The Commerce Clause Meets Environmental Protection: The Compensatory Tax doctrine as a Defense of Potential Regional Carbon Dioxide Regulation

Abstract

On December 20, 2005, seven northeastern states signed the Regional Greenhouse Gas Initiative ("RGGI"), an agreement aimed at reducing greenhouse gas pollution from power plants. Once enacted by each state's legislature or rulemaking agencies, this agreement will establish a "cap-and-trade" program to cap greenhouse gas emissions within the region and allow power plants to trade emissions allocations. This program faces a significant challenge, however. Electricity suppliers within the region may import power from outside the regulated region to avoid the constraints of the emissions cap, resulting in little or no net decrease in overall emissions—a problem known as "leakage." Because limiting emissions imports would inevitably place burdens on the interstate trade of electricity, the regulatory approaches available to RGGI states to limit imports of power from unregulated regions may be subject to attack as violations of the Commerce Clause of the U.S. Constitution. This Note explores the possibility of applying the concepts embodied in the compensatory tax doctrine to defend a regulatory scheme that the RGGI states might employ to combat leakage