Constitutional Restrictions on Regulation by American States

Constitutional Restrictions on Regulation by American States Daniel Farber Today, both our economy and our ecosystem increasingly must be seen as global. Devoting equal attention to both, the 1992 Rio Declaration called for sustainable development on a global level. More specifically, Principle 12 of the Declaration endorses an open international economic system. Principle 7 requires all states to “cooperate in a spirit of global partnership” to preserve the ecosystem. Inevitably, the regulatory policies of economically important political jurisdictions, such as California and the European Union, have extra-territorial impacts. These impacts include direct effects on the practices of firms based in one jurisdiction seeking to do business in the other, and indirect effects through policy emulation, learning and coordination. These policies can also impose differential costs on local and outside firms, changing the terms of economic competition and potentially causing economic distortions. At the same time, policies may also have environmental effects in other jurisdictions, making coordination desirable. Explicit forms of cooperation between American States and other nations have also now begun to emerge. New England Governors have entered an agreement with Eastern Canadian Premiers to set goals for reducing CO2 emissions and monitor progress. 1 California has also begun a collaborative effort with the United Kingdom to aggressively pursue energy diversity and greenhouse gas limits by investigating and implementing common market-based approaches and sharing technical information and strategies. 2 In seeking to further cooperation with the EU, California legislation may encounter a variety of constitutional barriers. The purpose of this paper is to explore the constitutional restrictions on state legislation that might limit California cooperation with the EU. For instance, an otherwise desirable innovation may be inconsistent with federal law. California also may be precluded from entering into certain kinds of agreements with the EU because doing so would invade the foreign policy prerogatives of the federal government. American states are subject to three constitutional restrictions that are relevant to environmental and social regulation. The first is called the dormant commerce clause doctrine. It prohibits states from engaging in regulation that discriminates against interstate or foreign commerce or that unduly burdens such commerce. As we will see, this doctrine is analogous to EU mandates governing the free movement of goods or to WTO trade disciplines. WTO rules may themselves be a limitation on state legislation, See Eleanor Stein, Regional Initiatives to Reduce Greenhouse Gas Emissions, in Michael B. Gerrard, Global Climate Change and U.S. Law 326-327 (2007). Id. at 331.

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