## Facts

- California created a greenhouse-gas cap-and-trade program under state law, administered by the California Air Resources Board (CARB), setting an emissions cap and allowing allowance trading.
- California worked with Western Climate Initiative, Inc. (WCI, Inc.), a nonprofit that provided administrative and technical services for multi-jurisdiction emissions trading systems.
- California and the Province of Quebec entered a 2013 agreement to harmonize and integrate their cap-and-trade programs, enabling joint auctions and mutual recognition of allowances.
- The agreement focused on technical coordination (e.g., auction platform and tracking systems), disclaimed changing either jurisdiction’s statutes or regulations, and allowed unilateral withdrawal.
- Ontario briefly joined the linkage and later withdrew without advance notice and without legal consequence.
- The United States sued, asserting the linkage intruded on federal authority over foreign relations and violated constitutional limits on state dealings with foreign powers.

## Issues

1. Whether the California–Quebec agreement constituted a prohibited “treaty” under the Treaty Clause.
2. Whether the linkage was an “agreement or compact” with a foreign power requiring congressional consent under the Compact Clause.
3. Whether the linkage increased state power in a manner that encroached on federal supremacy (the functional Compact Clause test).

## Decision

- The court granted summary judgment for California and the WCI, Inc. defendants on the Treaty Clause and Compact Clause claims and denied the United States’ cross-motion.
- The court held the agreement was not a “treaty” within the meaning of the Treaty Clause.
- The court held the agreement was not an impermissible compact and did not require congressional consent because it did not enhance California’s political power at the expense of federal supremacy.

## Legal Principles

- The Treaty Clause is not triggered by cross-border administrative coordination that does not bind a state in sovereign commitments or purport to speak for the United States in foreign relations.
- For Compact Clause purposes, congressional consent is required only for agreements that tend to increase state political power in a way that may encroach upon federal supremacy.
- An arrangement that preserves each party’s unilateral authority to modify or terminate its program, creates no new sovereign or regulatory entity, and leaves federal policy-making capacity unimpaired generally does not require congressional consent.

## Conclusion

The court upheld California’s cap-and-trade linkage with Quebec, ruling that the technical, nonbinding, and terminable coordination did not amount to a prohibited treaty and did not constitute a compact requiring congressional consent because it did not threaten federal supremacy.


United States v. California, 444 F. Supp. 3d 1181 (E.D. Cal. 2020)