The New York Legislature Takes Action on a Number of Pieces of Legislation Related to Climate Change
The 2008 New York legislative session came to a close on June 27th. With so much attention on climate change and rising energy prices, its not surprising that several pieces of legislation relating to the environment and energy were passed by both the State Senate and the State Assembly and are currently awaiting action by the Governor.
One significant legislative initiative driven by Governor David Paterson was the adoption by the Senate and Assembly of an expanded net metering law to allow businesses, municipalities and non-profit utility customers to receive credit on their utility bill for excess energy produced through solar or wind technologies. Under current law only residential customers are allowed to sell power back to the utilities. While non-residential customers will be capped at the lesser of 2 mega watts or their peak load, the expansion of net-metering is expected to further spur the development of solar and wind projects in New York.
The Senate and Assembly also came together to pass legislation that provides a 4 year real property tax abatement for solar electric generating systems placed in service in New York City. The abatement ranges from 5 percent - 8 ¾ percent of the cost of the solar equipment depending on whether the equipment is placed in service. Again, this legislation (coupled with the net-metering expansion mentioned above) is expected to spur development of solar projects in New York City.
Another lesser know legislative effort relating to the environment and climate change was the passage of legislation by the Senate and the Assembly establishing the New York State Greenhouse Gases Management Research and Development Program. The legislation amends the Public Authorities Law to authorize the New York State Energy Research and Development Authority (“NYSERDA”) to provide grants for research that promotes new technologies that will avoid, abate, mitigate, capture and/or sequester carbon dioxide and other greenhouse gases. The legislation authorizes NYSERDA to make grants of up to $150,000 to research entities in New York, but is subject to funding being included in the State Budget. Research entities are defined as not-for-profit colleges, universities or other institutions that conduct an intensive ongoing program of research and study.
One piece of legislation passed in the waning days of the legislative session by both the Senate and the Assembly that is just now starting to attract some attention is the Plastic Bag Reduction, Reuse and Recycling Act. This bill requires operators of retail stores over 10,000 square feet, retail stores with five or more branches of 5,000 square feet or more, and retail stores over 50,000 square feet in an enclosed shopping mall, to establish an at-store recycling program to include:
- a visible and accessible collection bin;
- a prohibition on the placement of plastic bags in a solid waste facility by stores;
- a requirement that stores make reusable bags available for purchase;
- a requirement that compostable plastic bags indicate that they cannot be recycled; and
- a requirement that plastic bags include the phrase "please return to a participating store for recycling" or a similar recycling message approved by the Department of Environmental Conservation.
The legislation establishes fines of up to $500 in cases where a person knowingly or intentionally violates the recycling program requirements.
Notable legislative efforts that failed during the 2008 session included a “bigger better bottle bill” to require container deposits on plastic water bottles, expanded regulation of wetlands, a power plant siting law for projects of 80mw or greater (draft legislation contemplated an expedited review process for clean energy or renewable projects), electronic waste recycling, and a greenhouse gas cap. All of these failed initiatives are likely to come back with greater support from the Governor (who only took office in March) in 2009 and may stand a greater chance of passage depending on the outcome of the State legislative races this November.
Water Agencies Seek Inclusion in Climate Legislation
For some time we have been hearing about changing precipitation patterns, rising sea levels, and other various ways that climate change will severely impact our nation’s hydrologic systems. In the debate over climate legislation water groups are advocating for congressional funds to assist with mitigating the effects on water supplies of a changing climate. Although water groups are pleased to have been included in funding proposed in the most recent version of Lieberman-Warner, the amendment offered up by Senator Boxer is not specific about what portion of the $136 billion in funding that drinking, waste, storm-water utilities would be eligible for under the energy block grant program. In the last few weeks, water groups have stepped up their efforts and sent letters to Senator Boxer and Congress pushing for assistance and inclusion in a cap and trade program.
The May 16th letter sent by the National Association of Clean Water Agencies (NACWA) seeks “clearly designated federal funding” to assist wastewater treatment agencies with:
- adaptation and public health risk;
- proactive climate change mitigation projects; and
- furthering efforts to establish wastewater industry GHG offsets.
On May 20th eight water groups followed-up NACWA’s effort with a letter outlining three broad objectives they are calling on Congress to implement:
- develop an applied research program focusing on climate change and water resources;
- increase federal funding and support for both water infrastructure and climate change impacts; and
- provide support and incentives for water utilities to reduce greenhouse gas emissions.
In an earlier post, we blogged about obtaining GHG credits through managed water supply systems and concluded that water utilities should be proactive in developing strategies for dealing with nitrogen oxide and methane emissions that are almost certain to be regulated under federal climate legislation. Now industry groups, such as NACWA, are actively pursuing inclusion in whatever allocation or cap and trade program our future holds.
Climate Change Tort Suits: Hot or Cold?
Kivalina, Alaska, a village located eighty miles north of the Arctic Circle on a barrier island, is falling into the sea.
Since the early 1980s, sea ice ‑ which offers seasonal protection from storm surges ‑ has been forming later and melting earlier. As a result, the village is exposed to more winter storms of increasing severity.
In 2006, the US Army Corps of Engineers (“CoE”) concluded that the situation in Kivalina had become “dire” and that the entire town would have to be relocated within six years. A group of 400 Kivalina residents have filed suit against twenty petroleum producers, coal-burning utilities, and other energy companies, asserting that their carbon dioxide (CO2) emissions create a public nuisance and that they conspired to mislead the public about climate change.
Native Village of Kivalina v. ExxonMobil Corp. et al., CV 08-1138 (N.D. Cal., Filed Feb. 26, 2008). Citing a report by the CoE, the Kivalina villagers allege that environmental changes associated with global warming have exacerbated flooding and erosion threats to Kivalina and other coastal villages in the Arctic.
They seek recovery of the estimated $400 million cost to relocate their village, which they claim is a result of the defendants’ climate-changing activities.
By no means is the Kivalina suit the first action in which plaintiffs have sought to recover climate change-related damages from a CO2-emitting industry. Electric utilities and leading automobile manufacturers have each defended similar actions. They defeated these suits by filing motions to dismiss, asserting that the lawsuits raised a political question ‑ how best to address climate change ‑ which is the type of policy determination that should be reserved for the political branches of government, rather than the courts.
So long as the legislative and executive branches remain undecided on climate change, the political question doctrine promises to keep such litigation in check. Many observers, however, believe that Congress eventually will pass, and the President will sign, climate change legislation. At that point, courts may have less ability to dismiss cases on the ground of the political question doctrine.
How will these climate change tort actions fare then?
In this Legal Backgrounder, we explore the next line of defenses to such actions. In brief, defendants to climate change tort suits likely can assert several other facial challenges, such as lack of standing and preemption, which may stop such litigation in its tracks. Moreover, climate change suits must overcome formidable causation problems. The charge of civil conspiracy adds a new wrinkle: it is the same strategy that forced big tobacco to settle. There are numerous differences, however, between tobacco and CO2, which portend a steeper climb for plaintiffs in climate change tort suits.
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The US's Existing Climate Protection Laws: Will They Work?
Less than a decade has passed since the accepted wisdom was that the US would enact a greenhouse gas control regime to implement the framework climate treaty and the Kyoto Protocol, which the Senate would have ratified after much debate. Yet today it appears that our national climate strategies are going off in unanticipated directions that would have astonished the climate pundits of ten years ago.
Last December, Congress enacted a fuel, vehicle mileage, and overall energy efficiency law that will clearly help lower carbon emissions. The Senate will vote on a comprehensive climate bill in June, if the sponsors have their way, but that bill is a far cry from implementing legislation for Kyoto. The states may soon have blanketed a large part of the nation with regional and state climate initiatives that will be so pervasive that they will set the bar for the key components of over-arching federal legislation – and preserve a major role for state and local governments. There is even talk of bilateral climate agreements with India and China, and also a totally new international approach that would target greenhouse gas emissions sector-by-sector across the economies of the developed nations.
Furthermore, while all this is taking place, it appears that the Environmental Protection Agency and the environmental community have discovered – with the help of the Supreme Court – that the US has had a greenhouse gas regulation law in place for decades, well before Kyoto. By ruling a year ago that greenhouse gases are “air pollutants” under the motor vehicle emissions control provision of the Clean Air Act, the Court made the entire Act a little pregnant with the potential for federal regulation of all manner of greenhouse gas sources – the thousands of sources controlled under state implementation plans to achieve federal ambient standards, new and modified stationary sources, emitters of air toxics, sources in clear-air areas of the country, and others regulated under the Act. The particular trigger for new motor vehicle emissions regulation is a statutory determination that greenhouse emissions may reasonably be found to endanger public health or welfare, but other Clean Air Act provisions contain the same or a similar trigger for greenhouse “air pollutants” as well.
The key Clean Air Act provisions involved were rather elegantly analyzed for a House subcommittee on April 10, 2008 by the EPA’s air program administrator Robert Meyers in 19 pages of testimony, which he prefaced by saying that a full explanation “could easily fill a text book.” The relevant sections, most of which are covered in the seven petitions states and private organizations have filed, are an alphabet soup of the Clean Air Act specialists favorite programs: NAAQS, SIPs, PSD BACT, Non-attainment RACT, NSPS, HAPS MACT, aircraft, ship, and locomotive emissions provisions, and the welter of road and non-road vehicle and equipment engine and fuel emissions requirements that the Act authorizes.
To plunge into the greenhouse ramifications of any one of these programs is to plunge deep. Our Ports and Harbors Practice, for example, is considering the myriad of greenhouse gas controls that may be relevant to shippers, port authorities, transportation networks, and others on, or on the way to or from, the nation’s ports and harbors.
The EPA has tried to put off the reckoning, but the Clean Air Act has been held to be applicable to greenhouse emissions. The question is, can we live with it – can we make it work as a climate statute? States and environmental groups appear at first to be saying yes, we can, but the EPA is skeptical and has initiated a national head-scratching over the issue. The groups are pressing for a court order for EPA to come clean and issue the endangerment finding, which the groups say they have conclusive evidence that the Agency has already made. The EPA has come to the brink of making the endangerment finding more than once, only to recoil from taking the first fateful step toward conscripting the Clean Air Act into the federal climate arsenal.
Recently, the Agency has contrived to prolong its agony. It announced that it would issue an advanced notice of proposed rule making this spring inviting the public to offer its comments on climate science (endangerment) and “the broader ramifications” to “many relevant sections of the Clean Air Act” of using it as the primary policy tool for controlling greenhouse emissions. These comments would then help the Agency issue a second proposed rule that would set forth the Agency’s views on how to comply with last year’s Court decision.
The environmental plaintiffs are pressing hard for a court order requiring EPA to make the endangerment finding. They argue that the Supreme Court’s decision leaves no room for the EPA to organize a national town hall meeting on the advantages and disadvantages of using the Clean Air Act to control greenhouse gases. They reason that the Court required the agency to make an endangerment finding or give cogent scientific reasons why it could not. No other paths lie open, they say.
The Agency’s invitation for public comment seems designed to resurrect its view, rejected by the Court, that the Act would provide only an “inefficient, piecemeal approach” to controlling emissions and that a regulatory scheme that included “all significant sources and sinks” would be best. Perhaps. But an agency rule making is not the place for this legislative debate, one which Congress has already initiated and seems inclined to bring to a conclusion in a time frame that may turn out to be less protracted than EPA’s two-step rule-making process is likely to be.
In fairness to EPA, regulating greenhouse emissions through the Clean Air Act is likely to be a bit like opening Pandora’s Box to find a Trojan Horse inside. The statute may reach greenhouse “air pollutants,” but just barely, and its extensive implementing provisions were not designed with climate protection in the front of the congressional mind. The Agency appears to have concluded, we think correctly, that if it regulates motor vehicle greenhouse emissions as the states and environmental groups demand, they have to act favorably on petitions that the groups have also already filed to regulate the greenhouse emissions from a full Mother Hubbard’s cupboard of emitter bones and snacks already alluded to – airplanes, ocean vessels, off-road and recreational vehicles, sources in mining, agriculture, and construction, outdoor power equipment, and the like. This may not be the systematic, finely tuned, and comprehensive solution the nation deserves to the climate challenge, but such is the logic of the situation in which US climate policy is now mired.
It may well be that the states and environmental plaintiffs are forcing the issue on the Clean Air Act, not actually expecting or even wanting to remake it as a climate protection statute. Their purpose may be to force Congress to reach the same conclusion EPA has reached and thus pressure Congress into enacting a comprehensive climate law before the courts turn the Clean Air Act into a greenhouse gas nightmare. Chairman John Dingell appears to have fallen hard for the strategy, recently calling for federal cap-and-trade legislation to correct the “hideous mistake” the Supreme Court made. But in the meantime, the EPA is obliged to try to reconcile existing law with demands for piecemeal greenhouse regulation under the welter of Clean Air Act provisions that various groups have lined up like dominoes, ready to ask the courts to tip over.
EPA’s strategy has been dismissed by state and environmental groups as one of delay until the Administration comes to an end January 20, 2009. Listening to the skillful but beleaguered EPA Administrator at press conferences on the President’s program lends some support to this view. But Administrator Johnson does make a point that while the Clean Air Act Endangerment Stew is simmering, Congress has enacted – in important part with Administration endorsement – a law that actually may lower vehicle and other carbon emissions below the steep upward trajectory they were on only a couple of years ago. The Energy Independence and Security Act (EISA) of 2007 specifies a national mandatory fuel economy standard, a “CAFE standard,” of 35 miles per gallon by 2020, which should, the White House says, increase vehicle efficiency by 40 percent. The new law also hikes the renewable fuels mandate passed in 2005 to 36 billion gallons by the year 2022 (although plenty of pundits have begun to point out the climate and air quality downside of corn ethanol.) The new Act includes a lighting efficiency requirement for phasing out incandescent bulbs by 2014 and lighting efficiency improvements of up to 70 percent by 2020. There are also significant appliance and federal operations energy efficiency requirements in the legislation.
Based on the President’s “20 in 10” program set out in his 2007 State of the Union message (20 percent reduction in gasoline use by 2010), the Administration’s other energy savings and “green” source programs, and the EISA, the EPA has argued, somewhat logically, that all these measures are more effective than – or at the least the functional equivalent of – the command-and-control regulations that may in time be served up from the Clean Air Endangerment Stew. In fact, EPA has suggested in the past that these steps comply legally with the Supreme Court’s decision in Massachusetts v. EPA. This is what the national town hall advanced notice of proposed rule making is all about. It is also the current version of the rule making that EPA once wanted to launch, i.e., a multi-departmental rule that would involve several statutes (including the Clean Air Act) and implement the President’s 20-in-10 agenda.
More fundamentally, the Clean Air Endangerment Stew has now locked the courts, the EPA, and Congress in a struggle over how tripartite constitutional government should approach climate policy, a classic separation of powers issue that only lacks the states to make this a battle over federalism as well. As we move forward on climate in Congress, it might be wise to heed the admonition of Chancellor Bismarck. “Do not ask how legislation and sausages are made.”
Congress in 2008
Federal climate change legislation may be on the way. The Senate has targeted a vote in June, and the House by the end of the year, although a bill both chambers can agree upon is unlikely until 2009, if then. It would be a great mistake, however, to view 2008 as a lost year on the climate front. The fundamental elements of Senate and House bills will be debated and accessible to all who probe beneath the surface. The fundamental regulatory structure and economic impact of climate legislation will have been thrashed over thoroughly by the end of the year. To interested stakeholders, the time to weigh in is now. [summary]
While the candidates count delegates, key Senators and Members count votes and try to predict how far toward climate legislation the Congress will progress this year. The short answer: final legislation is not likely this year, although both chambers may come very close. Because the Senate has targeted a vote in June, and the House by the end of the year, it would be a great mistake to view 2008 as a lost year on the climate front, however. To get to these votes, or even to try to get legislation in shape for a vote, means that the fundamental elements of the Senate and House bills will be debated and visible to all who probe beneath the surface. Passage is quite likely in 2009, but the fundamental regulatory structure and economic impact of climate legislation will have been thrashed over thoroughly. The Congress in 2009 will not by any means be writing on a clean slate. To interested stakeholders, the time to weigh in is now – if not already past.
In the Senate, Senator Lieberman optimistically reports that he believes a vote would be veto-proof at sixty votes if the June vote occurs after the Lieberman-Warner bill reaches the Senate floor soon after the Memorial Day recess. But approval may falter if the many amendments Senators are likely to seek come into play. To reach the 60-vote total, the co-sponsors may have to agree to amendments that, while attracting support from fence-sitting senators, may cause others thought safely on board to fall off the fence. Thus, for the US Senate to approve a strong bill this year, the managers will have to walk a fine line from here on out.
Does Senator John McCain support the bill? His support for decisive action on climate is well-documented. But his desire and determination for a role for nuclear power in addressing the climate challenge may place a serious obstacle in the path of approval, because many "climate senators," including the Chair of the Committee on Environment and Public Works that has favorably reported out the Lieberman-Warner bill, Barbara Boxer of California, have expressed opposition to inclusion of incentives for nuclear power. When other ticklish issues are added to the long list of amendment-prone provisions, the prospects for passage this session look decidedly less optimistic.
In the House, Speaker Nancy Pelosi (D-CA) and special climate committee chair Edward Markey (D-MA) were not joking when on April Fools Day they expressed their determination to have climate legislation pass the House by the end of the year. But they have complicated their own task by stressing the importance of including India and China in climate solutions. Strictly speaking, there is no role for addressing these two nations' large GHG emissions totals in domestic US climate legislation; Pelosi and Markey are hoping that India and China will be addressed either through the Kyoto agreement process or through the time-tried pathway of bilateral agreements. But bringing up India and China, the twin Achilles' Heels of climate action, the two members appeared to be drawing attention to their critics' strongest reason for avoiding unilateral US action until the largest global emitters are brought into some sort of accord on joint action.
The issues to be addressed in a domestic climate law are truly daunting, and suggest that next calendar year, after the presidential election, is a more likely time to expect climate legislation for the US. Even then, the challenge cannot be overstated. The issues include negotiating out provisions to cover caps and baselines fairly and effectively, with key decisions to be made about how each plant, company, sector, and state will be expected to comply, not to mention vital assumptions going into a domestic framework regarding the limits to be placed on GHG emissions for the nation and the planet. Baselines need to be set, and the effects of mergers, acquisitions, and corporate reorganizations taken fairly into account. These issues exist even before taking up the much-discussed topic of the role trading/banking/offsets will play, especially vis-a-vis Clean Air Act-California AB 32-style performance standards. One of the very largest and most contentious areas will cover congressional decisions – no doubt after fierce lobbying – of the impact of legislation on different economic sectors (transportation, chemicals, manufacturing, not to mention electrical utilities and fuels production and consumption). In this connection, legislation can be made (or derailed) by proposed provisions regarding phase-in, byes and safety valves, and cost-spreading.
Allocating emissions allowances is about as controversial as the new legislation can possibly become, with major debate about the grandfathering existing sources, whether to auction all or just some of the rights to emit, and allowance retirement. After both creating enormous value in the form of legislative permission to emit GHGs, and auctioning or allocating the newly-minted rights to emit, already it is clear that a large federal direct and indirect subsidy program will be launched, that may favor green technology and conservation and disfavor existing unaltered high-GHG emitting technologies. Early action credits will certainly receive attention, but to what extent and in what form? This has yet to be fully resolved, nor has the point at which allowance purchase may finally be set to occur: upstream/downstream, at the point of energy use or the point of carbon release.
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)
