CLIMATE CHANGE – An Overview of What is Happening in Congress, the States, and the Courts

Monica A. Schwebs Bingham McCutchen

January 11, 2007

Overview of Presentation

I. Current Status of Federal Initiatives

II. Regional Initiatives

III. State-by-State Initiatives

IV. Litigation

V. Possible New Federal Legislation

Photo Source: U.S. Congress

I. Current Status of Federal Initiatives

Congress• 1997 Byrd-Hagel Resolution opposing

ratification of Kyoto Protocol

• 2003 McCain-Lieberman GHG emissions targets bill defeated

• 2005 Congressional GHG bills defeated

• Current Federal laws

• GHG emissions - only mandatory requirement is reporting of electric utility CO2 emissions

• Federal laws that support reduction of GHG emissions

• Energy efficiency standards

• Conservation and alternative fuel incentives

• Technological development incentives

Executive Branch

• 2001 President repudiated Kyoto Protocol

• 2002 President called for voluntary action to cut GHG intensity (the amount emitted per unit of economic activity) by 18% by 2012, leading to formation of voluntary programs including:

• Climate Vision - Public-private partnership initiative launched by DOE to focus on energy-intensive industries

• Climate Leaders - Voluntary EPA industry-government partnership that works with companies to develop long-term comprehensive climate change strategies; Partners set a corporate-wide GHG reduction goal and inventory their emissions

• 2005 President formed Asia-Pacific Partnership on Clean Development and Climate Change - Includes Australia, China, India, Japan, Korea, and the U.S. who together account for 50% of GHG emissions

Photo Source: The White House

U.S. GHG Emission Trends

Source: Pew Center for Climate Change

What the American Public Thinks

Source: “Americans on Climate Change: 2005,” Survey by Program on International Policy Attitudes, Univ. of Md.

Constitutional Obstacles for the States

• The Federal government has authority over foreign affairs and interstate commerce

• Federal law is “the supreme law of the land,”meaning it preempts conflicting state law

• States cannot enter into interstate compacts without the approval of Congress The Signing of the Constitution

By Howard Chandler ChristyPhoto Source: U.S. Senate

II. Regional Initiatives

Source: Pew Center on Global Climate Change

The West Coast

Western Governors’ Global Warming Initiative

• California, Washington, Oregon

• In 2003, the Governors announced they would coordinate their states’ policies to combat global warming

• Staff collaborated to produce a set of recommendations on strategies that the states can pursue cooperatively and individually

In Dec. 2006, PUC Commissioners from these states and New Mexico entered into follow-on regional cooperation agreement

Image Source: California Energy Commission

The Southwest• Southwest Climate Change Initiative

• New Mexico and Arizona

• In 2006 the two states agreed to collaborate through their respective Climate Change Advisory Groups

• The Governors also agreed to advocate for regional and national climate policies

• Arizona and New Mexico both released Climate Change Action Plans in 2006

• Governors of both Arizona and New Mexico have issued Executive Orders to implement the recommendations in the Plans

Photo Source: U. of Arizona

Governor Napolitano, ArizonaPhoto Source: Office of the Governor

Governor Richardson, New MexicoPhoto Source: Office of the Governor

Western Governors’ Clean and Diversified Energy Initiative

• Western Governors’ Association covers 17 states

• In 2004, started initiative to get:

• 30,000 megawatts of new clean and diverse energy generation by 2015

• 20 percent increase in energy efficiency by 2020

• Have been working together in task forces

• In June 2006 Governors approved collective policy resolution that is intended to enable the West to meet the goals

Photo Source: City of Sedona, Arizona

Powering the Plains

• Participants from eight states and one Canadian province

• Public-private partnership of state officials, industry participants, agriculture representatives and renewable energy advocacy groups working on energy and agriculture initiatives that address climate change

• Developing an integrated energy strategy, policy recommendations, and demonstration projects

Source: Powering the Plains

Photo Source: California Energy Commission

New England States (and neighbors)

• Climate Change Action Plan of New England Governors and Eastern Canadian Premiers (2001)

• The Regional Greenhouse Gas Initiative (“RGGI”) -

• 7 states plus MD shortly and possibly MA

• MOU, 2005; Model Rule 2006; implementation January 2009

• Will be first mandatory cap-and-trade system for CO2 in U.S

RGGI StatesImage Source: RGGI

Cap-and-Trade Basics

Cost Minimization with Trading

Source: U.S. EPA

Setting Up A Program

1. Set cap

2. Divide cap into allowances

3. Distribute allowances

4. Sources report emissions

5. Reconciliation

6. Penalties

Regional Greenhouse Gas Initiative Basics• Important limitations - Only covers CO2 and power plants

• Caps set to meet targets: 2009-2015 - stabilize CO2 emissions at current levels; by 2019 - 10% reduction

• Allocation of allowances

• Overall cap allocated among states

• Allocation process within each state has economic, equity, and political ramifications

• All RGGI states have agreed to propose minimum of 25 % set-aside for public benefit or strategic energy purposes

• For each type of power plant, states can take many factors into account in deciding allowances - e.g. energy output, fuel input, fuel source, historic emissions, early adoption, etc.

• Distribution of allowances to be decided by States

• States can distribute at no cost

• States can sell through direct sale or auction - e.g. NY and Vermont propose to use 100% auction

• Offsets permissible:

• Examples: energy efficiency, landfill and agricultural methane reduction, sequestration through reforestation, reduction in sulfur hexafluoride emissions

• Are used as “safety valve” - allowance price will determine extent to which can be used

• Linkages: system could be linked to states outside region

• Offsets can be from anywhere in U.S. w/agreement of state

• Whole system can be linked with other states

• Problems?

• Economic impact - $3 -$16 per household in 2015, but overall savings if take into account efficiency gains

• Leakage - i.e. What should be done about imports of out-of-region power that is not subject to RGGI caps?

• Constitutionality?

III. State-by-State-Initiatives

• Climate Action Plans

• Climate Action Advisory Groups

• Greenhouse Gas Inventories

• Greenhouse Gas Registries and Reporting

• Emission Caps

• Power Plant Limits

States with Climate Action Plans

Source: Pew Center on Global Climate Change

States with Active Climate Legislative Commissions and Executive Branch

Advisory Groups

Source: Pew Center on Global Climate Change

States with Greenhouse Gas Inventories

Source: Pew Center on Global Climate Change

States with GHG Reporting & Registries

Source: Pew Center on Global Climate Change

States with Greenhouse Gas Emission Targets

Source: Pew Center on Global Climate Change

Comparison of Selected Emission Targets

States Target by 2010 Target by 2020

CA 2000 levels 1990 levels

CT, MA, NH,

RI, VT

1990 levels 10% below 1990 levels

NY 5% below 1990 levels

10% below 1990 levels

Note: Kyoto target is 7% from 1990 levels by 2012

States with a Carbon Cap or Offset Requirement for Power Plants

Source: Pew Center on Global Climate Change

Cities and Other Local Governments

• U.S. Mayor’s Climate Protection Agreement – over 330 U.S. mayors have committed to strive meet Kyoto Protocol targets for U.S.

• U.S. Conference of Mayors endorsed U.S. Mayor’s Climate Protection Agreement in June 2006 and urged all to join

• More than 185 local government members participate in ICLEI’ s Cities for Climate Protection program

Seattle, WAPhoto Source: ICLEI, Local Governments for Sustainability

IV. LitigationA. Types of Cases

1. Clean Air Act Litigation

2. NEPA/CEQA Litigation

3. Nuisance Litigation

4. Preemption Litigation

5. Other Litigation

Photo Source: Courts of Minnesota

1. Clean Air Act Litigation

Massachusetts v. EPAPending in U.S. Supreme Court

Challenge by 12 states and others to EPA decision not to regulate GHGs as “air pollutants” from motor vehicles

Issues:

• Do plaintiffs have standing?

• Does EPA have legal authority to regulate GHGs?

• If EPA has legal authority, what is the scope of EPA’s discretion to decide not to regulate GHGs?

Photo Source: U.S. Supreme Court

Massachusetts v. EPA - Standing to Sue

• Standing is often challenged in GHG cases

• Stems from Constitutional requirement that courts hear only actual “cases and controversies”

• Plaintiffs must how:

• (1) particularized injury;

• (2) causation by defendant’s actions; and

• (3) relief will redress the plaintiff’s injury

• In Massachusetts v. EPA, will Court find plaintiffs have standing?

Massachusetts v. EPASelected Relevant CAA Provisions

§ 302(g): “The term ‘air pollutant’ means any air pollution agent or combination of such agents, including any physical, chemical, biological, radioactive (including source material, special nuclear material, and by product material) substance or matter which is emitted into or otherwise enters the ambient air.”

§ 202(a): “[EPA] shall by regulation prescribe (and from time to time revise) in accordance with the provisions of this section, standards applicable to the emission of any pollutants from any class or classes of new motor vehicles or new motor vehicle engines, which in [its] judgment cause, or contribute to, air pollution which may reasonably be anticipated to endanger public health or welfare.”

§ 302(h): “All language referring to effects on welfare includes, but is not limited to, effects on soils, water, crops, vegetation, manmade materials, animals, wildlife, weather, visibility and climate, damage to and deterioration of property, and hazards to transportation, as well as on economic values and on personal comfort and well-being, whether caused by transformation, conversion, or combination with other air pollutants.”

1. Clean Air Act Litigation (cont.)

• Coke Oven Environmental Task Force v. EPA - pending in D.C. Circuit

• Challenge by 10 states and others to EPA failure to take into account GHG emissions in setting New Source Performance Standards for certain power plants

• Stayed pending decision by U.S. Supreme Ct. in Massachusetts v. EPA

• Northwest Environmental Defense Ctr. v. Owens Corning, D. Or. 2006

• Challenge to failure to obtain PSD permit for facility that would emit hydrochloroflurocarbon, which is both ozone-depleting and a greenhouse gas

• Court granted standing, in part, because plant would increase GHG emissions and cause injury to plaintiffs

2. NEPA/CEQA Litigation• NEPA decisions holding climate change has to be taken into

account

• Border Power Plant Working Group v. Department of Energy - S.D. CA 2003

• Mid States Coalition for Progress v. Surface Transportation Board - 8th Cir. 2003 (second round regarding sufficiency of SEIS - Maho Foundation v. Surface Transportation Board, pending 8th Cir.)

• Pending NEPA Cases

• Center for Biological Diversity v. National Highway Traffic Safety Admin. - pending in 9th Cir.

• Challenge by 10 states and others to failure to prepare EIS for new Corporate Average Fuel Economy (“CAFE”) standards for light trucks in order to assess global warming implications

• Friends of the Earth v. Mosbacher - pending in N.D. CA

• In 2005 court granted standing to plaintiffs to argue that NEPA requires the Export-Import Bank and Overseas Private Investment Corporation, that provide financial assistance for energy projects abroad, to assess the global warming implications of their actions

• Pending CEQA Cases

• Natural Resources Defense Council v. Reclamation Board - pending in Sacramento Superior Ct.

• Challenge by several environmental groups to approval of development plan for island in San Joaquin Delta. Plaintiffs allege EIR is inadequate because it assesses the Project’s impact on Delta in its current condition without considering the impact of global warming on the Delta ecosystem in the future

• Center for Biological Diversity v. City of Banning - pending in Riverside Superior Court

• Challenge to City approval of new housing development remote from City core on the basis of EIR that does not address impact on global warming

• What should you tell your clients about NEPA/CEQA review and climate change?

The Judges of the California Supreme CourtPhoto Source: CA Supreme Court

3. Nuisance Litigation

• Connecticut v. American Electric Power - appeal pending, 2nd Cir.

• Suit brought by 8 states and others against 5 largest emitters of CO2 in the country - all of which are electric utilities

• Suit alleges nuisance and requests abatement order

• District Court dismissed invoking the “political question” doctrine which authorizes courts to decline to decide cases best resolved by the political branches; appeal pending

• California v. General Motors - pending N.D. CA

• New suit by California Attorney General against 6 manufacturers of motor vehicles contributing to global warming

• Suit alleges nuisance and seeks damages

• Class Actions? E.g. class action suit filed against oil and coal industry in S.D. Mississippi

4. Preemption Litigation

• Automobile Cases

• Central Valley Chrysler-Jeep v. Witherspoon - pending E.D. CA

• Auto industry challenge to California “Pavley” legislation which requires CARB to regulate GHG emissions from motor vehicles - Now adopted by 10 other states

• Case going forward on three preemption claims:

• Under EPCA - federal government sets CAFE standards

• Under CAA - CA required to get waiver for “standard related to control of emissions” (and EPA has not waived);

• Under Constitution - federal government controls foreign policy

• Green Mountain Chrysler-Plymouth-Dodge v. Torti - pending D. Vt.

• Lincoln Dodge, Inc. v. Sullivan - pending D. R.I.

• CA Power Plant GHG Performance Standard Cases

• SB 1368 requires CPUC, CEC to set GHG performance standard for electric utility purchases

• Constitutional claims have been raised - e.g. interference with interstate commerce and foreign policy

5. Other Litigation

Endangered Species Act -

• Center for Biological Diversity v. Gale Norton, pending N.D. CA - led to recent proposed listing of polar bear as endangered species due to impact of global climate change (Dec. 2006)

• In response to petition, NMFS listed elkhorn and staghorn coral as endangered in part because of high atmospheric CO2 levels (May 2006)

Polar BearsPhoto Source: USFWS

Elkhorn CoralPhoto Source: NOAA

5. Other Litigation (cont.)

• Center for Biological Diversity v. Brennan, pending N.D. CA

• New suit alleges that federal government has missed mandatory deadline for issuance of updated national assessment of climate change impacts

• Energy facilities

• Environmental licensing proceedings - e.g. power plants, refineries, LNG terminals

• Utility procurement prudence proceedings - esp. purchase of electricity produced from coal

V. Possible New Federal Legislation

• Selected Congressional Climate Change Legislation to Date

• GHG Regulatory Issues Before Congress

• Other Climate Change Agenda Items

Photo Source: Public Broadcasting System

Selected Congressional Legislation to Date

Senate - McCain-Lieberman

• Climate Stewardship Act - 2003

• Would have used cap-and-trade mechanism to get to target of 2000 levels by 2010 and 1990 levels by 2020

• Would have regulated six GHGs and included electricity, transportation, industry and commercial sectors

• Would have allowed for 15% to be met through offsets

• In 2003, floor vote failed 43-55

• Climate Stewardship and Innovation Act - 2005

• Similar, but added incentives for low carbon technologies, including nuclear power

• In 2005, floor vote failed 38-60

Senate - Bingaman Proposal and Resolution

• Proposal - Draft “Climate and Economy Insurance Act” - 2005

• Product of bipartisan National Commission on Energy Policy

• Featured an emissions intensity reduction goal of 2.4% per year from 2010 to 2019 that would be translated into annual caps

• Provided for pollution credit trading with a safety valve cost cap

• Did not have enough votes to be attached to Energy Policy Act of 2005

• Resolution - 2005

• Non-binding sense of the Senate resolution

• Calls for mandatory action to slow, stop, and reverse GHG emissions without harming the economy and for encouraging action by other nations that are trading partners

• Passed Senate in 2005 by vote of 53-44

GHG Regulatory Issues before Congress1. Who will be regulated and where?

• Sectoral v. economy-wide approaches

• Upstream v. downstream

Greenhouse Gas Emissions Flow, 2004(million metric tons of carbon-dioxide equivalent)

GHG Regulatory Issues Before Congress (cont.)

2. Cost Distribution: Should the costs of regulation be mitigated for any sector of the economy, through the allocation of allowances without cost? Or, should allowances be distributed by means of an auction? If allowances are allocated, what is the criteria for and method of such allocation?

• Technology R&D and incentives

• Adaptation assistance

• Consumer protection

• Set-asides for early movers

• Special considerations for fossil-fuel producers

• Allocations for downstream electric generators

• Allocations for energy-intensive industries

GHG Regulatory Issues Before Congress (cont.)

3. International Trading? Should a U.S. system be designed to eventually allow for trading with other greenhouse gas cap-and-trade systems being put in place around the world?

4. International collective action? How should the U.S. encourage comparable action by other nations that are major trading partners and key contributors to global emissions?

How long will it take to resolve these difficult issues?

Other Climate Action Agenda Items

• Invest in science and technology research

• Drive the energy system toward greater efficiency, lower-carbon fuels and carbon capture technologies

• Energy Efficiency - Production, distribution, and usage

• Lower Carbon Fuels - Natural gas, renewables, and nuclear

• Coal - Advanced generation coal plants, separation and capture, and carbon sequestration

• Stimulate innovation across key economic sectors• Transportation: Change CAFE program and support low-GHG fuel alternatives

• Manufacturing: Improve industrial efficiency and low-GHG technologies

• Agriculture: Raise the priority and funding levels on carbon sequestration

• Begin now to adapt to the consequences of climate change

• Negotiate to strengthen the international climate effort

Conclusion

• The States have done a great deal to address global warming

• To the extent to which the States’ efforts run up against Constitutional limits to thinking globally, acting locally, the federal government must become engaged

• In the next few years we will be making, as a nation, the difficult choices required of us to address global warming

• Questions? Contact me at Monica.Schwebs@bingham.com

Picture Source: BLM