Subnational Climate Mitigation Policy : A Framework for Analysis

This paper addresses the optimal role for state mitigation policy in the face of insufficient federal action. It contrasts a first-best regime of robust global carbon pricing, in which the proper role for sub-national governments would be limited to complementary policies like land use reform and congestion pricing, and to implementation and enforcement of higher order policies, with the current situation in which sub-national policies can also substitute for and promote federal action. Substitution means achieving direct emissions reductions and demonstrating, to the extent possible, a credible commitment to mitigation. Promotion means building constituencies for robust federal action and demonstrating and refining mitigation policies for application at the national level. On the margin, there are tradeoffs between these mechanisms for state policy in terms of allocation of political capital and other scarce resources. Optimal management of these tradeoffs depends on examining basic assumptions regarding the necessity of robust national and global action and the effectiveness of state policies at promoting such action