Innovative Litigation.
Practical Solutions.

[et_pb_dcsbcm_divi_breadcrumbs_module separator="sep-pipe" admin_label="Breadcrumbs" module_class="fl-darklinks fl-breadcrumbs" _builder_version="4.3.2" background_enable_color="off"][/et_pb_dcsbcm_divi_breadcrumbs_module]

Dealing with Present Challenges and Looking to the Future: From a Conceptual Basis to an Applied Framework for Handling Climate


Climate Change is an International, Interstate, Inter-Regional, Local Problem

The problem of climate change spans political boundaries, both international boundaries and state and local boundaries. Because the problem spans political boundaries, it must be addressed on a multi-agency level. Various different national, state, local and municipal governments have corresponding agencies to deal with environmental issues, such as climate change.

First, the problem is one of geography. If only isolated pockets or a subset of the agencies at issue take action, then adjoining or contiguous geographic areas of this action defeat the actions taken. Non-complying, adjoining areas may continue to emit carbon or other climate changing compounds unabated. Non-complying, adjoining industries’ continuing to operate and producing regulated compounds unabated will also be able to do so without bearing the costs of compliance with such regulations.

Indeed, given the interrelated nature of climate change and the fact that temperature and heat correlate to liquid states, trying to address climate change in one region without doing so in an adjacent region is similar to trying to get to the bottom of a pool of water with a shovel; any progress made is quickly overcome. One commentator has noted:

Climate change is a global problem and remains unsolvable at an isolated, local level. One ton of carbon emitted in New York has the same climate change effect in Portland, Oregon as one ton of carbon emitted in China. As a result, the flight to prevent or limit the effects of anthropogenic climate change requires international cooperation. Climate change is a global threat and therefore only international efforts can address problems such as the hypoxic dead zone and the slowing of the North Atlantic Current.

Jonathan Donehower, Analyzing Carbon Emissions Trading: A Potential Cost Efficient Mechanism to Reduce Carbon Emissions, 38 ENVTL. L. 177, 180 (2008).

Second, the climate of each geographical area is interrelated. So not only does the issue of climate change span political boundaries, it impacts interrelated parts of the planet in complicated ways. Climate change impacts, and is the result of nascent changes, in the atmosphere, hydrosphere and the lithosphere, or terra firma. In the atmosphere, climate change is largely attributed to the increasing concentration of six greenhouse gases (“GHGs”): carbon dioxide; methane; nitrous oxide; sulfur hexafluoride; hydrofluorocarbon; and perfluorocarbon. See S. 2191 §4 (15) (“America’s Climate Security Act of 2007” or “ACSA”). However, the impact of climate change is felt in the oceans, inland waterways, and on land. Virtually every part of the planet is, in some way, potentially affected.

A widely-reported example of climate change is the melting of the polar ice caps. As GHGs have accumulated in the atmosphere, they have increased its tendency to retain solar heat. As a consequence, the rising temperature has caused sea ice to begin melting. Accordingly, addressing climate change involves each of these different parts of the planet, the atmosphere, hydrosphere and the lithosphere. These impact not only natural ecosystems, but various population demographics throughout the world. See Edward Cameron, The Human Dimension of Global Climate Change, 15 HASTINGS-W.-N.W. J. ENVTL. L. & POL’Y 1 (“Why should this concern us? Because even subtle changes to the global climate will lead to increased risks to unique and threatened systems, including coral reefs; risks of extreme weather events, including swells, surges and cyclones); distribution of impacts, with the vulnerable and the poor being most at risk due to lack of adaptive capacity[.]”). “While the exact impact on migration and infectious diseases is hard to predict, analysis from sources as diverse as the Office of the United Nations High Commissioner for Refugees, the International Federation of the Red Cross and Red Crescent, and the Stern Review suggest that as many as 50 million people worldwide will be displaced because of drought, desertification and rising sea levels. The World Health Organization and leading health providers are anticipating an increase in water-borne and vector-borne diseases, in diarrheal diseases, and in malnutrition as a result of associated climate impacts.”). Id. at 4.

Climate Change is Accelerating

The rate of climate change also tends to increase over time, resulting in an actual acceleration of the changes taking place. This further complicates an already extraordinarily complicated problem. See Thomas D. Peterson, et al, Developing a Comprehensive Approach to Climate Change Policy in the United States That Fully Integrates Levels of Government and Economic Sectors, 26 VA. ENVT’L L. J. 227, 233 (2008) (“The impacts of these changes are uncertain and involve a multiplicity of risks to human health and the environment, including sea level rise, increased storms, intensified droughts and floods, water balance changes, expansion of vector borne disease, heat waves, and rapid shifts in growing zones and ecosystems. Impacts are not likely to be even over time – some regions will experience disproportionate effects. While no single risk factor is fully predictable, the interplay between such factors and their acceleration over time presents difficult scenarios to forecast.”).

The acceleration of climate change has been exacerbated by the failure of the Bush Administration’s EPA to act to curb GHG emissions with mandatory regulations. In fact, some point out that the EPA during this time actually fought against such actions. See Mary Christina Wood, Law and Climate Change: Government’s Atmospheric Trust Responsibility, 38 ENVTL. L. REP. NEWS & ANALYSIS 10652, 10656 (2008) (“The [EPA] even sent its lawyers all the way to the U.S. Supreme Court to argue that EPA did not have to regulate [carbon dioxide] pollution. The lawyers characterized the protection of our atmosphere as a political choice, and claimed that the [EPA] has discretion to permit pollution by the fossil fuel and automobile industries, no matter that this legalized pollution threatens to destroy the climate stability that has supported human civilization for 12,000. EPA lost that case, but it still hasn’t passed rules regulating [carbon dioxide], and it’s now doing everything in its power to prevent California from passing standards for new automobiles. It is as if our home is on fire, 20 fire trucks are in the driveway with hoses drawn, and the fire chief claims discretion to sit idle and watch our house burn down.”).

“[D]elaying action to reduce greenhouse gas emissions will certainly result in greater buildup of greenhouse gases in the atmosphere, and thus we commit the earth to long-lasting climate change and associated damages decades before these damages can be measured. Reversing the impacts of climate change becomes vastly harder, or impossible, and more expensive as we allow greenhouse gas pollutants to accumulate in the atmosphere.” Thomas D. Peterson, et al, Developing a Comprehensive Approach to Climate Change Policy in the United States That Fully Integrates Levels of Government and Economic Sectors, 26 VA. ENVT’L L. J. 227, 234 (2008) (quoting Brief for David Battisti, et al, as Amici Curiae Supporting Petitioners at 2-3, Massachusetts v. EPA, 127 S.Ct. 1438 (2007). Feedback mechanisms, some unknown until recently, also begin to accelerate climate change.

At such point, our enormous carbon pollution could kick in positive feedbacks in nature that are capable of unraveling the planet’s climate system, causing runaway heating despite any subsequent carbon reductions achieved by humanity. Scientists have identified several dangerous feedbacks. One is the albedo flip. When ice melts and turns to water, it causes further heating, because water absorbs heat and ice reflects heat. So, melting begets more melting. Another feedback is the failure of the earth’s natural sinks to absorb more carbon to compensate for our pollution. The Amazon rainforest is drying and burning, releasing more carbon than its remaining vegetation can absorb. The oceans are becoming saturated with carbon. In short, these places are on the verge of turning from carbon sink to carbon source. Another feedback results from vast expanses of permafrost melting in Siberia and Alaska, which has the capacity to release enormous amounts of carbon and methane – a scenario described by one science writer as an atmospheric tsunami.

Mary Christina Wood, Law and Climate Change: Government’s Atmospheric Trust Responsibility, 38 ENVTL. L. REP. NEWS & ANALYSIS 10652, 10654 (2008).

That there are numerous elements involved, e.g., at least six GHGs at work, that these form part of an extraordinarily complex and interrelated, global system, and the fact that the geographical areas at issue may be governed by various national, regional, state and local governments makes climate change both an intra-governmental and inter-governmental, as well as inter-agency, issue.

Climate Change is an Energy Issue, Agricultural Issue, Water Quality Issue

Coal, oil, natural gas, and related fossil fuels, powered the Industrial Revolution and account for approximately 90 percent of the world’s production of commercial energy. SeeLOUIS ROSEN, CLIMATE CHANGE AND ENERGY POLICY: PROCEEDINGS OF THE INTERNATIONAL CONFERENCE ON GLOBAL CLIMATE CHANGE: ITS MITIGATION THROUGH IMPROVED PRODUCTION 3 (Robert Glasser ed., 1992). Energy policy and energy prices are influenced by growing world-wide demand and, ultimately, a finite supply. Climate change reaches beyond being an energy issue. As energy policy favors renewable sources of fuel, it becomes an agricultural issue. As government seeks to regulate the amount and type of exhaust industry may emit into the atmosphere, it considers alternative fuels, such as renewable sources of fuel.

Climate change regulation then also becomes a question of energy and energy consumption. However, we are realizing that shifting to renewable sources of fuel impacts the amount of land available for food and agricultural production. The recent spikes in world food prices have been attributed to the U.S. shift to an ethanol mixture in its refined gasoline products. According to the World Bank:

“Biofuels offer a potential source of renewable energy and could lead to large new markets for agricultural producers. However, few current biofuel programs are economically viable, and most have social and environmental costs: upward pressure on food prices, intensified competition for land and water, and possibly deforestation. National biofuel strategies need to be based on a thorough assessment of those opportunities and costs. Globally, lower tariffs and subsidies in industrial countries will be essential for ensuring efficient allocation of biofuels production and guaranteeing social benefits to small farmers in developing countries.”

WORLD BANK, 2008 WORLD DEVELOPMENT REPORT, AGRICULTURE FOR DEVELOPMENT (2008); see also Ronald Bailey, The Biggest Green Mistake: Biofuels and the Global Food Crisis, REASON ONLINE (April 8, 2008) (“The result of these mandates is that about 100 million tons of grain will be transformed this year into fuel, drawing down global grain stocks to their lowest levels in decades. Keep in mind that 100 million tons of grain is enough to feed nearly 450 million people for a year.”); Aditya Chakrabortty, Secret Report: Biofuel Caused Food Crisis: Internal World Bank Study Delivers Blow to Plant Energy Drive, THE GUARDIAN, July 3, 2008 (“It argues that production of biofuels has distorted food markets in three main ways. First, it has diverted grain away from food for fuel, with over a third of US corn now used to produce ethanol and about half of vegetable oils in the EU going towards the production of biodiesel. Second, farmers have been encouraged to set land aside for biofuel production. Third, it has sparked financial speculation in grains, driving prices up higher.”).

Finally, the question of climate change is not solely an issue of atmospheric emissions and air quality. Water quality is also impacted by shifts in fuel products. First, as noted previously, climate change impacts water systems and the hydrologic cycle. See Zbigniew W. Kundzewicz, et al, The Impact of Climate Change on Freshwater Systems and Their Management, INTERGOVERNMENTAL PANEL ON CLIMATE CHANGE 175 (2007) (“Climate change affects the function and operation of existing water infrastructure as well as water management practices. Adverse effects of climate on freshwater systems aggravate the impacts of other stresses, such as population growth, changing economic activity, land-use change, and urbanisation. Globally, water demand will grow in the coming decades, primarily due to population growth and increased affluence; regionally, large changes in irrigation water demand as a result of climate change are likely. Current water management practices are very likely to be inadequate to reduce the negative impacts of climate change on water supply reliability, flood risk, health, energy, and aquatic ecosystems. Improved

incorporation of current climate variability into water-related management would make adaptation to future climate change easier.”).

Second, addressing climate change requires changes to the management of water sources. INTERGOVERN-MENTAL PANEL ON CLIMATE CHANGE, IPCC TECHNICAL PAPER VI §6.1 (2008) (“The relationship between climate change mitigation measures and water is a reciprocal one. Mitigation measures can influence water resources and their management, and it is important to realise this when developing and evaluating mitigation options. On the other hand, water management policies and measures can have an influence on greenhouse gas (GHG) emissions and, thus, on the respective sectoral mitigation measures; interventions in the water system might be counter-productive when evaluated in terms of climate change mitigation. At present, the primary issues in the area of climate change include assessment and study; prevention; remediation; and, more recently, affirmative action to eliminate carbon from the atmosphere.”).

Shift to Non-GHG Emitting Energy Sources

We have begun to realize that the inevitable result of using hydrocarbons and coal/chemical carbon chains for energy—whether to fuel automobiles or electrical power plants—is more carbon being emitted into the environment. See Ingi Salgado, Climate Shift Smogs Up the Nuclear Discussion, BUSINESS REPORT (July 31, 2008) (Climate change has also been a godsend to the image of the nuclear power industry, enabling it to divert the public imagination away from an association with the Cold War and safety concerns following the 1986 Chernobyl nuclear reactor accident. Nuclear’s newfound favour lies in its claim of clean energy status, based on the absence of greenhouse gas emissions in generating nuclear energy.”); Shirley Gregory, Nuclear Energy Sees Growing Support,ASSOCIATED CONTENT (January 11, 2008) (“Concerns about climate change are leading a growing number of experts and policy-makers to advocate a major shift to nuclear energy.”).

Long term solutions, given current population growth trends, point to increased use of base nuclear energy and electrification of transportation. See The Inexorable Comeback of Nuclear Energy, SPIEGEL INT’L (July 11, 2008) (“Still, it is nuclear power that many are beginning to see as the planet’s saviour. A typical coal-fired power plant (burning lignite) emits up to 1,150 grams of CO2 per kilowatt hour of electricity produced. The most modern gas-driven facilities emit 400 grams for the same amount of electricity. And for nuclear power plants? That number is around 30 grams per kilowatt hour when the entire life-cycle of the plant is taken into account.”). As automobiles turn electric, they will be equipped to tap into the electricity grid and obtain energy free of GHG emissions. SeeSandy Bauers, Electric Car Returns Energy to the Grid, PHILADELPHIA INQUIRER (February 2, 2009) (discussing new electric cars that return generated electricity to the electric grid).


How to Take Action?

The first question facing us is how do we take action. There are two main widely-circulated proposed approaches being debated. The GHG tax and the GHG cap-and-trade system. The concepts underlying these two approaches have been developed by academics, practitioners and commentators in various publications and conferences.

The Problem of GHGs as Economic Externalities

An externality is an effect of a use decision by one set of parties on others who did not have a choice and whose interests were not taken into account. The classic example of a negative externality is: pollution, generated by some productive enterprise, and affecting others who had no choice and were probably not taken into account. Where the use of the environment (which can be considered a limited resource) by a polluter or GHG emitter had once been free of charge, the GHG tax or cap-and-trade regulation places a chargeable cost on such a use to match the economic cost it entails. This is an effort to better value the resource of the environment and ensure its efficient use.

As a result of fossil fuel producers to successfully externalizing global-warming associated costs of fossil fuels, fossil fuel prices are artificially low. Artificially low fossil fuel prices do not efficiently allocate the use of the environment and the emission of GHGs, and exacerbate the problem of the GHG emission externality by encouraging increased fossil fuel consumption. Cf., Bradley Cosman, Green Derivatives: Exhorting Reductions in Greenhouse Gas Emissions via Shareholder Derivative Suits, 40 ARIZ. ST. L. J. 743, 744 n. 2 (2008).

The main goal of GHG regulation is to begin to place a price on what has for over a century simply been an economic externality. As one commentator puts it: “The theory of externalized costs lies at the heart of global warming litigation. Externalized costs exist when parties make a ‘decision about how to use resources without taking full account of the effects of the decision.’” Bradley Cosman, Green Derivatives: Exhorting Reductions in Greenhouse Gas Emissions via Shareholder Derivative Suits, 40 ARIZ. ST. L. J. 743, 744 n. 2 (2008).

At the same time, the externality associated with the release of GHGs into the atmosphere has been described as “inherently difficult to internalise.” Emissions trading has emerged as a popular method of achieving socially optimal emissions reduction.” Emissions Trading: The Pros and Cons, CLIMATE CHANGE AUSTRALIA (April 8th, 2008) (

How a GHG Tax Works:

An GHG emissions tax is a fee charged by a governmental agency on each unit of GHG emitted into the air. The GHG tax functions to internalize the externality cost of using the environment, and puts the actual economic cost in the cost of the product itself. An emissions tax may also add to the production cost of the GHG emission sufficiently to create an economic incentive to look for other solutions. See Kevin Doran, United States Climate Policy: Using Market-Based Strategies to Achieve Greenhouse Gas Emission Reductions,3 ENVT’L & ENERGY L. & POL’Y J. 31, 38 (2008). The tax would presumably be increased over time, and therefore encourage the overall reduction of carbon emissions.

Advantages and Disadvantages of a GHG Tax

According to one commentator, “[m]any economists and environmentalists agree … that a tax is a superior policy instrument in terms of economic benefits and ecological efficacy.” Daniel P. Schramm, A Federal Midwife: Assisting the States in the Birth of a National Greenhouse Cap-and-Trade Program, 22 TULANE L. J. 61, 65 (2008). Under a tax, businesses may be better able to identify ahead of time the costs associated with emitting GHGs. The tax may increase over time to encourage the development of alternative sources of energy.

Predictability of a GHG Tax

Some industry leaders have opposed the alternative to a GHG tax – a GHG cap-and-trade market – based on the concern that it may create yet another volatile market that speculators could influence or distort. See Kristin Hays, Marathon’s Cazalot Favors Carbon Tax, HOUSTON CHRONICLE (Feb. 12, 20009).

How GHG or Carbon Emission Markets Work

In a carbon emission market, the regulating body sets a cap on overall carbon emissions by all participants. The cap is based on scientific analyses and policy considerations regarding the acceptable amount of carbon emissions, and can be established by agreement among the participants or mandated by government. In addition, the market may impose fees or taxes to pay for its own operation.

The Economic Efficiency of a GHG Market

Cap-and-trade places a limit, or cap, on the overall GHG emissions, and allocates among a specific sub-set of emitters units each is allowed to emit. The emitters are then free to trade the units among themselves, allowing the market to ensure that the units go to the highest bidder. The highest bidder ensures that the limited amount of emission is used by those who need it the most, who are willing to pay the best price for it.

Once the overall cap is in place, the regulating body issues a permit and allocates an amount of acceptable emissions to each participant in the form of “credits.” A participant is limited in the amount of carbon exhaust it may emit to the amount of its registered credits, and violating that limit subjects the participant to a penalty. Once the permits and credits are issued to the participants, each may buy or sell them on the market to other participants. Any credits purchased allow the participant to increase its carbon emissions in direct proportion to its increase in credits. Conversely, any credits sold decrease the allowable emissions for that participant.

The operation of the market should result in the allocation of the credits in such a way as to maximize the use of the carbon emissions in the manner that society values most. For example, the price that a carbon emitter can command for its product or service, in part, is a reflection of the value that society places on it. That is, generally, the higher or more inelastic the price, the greater the demand relative to supply.

Therefore, carbon emitters that command high prices or that can easily pass on the costs of buying emissions credits will be more likely to aggregate credits and supply those goods or services that society prefers. Conversely, those carbon emitters that do not command high prices or have products or services that have high price elasticity are less likely to aggregate credits and will be forced to reduce emissions either by reducing production or becoming more efficient.

Further, the market would also reward carbon emitters that generate less carbon on a per unit basis than their competitors by requiring them to purchase fewer credits or providing them a surplus of credits to sell. This would simultaneously require their competitors to become more efficient in their carbon emissions so that they can remain competitive.

Thus, allowing participants to compete with each other for the emissions credits ensures that the emissions are used to generate those products and services that have the highest and best use from society’s point of view. This results in the market efficiently allocating the cost to the environment.

Advantages and Disadvantages of a Cap-and-Trade System

Leakage. Leakage in a cap-and-trade systems occurs when a GHG emitter is able to produce its products outside of the system regulatory framework. The problem is generally one attributed to non-mandatory or regional cap-and-trade systems. Lisa M. Hodes, Regional Regulation of Greenhouse Gas Emissions: Carbon Cap-and-Trade Programs Finally Arrive, THE ENVT’L LITIGATOR at 8, Winter 2009 (American Bar Association). During leakage, the GHG emitter does not internalize the externality of the emission into its product cost, and therefore sells its product at an artificially low price. An example of leakage would be an electricity provider emitting GHGs outside of a regional State cap-and-trade program, and selling electricity into the regional States at an artificially low price.

Overallocation. When a cap-and-trade system overallocates GHG emission credits, each emitter has the incentive to use all of its allocated units, even if it has a limited need for them. In such a situation, the ordinary incentive of the cap-and-trade system, to allocate emission credits and units to those willing to pay the highest price, is reversed. It is therefore important for the regulatory body to ensure that appropriate market mechanisms keep units efficiently allocated so that trade takes place.

Volatility. Finally, there has been concerned expressed recently that introducing yet another market into the energy production stream may risk price volatility. See Kristin Hays, Marathon’s Cazalot Favors Carbon Tax, HOUSTON CHRONICLE (Feb. 12, 20009). However, the most recent experience with cap-and-trade market systems has shown that volatility is not such a threat. See James Kanter, Group Says European Cap-and-Trade System Reduced Emissions, N.Y. TIMES (Feb. 16, 2009) (“The price of a ton of carbon dioxide in the current phase of the trading system has fallen to record lows recently. And although there are few suggestions the price could collapse entirely, the recent drop still is a worrying reminder that a market-based system to reduce emissions can be subject to significant volatility. In a boost for the system on Monday, however, a prominent research company, New Carbon Finance, said its calculations showed that the largest cause of a reduction in emissions in the European Union last year was attributable to the trading system — because it had encouraged greater use of gas in power generation rather than dirtier fuels like coal. European emissions dropped by roughly 3 percent in 2008.”).

Cap-and-Trade GHG Emissions Programs

The European Union Emissions Trading Scheme

The first major GHG market was launched in the European Union in 2005. It Emissions Trading Scheme operates in 27 countries and is designed to provide a mechanism for its member states to meet their compliance obligations under the Kyoto Protocol. Kenneth J. Markowitz, Environmental Integrity in the Global Carbon Markets, CLIMATE CHANGE, Jan. 21, 2009, at 5. Some of the problems experienced under the European system include differing levels of technological sophistication amongst its members, as well as enforcement issues. Although the European Commission overseas the Emission Trading Scheme, the United Nations retains the enforcement powers to ensure compliance with the Kyoto Protocol. See id.

U.S. Sulfur Dioxide Emission Markets

In the U.S., the cap-and-trade system proved successful in combating acid rain, which is caused by the emission of sulfur dioxide by fossil fuel plants into the environment. This market was established by the 1990 Clean Air Act Amendments and resulted in the reduction in acid rain. See Kevin Doran and Alain Ginnochio United States Climate Policy: Using Market-Based Strategies to Achieve Greenhouse Gas Emission Reductions, 3 ENVT’L & ENERGY L. AND POL’Y J. 31, 41-42 (2008). It was the first major cap-and-trade initiative designed for environmental science purposes and produced significant environmental benefits at substantially lower costs than originally predicted.

Kenneth J. Markowitz, Environmental Integrity in the Global Carbon Markets, CLIMATE CHANGE, Jan. 21, 2009, at 2. By 2006, it had reduced sulfur dioxide emissions by 6.3 million tons from 1990 levels, representing about 40 percent of the industrial power sector’s total emissions. However, some economists believe that GHG emissions will present a greater problem given their ubiquitous presence in so many different types of industrial and commercial processes. Id.see also Steve Lohr, The Cost of an Overheated Planet, N.Y. TIMES, Dec. 12, 2006.

The Regional Greenhouse Gas Initiative (RGGI)

In December 2005, seven New England and mid-Atlantic states united to form the first regional coalition of governmental bodies to form the first regional coalition in the U.S. to reduce GHG emissions. RGGI members include Massachusetts, Rhode Island, Maryland, Connecticut, Delaware, Maine, New Hampshire, New Jersey, New York and Vermont, who have collectively committed to reduce carbon emissions to 10 percent below 2009 emissions by the year 2018. Lisa M. Hodes, Regional Regulation of Greenhouse Gas Emissions: Carbon Cap-and-Trade Programs Finally Arrive, THE ENVT’L LITIGATOR at 6, Winter 2009 (American Bar Association). Both the Chicago Climate Exchange, a voluntary GHG market that opened in 2003, and the New York Mercantile Exchange have recently made it possible to trade future RGGI allowances. See Felicity Barringer and Kate Galbraith, States Aim to Cut Gases by Making Polluters Pay, N.Y. TIMES, Sept. 16, 2008.

To ensure consistency across the RGGI states regarding applicability of the regulations, allowances and offsets allocated, the RGGI member states developed the Model Rule. SeeAppendix A. It outlines the governing mechanisms and infrastructure for the regional cap-and-trade program and provides the specific requirements for permits, compliance certification, allowance allocations, the allowance tracking system, allowance transfers, monitoring and reporting, and offset allowances. As a condition of entry into the RGGI system, each state’s regulatory agency must implement rules materially consistent with the Model Rule.

AB 32 and the Western Climate Initiative

California enacted its own cap-and-trade system in its Global Warming Solutions Act of 2006, often referred to by its legislative number as Assembly Bill 32, or “AB 32.” Daniel P. Schramm, A Federal Midwife: Assisting the States in the Birth of a National Greenhouse Gas Cap-and-Trade Program, 22 TUL. ENVTL. L. J. 61, 71-2 (2008). In addition, on February 26, 2007, the governors of Arizona, California, New Mexico, Oregon, Washington, and the premiers of Manitoba and British Columbia formed the Western Climate Initiative. Id.Montana and Utah have also joined the group. Id.

United States Climate Action Partnership

The United States Climate Action Partnership (“USCAP”) is a group of businesses and leading environmental organizations that formed to call on the federal government to enact strong national legislation to require significant reductions in greenhouse gas emissions. (See It represents a critical union of the fossil fuel industry, chemical companies, multinational corporations, and scientists.

In January 2009, the Partnership presented to Congress “A Blueprint for Legislative Action: Consensus Recommendations for U.S. Climate Protection Legislation.” SeeUNITED STATES CLIMATE ACTION PARTNERSHIP, A BLUEPRINT FOR LEGISLATIVE ACTION (2009). The Partnership articulates a “new vision and policy direction to transition” in four parts:

increase in the overall energy efficiency of our economy; utilize responsibly our domestic supplies of coal, oil and natural gas; develop and export the transportation technologies and fuels of the future; ensure the nation has an adequate supply of electricity produced from low-carbon resources, including wind, solar, next generation nuclear technology, and coal with carbon capture and sequestration.

See id. at 2. According to the Blueprint,

Climate change presents a global problem that requires global solutions. USCAP believes that international action is essential to meeting the climate challenge. U.S. leadership is essential for establishing an equitable and effective international policy framework for robust action by all major emitting countries. USCAP believes that adoption of mandatory U.S. climate policy is an essential precondition for a full and effective international framework. The mechanism that Congress establishes as part of U.S. climate legislation can play a crucial role in encouraging broad international action. However, U.S. action to implement mandatory measures and incentives for reducing GHG emissions should not be contingent on simultaneous action by other countries.

Id. at 3. USCAP calls upon Congress to adopt and implement mandatory GHG cap-and-trade market controls and linking its national system to those in place internationally. See id. at 3-4.

Where to take action?

What agencies and areas of government are called upon to address climate change? Taking action to alleviate climate change must be as multi-faceted as the phenomenon itself.

This raises a number of issues, the most important one being how to coordinate the policy already put in place by regional markets and cap-and-trade programs. See Jonas Monast,Integrating State, Regional, and Federal Greenhouse Gas Markets: Options and Tradeoffs, 18 DUKE ENVT’L L. & POL’Y F. 329, 332-3 (2008). Clearly, the problem of coordinating federal and state efforts has been faced before the issue of limiting GHG emissions. In both the Clean Air Act and the Clean Water Act, legislation allowed the states to enact laws or regulations that exceed the baseline set by the federal government. Id. at 334. The most recent federal legislation, the American Climate Security Act of 2008, also follows this model, allowing the state and regional markets in place to coexist with the federal scheme. Id.

“Climate Change Integration Matrix”

One commentator has constructed a “Climate Policy Integration Matrix” that seeks to take into account the various levels of government and how each relates to the economic sectors that impact GHG emissions. See Robert B. McKinstry, Jr. and John C. Dernbach,Developing a Comprehensive Approach to Climate Change Poicy in the United States That Fully Integrates Levels of Government and Economic Sectors, 26 VA. ENVT’L L. J. 227, 251-2 (2008).

Level of Government Local State Regional National
Economic Sector Energy Supply
Residential, Commercial, Industrial
Transportation and Land Use
Waste Management

This matrix provides a concrete and readily available illustration for the differing interests involved. To the extent a federal system is put in place to overlay the state and regional systems already in place, it should address as much of this matrix as possible.

The U.S. House of Representatives Committee on Energy and Commerce and its Subcommittee on Energy and Air Quality released a White Paper entitled, “Appropriate Roles for Different Levels of Government.” STAFF OF HOUSE COMM. ON ENERGY AND COMMERCE, APPROPRIATE ROLES FOR DIFFERENT LEVELS OF GOVERNMENT 1 (Comm. Print 2009). It set forth eight key factors to consider and balance in constructing a national GHG control program and rationalize the different roles of government:

  • the global effect of gas emissions;
  • the effect on the level and cost of national greenhouse gas reductions;
  • the efficient use of government and societal resources;
  • the benefit of States, Tribes and localities as laboratories;
  • differing local circumstances;
  • the burden on interstate commerce;
  • imposition of costs on other States; and
  • stakeholder needs.

See id. at 2.

Federal v. State Level Actions

Advantages of Disparate State or Regional GHG Regulation

“It is one of the happy incidents of the federal system that a single courageous state may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.” New St. Ice Co. v. Liebmann, 285 U.S. 262, 311 (1932) (Brandeis & Stone, J.J., dissenting). States and regional cap-and-trade markets have provided a valuable “laboratory” that will teach lessons to Congress in enacting additional legislation. Despite arguments that disparate state-level actions create a “patchwork” of disunited schemes, one advantage of separate attempts at GHG regulation is the chance to learn from prior mistakes. See Gloria Sefton, California’s Not Dreamin’: Federal Inaction on Greenhouse Gas Regulation Provides an Opening for the State to Regulate, 30 WHITTIER L. REV. 101, 111 (1008).

RGGI and its Advice to the Congress

On October 31, 2007, the RGGI issued correspondence to the U.S. Congress offering “design principles” to be “incorporated into a cap-and-trade program adopted as part of a comprehensive set of federal greenhouse gas emissions reductions policies.” Letter from the Heads of the State Agencies of the Regional Greenhouse Gas Initiative (October 31, 2007) (

Among the “Guiding Principles” suggested by RGGI was an admonition to “[r]espect state authority to implement state programs that are in addition to federal requirements. States that have undertaken early action have made considerable political and economic investments to achieve success in reducing greenhouse gas emissions. These efforts should be encouraged and rewarded. Federal programs should not punish early action by states, and should not reward states for failing to take early action.” Id. at 5.

Among the “Design Principles” suggested by RGGI were the recommendations that the states be allowed to “distribute sales revenue” and “implement a portfolio of policies and measures that improve electric end-use energy efficiency and reduce electricity demand.” Id. at 6. Also recommended was that new conventional coal-fired plants not be grandfathered under a federal cap-and-trade system, but be required to purchase their allowances on the open market.” Id.

Other Issues With Federal GHG Regulation

Other issues that may arise regarding federal GHG regulation include preemption, and possible violations of the Commerce Clause or the Compacts Clause of the U.S. Constitution. See Dale S. Bryk, Recommendations for Designing a Greenhouse Gas Cap-and-Trade System for California, AMERICAN LAW INSTITUTE, THE MARKET ADVISORY COMMITTEE TO THE CALIFORNIA AIR RESOURCES BOARD, at 145 (2008) (“Both approaches are subject to potential legal challenges based on whether California’s treatment of imported electricity is consistent with the Interstate Commerce Clause, which prohibits discrimination in trade. The principal issue is whether the regulations treat in-state and out-of-state electricity in a similar way.”).

Federal legislation and rules implemented to address GHG emissions and incorporating the efforts of the states already in place must take the Commerce Clause and the Compacts Clause into consideration. Without properly drafted legislation, the courts may hold that the Commerce Clause preempts the state markets and state efforts in areas where Congress has decided to regulate. The ACSA already has some provisions drafted to accommodate these issues. See S. 2191 § 9004 (specifically reserving to the States certain regulatory rights not to be considered preempted).

Representing Clients Regarding Climate Change and GHG Issues

The variety of issues that may confront a lawyer working with governmental agencies in climate change litigation is as wide as the types of issues climate change involves. As a result of the very nature of the climate change problem, lawyers who work in the area of climate change law are increasingly discovering that climate change issues are inter-agency in nature.

Climate change impacts the entire U.S.; therefore, a coordinated, well-planned and orchestrated nationwide scheme is required to address the problem. The specifics regarding GHG regulation due from the federal government is not yet known. However, clearly some uniform standards are required, or differing standards from state to state will interfere with business. Differing standards prevent uniformity and cost efficiencies because one single product no longer meets regulations.

If GHG regulations differ from state to state, then energy companies and other GHG emitters have different standards to deal with in refining petroleum products. Producers may be required to operate differently across state lines. Differing standards results in a loss of uniformity and efficiency. In addition, there may be an incentive for some GHG emitters to operate in some parts of the country, and not others, if the GHG emissions are less restrictive. The result would be more GHG emissions and more climate change, not less.

Effectively representing clients in climate change issues requires as much knowledge as possible of the state or regional regulations in place for various initiatives and markets. Finally, it is important to understand how these state and regional initiatives fit in with the federal scheme once it is finally conceived and enacted.

Federal, State, Regional and Local Issues

In the U.S., representing clients with regard to climate change issues means being able to address issues at both the state and the federal level, as well as the local and municipal level. As set forth above, in the absence of national federal GHG regulation of carbon emissions, the states have formed regional coalitions. Although different rules govern different coalitions, RGGI has set forth a model set of rules. These model rules may form the basis for either a federal cap-and-trade scheme or for additional state regional cap-and-trade schemes. Climate change issues in the U.S. may also impact Native American tribes and their governments.

Representing clients with regard to climate change issues requires knowledge, expertise and experience with different types of governmental agencies at different levels of government. “The urgent need for comprehensive action, the opportunities presented by state and local actions, and the difficulties associated with governing such a complex environmental issue all suggest that the conventional approach of federal legislation is unlikely to adequately address the climate issue without substantial augmentation by state learning and example.” Thomas D. Peterson, et al, Developing a Comprehensive Approach to Climate Change Policy in the United States That Fully Integrates Levels of Government and Economic Sectors, 26 VA. ENVT’L L. J. 227, 234 (2008).

Agency Culture and Political Interests

Agency culture is implicated in climate change efforts, as various industry interests and environmental concerns vie for control and the power to determine the extent and nature of regulations addressing climate change. See Irma S. Russell and Jeffrey S. Dennis, State and Local Governments Address the Twin Challenges of Climate Change and Energy Alternatives, 23 NAT. RESOURCES & ENV’T 9, 14 (2008) (discussing California’s attempt to implement its own motor vehicle emissions, and EPA’s refusal to grant a waiver of the Clean Air Act so that it could do so).

Indeed, there is still a flourishing campaign arguing that climate change is fictional or, at the very least, not the result of human action.

We face a problem that is unprecedented in terms of its consequences, a problem that is caused by virtually everyone on earth, a problem that requires us to overhaul our sectors and lifestyles to solve, and – as if that were not enough – a problem that requires us to act before nature passes a critical tipping point looming right in front of us. Climate thinkers agree: nothing less than a massive, global effort surpassing the scale of World War II will provide hope of stabilizing climate at this point.

Mary Christina Wood, Law and Climate Change: Government’s Atmospheric Trust Responsibility, 38 ENVTL. L. REP. NEWS & ANALYSIS 10652, 10655 (2008). However, even most multinational energy companies—including the largest, Exxon Mobil—are on record stating that climate change is very real, and is the result of human actions. See Steven Mufson, Exxon Mobil Warming Up to Global Climate Debate, THE WASHINGTON POST, Feb. 10, 2007. The question now is what to do about it.


The Regional Greenhouse Gas Initiative Model Rule

In dealing with client representation regarding GHG emission cap-and-trade, it is essential to ascertain what rules apply. RGGI has formulated a set of model rules (“RGGI Model Rules”) that will likely form the template for any federal system ultimately put in place. For purposes of this discussion, these rules have been implemented and are currently being tested. They are useful here for a discussion regarding how to handle client representation in the event of an alleged rules violation. Further, and since these rules involve U.S. clients and State governments operating within the framework of U.S. law, they will carry great weight in further formulations of GHG cap-and-trade market rules. These rules have been included with this chapter as its Appendix A.

Forewarned is Forearmed: Does the Client’s Issue Involve Simple Compliance?

When dealing with climate change compliance issues and governmental agencies, compliance efforts should be prioritized. If the client is seeking simply to meet compliance requirements, rules and regulations set forth by a GHG emission market, then the criteria for such a prioritization should involve step-by-step actions to ensure such compliance.

With carbon emissions markets – which represent the current trend in government regulation regarding climate change – compliance is an issue that spans several agencies. There is the central authority that issues the units of carbon emission and tracks their trade and usage. There is also likely another agency that keeps track of overall emissions and sets policy to ensure that the overall emissions are reduced. Finally, there must be an enforcement mechanism in place whereby violators of emission limits or those who emit without the required emission unit credits are penalized.

Ascertaining how the client is to comply with GHG emission requirements, rules or regulations should likely follow the same procedure the client uses to implement any other governmental emission requirement, rule or regulation. This is especially the case if there is any past history experience with sulfur dioxide markets, which should have similar procedures in place. The main difference between most prior emission regulations and GHG cap-and-trade market regulations will be evaluating the needs of the client regarding GHG emissions and making economic decisions accordingly. This is not so much a compliance issue as it is one of economic analysis.

Section XX-8 of the RGGI Model Rules governs “Monitoring and Reporting” and includes within it requirements for installation, certification and data accounting. See Appendix A at 72. RGGI Model Rule XX-8.2 governs initial certification and recertification procedures. The RGGI Model Rules also incorporate by reference portions of the Code of Federal Regulations governing applicable standards. Section XX-8 also contains RGGI Model Rules regarding conventions for reporting data and prohibited actions. See id. at 74-76. As noted, any final set of rules will likely use these RGGI Model Rules as an example.

Does the Client’s Issue Involve Allegations of Non-Compliance or a Violation of Requirements, Rules or Regulations?

If, however, the compliance issue involves the client’s alleged violation of a requirement, rule or regulation set forth by a GHG emission market, then the priority will be to seek resolution while at the same time defending the client from any alleged violation. This is a subtle difference in the tact that will be taken by counsel.

Prioritizing the Representation

The priorities in the representation will also depend upon the statutory scheme, requirements, rules or regulations at issue. Ascertain what parts of the rules and regulations are at issue. If the client has been served with notice of a proceeding based on the alleged violation or non-compliance, focus on the allegations made and begin an investigation into the facts underlying the allegations.

In the area of climate change rule enforcement, there are usually statutory provisions in place, or the agency charged with enforcement promulgates rules governing the enforcement procedures. These procedures usually have notice provisions, then an opportunity to respond, and a hearing. Some may even have appeal procedures. There may also be judicial review in the courts.

Aninvestigation procedure must involve a notice or communication indicating that the investigation is being opened. It should also involve face-to-face meetings and onsite visits and analyses. Afterward, there has to be some hearing procedure before a decision is handed down. All of this must be structured to obtain resolution by agreement, if possible. In any event, it is important that the procedures function expeditiously and promptly.

The attorney’s role as outside counsel in climate change litigation is to represent the interests of the client. As in any litigation, arbitration, mediation, statutory, or administrative proceeding, the attorney should seek to resolve any issues as economically and as efficiently as possible. If there are issues that the client holds dear, then those issues may be disputed and litigated. However, it is important to present the cost-benefit analysis of litigation to the client and keep it at the forefront of the client’s mind.

The RGGI Model Rules

The client should understand the applicable regulatory scheme, and its outside counsel should ensure that it is in compliance, so much as reasonably possible. The client should also understand the government’s position and its options going forward. If the client, through its in-house or outside counsel, can also propose or conceive of an agreed-upon solution, costs are typically minimized, and the issue resolved most efficiently.

The RGGI Model Rules anticipate actions for enforcement taken by the regulatory agency or its agent. See RGGI Model Rule XX-6.5(d)(3) at 66-7. “The REGULATORY AGENCY may review and conduct independent audits concerning any submission under the CO2 Budget Trading Program and make appropriate adjustments of the information in the submissions.” Id. at XX-6.5(f).

Such actions, however, do not preclude litigation. “The commencement or pendency of any administrative enforcement, or civil or criminal judicial action arising from or encompassing that excess emissions violation will not act to prevent the REGULATORY AGENCY or its agent from initially deducting the CO2 allowances …” Id. at XX-6.5(d)(3).

Seeking Solutions in Dealing With Climate Change Compliance Issues

Five Steps for Working with Government Agencies on Climate Change Issues

There are five key steps for working with government agencies on climate change issues:

Assess the problem. Determine what the client’s problem is, what law addresses it, and what governmental agencies address that particular aspect of law. For example, if it is a question of certification, addressing it will be different from an action filed against the client for non-compliance or violating emission allocations or regulatory rules.

Plan the approach. Determine what needs to be done before engaging the government, and how to proceed as expeditiously as possible with the governmental agency or agencies. If investigations are launched, negotiated cooperation may ensure that it is as non-obtrusive to the client’s business as possible. It may also help you reach resolution or persuade the acting agency that there was no non-compliance in the first place.

Seek to obtain agreement or resolution of issues with the governmental agency. Isolate those issues that cannot be agreed upon, and seek quick and efficient resolution through administrative or judicial proceedings. Given the power of regulatory governmental agencies, it is rarely advantageous to act in solely an adversarial manner. It is important to prioritize the issues at stake and work the client to pick what battles, if any, are worth fighting. Once these are isolated, it may be important to agree to work with the government on the issues not worth opposing.

Focus on obtaining as favorable an outcome as possible, but ensure that the client is protected from further compliance issues. It is important to ensure that the investigation or non-compliance action are resolved finally. On-going, interminable issues with the government are costly and interrupt business. One way to accomplish this is to enter into an enforceable agreement with the governmental agency. Once all issues have been decided, either by cooperative agreement or by ruling, enter into an enforceable agreement to ensure the problems are in the past once and for all.

Ensure that the client’s ongoing operations comport with the regulations, statute, or rules set forth from the proceedings. Once you have resolved the issue with the government and have an enforceable agreement going forward to protect your client, see to it that the client understands and will comply. It should include any agreements reached, and that any internal policies reflect changes in operations that accommodate the results of the proceedings. This is important in the event there are future issues as proof of attempts to comply.

Techniques for Communicating with Government Agencies

In order to communicate effectively with government agencies with respect to climate change issues, it most helpful to get to know the members of the agencies who handle your client’s issues. It is also useful to know members or officers of trade associations, which usually have good relations with government agencies. In many cases, positions in government are filled by members of trade associations.

Personal communications with government agencies are always preferable to other types of communications. Personal communications tend to prevent simple issues from becoming more complex, and more complex issues from becoming adversarial; they then simply remain issues of compliance.

In order to develop relationships with government officials you should use the same techniques that are typically used in developing any relationships—i.e., meeting over lunch, at various industry functions, etc.—there is really no limit. Also, working together and recognizing a problem the official may have, and assisting in working through it, may pay future dividends. These are the same techniques used for client development.

If documents need to be shared or submitted with government agencies it is easiest to do so electronically. Be certain that document requests are thoroughly examined by the client. In the event the scope of the requests may be narrowed through negotiation, do so when it is in the client’s interest. Documents may even be stored offsite on a server to which access can be granted to ensure as little business interruption as possible.

Complications when Working with Government Agencies on Climate Change Issues

Complications that often arise when working with government agencies on climate change issues include difficulty in communicating or obtaining information; lack of responsiveness; dilatory proceedings; and unclear procedures or direction. These complications are often caused by ideology and industry special interests infiltrating the agency and contradicting the science and the broader scientific community.

Additional factors that contribute to complications in this area include mission creep, poor management of the agency, and insufficient creativity regarding outside counsel’s finding a solution or resolution.

Dispute Resolution Options

When working with government agencies on climate change issues, dispute resolution options include mediated agreement; plea agreement; settlement; consent decree; agreed judgment; or simply a contract. The Justice Department is involved to address any criminal law issues, as well as to represent the governmental agency in court and in some administrative proceedings. Dispute resolution is always a preferred option when there is a palatable set of options presented by the government and that the client can accept. Only when there is a set of issues that the client must litigate is dispute resolution not an option.

Document Requirements and Electronic Discovery

Document production requirements may be substantial in climate change litigation, particularly in any issues dealing with the government. Especially where the dispute involves process or data materials—such as records of pipeline transported products or atmospheric emissions—the document requirements may be significant. Which reports are generated depends upon the specific climate change problem, and what regulations or laws are at issue.

Being proficient in e-discovery—including preparing, issuing, and administering e-discovery holds to preserve potential evidence—is critical in some climate change law situations involving government agencies. In addition, knowing how to navigate e-discovery of client computer servers, systems, and even imaging such servers or remote servers on laptops or in instrumentation, is essential to dealing with the government in these matters.

Final Thoughts

It is most important for outside counsel and in-house counsel in this practice area to be familiar and stay abreast of agency changes, pending legislation, any proposed rules, and the accompanying comment period. Being forewarned is being forearmed, and it is up to the lawyer to be forewarned for the client. Given the lack of initiative at the federal level for nearly a decade, and given the progressively worsening climate situation, I would advise lawyers working with government agencies on climate change issues to be prepared to think creatively about how government agencies may seek to limit carbon emissions in the future—i.e., through carbon emissions markets, trading floors, or industry formulas. You should also think creatively about how to resolve problems that may arise in this very new arena. Finally, think creatively about how best to work in the client’s interest in addressing the government policies at issue. Much of the work that needs to be done in the years to come will be new. As lawyers and their clients work together, where possible, with government agencies, costs will be minimized, and the goal of a better environment may be more likely to be achieved. However, given the increasing speed and acceleration of climate change, nearly on a day-to-day basis, it is uncertain what the overall impact or outcome of these efforts will be. Again, it is important to think creatively going forward; be aware of pending legislation, proposed or promulgated rules, and industry comments and commentary periods; and, most importantly, understand the rules and procedures that are currently in place and how they function. All of this is the best way to ensure as positive an outcome in climate change litigation as possible.


Cases that are relevant to the matters covered include:

Massachusetts v. EPA, 127 S.Ct. 1438 (2007)

Statutes that are relevant to the matters covered include:

The Clean Air Act, 42 U.S.C. ss 7401-7671q (2000)