Greenhouse Gas Issues to Remain at the Forefront in 2008

January 16, 2008
Client Alert Newsletter Forecast 2008

Greenhouse gas issues emerged as the major environmental story of 2007, and it appears that international, national, state and local efforts to control and regulate these emissions will again dominate headlines in 2008. While greenhouse gas issues may continue to make news, any national legislation or significant shift in U.S. policy is unlikely to emerge until after the new administration takes over in Washington, regardless of the victorious party. In this vacuum, regional, state and local authorities will likely press forward with their own efforts to create programs with mandatory controls on greenhouse gas emissions.

On the international front, more than 180 nations, including the United States, met in Bali at the end of 2007 and agreed on a "road map" for negotiations of a new climate treaty by the end of 2009 that would go into effect in 2012 when the Kyoto Protocol ends. In addition, the U.S. has coordinated two rounds of meetings of 17 major economic powers to further discuss global climate change and energy issues, and additional meetings are expected in 2008. While the Bush administration has reiterated that it will not commit to binding international goals without similar commitments from other major developing countries such as India and China, recent reports indicate a new willingness by the U.S. to consider mandatory controls on greenhouse gas emissions in 2008.

With respect to national programs, at the end of 2007 and in the wake of the Supreme Court decision in Massachusetts v. EPA, which held that the U.S. Environmental Protection Agency ("EPA") was required to regulate greenhouse gas emissions from motor vehicles or explain why it was not doing so, EPA denied California's request for a waiver that would have allowed California to enforce its own standards limiting greenhouse gas emissions from new motor vehicles. In announcing the denial, EPA asserted that it was important to address global warming on a national scale and that provisions of the recently enacted Energy Independence and Security Act of 2007 requiring significant improvements in fuel economy should be the focus of efforts to reduce greenhouse gas emissions from motor vehicles. EPA's denial of California's waiver request casts uncertainty upon regulations currently in place in a number of states that incorporate the California greenhouse gas emission standards, and has prompted several states, including Pennsylvania and New Jersey, to join a lawsuit seeking to reverse EPA's denial of the waiver request. In addition, Congress has pressed EPA Administrator Stephen Johnson amid reports that he overruled the recommendations of his legal advisors and EPA staff in issuing the denial. Notwithstanding the waiver denial, Johnson has indicated that EPA will propose a greenhouse gas rulemaking in response to the Massachusetts v. EPA decision sometime in 2008.

At the same time, congressional debate over mandatory national "cap-and-trade" legislation for greenhouse gases will continue this year. In the Senate, a cap-and-trade bill introduced by Senators Lieberman and Warner was approved by the Senate Environment and Public Works Committee at the end of 2007 and is expected to be scheduled for a floor vote during the first half of 2008. In the House, Representative Dingell recently announced that the House Energy and Commerce Committee intends to push greenhouse gas legislation onto the House floor in time to have a bill before President Bush by the end of 2008.

In the absence of a mandatory national program, regions, states and localities will likely press forward with their own programs in 2008. In this region, New Jersey Governor Corzine recently signed legislation that allows New Jersey to implement the Regional Greenhouse Gas Initiative ("RGGI"), a cap-and-trade program for power plants in 10 Northeastern and Mid-Atlantic states (not including Pennsylvania) that goes into effect in 2009. The first auction of RGGI CO2 allowances is expected to take place in June 2008, although there has been some skepticism as to whether all member states will be ready to participate. By June 2008, the New Jersey Department of Environmental Protection ("NJDEP") is also required to issue its first report under the Global Warming Response Act, which calls for greenhouse gas emissions in New Jersey to be reduced to 1990 levels by 2020 and to 80% below 2006 levels by 2050.

In Pennsylvania, 2007 saw each house of the General Assembly pass programmatic climate change legislation that ultimately calls for the Pennsylvania Department of Environmental Protection ("PADEP") to produce a greenhouse gas action plan for the governor's approval. Indications are that the General Assembly will attempt to reconcile the minor differences between the two bills and present legislation to the governor in 2008. At the same time, however, PADEP officials have said that Governor Rendell plans to issue his long-awaited comprehensive climate change strategy for Pennsylvania during the first part of 2008. PADEP has also indicated that it may engage in discussions with states that have signed onto the Midwest Greenhouse Gas Accord to explore roles for Pennsylvania in that regional greenhouse gas reduction program.