As Carol Holahan discussed, the 7th Circuit last month affirmed the Illinois zero emission credit program. Now the 2nd Circuit has weighed in, agreeing with the 7th Circuit and affirming the similar New York State ZEC program. Whatever one’s views on the merits, it seems pretty clear at this point that state programs to encourage generation of renewable or zero-emissions energy will be upheld by the Appeals Courts, so long as the incentives are:
Untethered to a generator’s wholesale market participation.
Traditional generators are going to have an uphill battle combating these programs for at least three reasons. First, liberal judges want to preserve programs that encourage renewable energy use. Second, conservative judges want to preserve state authority. Finally, in the absence of a Circuit split (which is becoming less likely by the day), the Supreme Court seems unlikely to take these cases.
Of course, we still haven’t figured out how to allow states to regulate energy production to encourage outcomes states find desirable without interfering in efficient wholesale markets. Just because these programs are constitutional doesn’t mean that the deregulated market system developed over the past 20 years doesn’t face some significant challenges.