Proposed Reporting Regulations

The proposed reporting regulations make interesting reading. You can review the ARB staff's Initial Statement of Reasons and draft regulations here.

Interestingly, the ARB staff estimates a fairly low cost of compliance for the reporting obligations that the new regulations will impose -- on the order of $3,000 to $300,000 per facility, with the higher costs imposed on the larger more complicated facilities (see pages 82-85 of the PDF). The economic impact of AB 32 will not result from reporting GHG emissions, but from reducing them.

- Morgan

Will the IPCC and the Nobel Committee decide the next US Presidential election?

Today, two related news stories broke that could decide the next US Presidential election.

First, greenhouse gases, which were not expected to cross the critical 450 ppm threshold for another decade, in fact are already at 455. The Intergovernmental Panel on Climate Change (IPCC) will report next month that earth passed the 450 threshold in mid-2005, according to Tim Flannery, an award-winning climate scientist who has reportedly seen the report's underlying data. Dr. Flannery was quoted by Reuters and the Christian Science Monitor as saying, "What the report establishes is that the amount of greenhouse gas in the atmosphere is already above the threshold that could potentially cause dangerous climate change." See http://www.csmonitor.com/2007/1011/p11s01-wogi.html for the Monitor's story.

Second, the Norwegian Nobel Committee announced that the Nobel Peace Prize for 2007 has been awarded jointly to the IPCC and Al Gore "for their efforts to build up and disseminate greater knowledge about man-made climate change, and to lay the foundations for the measures that are needed to counteract such change." See http://nobelpeaceprize.org/. The Committee went on to say:

"Al Gore has for a long time been one of the world's leading environmentalist politicians. He became aware at an early stage of the climatic challenges the world is facing. His strong commitment, reflected in political activity, lectures, films and books, has strengthened the struggle against climate change. He is probably the single individual who has done most to create greater worldwide understanding of the measures that need to be adopted.

"By awarding the Nobel Peace Prize for 2007 to the IPCC and Al Gore, the Norwegian Nobel Committee is seeking to contribute to a sharper focus on the processes and decisions that appear to be necessary to protect the world’s future climate, and thereby to reduce the threat to the security of mankind. Action is necessary now, before climate change moves beyond man’s control."

The Peace Prize is awarded by an Oslo-based committee of five, coincidentally the same number of (Washington-D.C.-based) people who decided the 2000 US Presidential election against Mr. Gore.

-Brian

Everything you know about carbon markets and taxes is wrong.

Here's a thesis that's getting some attention:  the growing focus on de-carbon-izing the atmosphere is distracting the world from its only hope of averting climate change disaster.  That hope, according to Alan Carlin, a Senior Economist at USEPA, is solar radiation management, or SRM.  Essentially a form of global climate engineering, SRM involves the introduction of particulate matter into the stratosphere to block incoming radiation and, thereby, turn down the planet's thermostat.  As proof of the approach's efficacy, Mr. Carlin cites evidence that volcanic eruptions have caused measureable, sustained reductions in average world temperature.

Mr. Carlin's article, which appeared in the September/October 2007 issue of The Enviromental Forum (a publication of the Environmental Law Institute), can be found here:  http://carlineconomics.googlepages.com/CarlinEnvForum.pdf.

Federal Judge Affirms State Regulation of Greenhouse Gas Emissions from Motor Vehicles

Chalk up another victory to the states in their ongoing battle with the federal government over regulation of GHG emissions from motor vehicles. On Wednesday, District Court Judge William Sessions determined that the GHG regulations first enacted by California and later adopted by Vermont are not preempted by federal law.

In a massive, 240-page opinion following trial, the Court roundly rejected the automobile industry's challenges under various preemption theories. In particular, the Court held that: (1) California's regulations were not expressly preempted by either Section 209(b) of the federal Clean Air Act or the fuel economy standards of the Environmental Policy and Conservation Act; (2) federal law does not "occupy the field" of regulation of carbon dioxide emissions from motor vehicles; (3) the regulations do not sufficiently "conflict" with federal laws to warrant preemption; and (4) the regulations do not intrude upon or conflict with national foreign policy.

Conflict preemption was the primary focus of both the trial and the opinion. At trial, the automobile industry attempted to prove that the state regulations stood as an obstacle to EPCA's objectives and purposes by demonstrating that the regulations were technologically and economically infeasible. The Court was not persuaded: "In light of the the public statements of industry representatives, history of compliance with previous technological challenges, and the state of the record, the Court remains unconvinced automakers cannot meet the challenges of Vermont and California's GHG regulations."

The opinion can be found here: http://www.vtd.uscourts.gov/Cases/05cv302.html

____________________________
Brett S. Henrikson, Esq.
Barg Coffin Lewis & Trapp, LLP
One Market
Steuart Tower, Suite 2700
San Francisco, CA 94105
tel: 415.228.5400
fax: 415.228.5450
email: bh2@bcltlaw.com

Air District Regulations and Preemption

On August 20, 2007, the Ninth Circuit held that South Coast Air Quality Management District requirements that California government agencies purchase low-emission vehicles for their fleets are not preempted by the federal Clean Air Act. The decision is based on California's right, under the "market participant doctrine," to choose the type of vehicles that the state will purchase for its own use. The Ninth Circuit did not reach the issue whether the same type of rules, as applied to private fleets, would be preempted, but instead remanded the case to the district court for a determination whether the "fleet rules" would be preempted. Although the decision's impact is limited, it is nevertheless an important precedent in the continuing tug of war between the federal government and California over emissions limitations.

-Morgan

Climate Change and Land Use

Land use promises to be one of the hottest areas of controversy in the development of climate change policy. We have already seen efforts by California AG Jerry Brown to require local governments to incorporate climate change evaluations into the CEQA review process. Here's a blog entry describing an ABA discussion on the topic. The court decisions thus far have all focused on challenges brought after a project has already been approved. We're still waiting for the first decision to address a challenge brought pre-approval.

Morgan

Falling Prices For Emissions Credits

One of the interesting phenomena of this early stage of the development of carbon trading markets is the long-term price trend. On the European market, there are forecasts that carbon offsets for the 2007-2012 period will fall to 8 Euros per ton from about 21 Euros per ton today. See article here. On the Chicago Climate Exchange, prices have fallen from over $4.50 last year to under $3.50 this year. While falling prices may be bad for the carbon trading markets, on a global level they are encouraging. These prices apparently reflect the ease with which industries are finding low cost methods of reducing and/or offsetting CO2 emissions. This price signal, together with the large flow of investment dollars into "green" climate change projects (see BBC article), will likely encourage further and more vigorous government action to reduce GHG emissions. As mandatory reductions take hold in California and elsewhere in the U.S., it will be interesting to watch the price signal, whether rising or falling, and to see whether and how government reacts to it.

Cap-and-Trade Is Whack-A-Mole Until Everyone's Bound By The Cap

It may not be news, but now it's scientifically documented:  when we export manufacturing to China and import the resulting goods back here, the net result is to increase greenhouse gas emissions.  See the June 2007 paper by Carnegie Mellon University engineers Christopher L. Weber and Scott H. Matthews, published in the journal Environmental Science and Technology.  Here's a link to a press release about the paper:  http://www.eurekalert.org/pub_releases/2007-06/cmu-cmr061407.php.

This phenomenon is likely to accelerate as less-than-global cap-and-trade schemes are enacted. 

--Brian

CCX announces formation of California Climate Exchange

The Chicago Climate Exchange has announced that it is forming a California-specific exchange to handle any trading scheme that may develop under AB 32. Here's the press release:

http://www.chicagoclimateexchange.com/news.jsf?story=1401

Morgan

Climate Change & CEQA

The California Attorney General has urged local officials to reject the Environmental Impact Report (EIR) for the Yuba Highlands development project because the EIR failed to address greenhouse gas emissions. The Attorney General asserted that this failure constituted a violation of the California Environmental Quality Act (CEQA).

http://www.appeal-democrat.com/news/yuba_48418___article.html/county_letter.html

Chief Energy Officer?

According to a report by Hill & Knowlton, 82 percent of senior technology leaders from around the world said they "closely monitor" global warming news, but only 35 percent have an energy strategy to deal with it. The report suggests the creation of a corporate Chief Energy Officer position.

http://www.greenbiz.com/news/news_third.cfm?NewsID=35038

Morgan

More on the Climate Registry

Following up on yesterday's news, here is the Climate Registry's press release on its new members:

http://www.theclimateregistry.org/The_Climate_Registry_Press_Release.pdf

Morgan

Led by California, 31 states with over 70% of the U.S. population
announced a nearly-national greenhouse gas registry today.

http://www.latimes.com/news/local/la-me-greenhouse9may09,0,3341341.story
?coll=la-home-headlines

Morgan

Media coverage of climate change report

Today's International Panel on Climate Change (IPCC) report, "Mitigation of Climate Change," outlines ways to mitigate global warming. http://www.ipcc.ch/

Wednesday's USA Today story previewing the report is headlined "Fixing climate carries big costs." http://www.usatoday.com/tech/science/environment/2007-05-02-climate-fix-cost_N.htm. As a result, many may resist taking action to fix climate change because they believe the costs are big.

What is missing from the headline, however, is any consideration of the costs of not taking action. As the report's "Summary for Policymakers" states, "The projected mitigation costs do not take into account potential benefits of avoided climate change." http://www.ipcc.ch/SPM040507.pdf, p. 10. Moreover, available evidence, notably the Stern report, indicates that "the benefits of strong and early action far outweigh the economic costs of not acting." http://www.hm-treasury.gov.uk/media/999/76/CLOSED_SHORT_executive_summary.pdf.

To be fair, USA Today's story beneath the headline went on to say, "The report will underline the environmental and financial benefits of quick action to cut emissions." But the headline is an example of how incomplete analysis can paint a misleading picture.

--Brian

Toward a US Cap And Trade System

David Hayes, former Deputy Secretary of the Interior, has an interesting report on the Public Policy Institute's website on how the US should structure a carbon cap and trade system, and the benefits to the US of setting up a market now. Hayes argues that the US's failure to join the Kyoto parties has put the US behind in an important developing market, and he identifies lessons that the US should learn from the development of carbon markets to date.

On that note, the World Bank reports that the global carbon market tripled from $11 billion to $30 billion in 2006, with the EU accounting for about 75 percent of that amount. http://www.iht.com/articles/2007/05/02/business/carbon.php.

Morgan

Biofuels and unintended consequences

As is so often the case in matters of environmental policy, the law of unintended consequences is rearing its problematic head in the much-hyped bio-fuels arena.  Whether and how much bio-fuels may help solve global warming depends on many factors, Mike Corder of the Associated Press reported yesterday:

In the rush to develop biofuels, forests are burned in Asia to clear land for palm oil, and swaths of the Amazon are stripped of diverse vegetation for soya and sugar plantations for ethanol.

http://www.washingtontimes.com/world/20070428-105649-1097r.htm.

Mr. Corder's article goes on to explain that a Dutch commission has developed a framework designed to ferret out whether a given bio-fuel production process is doing more harm than good.

--Brian

British Columbia Reported To Join Western Region Climate Initiative

Reuters reported on April 25 that British Columbia has joined California and five other states in the Western Region Climate Initiative, a carbon trading market promoted by Governor Schwarzenegger.
http://news.yahoo.com/s/nm/20070425/wl_canada_nm/canada_environment_britishcolumbia_ca_col_1

Proposed Early Actions Under AB 32

The California Air Resources Board has issued a report regarding proposed Early Actions under AB 32 to mitigate climate change. The report is one of many resources on CARB's Climate Change page.

There are a number of additional interesting documents, including the Governor's executive orders regarding the Low Carbon Fuel Standard and the Western Regional Climate Action Initiative, on the Governor's energy page.

Climate Change: A New Job

Climate change legislation and regulations (and possibly litigation) will be the most important environmental law trend in the next decade. California passed the first state legislation, Assembly Bill No. 32, to cap and reduce greenhouse gases in 2006. AB 32 by itself will have little direct effect on industry, but it sets in motion a planning and regulatory process that will eventually affect every business that uses energy -- electricity, any type of vehicle besides a bicycle, even potentially a leaf blower. Surprisingly, many lawyers I know, even environmental lawyers, have not read the statute. It's a short, easy read, and here's what it provides in a nutshell:

AB 32 adds a new Division 25.5 to the Health & Safety Code, starting at Section 38500. Part 1, Sections 38500 to 38505, contains a short title (the "California Global Warming Solutions Act of 2006"), findings and declarations, and definitions. The Act defines greenhouse gases to include not only carbon dioxide and methane, but also nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride.

Part 2, Section 38530, authorizes the State Air Resources Board to adopt regulations requiring the reporting and verification of greenhouse gas emissions. The regulations may apply to all "greenhouse gas emissions sources," and the State Board has discretion to determine which sources are significant enough to be regulated. Thus, the statute ducks the question of whether greenhouse gas regulations should apply to sources at the level of leaf blowers and lawn mowers, or just to large industrial users. The statute does require, however, that the State Board "[a]ccount for all electricity consumed in the state."

Part 3, Sections 38550 and 38551, requires the State Board to determine the state's level of greenhouse gas emissions in 1990, set that level as a target for emissions in 2020, and continue reductions after 2020.

Part 4, Sections 38560 to 38565, sets forth the tools that the State Board may use to reduce greenhouse gas emissions. First, the State Board's regulations must be designed to "achieve the maximum technologically feasible and cost-effective greenhouse gas emission reductions from sources or categories of sources." Second, subject to that standard, the State Board shall publish a list by June 30, 2007 -- three months from now -- of "early action" measures that can be implemented in regulations to be adopted by January 1, 2010. Third, by January 1, 2009, the State Board shall prepare a "scoping plan," which will be updated every five years, to reduce greenhouse gas emissions. Fourth, by January 1, 2011, The State Board shall adopt regulations, which will become effective January 1, 2012, to achieve the plan. The Act includes principles to guide the Board in developing regulations (minimizing costs and maximizing benefits), and in particular AB 32 requires in Part 5, Section 38570, that the State Board consider a cap-and-trade emissions system.

Parts 6 and 7 contain enforcement and miscellaneous provisions; the Board is empowered to mpose fees on greenhouse gas sources, and there is an escape clause that allows the Governor to postpone deadlines set by the State Board in one-year increments. There's more detail, but that's the gist of it.

Here in summary is the time-table:

• June 30, 2007: Identification of early action measures
• January 1, 2009: State Board to prepare scoping plan
• January 1, 2010: Early action measure regulations to be adopted
• January 1, 2011: Adopt regulations to achieve scoping plan
• January 1, 2012: Regulations become effective

Some companies have already begun to incorporate greenhouse gas planning into their business decision-making, but most businesses seem to think this process will happen to someone else. It's possible that some small businesses may not be much affected, but every large business should be following the regulatory process and identifying those key strategic business decisions that may be affected by greenhouse gas emissions regulations. If you're in environmental law, especially if you work in California, this is likely to be your new job.