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Volume 16, No. 4 © 2008 The Metropolitan Corporate Counsel, Inc. April 2008

Climate Change and the Environment – Law Firms Regulating Climate Change: A Summary Of Federal And State Action

Michael David Lichtenstein The Domestic Landscape – State Action LOWENSTEIN SANDLER PC In the absence of federal legislation, states have moved to fill the vacuum of Climate change regulation is coming climate change regulation. State action “whether you would risk it or not.”1 What has been of two types Ð state legislation the International Policy Network called a and regional initiatives. A good example “myth” in November 2004,2 is now of state legislation is the New Jersey accepted fact in most corners of the sci- Global Warming Response Act.4 Signed entific community and the world.3 You into law on July 6, 2007, the Act estab- might ask why we need climate change lishes greenhouse gas emission reduction regulation in the United States. The short requirements in New Jersey to 1990 lev- answer is because the United States has els by 2020 and by 80 percent of 2006 committed to play a role in the world- levels by 2050. wide effort to reduce greenhouse gas The Act requires the New Jersey emissions. This article is a brief primer Department of Environmental Protection on what regulation you can expect now (NJDEP) to develop a New Jersey green- and in the near future. house gas inventory and an emission monitoring and reporting program. A The International Landscape Michael David Lichtenstein draft inventory was presented by the In December 2007, the Government NJDEP in February 2008 for public com- of Indonesia hosted the United Nations 5 the terms of an agreement on climate ment. Comments will be considered until Climate Change Conference which March 20, 2008. The inventory must be included participants from 180 countries. change issues. The first meeting will be held from March 31 Ð April 4 in finalized by June 30, 2008. The draft The conference culminated in the adop- report also contains suggestions for tion of the Bali Roadmap, consisting of a Bangkok, Thailand. The issues to be addressed include, among others, mea- potential reductions in emissions where number of forward-looking tracks to the NJDEP anticipates reductions can be worldwide greenhouse gas emissions surable, reportable and verifiable national commitments to quantified achieved with strategies consistent with reduction. A major component of the New Jersey’s overall goal of reducing its Roadmap is the Bali Action Plan. The greenhouse gas emissions limitations and energy use to 1990 levels by 2020 (about Plan authorized the creation of an Ad reduction objectives. The Ad Hoc Work- a 20 percent reduction from currently Hoc Working Group on Long-term ing Group will present its work product anticipated 2020 levels). Cooperative Action. in 2009, when all countries will be The Act regulates greenhouse gas The Ad Hoc Working Group will hold expected to sign a binding agreement. emissions from numerous sources, quarterly meetings in 2008 to negotiate Because the United States committed to the Bali Roadmap, there will be tremen- including sources associated with fossil Michael David Lichtenstein is a Member dous pressure on the United States to fuels used in New Jersey. These sources of Lowenstein Sandler PC where he is the participate in whatever agreement the include entities who manufacture and dis- Co-Chair of the firm’s Insurance Practice Working Group presents; participation tribute fossil fuels, generate electricity in Group and an active member of the firm’s will require implementing legislation if the State or outside the State to be used Climate Change Practice Group. none exists beforehand. inside the state, gas public utilities, and Please email the author at [email protected] with questions about this article. Volume 16, No. 4 © 2008 The Metropolitan Corporate Counsel, Inc. April 2008

other significant sources of greenhouse The Federal Government – Proposed Greenhouse Gas Registry to maintain gas emissions that the NJDEP identifies. Action information, verify and audit regulated By January 1, 2009, NJDEP must file the While there are several competing entities’ submissions, develop green- first of a series of biennial reports evalu- bills in Congress, the bill with the great- house gas emissions calculation methods ating the status of the greenhouse gas est traction is sponsored by Senators Joe and publish non-confidential information emission monitoring and reporting pro- Lieberman and John Warner (S.2191).8 from regulated entities on the Internet. gram, the current level of greenhouse gas The Lieberman-Warner Climate Security Summing Up emissions in the State, and progress Act of 2007, which reported out of the There are a variety of competing reg- toward meeting the 2020 and 2050 emis- Senate Environment and Public Works ulatory programs in effect and in design. sions levels. By June 30, 2010, NJDEP Committee on December 5, 2007, The programs all have similar goals, but must report on measures necessary to applies to coal-burning power plants and often use different methods for achieving meet the 2050 emissions limit.6 This industries, natural-gas processing plants them. Members of the regulated commu- and importers, petroleum- or coal-based report must include specific recommen- nity are understandably confused about fuel producers and importers, and facili- dations for statutory or regulatory mea- how, if at all, to react to these programs ties that produce or import (for sale) now. sures that will be necessary to meet the greenhouse gases such as sulfur hexaflu- While a comprehensive answer to that 2050 limit. oride or perfluorocarbons. The bill estab- question is beyond the scope of this arti- The Regional Greenhouse Gas Initia- lishes an economy-wide cap covering cle, companies should be careful not to tive (RGGI) is a good example of a over 87 percent of United States green- hide their individual or collective heads regional initiative.7 RGGI is a coopera- house gas emitters, with a goal of reduc- in the sand. The regulated community tive effort by ten Northeast and Mid- ing greenhouse gas emissions should pay careful attention to the laws Atlantic states to design and operate a “substantially enough between 2007 and on the books and in the legislative regional cap-and-trade program covering 2050 to avert catastrophic impacts of pipeline, stay involved in the regulatory carbon dioxide (CO2) emissions from global climate change.” process, and provide comments on pro- power plants in the region. Participating The bill proposes to regulate emis- posed regulations when given the oppor- states include Connecticut, Delaware, sions of CO2, methane, NO2, sulfur tunity. Maine, Maryland, Massachusetts, New hexafluoride, perflouro-carbons and Above all, companies that are in the Hampshire, New Jersey, New York, hydro-fluorocarbons, and sets emission process of making changes now to reduce their greenhouse gas emissions, Rhode Island, and Vermont. The Initia- reduction objectives for greenhouse gas by changing to low-watt light bulbs, tive has made substantial progress since emissions in 2012 to 2005 levels (5.775 billion tons CO2 equivalents9) and in recycling, printing on double-sided New York Governor George Pataki sent paper, changing processes to reduce letters, in 2003, to eleven governors from 2050 to 1.732 billion tons CO2 equiva- lents (a 70 percent reduction from 2005). waste or energy use, and/or buying elec- Maine to Maryland inviting participation To achieve these results, Lieberman- tricity from renewable sources like wind to develop a regional cap-and-trade pro- Warner establishes a national cap-and- or hydroelectric, should consult all gram. The initial auction of emissions trade system of emissions “allowances.” applicable laws to take advantage of credits is scheduled for 2009. The newly created Climate Change early action credits that may be available. RGGI is designed to stabilize and then Credit Corporation will create and con- Climate change regulation is coming Ð reduce CO2 emissions. It is applicable to duct the allowance auction, selling all get ready and be prepared. electric generating units with a rated allowances by the end of 2011. To facili- 1 Aragorn speaking of “Open War” with King Théoden. capacity of 25 megawatts or greater. The tate the reduction of greenhouse gas Lord of the Rings: The Two Towers. Initiative establishes a CO2 emission emissions, the Climate Change Credit 2 The Impacts of Climate Change: An appraisal for the budget and allowance trading program, Corporation will reduce the number of future (multiple authors November 9, 2004). designed to reduce current emissions lev- allowances that it sells at auction by 96 3 IPCC (Intergovernmental Panel on Climate Change) Fourth Assessment Report: Climate Change 2007 els in each of the ten states by 10 percent million tons of CO2 equivalents each (February 2007). in the year 2018. In addition to the pur- year. The funds raised by the auction will 4 Codified as N.J.S.A. 26:2C-37 et seq. chase of emissions credits, regulated be used for technology development, 5 http://www.nj.gov/globalwarming. entities will be permitted to use emis- worker training, low income assistance 6 Legislation signed into law by Governor Corzine on sions offsets like landfill gas capture and programs and United States and interna- January 13, 2008 requires NJDEP to establish regula- tional adaptation programs. tions to implement the sale, exchange, allocation or destruction. Regulated entities may also auction of State CO2 allowances. P.L.2007, c.340. Under Lieberman-Warner, the United 7 take advantage of early reduction credits The other regional initiatives are the Western States Environmental Protection Agency for CO emissions reduction projects Regional Climate Action Initiative (WCI), including, 2 (EPA) must promulgate regulations to Washington, Oregon, Arizona, New Mexico, Califor- undertaken after the December 20, 2005 nia, Utah, and British Columbia, and the Midwestern ensure accuracy, completeness, consis- Greenhouse Gas Reduction Accord (MGA), including and before January 1, 2009. tency and transparency of data on green- Minnesota, Wisconsin, Illinois, Indiana, Iowa, Michi- Finally, RGGI anticipates subsequent house gas emissions and fuel usage. The gan, Kansas, Ohio, South Dakota, and Manitoba. federal legislation and all ten states have bill also requires emissions reporting by 8 Other bills include Lieberman-McCain (S.280), Bingamen-Specter (S.1766), Feinstein-Carper agreed to transition into a future federal regulated entities, including continuous (S.317) and Olver-Gilchrest (H.R. 620). program if one is adopted that is “com- 9 emissions monitoring where technologi- ACO2 equivalent has the same global climate parable” to RGGI. cally feasible. The bill creates a Federal change impact as 1 metric ton of CO2.