of California has veered outside of its proper constitutional lane to enter into an international emissions agreement,” said Assistant Atty. Gen. Jeffrey Bossert Clark of the Justice Department’s Environment and Natural Resources Division in a statement. “California’s unlawful cap-and-trade agreement with Quebec undermines the President’s ability to negotiate competitive agreements with other nations, as the President sees fit,” Clark added.

California Gov. Gavin Newsom released a statement criticizing the lawsuit as another episode in what he called the Trump administration’s ongoing “political vendetta against California.”


“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,” the governor said. “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.”

The Trump administration has steadily escalated its attacks against California’s ability to crack down on air and water pollution. In September, it revoked a decades-old rule that empowered California to set tougher car emissions standards than those required by the federal government, prompting the state to file a lawsuit in response. Then, in the span of about a week, Trump’s Environmental Protection Agency sent letters threatening to cut federal highway funding for California over alleged Clean Air Act violations and accusing the state of failing to protect its water.

In addition, the Department of Justice has launched an antitrust investigation into whether four automakers violated federal competition law by reaching a voluntary emissions agreement with California.

California’s cap-and-trade program has been in operation since 2013 and is considered essential if the state is to meet its targets for reducing carbon pollution.

The program works by establishing an annual limit, or a cap, on nearly all of the state’s greenhouse gas emissions. California oil refineries, cement plants and other industries can meet this requirement by either lowering their emissions or buying state-auctioned permits that allow them to pollute. These permits can then be bought and sold within an open market — the “trade” part of the program.

The theory underlying the program is that as the emissions cap is lowered, companies will find it more cost effective to decarbonize rather than continue to pay for pollution permits.


Quebec has participated in the program from the beginning, expanding the size of the emissions-trading market. Companies in California can trade carbon emission allowances with companies in Quebec.

David Wright, an assistant professor at the University of Calgary Faculty of Law, who has studied California’s agreement with Quebec, said that while there is some case law supporting the Trump administration’s legal argument, “the case is extremely far from a slam dunk.”

“I would suggest that this litigation will not be successful because the cap-and-trade regime was carefully structured to not have key characteristics of formal international agreements,” he said. “Even if unsuccessful, though, this litigation is problematic because it will affect market confidence in this emissions trading regime.”

Wright added that the administration’s lawsuit could ultimately backfire. If courts uphold the California-Quebec agreement, it could encourage other states to join.

Other legal experts said Trump may have weakened his administration’s own case by announcing plans to withdraw from the landmark Paris agreement on climate change, under which nearly 200 countries agreed to reduce greenhouse gas emissions.

“It is deeply ironic for the United States to make an argument that California is interfering with the United States’ ability to conduct foreign policy on greenhouse gas emissions when it has no foreign policy on greenhouse gas emissions,” said Ann Carlson, a professor of environmental law at UCLA.

California’s cap-and-trade program has raised billions of dollars since its launch through the auction of pollution permits. But so far, the program is not a major driver of cuts in greenhouse gases — most of which are being achieved through other, more traditional regulations including those on fuels, vehicles and power generation.

This has prompted some state lawmakers and other critics to question the program’s stringency, and whether an oversupply of allowances will be an obstacle to its efficacy.

Regardless, California regulators say the program’s role must increase dramatically in the coming years if the state is to meet its ambitious target of slashing greenhouse gas emissions to 40% below 1990 levels by 2030. The state Air Resources Board’s plan calls for cap-and-trade to become the single biggest driver of emissions reductions by 2030, responsible for more than one-third of emissions cuts.

The state’s plan to achieve its 2030 climate goal not only depends on a more stringent cap-and-trade program with a continually declining cap on emissions, but also calls for preserving the program’s linkage with Quebec as well as “future linkages with other jurisdictions, thus facilitating international action to address climate change.”

Though California officials hoped the program would spread to other states, that has not been the case. An attempt in Oregon to pass cap-and-trade legislation fell apart over the summer after Republican senators fled the state to avoid a vote on the measure and Democrats lost support for the bill within their own caucus.