Shopping for State Constitutions: Unequal Gift Clauses as Obstacles to Optimal State Encouragement of Carbon Sequestration

Carbon capture and sequestration technology (CCS) could drastically reduce CO2 emissions from coal-fired power plants, thereby mitigating climate change. CCS, however, faces a difficult barrier to market entry: liability for the technology’s many long-term risks. States would like to alleviate this long-term liability problem to capture CCS’s social benefits. Some state constitutions, however, have provisions called “gift clauses” that prohibit giving aid to private parties. This Note argues that some state constitutions’ gift clauses prevent indemnification of private CCS developers. As this Note’s fifty state survey shows, other state constitutions allow indemnification. This asymmetry in constitutionally-allowed financial encouragement results in unfair interstate competition and poor incentives for safe site-selection. This Note then proposes some alternative financing strategies that states can use to close the gap and federal interventions that could level the playing field