environmental law for business seminar: status report on the call for action on climate change

Environmental Law For

Business Seminar:

Climate Change Outlook

Toronto, January 28, 2015

Addressing Climate Change in the United States

Federal and State Developments

Laura Godfrey Zagar

Perkins Coie LLP

San Diego, CA

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Overview

• The United States has a multi-

prong, “use every tool in the

toolbox” approach to addressing

climate change

• Standards

• Incentives

• Market-Based Programs

• Affecting every aspect of

environmental regulation

• Federal level

• State level

• Areas of particular concern

• Power source emissions

• Transportation emissions

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Climate Change Developments: Federal Level

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Actions by the Obama Administration

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President Obama’s Climate Action Plan

Comprehensive plan takes action to:

• Cut carbon pollution in America

• Reduce carbon pollution from power plants

• Increase clean energy development

• Toughen fuel economy standards for passenger vehicles

• Prepare the United States for the impacts of climate change

• Assess the impacts of climate change

• Build a more climate-resilient America

• Lead international efforts to address global climate change

• Expand public sector financing toward cleaner energy

• Cooperate with major economies on clean energy initiatives, HFC

emissions, and vehicle emissions standards

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Clean Power Plan

• Power plants are the largest concentrated

source of emissions in the United States

• Roughly 1/3 of all domestic GHG emissions

• June 2014: EPA released the proposed

Clean Power Plan

• First-ever carbon pollution standards for

existing power plants

• 30% reduction in carbon pollution from

power sector by 2030

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Clean Power Plan: Key Dates

• Jan. 2015: EPA begins regulatory process for proposing a

federal plan for cutting carbon pollution from existing power

plants

• Summer 2015: EPA issues final rules on Clean Power Plan

for Existing Power Plants, and also Carbon Pollution

Standards for New, Modified and Reconstructed Power

Plants

• Summer 2016: Proposed due dates for states to submit

compliance plans to EPA (can be complete plans or initial

plans with 1- or 2-year extensions)

• Summer 2020: Proposed beginning of Clean Power Plan

compliance period

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New Proposed Cuts to Oil and Gas Methane Emissions

• Earlier this month, the White House and

EPA announced they will release new

regulations this summer relating to oil and

gas methane emissions

• Goal to reduce methane emissions from

the oil and gas sector by up to 45% below

2012 levels by 2025

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Clean Air Act: Section 111

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Clean Air Act Section 111: Developing Carbon Pollution Standards

• EPA is using its authority under Section 111 to

issue regulations that address carbon pollution

from new and existing power plants

• Section 111 requires EPA to develop regulations for

categories of air pollution sources which may

endanger public health or welfare

• It establishes a mechanism for controlling air

pollution from stationary sources

• 111(b): federal program that establishes

standards

• 111(d): state-based program for existing sources

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Section 111(d): State-Based Program

• Section 111(d) is a state-based program for existing

sources

• Requires states to develop plans for existing sources

of noncriteria pollutants that fit within EPA’s Section

111 guidelines to achieve the needed reductions

• E.g., Clean Power Plan

• Plans are subject to EPA review and approval

• Other examples of source categories subject to

111(d) are existing municipal solid waste landfills,

sulfuric acid plants, phosphate fertilizer

manufacturing facilities

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Addressing Climate Change Impacts to Water

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EPA’s 2012 “Response to Climate Change” Strategy for Water

Presents five long-term vision areas designed

to shape EPA’s future work on climate change

and water issues

• Infrastructure

• Watersheds and Wetlands

• Coastal and Ocean Waters

• Water Quality

• Working with Tribes

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EPA Climate Change Adaptation Implementation Plans

• In 2014, EPA released its Climate Change

Adaptation Plan and 17 corresponding

Implementation Plans produced by

Program and Regional Offices

• E.g., Office of Water’s Climate Change

Adaptation Implementation Plan

• Draws on and is intended to help implement

the 2012 “Response to Climate Change”

Strategy

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U.S. Supreme Court Decisions

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U.S. Supreme Court Upholds GHG Regulation

• Massachusetts v. EPA (2007): Clean Air

Act gives EPA the authority to regulate

GHG emissions from new motor vehicles, if

reasonably anticipated to endanger public

health and safety

• After this decision, EPA opened extensive

rulemaking on GHG regulation for:

• Mobile sources

• Stationary Sources

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New Developments from the U.S. Supreme Court

Utility Air Regulatory Group v. EPA (2014):

• Affirmed EPA’s ability to regulate GHG

emissions, but found that Massachusetts did

not allow the regulation of stationary sources

based on GHG emissions alone

• However, the decision affirmed EPA’s ability to

regulate stationary sources of GHG emissions

when subject to EPA jurisdiction due to

emissions of conventional pollutants (a.k.a.

“anyway” sources)

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U.S. Supreme Court Decisions: Takeaways

• EPA regulation of GHG emissions will

continue

• Mobile sources

• “Anyway” stationary sources

• EPA does not have free rein to regulate

GHGs under the Clean Air Act

• Agencies’ enforcement discretion does not

allow an agency to alter otherwise clear

statutory requirements

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Climate Change Developments: State Level

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Looking Specifically at California…

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Assembly Bill 32: California’s Framework

• Passed in 2006, AB 32 was the first program in the country

to take a comprehensive, long-term approach to addressing

climate change

• Requires California to reduce its GHG emissions to 1990

levels by 2020

• GHG reductions from virtually all sectors of the economy

• Combination of policies, planning, direct regulations,

market approaches, incentives, and voluntary efforts

• Targets GHG emissions reductions from cars and trucks,

electricity production, fuels, and other sources

• California Air Resources Board (CARB): lead agency to

implement AB 32

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Market-Based Programs

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Cap-and-Trade Programs

• Cap-and-trade is a market regulation

designed to reduce GHG emissions from

multiple sources

• Sets a firm limit or “cap” on GHGs

• Establishes a price on carbon for GHGs

• Trading creates incentives to reduce GHGs

and increases investments in clean

technology

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California’s Cap-and-Trade Program

• Active cap-and-trade program thru CARB and AB 32

• Establish overall limit on GHG emissions from capped sectors;

cap will decline 3% each year beginning 2013

• Facilities subject to the cap trade permits to emit GHGs

• Starting Jan. 1, 2015, GHGs from fuels, such as gasoline, diesel,

propane, and natural gas, are covered under the program

• Fuel suppliers must purchase pollution permits when the fuel they

supply is burned

• Will reduce GHG emissions from regulated entities by more than

16% between 2013 and 2020; help California meet its goal of

reducing GHG emissions to 1990 levels by 2020; further goals

by 2050

• California is working closely with Western Climate Initiative

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Western Climate Initiative

• Collaborative effort to reduce GHG emissions

originally involving 7 U.S. states and 4 Canadian

provinces

• Target: 15% below 2005 levels by 2020

• Broad cap-and-trade program

• Now only British Columbia, California, and Quebec

• California and Quebec linked their cap-and-trade

programs in Jan. 2014

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Low Carbon Fuel Standards

• Requires reduction of at least 10% in the

carbon intensity of California’s

transportation fuels by 2020

• Uses market-based cap and trade

approach to lowering GHG emissions from

petroleum-based transportation fuels

• Administered by California Air Resources

Board (CARB)

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Renewables Portfolio Standards

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Renewables Portfolio Standards (RPS)

• How much energy (usually as a %) each

state has committed to getting from

renewable sources by a given year

• States’ definitions of “renewable” can vary

and may restrict location of generation

• As of March 2013, 29 states and D.C. have

RPS standards

• Another 8 states have renewables portfolio

goals

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RPS in the United States (As of March 2013)

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RPS in California

• Current goal is 33% renewables by 2020

• California’s Governor Jerry Brown recently

called for an increase in the state’s

renewable energy to 50% renewables by

2030

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Challenges in Increasing RPS Goals

• Infrastructure

• Cost

• Grid Reliability

• Changing Technology

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Grid Reliability

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Grid Reliability – “The Duck Chart”

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Energy Storage

• Energy storage could be a game changing

technology, helping address reliability

concerns with integration of renewables

and retirement of carbon-intensive plants

• The technology is not fully developed

• States are starting to implement battery

storage requirements to drive innovation

(e.g., California Public Utilities Commission

storage requirements)

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California Incentives

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Electric Cars

• Substantial rebates, discounts, tax breaks,

and other incentives for buying plug-in

electric vehicles (PEVs) in California, e.g.:

• Up to $7,500 federal tax credit

• $2,500 state of California rebate

• $250 per month employer subsidy for driving in

carpool lane

• Free charging stations in many areas and work

places

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Green Building Incentives

• E.g., LEED certification

• At state and local level, incentives may

include tax incentives, expedited

permitting, net metering, grants, loans,

rebates and discounts on environmental

products, etc.

• For residences, federal tax credits may

apply, e.g., Residential Renewable Energy

Tax Credit

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Feed-in Tariffs for Distributed Generation

• Boosts small-scale renewable generation

(such as rooftop solar)

• California’s RPS feed-in tariff (FIT)

• Small renewable generators (up to 3 MW in

size) execute a standard offer contract to

export renewable energy to one of the

state’s three large investor-owned utilities

• Generators get paid for their excess energy

• Challenges associated with High DG

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Questions?

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Contact Information

Laura Godfrey Zagar

[email protected]

858-720-5748

IBA: Climate Change

Justice and Human Rights

Task Force Report

David Estrin

Counsel

The CO2 reduction imperative

The IPCC projects that without additional mitigation, the planet will experience temperature increases 3.7 to 4.8°C above pre-industrial levels

The World Bank and the Postdam Institute describe an increase in 4°C as “devastating”, resulting in “the inundation of coastal cities; increasing risks for food production; unprecedented heat waves in many regions, especially in the tropics.”

The CO2 reduction imperative

“There is also no certainty that adaptation to a 4°C world is possible. A 4°C world is likely to be one in which communities, cities and countries would experience severe disruptions, damage, and dislocation, with many of these risks spread unequally. It is likely that the poor will suffer most and the global community could become more fractured, and unequal than today.”

World Bank and the Postdam Institute, 2012

The carbon budget

Carbon budget cumulative

emissions targets Cap emissions below

one trillion tonnes (or below a

concentration of 450 ppm) to

avoid 2°C warming scenario

(IPCC, Meinshausen et al)

A cap of 600 billion tonnes

would be necessary to more securely safeguard the climate

system for future generations

(Hansen & the Columbia Earth

Institute)

As of June 2014

Trillionthtonne.org,

As of June 2014

580.7 billion tonnes of

CO2 have already been

emitted

At current rates the

trillionth tonne would be

emitted in December 2040

The carbon budget

66% of proven reserves must remain embedded in place to meet the 2ºC target* **

International Energy Agency, 2012

Others estimate 80% of reserves must be unexploited to

achieve “safe” levels of warming

Carbon Tracker, the Grantham Institute on Climate Change & the London School of Economics, 2013

New developments – Right to a healthy environment

“States have obligations to protect against environmental harm that interferes with the enjoyment of human

rights” John Knox, Report of the Independent

Expert on the issue of human rights obligations relating to the enjoyment of a safe, clean, healthy and sustainable environment, 2013

“States have obligations

(a) to adopt and implement legal frameworks to protect against environmental harm that may infringe on enjoyment of human rights; and

(b) to regulate private actors to protect against

such environmental harm” Knox, 2013 Report

Ruggie - Corporate responsibility to respect human rights

“Business enterprises should respect human rights. This means that they should avoid infringing on the human rights of others and should address adverse human rights impacts with which they are involved” John Ruggie, Report of the Special

Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises: Guiding principles on business and human rights, 2011

“The responsibility to respect human rights requires that business enterprises:

(a) Avoid causing or contributing to adverse human rights impacts through their own activities, and address such impacts when they occur;

(b) Seek to prevent or mitigate adverse human rights impacts that are directly linked to their operations, products or services by their business relationships, even if they have not contributed to those impacts”

Ruggie, 2011 Report

Ruggie - Corporate responsibility to respect human rights

“In order to meet their responsibility to respect human rights, business enterprises should have...

(a) a policy commitment to meet their responsibility to respect human rights;

(b) a human rights due-diligence process to identify, prevent, mitigate and account for how they address their impacts on human rights;

(c) processes to enable the remediation of any adverse human rights impacts they cause or to which they contribute.”

Ruggie, 2011 Report

State

State duties and corporate responsibility for carbon exploitation

Ruggie + Knox frameworks

= A basis for voluntary and, if

necessary, state-imposed carbon budget requirements

Reframing carbon as a toxic substance

Need for carbon limits

Human right to a healthy environment

Carbon as a toxic

substance

In future, carbon reserves may be regarded as toxic substances and would, therefore, need to remain embedded Except under conditions assuring no new GHG emissions during

extraction / use

Limited exceptions would apply in exigent local circumstances or for fairness to those substantially lacking access to energy

Reframing carbon as a toxic substance

Today Tomorrow

Future carbon resources: toxic just like tobacco

“Toxic” carbon: Stranded carbon assets

Stranded assets: assets that

have become obsolete or non-

performing well ahead of their

usual life and must be

recorded on a balance sheet

as a loss of profit

Stranded carbon assets:

assets that have become

obsolete as a result of

changing climate change

policies / societal norms

Achieving the carbon budget – Citizen action

Fossil fuel labeling to change purchasing behaviour Not-for-profit, Our

Horizon, works with municipalities to pass by-laws placing warning labels on gas pumps

The Municipality of West Vancouver recently voted to pursue a such by-law

Achieving the carbon budget - Conclusion

Constitutionalization of environmental

rights

Important, new international reports

Concerned public activism

Heightened corporate social

responsibility

Achieving a global carbon cap?

Thank You

David Estrin , Co-Chair, International Bar Association Climate Change Justice and Human Rights Task Force; Visiting Professor, Osgoode Hall Law School; Occasional Lecturer, University of Ottawa Law Faculty; Certified Environmental Law Specialist (Ontario, Canada)

T : 416-862-4301

[email protected]

Voluntary Carbon Markets

Environmental Law for Business

Presented by: Mark L. Madras Certified Specialist (Environmental Law)

Toronto, January 28, 2015


What are voluntary carbon markets?

• The voluntary creation and conveyance of carbon

credits.

• The carbon credits evidence carbon emission reductions

or the avoidance of carbon emissions production.

• An unregulated market – no requirement to participate,

no mandatory emission reduction targets, no prescribed

compliance standards govern the creation of the credits,

their trading or application.

• Carbon credits may have co-benefits: related

environmental and social attributes.

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• The use of market forces to drive environmentally

desirable behaviour is not novel.

• Fundamental to the Kyoto Protocol.

• Kyoto Protocol was adopted on December 11, 1997,

entered into force on February 16, 2005.

• Canada ratified in 2002, withdrew effective December

2012.

• First commitment period ended in 2012.

• Negotiations now underway to establish a legal

framework to obligate all major GHG emitters to reduce

CO2 emissions.

• All UN member states are parties except Canada, U.S.,

Andora and South Sudan.

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• Kyoto contemplated a significant role for market forces to

drive GHG emissions reductions through national

mandatory emission reduction laws.

• System of GHG emission allowances as the platform for

a cap and trade market to set a price for GHG emissions.

• Use of GHG reduction project-based credits to offset

GHG emissions.

• CDM mechanism to incentivize investments in

developing world GHG reduction projects that could be

applied to offset developed world GHG emissions.

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• The largest regulated carbon market regime currently in

force – EU ETS.

• 11,000 power stations, industrial plants, as well as

airlines.

• A cap and trade system, based on emission allowances,

received or bought.

• May trade allowances.

• May apply offset credits from emission reduction

projects.

• Projection that by 2020 GHG emissions will be 21%

lower than in 2005.

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• Voluntary carbon markets exist outside, absent or in

conjunction with regulated markets.

• While no authority is in charge of regulating the voluntary

market, including the creation or trade of emission

reduction credits, there are market standards.

• In 2012 the emission of 101M tonnes of GHG are

reported to have been avoided valued at $523M

• EU acquired 43.4M tonnes of voluntary offsets.

• U.S. based companies acquired 28.7M tonnes.

• 2013: record number of transactions: 76M tonnes,

valued at $379M.

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Additional to GHG reductions are various identified co-

benefits:

• biodiversity

• employment

• sourcing of materials and services

• infrastructure development

• ecosystem protection

• public health

• technology transfers.

• Projects with verified co-benefits create additional value

to the offset credits – they trade for greater value.

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A recent study found:

• In addition to every tonne of

CO2 that is offset, $664 in

additional environmental,

social and economic

benefits is delivered

• 72 surveyed businesses

were willing to pay, on

average, 33% more for a

carbon offset that had

verified co-benefits Study conducted by the International Carbon Reduction

and Offset Alliance and Imperial College London

University ; 59 projects were analyzed


Voluntary Carbon Standards

• The Gold Standard

• The Verified Carbon Standards

• ISO 14064

• Chicago Climate Exchange

• The Plan Vivo Standard

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Standards that Verify Co-Benefits

• Climate, Community and Biodiversity Standards

• Social Carbon

• American Carbon Registry Standard

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What is in a Standard?

Protocols for creation of offset credits:

• To ensure reductions are real and permanent.

• Reductions must be additional – would not have

occurred but for the offset project.

• Verification, certification and monitoring.

• Registration.

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Registries:

• Markit Environmental Registry

• Verified Carbon Standard (VCS)

• APX VCS Registry

• CCX

• Canadian Standards Association’s GHG CleanProjects

Registry


Examples of Transactions

Disney

• In 2013, Disney retired 457,882 metric tonnes of CO2,

including from Irmaos Fuel Switching Project in Brazil –

use of renewable biomass rather than local forest wood.

• Additional benefits: improved groundwater, soil quality,

worker training, supported renovation of local school.

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Biomass Urja Kotdwar, Indian – Gold Standard Biomass project


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Google

• Partnered with Duke University to develop improved

waste management system for swine farm, now open

sourced to any farm.

• Uses the methane to run the turbine to power the

system and support the farm operations.

• Also supported a methane capture from landfill project.

• Google has been carbon neutral since 2007 from offset

projects.


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Marks & Spencer

• In 2013 achieved carbon neutrality through the purchase

of offset credits.

• In Kenya: acquired credits from the Meru & Nanyuki

community reforestation project; tree planting by small

hold farms, conservation farming; reduces soil erosion,

increases food production and biodiversity, and water

catchment areas.

• In Bangladesh: 40,000 fuel efficient, low pollution stoves,

manufactured and maintained by local entrepreneurs;

addition benefits include health benefits from reduction

of indoor air pollution, 150 local jobs.


Improved Household Charcoal Stoves – Gold Standard Project


Chevrolet

• In 2014 it committed to purchase up to 8 million tonnes

of carbon credits from a variety of clean energy projects

in communities across the U.S.

• The credits it acquires focus on energy efficiency,

renewable energy and forestry.

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The Province of British Columbia

• In 2013, B.C. purchased credits from the Great Bear

Initiative – a project led by The Coastal First Nations;

protects old growth forest, avoiding carbon emissions

and protecting ecosystems.

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TD Canada Trust

• Objective to become carbon neutral.

• Acquiring offset credits.

• Example: Ontario Biodiversity Afforestation Project: a

project to restore natural forests to hundreds of

hectacres of former farmland in the boreal region of

northeast Ontario. Farmers offered opportunity to plant

native trees at no cost; must agree to keep forest intact

for at least 100 years.

• Benefits: reduction of GHG emissions and increase of

species habitat.

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Conclusions:

• Market mechanisms can play a positive role in GHG

emissions reduction.

• Markets may also play a positive additional role by

valuing related ecosystem and social benefits.

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montréal ottawa toronto hamilton waterloo region calgary vancouver moscow london

Thank You

Mark L. Madras

Certified Specialist (Environmental Law)

Tel: (416) 862-4296

Email: [email protected]