The Dormant Commerce Clause Threat to Market-Based Environmental Regulation: The Case of Electricity Deregulation

Abstract:     
This Article is an attempt to address the Commerce Clause issues raised when state regulators employ market-based approaches to environmental regulation. Commerce Clause issues 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. Whether those things be tradable obligations to purchase renewable power or tradable permits to pollute, does a state that adopts such market-friendly approaches thereby automatically transform its regulatory authority into an article of commerce within the meaning of the Commerce Clause? Will such a state unwittingly find its efforts to protect the environment stymied by the Supreme Court's dormant Commerce Clause jurisprudence? Similar issues arise when a state employs other market-based approaches to regulation, such as forcing manufacturers to internalize the environmental costs of production or waste disposal, thereby increasing the price of goods. These Commerce Clause questions may be expected to arise with greater frequency as market-oriented approaches to achieving public goals become increasingly popular. The thesis of this Article is that barriers to interstate commerce should be considered constitutionally permissible when they result from state efforts to (1) retain the benefits of an incentive-based environmental market the state itself has created; (2) prevent the loss, to other jurisdictions, of the benefits generated where citizens collectively invest in industries using more environmentally sensitive production processes; or (3) stem the flow, to other states, of conventional economic benefits that result when a state forces industries to internalize the environmental costs of production and waste disposal. In other words, the Commerce Clause should not void state regulation that attempts to prevent free benefits from accruing to other states.

Number of Pages in PDF File: 107

Keywords: State, market-based, environmental, regulation, dormant, Commerce Clause, tradable permits, emissions credits, renewable power, renewable portfolio standard, electricity deregulation, interstate commerce, incentives

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