States and Regions Expected to Continue to Push Forward on Climate Change Issues in 2009

January 8, 2009
Client Alert Newsletter Forecast 2009

In the absence of comprehensive federal climate change legislation or regulation under the Bush administration, states and regions across the United States took the lead and moved ahead with their own climate change programs. While many expect the federal approach towards climate change and the regulation of greenhouse gas ("GHG") emissions to shift under the Obama administration and the 111th Congress, state initiatives, including programs in Pennsylvania, New Jersey and Delaware, will continue to push forward in 2009 with proposals that could affect a wide range of area businesses and industries.

January 1, 2009 marked the official start of the first compliance period for the Regional Greenhouse Gas Initiative ("RGGI"). RGGI is a cap and trade program among ten Northeast and Mid-Atlantic states designed to reduce GHG emissions from power plants in the region. In 2008, New Jersey and Delaware both promulgated regulations that required affected sources (i.e., fossil fuel fired sources serving electric generating units of 25 megawatts or more) to obtain CO2 allowances for any CO2 emissions. To that end, RGGI has already coordinated two emission allowance auctions for the first three-year compliance period that included sales of allowances from Delaware and New Jersey. The clearing prices for the allowances were $3.07 and $3.38; approximately 121 million allowances were sold at these two pre-compliance auctions, raising about $141 million for the participating states. The next auction is scheduled for March 18, 2009. Many will be looking towards these RGGI auctions and the implementation of other aspects of RGGI, such as monitoring, reporting, and offset approval, as a preview of other cap and trade programs that may come on-line in the future.

Specific to Pennsylvania, the Pennsylvania Climate Change Act ("Act 70"), requires the Pennsylvania Department of Environmental Protection ("PADEP") to implement a number of climate change initiatives in 2009 with the advice of the 21-member Climate Change Advisory Committee ("CCAC"). PADEP has already completed one of these initiatives by selecting the Climate Registry, the Climate Action Reserve, the Voluntary Carbon Standard and the Gold Standard as the official voluntary emission and offset registries. In addition, in Spring 2009, PADEP expects to deliver to the General Assembly a report required by Act 70 on the impacts of climate change and the economic opportunities for the Commonwealth. Act 70 also requires PADEP to deliver a Climate Change Action Plan to the Governor and the General Assembly by October 2009. Currently, various subcommittees of the CCAC are discussing and evaluating climate change "work plans" that were previously developed by PADEP and cover a wide range of Pennsylvania industries. PADEP announced that the CCACs are seeking public input through February on items that should be included in any Action Plan. PADEP expects to release a draft Action Plan in May or June 2009 for additional public comment. Act 70 also requires PADEP to begin to compile a GHG emission inventory and present a report by 2011.

New Jersey is also expected to move forward on a number of climate change initiatives in 2009 under the Global Warming Response Act ("GWRA"). The GWRA calls for GHG emissions in New Jersey to be reduced to 1990 levels by 2020 and to 80 percent below 2006 levels by 2050, and requires the New Jersey Department of Environmental Protection ("NJDEP") to issue reports listing recommended actions in order to achieve these levels. In December 2008, NJDEP released a draft report that asserted that three already existing programs, if fully implemented on schedule, will allow New Jersey to achieve the 2020 limit: the Energy Master Plan; the State's Low Emission Vehicle program; and RGGI. In addition to the three core recommendations, the draft report includes over three dozen "supporting recommendations" already under consideration in New Jersey that NJDEP recommends taking action on within the next 18 months. These supporting recommendations cover a wide range of sectors including building and construction, industrial sources, electric generating units, the waste disposal industry, forestry and agriculture, transportation and land use. The draft report also provides a "framework" for meeting the more ambitious 2050 limit, and states that some progress on this framework is necessary starting in 2009 if the 2050 limit is to be reached. The 2050 framework includes potentially sweeping changes in four sectors: land use planning and transportation; terrestrial carbon sequestration; energy efficiency and renewable energy; and new technologies and markets that support a climate-friendly economy. NJDEP held a series of public meetings in January 2009 to solicit stakeholder input on the report and hopes to finalize the report in March 2009.