Cross-Border Constraints on Climate Change Agreements: Legal Risks in the California-Quebec Cap-and-Trade Linkage

Abstract

As the world begins implementing the Paris Agreement, Canada and the United States remain without comprehensive greenhouse gas regimes at the federal level; most action has taken place at the sub-national level. At the forefront is the California-Quebec cap-and-trade market linkage. Close examination of this example demonstrates that such linkages are susceptible to constitutional constraints on both sides of the border. This Article presents constitutional dimensions from Canada and the United States, and shows there is a live risk that a court could find the linkage constitutionally offside due to its binding effect. Constitutional constraints particular to the United States also suggest that foreseeable changes may put the California state program at variance with federal climate policy, rekindling risks around consistency between state action and U.S. foreign policy. The Article puts forward two suggestions, one federal and one sub-national, that could be taken in Canada and the United States to partially reduce the remaining legal risk.

Keywords: carbon markets, climate change, market mechanisms, climate policy, emissions trading