A Climate for Change

Photo by Stephen Strathdee / Dreamstime.com State regulation of greenhouse gas emissions has caused a flurry of legal challenges to business activities that affect the environment. In states like California, lawyers and their clients need to be proactive about incorporating climate concerns into development plans.

Never one to shy away from the spotlight, California Gov. Arnold Schwarzenegger took the podium at the recent United Nations Climate Change Summit to declare that “California is leading the U.S.” in efforts to address global climate change, “moving the United States beyond debate and doubt to action.” President Bush was elsewhere that day, proving the governor’s point.

The scene at the United Nations is emblematic of greenhouse gas (GHG) regulation in the United States. While President Bush and the Environmental Protection Agency (EPA) talk about the need to reduce GHG emissions, the states are taking action. Climate change laws are sprouting up across the nation – seven so far – mandating GHG reductions. How much and by when depends upon the state. Another ten states have issued executive orders or other policies prescribing GHG emission reduction targets.

California, which seeks to cap GHG emissions at 1990 levels by 2020, was first to require state-wide reductions and specify penalties for non-compliance. California also pioneered legislation to limit GHG tailpipe emissions. A state law passed in 2002 requires reductions in greenhouse gas emissions from new automobiles starting with the model year 2009. Twelve states have now adopted California’s stringent vehicle emission standards, which are awaiting EPA approval.

In addition to spurring states to adopt laws and policies, the federal regulatory vacuum also is causing local jurisdictions and environmental advocates to focus on individual projects under the National Environmental Protection Act (NEPA) and state equivalents. These laws require analysis of the potential environmental effects of proposed projects. Viewing these laws as a means of achieving GHG reductions on a project-by-project basis, plaintiffs in state and federal courts are challenging environmental reviews for failing to adequately address climate change. Recently challenged projects range from federal funding of national and international fossil fuel projects to a mixed-use development proposed to be built on a newly constructed levy. There are also nuisance cases, such as California v. General Motors Corp., No. 06-CV-05755 (N.D. Cal. Filed Sept. 20, 2006), in which states or class action plaintiffs allege that defendants’ GHG emissions – in this case from the “big six” automakers – are contributing to global warming, creating a public nuisance.

Those watching these legal developments and hoping the federal government will step in to provide a uniform regulatory approach are likely to be disappointed, at least in the short term. Although the Supreme Court’s recent decision inMassachusetts v. EPA, 127 S. Ct. 1438 (2007) gave EPA the green light to regulate GHGs as “pollutants” under the Clean Air Act, there is no sign the agency will take up the mantle anytime soon. Nor is Congress likely to pass a national climate change law before the next election. So, for the time being, states and the courts will continue to lead the way.

What does this mean for environmental lawyers and our clients? For lawyers, it means racing to keep pace with the daily barrage of information, legal developments, technical guidance and climate change pronouncements at the federal, state and local levels. For clients, it means proactively making climate change part of any planning for a new development project, new plant construction or facility expansion. Buildings use energy; employees or residents will use transportation; buildings will generate waste. All of these activities contribute to GHG emissions.

California’s approach to climate change is an example of how state action can affect an environmental practice and a law firm’s clients. Here, the government has adopted a three-pronged GHG reduction strategy: reduce automobile emissions; cap statewide emissions; and compel new projects to mitigate climate change impacts. The focus on vehicle emissions began in 2002, with the passage of AB 1492. That law required the California Air Resource Board (CARB) to adopt regulations “that achieve the maximum feasible and cost-effective reduction of greenhouse gas emissions from motor vehicles” manufactured in the 2009 model year and beyond. The state regulations adopted in 2005 require a preemption waiver from EPA under section 209(b) of the Clean Air Act. In December, the government agency denied the waiver request, and California officials said that they would sue in federal court to challenge this decision.

The California Global Warming Solutions Act, known as “AB 32,” leaves no doubt as to California’s official views on global warming. The act states that “global warming poses a serious threat to the economic well-being, public health, natural resources, and the environment of California.” Addressing this threat requires state-wide, mandatory reductions in greenhouse gas emissions. AB 32 regulates six GHGs: carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulfur hexafluoride, mandating their reduction to 1990 levels by 2020. The first step, therefore, is determining what the GHG emissions were in 1990. Using that baseline, CARB must adopt rules by Jan. 1, 2011 that will achieve the 2020 cap. Those rules must take effect no later than 2012 and require certain sources to inventory and reduce GHGs. So-called “early action measures” will take effect even sooner. In order to achieve mandatory reductions, AB 32 authorizes CARB to adopt a market-based cap-and-trade compliance system, allowing emission credits to be accrued and traded between companies.

Beyond these fairly typical provisions, AB 32 imposes penalties for noncompliance. Regulated industries that fail to reduce emissions as required will be subject to penalties ranging from $25,000 to $75,000 per violation per day.

Although CARB will not issue regulations until late 2010, AB 32 already has changed the legal landscape, sparking a flurry of activity and lawsuits. Much of that activity involves challenges to individual projects under the California Environmental Quality Act (CEQA), the state law that parallels NEPA, the national act. CEQA, like NEPA, requires government agencies approving projects to analyze their “potentially significant environmental effects.” CEQA further requires agencies to impose measures to mitigate those effects.

AB 32 did not expressly amend CEQA. Citing the law’s passage, however, project opponents now argue that climate change must be evaluated as a potential environmental effect under CEQA. That argument has plagued lawyers on the defense side. In the absence of any regulations, what level of GHG emissions from an individual project poses a “potentially significant environmental effect” on global climate change? Is one molecule enough? One ton? Without an answer to that fundamental question, how can a court determine whether the project’s effect on climate change must be analyzed, let alone mitigated?

The good news for lawyers is that answers to these questions are forthcoming. The bad news is, not soon enough. New legislation passed on Aug. 24, 2007 requires the state to adopt by Jan. 1, 2010, CEQA guidelines for mitigation of greenhouse gas emissions or their effects. Meanwhile, the courts will continue to answer these questions, one case at a time.

While California law develops case by case, and with no guidelines in place, advising clients facing a CEQA project review poses significant challenges. Projects must go forward, with or without CEQA guidelines. At the same time, CEQA lawsuits can delay project construction for months or years. How do you ensure that an environmental impact report (EIR) has adequately addressed the issue, and that the project includes appropriate mitigation measures? In the absence of regulations, the answer normally lies in the science used to evaluate environmental impacts. Here again, however, there are more questions than answers. Air quality specialists indicate that analytical tools have not been developed that could determine the effect on global climate change from a particular increase in greenhouse gas emissions, or the resulting effects on climate in a particular locale. The scientific tools needed to evaluate the impact that a specific project may have on the environment are even farther away.

Even with all the uncertainty facing CEQA practitioners, one thing is sure: Ignoring the issue no longer is an option in California. Developing a legal strategy for clients cannot wait for clarification of the myriad issues, both legal and technical. The only option is to synthesize whatever direction can be gleaned from the courts, the state attorney general’s office and air quality consultants, and determine how best to proceed in each case.

As far as direction from the courts, case law thus far offers little guidance as to what a sufficient CEQA analysis of climate change impacts would look like. Direction from the California attorney general, by contrast, abounds. Edmund G. (“Jerry”) Brown has challenged several projects for failing to address climate change under CEQA. Having adopted this issue as his cause célèbre, Brown has made it clear that projects must determine whether project GHGs may have a significant impact on global warming, and must mitigate those impacts.

To clarify the state’s position, Brown has issued dozens of comment letters during the CEQA process for projects. Each letter asserts that emissions of GHGs make it more difficult for the state to meet the emission reduction requirements of AB 32. Accordingly, the letters urge that the EIRs estimate GHG emissions and demonstrate that any increase in such emissions would not impair the state’s ability to achieve the mandatory greenhouse gas reductions. With regard to mitigation measures, the comment letters require proponents of industrial, commercial and residential projects to adopt GHG reduction strategies, such as these developed in March 2006 by the California Climate Action Team, which is made up of representatives of several state agencies. Project proponents who do not take the attorney general’s letter seriously will find themselves in court.

The attorney general’s aggressive stance on climate change is prompting some attorneys to advise clients to evaluate the GHG emissions associated with any project facing CEQA review, and to adopt voluntary feasible reduction measures. The California Climate Action Team and organizations such as the Association of Environmental Professionals have developed lists of mitigation strategies that may be considered “feasible” for various industries and projects.

Mitigating GHG emissions typically involves energy efficiency, waste recycling and other conservation methods. Some of these bring the added benefit of cost savings. EPA’s Waste Wise program has quantified GHG reductions that can be achieved from small measures such as double-sided printing or recycling soda cans. EPA calculated, for example, that preventing 500 tons of aluminum from being disposed is equal to taking about 952 cars from the road in one year.

Dozens of GHG reduction strategies have been suggested by state agencies and interest groups. The measures generally fall into eight categories:

1) Energy efficiency;
2) Clean energy, such as solar or wind power;
3) Transportation measures like car and van-pooling;
4) Waste reduction and recycling;
5) Agricultural and forestry measures to manage manure, plant trees and prevent forest fires;
6) Programs to capture and sequester GHGs including methane and carbon;
7) Industry-specific measures for the oil industry, cement manufacturers, and others; and
8) GHG quantification and financial instruments, such as carbon offsets or credits

Some GHG reduction strategies may be better than others. For example, the strategy of purchasing “carbon offsets” or “carbon credits” has drawn criticism recently. A company that has exhausted its own GHG reduction options can pay others to reduce their carbon emissions, rather than reducing its own. Offsets can be a good market-based incentive to keep businesses on track toward meeting their emission limits. However, a lack of verification and unscrupulous brokers can lead to buying credits that do not yield actual reductions in carbon emissions, which is why experts recommend that offsetting be used as a last step to reduce GHG.

California’s experience with GHG reductions may not be unique, but if it is indeed “leading the U.S.” on this issue, its approach will influence how climate change is addressed elsewhere, at the state and federal level. That approach goes beyond laws and regulations, as the attorney general’s aggressive CEQA stance illustrates. In fact, if the California experience has taught us anything, it is that climate change law will develop project by project while we await the regulations. The same may be true in any of the growing number of states adopting GHG reduction targets, which can form the basis for challenging new projects. As a result, municipalities, industry, and residential and commercial developers in those states also may want to implement GHG reduction strategies even if none are yet required. As we have learned in California, taking the preventive step of evaluating and addressing GHG emissions associated with projects not only can benefit the environment, but also can avoid costly and time-consuming legal challenges.

The absence of federal leadership on the issue of climate change has created a challenging legal environment, but one in which the states, and all stakeholders, have the opportunity to play a formative role.

Jocelyn Thompson is a partner at Weston Benshoof Rochefort Rubalcava & Maccuish, where she assists clients in obtaining environmental permits and provides advice regarding compliance with environmental laws. Donna Diamond is of counsel at the firm and also focuses her practice on environmental compliance and permitting issues.