At the annual U.N. climate talks in Doha, Qatar, delegates are undoubtedly applauding the new Australian cap-and-trade scheme, bemoaning Canada's withdrawal from the Kyoto Protocol, and wondering what to do about emissions from emerging India. They will spend far less time thinking about an economy bigger than any of those: California.
California's new cap-and-trade system is perhaps the biggest good news climate story this year, and delegates in Doha should be celebrating it. Just last month, environmentalists celebrated California's first successful auction of carbon emissions allowances. Yet the rise of Sacramento and other state capitals as leading forces in U.S. climate policy raises thorny foreign-policy dilemmas, too. These are easy to miss because U.S. states have no seats at the global climate talks, but are nevertheless critical for negotiators around the world to address.
Taking credit for progress in California and elsewhere will be tricky for the United States: International diplomacy tends to focus on what is happening in national capitals, slighting state efforts in the process. This problem will be resolved over the long run by what happens on the ground, since climate policy success in places like California should reduce total national emissions -- the ultimate proof of their success. But U.S. diplomats can reap dividends today by doing a better job of systematically showing other countries what ongoing state-level efforts will deliver. Putting those efforts in the context of what is happening in similarly sized economies -- like Australia, Russia, and the United Kingdom -- could help.
Some of what happens as a result of state policy, though, presents tougher challenges for Washington. California's cap-and-trade program, in particular, promises to launch the United States into uncharted territory on climate change -- and could even cause Sacramento to develop its own foreign policy at odds with the agenda formulated at Foggy Bottom.
California is already becoming entangled in the international system: Its program will eventually allow companies to comply with its climate laws in part by buying international "offsets" instead of reducing their own emissions. (Offsets are payments to entities overseas that cut their emissions below what regulators judge that they otherwise would have been, had the offset system not been in place.) Offsets are being used by Europe and Japan to help meet their obligations under the Kyoto Protocol; implemented properly, they can be an important part of California's approach too.
Yet they pose significant dilemmas for Washington. The first has to do with accounting. When the Japanese or European governments report their total emissions to the United Nations, they take credit for offset projects that they or their companies have supported abroad. If an oil company operating in the Netherlands, for example, buys offsets that finance a big reduction in Indian power plant emissions, the Netherlands gets to report that emissions cut as its own. As California allows international offsets into its system, then, Washington will be faced with a decision: Should it follow the European precedent and count the foreign emissions cuts supported by California-purchased offsets as its own?