Question of the Week
Climate change and sustainability law is undoubtedly emerging as the new direction for environmental law in Florida. This is the first of a new monthly series by the LeMieux Report, authored by Luna E. Phillips, an environmental and law use attorney of counsel to Gunster Yoakley. The column is focused exclusively the emerging role of sustainability, climate change and other related environmental initiatives and their legal, policy and economic impacts to Florida’s environment and economy.
Last year brought unprecedented attention to the emerging issues of climate change and sustainability, not only in Florida, but also across the nation. Many are wondering whether the heightened focus on climate change is just a passing fad or if we are witnessing the start of a revolutionary new era in the environmental field.
While the debate on the causes and consequences of global warming continues, one thing is certain, the concern and commitment to addressing global climate change has taken deep root in public opinion across the nation. Global warming coupled with the economy’s current downturn and the increasing costs of energy has set the stage for the development of a new regulatory framework to address greenhouse gas (GHG) emissions. This article explores some of the current developments and impacts associated with the emergence of climate change as a new facet of environmental practice.
Currently, there are no federal laws that require the industry to reduce their GHG emissions, and likewise, there is no charge to emit GHG into the atmosphere. It is widely anticipated though that this will change in the next few years with the passage of comprehensive federal legislation addressing GHG. Even the U.S. Supreme Court has held that GHG can be regulated as a pollutant under the Clean Air Act . While the current administration’s policy is one of voluntary reductions, many states, and even municipalities, are rushing to fill in the void created by the lack of federal laws. Various states have formed regional initiatives and are working on rules and policies to address GHG within their geographic areas. Two such initiatives at the forefront of tackling climate change on a larger scale are in the Northeast and the West. The Northeast States have created the “Regional Greenhouse Gas Initiative” (RGGI) consisting of Connecticut, Delaware, Maine, New Hampshire, New Jersey, New York, Vermont and Maryland. The District of Columbia, Massachusetts, Pennsylvania, Rhode Island, the Eastern Canadian Provinces, and New Brunswick are observers in the process . The Western Climate Initiative (WCI) is a regional initiative by states and provinces along the western rim of the United States, Canada, Mexico, and Indian nations . Other similar initiatives are being developed in the Southwest and the Midwest. It remains unclear what will happen to the state created cap and trade programs when federal legislation passes mandating a nationwide program.
Florida has also passed its own energy bill during its 2008 legislative session, which is expected to become law on July 1, 2008. The bill establishes aggressive goals for implementing renewable energy sources and reducing GHG to 80% of 1990 levels by the year 2050. While the bill authorizes a cap and trade program for electric power generators only, the scope of this law is expected to increase over time.
There are numerous ideas and approaches on how to reduce GHG emissions including tax incentives, development of energy efficient appliances and vehicles, renewable clean technologies, green sustainable buildings and carbon sequestration. However, one common theme emerging from the multitude of plans is the mandatory cap and trade program. A cap and trade program is a market-based approach for reducing emissions of GHG through economic incentives and rewards . The “cap” is the total amount of GHG that can be emitted by an industry and is set by the government. The government distributes “allowances” or “credits” to companies allowing them to emit their portion of the overall cap. A company, who reduces its carbon footprint and generates a surplus of credits for itself, can sell those credits to another company that needs more. This concept of free trade is expected to create economic incentives by creating a valuable commodity, the carbon credit. It appears clear that not only will carbon trading be part of the mix that ultimately regulates GHG, but it will be mandatory. There are differing approaches on how to implement a cap and trade program, who is eligible to participate, how allowances will be distributed and how prices will be set and/or monitored. The companies and sectors that are likely to be regulated under a mandatory emissions program may include power generators, the transportation sector, industrial and manufacturing companies, commercial and residential development and activities, and the agricultural sector.
Even though cap and trade programs are being developing in varying stages all across the U.S., including Florida, one example of a private trading program is the Chicago Climate Exchange (CCX), operating since 2003. Although the CCX registry is voluntary, it facilities the reduction of all six major GHG through a legally binding trading system. CCX members commit to reduce GHG below target levels and in turn have surplus allowances to sell or bank, while those who emit above the targets comply by purchasing the equivalent of additional allowances. Members of the CCX include power companies, manufacturing industry, automotive industry, agricultural services and environmental services.
Although businesses today operate under mostly under voluntary means, many are starting to accept the reality of climate change regulations. In fact, numerous Fortune 500 companies are positioning themselves now with strategic planning and research to implement the regulations when they become effectives. Companies are creating their own long-term plans for reducing GHG emissions and exploring the economic incentives and financial markets that will be created when a cap and trade market is officially started. Venture capital funds are investing in the environmental and energy fields, including the development of clean technology alternatives. Conversely, companies must also struggle with corporate issues like securities law disclosures, corporate directors’ fiduciary responsibilities, insurance and taxes related to climate change.
In addition, we are seeing a rising frequency in the number of lawsuits filed centered on climate change. Cases are being filed challenging the failure to assess climate change impacts under the National Environmental Policy Act (NEPA), 42 U.S.C. s. 4331 . These cases have generally held that impacts from GHG emissions should be considered under NEPA, but fall short in addressing how any impacts may be mitigated. Other lawsuits being filed are premised under common law theories such as nuisance. The State of California filed a public nuisance claim against several major automotive companies alleging their automobiles contributed to global warming . Accordingly, businesses will be best served by engaging now in order to assess the available opportunities and their risks and liabilities in time to tackle the new regulations and financial opportunities that are certain to follow.
For more information, please contact Luna Phillips.
Click here to download a printable pamphlet on Gunster Yoakley’s Climate Change and Sustainability Team.
