Obtaining GHG Credits Through Managing Water Supply Systems
Most recent climate-oriented discussions of water supply and quality have focused on the potential for altered precipitation, stream flows, groundwater recharge, and other impacts of regional climate change. These impacts are more likely than not to be severe in some locales, and thought is being given to the development of new infrastructure to address these changes (see related item on climate adaptation). But in addition to these obvious impacts on water supply and quality, it is now apparent that "non-trivial" greenhouse gas emissions are associated with the treatment of drinking water and sewage. [summary]
Continue Reading...Carbon Accounting 101
The stars appear to be lining up for passage of federal climate change legislation in the next year or two. We could back this prediction with a wonkish reading of congressional tea leaves, e.g., industry support for climate change legislation through coalitions such as the US Climate Action Partnership, a Democratic majority in both houses, and pressure by Republican incumbents on the president not to veto climate change legislation because they fear that a presidential veto could hurt their chances in the 2008 elections, but instead we will press on to an equally compelling consideration.
The climate change issue appears to be following the typical trajectory of new environmental laws. First, scientists identify the environmental threat. Then environmental activists amplify the scientists’ findings, usually aided and abetted by dramatic, illustrative harms. Today it’s arctic melt and Hurricane Katrina. Next, the environmental issue is featured on the cover of Time Magazine. Progressive states, typically California and/or New Jersey, enact laws. The resulting patchwork of state regulation causes Congress to begin the search for a national solution. Finally, additional environmental insults (Love Canal, Bhopal) tip broad public opinion from ambivalence to insistence that Congress act.
Climate change has now crossed most of these familiar thresholds. Most scientists had reached consensus on the human role in climate change by the start of the twenty-first century. Former Vice President Al Gore’s film, An Inconvenient Truth, certainly amplified the scientists’ findings. Climate change stories have graced the cover of Time Magazine on numerous occasions during the past few years. Today, the deluge of coverage resembles the streams gushing off melting glaciers. As we go to press, for example, PBS’s Frontline is airing a devasting critique of governmental inaction and obstruction in the face of mounting scientific evidence that the climate challenge must be faced.
Government, in fact, is responding. In 2006, California enacted Assembly Bill 32, which mandates that state sources of carbon dioxide (CO2) reduce emissions to 1990 levels by 2020. In 2007, there were more than 110 climate-related hearings in Congress and 150 bills addressing climate change. For coverage of developments in Congress, see Energy and Environment Daily, or Pew Center on Global Climate Change, What’s Being Done in Congress. All that remains to complete the cycle is the climate-change-driven cataclysm, although some have painted Hurricane Katrina as that event. [summary]
Global Climate Change Under NEPA
Increasingly, the National Environmental Policy Act (NEPA) is being seen as a vehicle for ensuring that the federal government considers the impact of its actions on global climate change. Relying on a string of judicial decisions that require agency NEPA impact statements specifically to address the climate consequences of agency actions, environmental organizations have petitioned the President’s Council on Environmental Quality to conform its NEPA guidelines to the requirements of these cases. Climate will clearly figure prominently in future federal impact statements, and non-federal stakeholders, who often are the real parties in interest in NEPA compliance, would be wise to address climate early and often when developing their NEPA compliance strategies. [summary]
Continue Reading...Summary of the UNFCCC and Plans for Moving Forward
The 1992 United Nations Framework Convention on Climate Change (UNFCCC) sought to launch a global climate change regime. In 2005 the well-known Kyoto Protocol, to which a large group of developed and emerging countries became signatories, laid the groundwork for a detailed system of incentives and targets for carbon emissions reductions, but the Protocol will remain in effect only through 2012. The December 2007 meeting in Bali of the Kyoto Conference of the Parties (COP) began to address a new international climate change treaty to take effect in 2013 upon the expiration of the Kyoto Protocol. Their “Bali Road Map” identified the core issues a new treaty must address: adaptation, mitigation, technology, finance, and cooperative action. [summary]
Continue Reading...Climate Adaptation
As we consider climate legislation, we do not like to be reminded that despite our best efforts, the likelihood is that national and global GHG reductions will not be enough in time to keep regional climate from changing significantly. A new two-year Resources for the Future project, “Adapting to Climate Change,” has as its purpose developing an array of on-the-ground measures to allow our institutions to mitigate the effects of climate change, when and if it occurs. [summary]
Continue Reading...Food vs. Fuel and Impacts on Climate Change: Biofuels Under Siege
Concern about world food prices and shortages is causing law makers in both the EU and the US to consider either a moratorium or a cutback in biofuels production. In particular, ethanol produced from corn is being blamed as a significant contributor to the world food crisis. [summary]
Continue Reading...Now is the Time to Assess the Impacts of Climate Change on Your Business
Companies can no longer postpone consideration on the impact of climate change regulation and the resulting carbon-constrained economy on their business until the day after climate change legislation is enacted. Jeffrey Immelt, CEO of General Electric, recently described his company's consideration of climate change regulation on its business plans as follows: "I run my company assuming there is going to be a market for carbon some day, and a cap and trade system some day. No publicly traded company should have a different philosophy. The day you decide is already ten years too late for me." (Remarks before the National Governors Association Annual Meeting, Washington, DC, February 23, 2008.)
In the absence of federal climate change legislation, how should a company evaluate the impact of forthcoming climate change regulation on their business plans? Companies can start by recognizing that in many parts of the country climate change regulation already has been enacted at the state level, and that federal policy is likely to resemble this effort, only on a national scale. In this regard, most northeastern states have joined the Regional Greenhouse Gas Initiative ("RGGI"), which will take effect January 1, 2009. Under RGGI, greenhouse gas emissions from fossil fuel burning power plants will be capped at 2009 levels until 2015, and thereafter must reduce emissions 2.5 percent annually until 2018. Similar schemes have been adopted in several other states. These measures will have a significant impact on the cost of electricity; businesses that buy power from these utilities will face higher energy costs which could price their products out of the market. Planning for such contingencies must begin now.
Another sign of the changing perception of the pressures on the carbon economy is the recent adoption of the so-called "Carbon Principles" by three of the world's largest financial institutions – JP Morgan Chase, Citi, and Morgan Stanley. Under the Carbon Principles, these financial institutions state that they will consider the cost of carbon emissions or mitigation of the emissions on their investment decisions and investment advice. Thus, for example, before financing a coal-fired power plant these banks would estimate the cost per ton of carbon of carbon dioxide emissions which the plant might have to pay to emit under future legislation – and consider that cost as part of the investment decision. This new approach will have profound effects on carbon-intensive industries: for firms with plans to expand operations or open build new plants, the cost of borrowing just went up.
While costs will undoubtedly increase, climate change legislation will also create opportunities for investment and new ways to do business. These are but a few of the concrete climate change-related developments that firms can assess now.
With that in mind, every business should consider starting the evaluation process to determine where they are today and how they may be able to prosper in the new climate change world.
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Published McKenna Long & Aldridge LLP Climate Change Advisory (March 2008)
The SEC is Getting Hot and Bothered over Climate Change
Publicly-traded companies should evaluate whether global warming (or, if you prefer, climate change) is reasonably likely to have a material impact on the company's future financial performance. If the company concludes that there is a material impact, it must disclose that conclusion to the US Securities Exchange Commission (SEC) in various periodic reports.
As the Intergovernmental Panel on Climate Change (IPCC) stated in its 2007 report, evidence of climate change "is unequivocal, as it is now evident from observations of increases in global average air and ocean temperatures, widespread melting of snow and ice, and rising global average sea level" (see IPCC Report, Summary for Policymakers, in Climate Change 2007: The Physical Science Basis at 5). Thus, the only question is whether the potential consequences of these physical effects of global warming on the company - such as damage to company property, interruption of revenue streams that such property generate, increased costs to comply with regulations attempting to minimize global warming, and potential liability in lawsuits seeking damages from parties perceived as causing global warming - are "reasonably likely" to have a "material" impact on a company's financial performance.
How to interpret and apply these two expansive and as-yet poorly defined terms in the context of climate change, given the unknown time horizons during which the financial impacts may arise, is the $64 or $640 million question publicly traded companies must now answer. [summary]
International Wind Power
Wind energy experienced a record year of international growth in 2007. According to the Global Wind Energy Council (GWEC), installations of new wind energy facilities increased by thirty percent in 2007, with twenty gigawatts (GW) of new installations brought into service worldwide. According to a US Department of Energy May 2007 report, this follows seven years of growth in wind capacity at the rate of twenty-four percent per year in the US and twenty-seven percent per year worldwide. This growth has been driven in part by multinational utilities such as Iberdrola and Acciona, which joined FPL Energy and Babcock and Brown in 2007 as leaders in wind power plant ownership with new facilities installations in North America and worldwide.
The annual 2007 survey by GWEC and Emerging Energy Research (EER) reflect that wind power ownership and installations continue to increase in North America, Europe, Latin America and Asia. EER reports that while the United States in 2007 remained the largest market with 5.2 GW of new installations, it was closely followed by Spain and China, which added 3.5 GW and 3.4 GW, respectively, to their total capacity of wind power. The other leading international markets include Germany, Canada, India, Denmark, Italy, the UK, Portugal, and France.
The development of wind power is now a global opportunity. For many companies, establishing operations in new international markets may be a sound and profitable part of their strategic growth, particularly markets in which sponsors can achieve greater cost efficiencies and profitability.
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