global warming implications and opportunities for your practice barry s. neuman merrill j. baumann,...

C A R T E R L E D Y A R D & M IL B U R N L L Pw w w.c lm .com P a rtn ers fo r Yo ur B u sin ess ®

Global Warming Global Warming Implications and Implications and

Opportunities for Your Opportunities for Your PracticePractice

Barry S. NeumanMerrill J. Baumann, Jr.

Meritas Annual MeetingApril 23, 2009Orlando, FL

2CL&Mwww.clm.com

2008

3CL&Mwww.clm.com

2030?

4CL&Mwww.clm.com

The International ContextThe International Context United Nations Framework Convention

On Climate Change 1992 UN Rio De Janeiro Conference On

Environment And Development Developed And Developing Countries Have

“Common But Differentiated” Responsibilities Established Annual Conference of Parties

(COP) Legislative-Type Body to Implement Goals Negotiated Kyoto Protocol At 1997 COP

Meeting

5CL&Mwww.clm.com

Kyoto ProtocolKyoto Protocol Became Effective In 2005 183 Countries Have Ratified U.S. Is Only Major Industrialized Country

Not to Sign Sets Binding Emissions Limits On Developed

Countries Must Be Met By 2012 Different Countries Must Reduce Emissions By

Different Percentages Below 1990 Emissions(U.S. Figure Was to Be 7% Below 1990)

Overall Goal: to Reduce Emissions By 30% Below “Business As Usual”

6CL&Mwww.clm.com

FlexibilityFlexibility

Each Country Decides How to Meet Its Limits

International Emissions Trading System Clean Development Mechanism (CDM)

Developed Country Invests in Project In Developing Country

Countries Can Band Together As One Unit European Union

7CL&Mwww.clm.com

Looking Towards Post-2012 Looking Towards Post-2012 Commitment PeriodCommitment Period

Bali Conference (December 2007) First Comprehensive Negotiations For

Post - 2012 U.S. Declines to Agree to Binding

Emissions Reductions Discussions Continued In Poznan,

Poland In December 2008 Next Conference -- Denmark

(December 2009)

8CL&Mwww.clm.com

E.U. Trading SchemeE.U. Trading Scheme

Opened for business January 1, 2005 One of the policy measures to enable

E.U. to meet Kyoto Protocol targets In effect in 25 E.U. member states

9CL&Mwww.clm.com


Sectors Covered: Electric Power (20 MW capacity plants) Oil Refineries Coke Ovens Metal Ore and Steel Cement Kilns Glass Ceramics Paper and Pulp

10CL&Mwww.clm.com

E.U. Trading SchemeE.U. Trading SchemeTimetable:Phase I: 2005 – 2007 Implement National Allocation Plans Assess Reliability of Emissions Data 362 Metric Tons Traded 1st YearPhase II: 2008 – 2012 Coincides with Kyoto Renegotiation Aviation Sector Included Norway, Iceland, Liechtenstein Join Litigation against Austria, Czech Republic,

Denmark, Hungary, Italy and Spain (late NAPs) Target Reductions: 7%

11CL&Mwww.clm.com


Distribution of Allowances Phase I: Most Given Away Free Auctioning of Allowances Later Banking and Borrowing Allowed

12CL&Mwww.clm.com

E.U. Trading SchemeE.U. Trading SchemeCriticisms:First Year: Data Collection Problems Overallocation of Allowances Cap Too High No Incentives to Reduce Phase I Allowances – WorthlessClaims of Allowance Double-

Counting

13CL&Mwww.clm.com

Possible U.S. Legislation U.S. Legislation Waxman-Markey Draft (March 31, 2009)

Subcommittee Mark-Up This Month Committee Mark-Up In May

Title I and II: Clean Energy & Energy Efficiency Incentives/Requirements for Carbon Capture

And Sequestration (CCS) Promote Smart Grid Grants/Loans to States, Munis And Private

Companies For Large-Scale Demonstration of Electric Vehicles

Funding to Retrofit Existing Buildings

14CL&Mwww.clm.com

Title III: Climate ChangeTitle III: Climate Change Cap-And-Trade Program Silent On Free Allocation vs.

Auctioning of Allowances Covers 85% of U.S. GHG Emissions By 2050, 83% Reduction In Emissions

Below 2000 Levels Preempts State Cap-And Trade

Programs For 5 Years Prohibit EPA From Regulating Carbon

Emissions From Stationary Sources

15CL&Mwww.clm.com

International Trade International Trade ImplicationsImplications Various Proposals to Protect U.S.

Industry Border Adjustments On Imports From

Countries Lacking “Comparable” Controls

Internal Subsidies For Disadvantaged U.S. Companies H.R. 1759 (Reps. Inslee And Doyle)

16CL&Mwww.clm.com

International Trade International Trade ImplicationsImplications May Be Necessary to Enact

Legislation But:

Are Vulnerable Under WTO/GATT Ignite Trade Wars? Recent Threat of E.U. vs. U.S..

17CL&Mwww.clm.com

Prospects For PassageProspects For Passage

On One Hand: Complex Effort/Broad Impacts on U.S.

Economy Never Been Subject to Full Debate Republican Committee Members

Oppose Cap and Trade Moderate Democrats Reluctant Obama Stepping Back?

18CL&Mwww.clm.com

Prospects For PassageProspects For Passage

On Other Hand: Bill Goes Far to Accommodate

Moderate Concerns Reflects Many Recommendations of

Climate Action Partnership The Alternative -- Direct Regulation by

EPA

19CL&Mwww.clm.com

EPA Regulatory InitiativesEPA Regulatory Initiatives Massachusetts v. EPA (2007)

5-4 Decision EPA Has Authority to Regulate GHG Emissions

From Motor Vehicles Under The Clean Air Act EPA Must Determine Whether GHG Emissions

From Motor Vehicles Pose A Danger, And, If So, It Must Regulate

Endangerment Finding Is Imminent The Real Kicker:

Logic of Decision Applies to “Stationary Sources” -- Factories, Industrial Plants, Any Source of GHG That Doesn’t Move

20CL&Mwww.clm.com

GHG Emissions InventoryGHG Emissions Inventory EPA Proposed Rule Would Require Annual GHG Emission

Reporting Purpose: “To Support A Range of Future

Climate Change Policies And Regulations Applies To:

Suppliers of Fossil Fuels And Industrial Chemicals,

Manufacturers of Motor Vehicles And Engines Facilities That Emit 25,000 Metric Tons Per

Year of CO2 Equivalents

21CL&Mwww.clm.com

GHG Emissions InventoryGHG Emissions Inventory Would Cover About 13,000 Entities

Emitting About 85% of GHG Emissions In The U.S. Cement Production Electricity Generation Ethanol Production Electronics Manufacturing Pulp And Paper Manufacturing Petroleum Refining Petrochemical Production

Reporting Would Be Required At The Facility Level

22CL&Mwww.clm.com

Regional Greenhouse Gas Regional Greenhouse Gas Initiative (RGGI)Initiative (RGGI) The First Mandatory Cap-And-Trade

Program In U.S. For C02 Ten States

CT; DE; MA; MD; ME; NH; NJ; NY; RI;VT Applies to Electric Power Generation

Account For 25% of C02 Emissions In The Region

≥ 25 Mw 225 Facilities

23CL&Mwww.clm.com

Regional Greenhouse Gas Regional Greenhouse Gas Initiative (RGGI)Initiative (RGGI) Aggregate Regional Cap of 188 Million

Tons Each State Is Allocated A Share of The Cap Each State Then Issues C02 Allowances In A

Number That Is Proportional to Its Share Each Allowance Equals A Permit to Emit One

Ton of C02 Cap On C0 Emissions Will Be 10% Lower

In 2018 Than 2009 Revenues From Auctions Allowances

Invested In Energy Efficiency And Renewable Energy

24CL&Mwww.clm.com

Regional Greenhouse Gas Regional Greenhouse Gas Initiative (RGGI)Initiative (RGGI)

Allowance Market States Distributes Allowances Through

Regional Auctions Allowances Can Also Be Traded On

Secondary Market Power Plants That Obtain More

Allowances Than They Need Can Sell Excess Allowances; Those Needing More Allowances Can Buy Them

25CL&Mwww.clm.com


Emission Offsets Allowed

Can Be Used to Meet 3.3% of Compliance

Limited GHG Reduction Projects Outside The Electricity Generation Sector

26CL&Mwww.clm.com


Allowance Auctions Quarterly Auctions Minimum Clearing Price $1.86/Ton Independently Monitored Three Auctions Thus Far

27CL&Mwww.clm.com


December ’08 Auction: Demand Was 3.5 X Supply Low Concentration of Bids Distribution of Bid Prices Indicates That

Prices Were Elastic And The Results Were Competitive

76% of Bids From Regulated Entities 24% of Bids From Env. Groups And

Financial Institutions Clearing Price of $3.38 Raised $106.5 million

28CL&Mwww.clm.com

Western Climate InitiativeWestern Climate Initiativewww.westernclimateinitiativbe.orgwww.westernclimateinitiativbe.org Signed on February 26, 2007 by

Washington, Oregon, California, Arizona and New Mexico

Allows other U.S. states, tribes, Canadian Provinces and Mexican states to observe and join

WCI goal set August 2007: reduce region-wide GHG emissions to 15% below 2005 levels by 2020

29CL&Mwww.clm.com

WCI ParticipantsWCI ParticipantsU.S. Partners: Arizona, California, Montana, New Mexico,

Oregon, Utah, WashingtonCanadian Partners: British Columbia, Manitoba, Ontario, QuebecObservers: Alaska, Colorado, Idaho, Kansas, Nevada,

Wyoming, Saskatchewan, Baja California, Chihuahua, Coahuila, Sonora, Nuevo Leon, Tamaulipas

30CL&Mwww.clm.com

WCI SignificanceWCI Significance

Together the WCI Partners represent over 70 percent of the Canadian economy and 20 percent of the U.S. economy

Collectively would be the 3rd largest economy in the world

Will influence U.S. and Canadian national GHG reduction programs

31CL&Mwww.clm.com

WCI Design RecommendationsWCI Design Recommendations

Released September 23, 2008 Broader Scope than RGGI: when

fully implemented, the WCI cap & trade program will cover nearly 90% of the GHG emissions in the WCI region

The cap & trade program will work with other “complementary” policies to reach the WCU regional goal

32CL&Mwww.clm.com

Scope of the WCI Cap & Trade Scope of the WCI Cap & Trade ProgramProgram By January 1, 2012:

Electricity Combustion at industrial and commercial

facilities Industrial process emission sources

By January 1, 2015: Emissions to be covered upstream Transportation fuel combustion Residential and commercial fuel combustion

Threshold coverage level: 25,000 MT CO2e or more per year

33CL&Mwww.clm.com

Offsets & Other AllowancesOffsets & Other Allowances

Program will include a rigorous offsets system to reduce compliance costs Will also recognize allowances from other GHG

trading systems WCI will develop criteria for offsets and other

system allowances WCI will limit offsets and allowances from

other trading systems to no more than 49% of the total emissions reductions from 2012 – 2020 Purpose to ensure that a majority of emissions

reductions occur at WCI covered entities and facilities

34CL&Mwww.clm.com

ReportingReporting

Mandatory measurement and monitoring of GHG emissions to start in January 2010

Mandatory reporting to start in January 2011

Threshold coverage level: entities and facilities with annual emissions equal to or greater than 10,000 MT CO2e

35CL&Mwww.clm.com

Other State InitiativesOther State Initiatives

Many states developing or implementing cap & trade

California Global Warming Solutions Act of 2006 Enacted September 2006 Requires GHG emissions reduced to 1990 levels by

2020 Early Action measures (low carbon fuel standard,

mobile air conditioning, tire pressure program, shore power for ocean-going vessels)

Governor has “safety valve” in the event of extraordinary circumstances

36CL&Mwww.clm.com

Other State InitiativesOther State Initiatives

The Oregon Standard Enacted 1997 All new power plants required to

offset part of their CO2 emissions Payment of Mitigating Funds

allowed

37CL&Mwww.clm.com

The Oregon StandardThe Oregon Standard

Early trading in U.S. of carbon dioxide offsets

Quantification of emission reductions (usually in metric tons) achieved by new actions

38CL&Mwww.clm.com

Offset CriteriaOffset Criteria Real Reductions – Activity must be lower aggregate

emissions from an agreed-upon baseline emissions level in the past

Permanence – Activity cannot be easily undone (efficiency upgrades, reforestation projects)

Quantifiability and Verifiability – Detailed monitoring and verification plan specific to that particular project that defines how, when and by whom the quantification and verification will be done

Additionality –Offset producer must prove that the emission reductions reflected in the offset would not otherwise have been realized under a “business as usual” scenario. In many cases, additionality is established by confirming that the emission reduction project would not get off the ground but for receipt of offset funding

Registration – to ensure they are not sold multiple times and double-counted

39CL&Mwww.clm.com

Examples of Offset/Emission Examples of Offset/Emission Reduction ProjectsReduction Projects

Traffic signal optimization Energy efficiency Reforestation Truck Stop Electrification Biodigesters

40CL&Mwww.clm.com

Climate Change LitigationClimate Change Litigation

National Environmental Policy Act (NEPA) Requires Preparation of Environmental

Impact Statement For Every “Major Federal Action” That “Significantly Affects The Quality of The Human Environment”

Permitting, Licensing, Proposals For Action, Funding of Projects

41CL&Mwww.clm.com

Climate Change LitigationClimate Change Litigation NEPA

Impacts of Global Warming Must Be Addressed Border Power Plant Working Group v. DOE,

260 F.Supp. 2nd 997 (S.D. Cal. 2003)(Transmission Line)

Mid States Coalition For Progress v. STB, 345 F.3d 520 (8th Cir. 2003) (Rail Line For Transportation of Coal)

Friends of The Earth v. Mosbacher, 488 F.Supp.2d 889 (N.D. Cal. March 20, 2007) (Financing of Overseas Project By OPIC And Export-Import Bank)

Bravos v. Bureau of Land Management (D.N.M. Filed Jan. 2009 (Oil And Gas Leases)

But: Analysis Can Be Cursory

42CL&Mwww.clm.com

State “Mini-NEPA Laws”State “Mini-NEPA Laws” California Environmental Quality Act

(CEQA) State of Cal. v. San Bernadino

State A.G. Sues County Settlement: County to Develop GHG

Emissions Inventory Re Land-Use Decisions And County Operations, Set Emissions Reduction Goals And Adopt Mitigation Measures

43CL&Mwww.clm.com

State “Mini-NEPA Laws”State “Mini-NEPA Laws” Massachusetts Environmental Policy Act

(MEPA) Exec. Office of Energy And Environmental Affairs

-- GHG Policy (April 23, 2007) Applies to Many Projects Subject to Review

Under MEPA Requires Quantification of Project-Related GHG

Emissions Requires Consideration of Mitigation Measures

And Alternatives Harvard University Expansion of Alston Campus

First Project In Nation to Legally Bind A Developer to Reducing GHGs Beyond Current Standards

Voluntary Commitment to Cap GHGs Below Existing Standards In Implementing 20-Year Master Plan

44CL&Mwww.clm.com

State “Mini-NEPA Laws”State “Mini-NEPA Laws” New York State Environmental

Quality Review Act (SEQRA) March 2009 Proposed Guidelines Issued

By State DEC Protocols For Analysis Vary

Direct Operational Impacts Purchased Electricity Induced Vehicle Trips Construction Impacts

45CL&Mwww.clm.com

Common Law Litigation Common Law Litigation Public Nuisance: Unreasonable

Interference With Public Safety or Health Connecticut v. American Electric Power Co.,

2005 U.S. Dist. Lexis 19964 (S.D.N.Y. Sept.. 22, 2005) (Appeal Pending) Eight States Sue Five Biggest Power

Companies Allege GHG Emissions Constitute Public

Nuisance By Contributing to Global Warming District Court Dismisses Based On Political

Question Doctrine Appeal Argued In 2d Cir. In June 2006

46CL&Mwww.clm.com

Common Law LitigationCommon Law Litigation California v. General Motors Corp.,

2007 U.S. Dist. Lexis 68547 (N.D. Cal. Sept. 17, 2007) Same Result

Native Village of Kivalina v. ExxonMobil Corp., Cv 08-1138 (N.D. Cal., Filed 2/26/08) Alleges GHG’s From Oil, Electric Utility

And Coal Companies Are Nuisance Village Sits 10 Feet Above Sea Level

And Is Threatened By Flooding Seeks $400 Million In Damages As Cost

of Relocating The Entire Village Motions to Dismiss Pending

47CL&Mwww.clm.com

The Far Reach of Climate The Far Reach of Climate Change Change Securities Laws: When and how to

disclose climate risk? Contracts, Property, Energy: Get

used to it Insurance: Unpredictability of

climate events creating pricing challenges; potential new products

Stimulus Funds: Opportunities

C A R T E R L E D Y A R D & M IL B U R N L L Pw w w.c lm .com P a rtn ers fo r Yo ur B u sin ess ®

Thank you.Thank you.

Barry S. Neuman

[email protected]

202-623-5705

Merrill J. Merrill J. Baumann, Jr.Baumann, Jr.mjb@[email protected]

503-242-9620503-242-9620

Merrill J. Merrill J. Baumann, Jr.Baumann, Jr.mjb@[email protected]

503-242-9620503-242-9620

global warming implications and opportunities for your practice barry s. neuman merrill j. baumann,...

Documents