Publication

September 29, 2009Client Alert

Moving Forward on Climate Change – Again

A lot is happening on the climate change front, including international forums, federal administrative action, federal court decisions, as well as federal and state level legislation. While the House passed federal climate change legislation back in June 2009, the Senate has been temporarily sidetracked by the health care debate (and may be permanently sidetracked with elections in 2010). Senators Kerry and Boxer have announced they will release climate change legislation in the Senate this week. Stay tuned for updates on the Senate legislation.

Meanwhile, all other interested parties, including many U.S. businesses, seem to be picking up the ball and running with it. For example, Chicago-based Exelon Corp., New Mexico-based PNM Resources, Inc, and California-based Pacific Gas & Electric, have all recently decided to withdraw from the U.S. Chamber of Commerce. A spokesperson for Exelon stated on Monday that the company was leaving the Chamber because of the Chamber’s “opposition to climate legislation.” Other Chamber members have also expressed their concern over the Chamber’s position on federal climate legislation, and the Chamber is now trying to re-frame its position in the media and maintain its credibility among members who support federal climate change legislation.

The balance of this alert will briefly summarize some of the recent news pertaining to the climate change discussion.

International Discussions

The United Nations convened in New York last week to discuss issues that will be the focus of climate change talks in Copenhagen, Denmark in December. No real negotiating occurred, but rather heads of state gathered to make political statements and set the stage for negotiations in Copenhagen.

  • At the summit, President Obama recognized the United States’ commitment to mitigating the impacts of climate change, but emphasized the need for the United States’ efforts to be part of a cooperative international approach.

  • Chinese President Hu Jintao also addressed the UN Summit, publicly stating his country’s intention to curb the growth of China’s greenhouse gas emissions. President Hu Jintao’ speech was cautious, only stating that the country would cut its emissions per unit of output by a “notable margin” by 2020, but also included a commitment to use renewable sources for 15% of its total energy output by 2020. Industry commentators have noted that China is actually developing renewable sources of energy at a faster rate than any other country in the world. However, in 2009 alone, China may add 100 gigawatts of power to its electricity grid – and upwards of 75% of that will be coal-fired.

Administrative Developments

Despite the apparent lag in federal legislation, the U.S. EPA has been moving ahead on federal climate change regulations, including mandatory GHG reporting, a suite of publications in the last several months, and certifying offsets for its own voluntary emission reduction program.

  • As noted in our client alert titled, "Environmental Protection Agency Finalizes Mandatory GHG Reporting Rule," U.S. EPA Administrator Lisa P. Jackson recently signed a final rule that requires mandatory GHG emissions monitoring and reporting for certain source categories and other facilities that emit more than 25,000 metric tons of GHGs per year. EPA estimates that rule will affect 10,000 facilities, which account for 85% of all GHG emissions nation-wide. EPA plans to use the data collected pursuant to the GHG reporting rule to develop and support policy decisions on climate change regulation.

  • Since the Obama Administration took the reigns, EPA has also taken a number other steps in the direction of regulating GHGs, including: publishing a Notice of Proposed Rulemaking to Establish Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Fuel Economy Standards (signed September 15, 2009); publishing its long awaited Proposed Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202(a) of the Clean Air Act, 74 FR 18886 (April 24, 2009) – it is anticipated this will be finalized in the coming months; reconsidering “EPA’s Interpretation of Regulations that Determine Pollutants Covered By Federal Prevention of Significant Deterioration (PSD) Permit Program” 73 FR 80300 (December 31, 2008); and granting California’s request for a waiver for its GHG vehicle standard, 74 FR 32744 (July 8, 2009).

  • Besides the traditional command and control regulations, EPA recently approved the certification of 100,000 metric tons of avoided GHG emissions that will be sold as offsets in voluntary carbon markets. Between January and September 2008, the Clinton County Landfill Methane Project, near Plattsburgh, N.Y., effectively avoided 100,000 metric tons of GHG emissions by collecting and destroying methane gas. This is the first set of offsets approved by EPA through its Climate Leaders program; the offsets also received third-party certification through carbonfund.org, which allows them to be sold into a voluntary offset market.

Climate Change Litigation

On September 22, 2009, the Second Circuit Court of Appeals issued a decision that could get U.S. Congress to move forward on federal climate change legislation. Eight states, including Wisconsin, the City of New York and three environmental advocacy groups, sought an injunction to curb carbon dioxide emissions from five of the largest utilities in the country. The Court allowed a federal public nuisance claim to proceed against defendants’ carbon dioxide emitting energy companies, in part because the claim was not preempted by either EPA regulation or Congressional action. While there is no outcome yet, this decision opens the door to more federal lawsuits against carbon dioxide emitters which could have significant impacts, not only on the energy industry, but on the insurance industry that covers such facilities.

State Initiatives

The State of Oregon recently passed a suite of climate change legislation, including new more stringent emission performance standards for power plants, expanded renewable portfolio requirements for solar power, a low carbon standard for transportation fuels, energy efficiency mandates and a feed-in tariff for renewable energy. The Oregon legislature failed to pass an enforceable GHG cap and trade program, in part because federal climate change legislation may still make its way through Congress.

With its new legislation, Oregon joins Vermont and California as the only states with feed-in tariffs on the books. Feed-in tariffs basically guarantee certain electricity generators, typically renewable generators, access to the transmission grid and a guaranteed electric rate. Feed-in tariffs are a tool to promote renewable energy generation. In January 2009, the Wisconsin Public Service Commission ("PSC") opened an investigation on Advanced Renewable Tariffs in Wisconsin. In May 2009, the PSC issued a Briefing Memo on its findings and has been accepting public comments on that memo. A number of other states are currently debating or studying feed-in tariffs, including Michigan, Illinois, South Dakota, Minnesota, and Hawaii, which may result in more state feed-in tariff legislation.

For more information, please contact the author(s) of this alert.

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