The Climate Report

In This Issue

U.S. Regulatory Developments 

In contemplation of future greenhouse gas standards for the transportation sector, the Federal Highway Administration has published a proposed rule that would require states and localities to evaluate and report on transportation system performance. The California Air Resources Board has issued its Proposed Short-Lived Climate Pollutant Reduction Strategy to reduce the emissions of such pollutants, including carbon black, methane, and fluorinated gases, by 40 to 50 percent by 2030. The U.S. Supreme Court's stay of EPA's Clean Power Plan regulating greenhouse gas emissions from existing power plants is likely to extend past some of the rule's initial compliance dates, but EPA has been unclear on how states should proceed. 

The Institutional Investors Group on Climate Change has released the latest in a series of guides aimed at increasing investor activism at the corporate board and senior management levels regarding potential risks associated with climate change. The report, titled "Investor Expectations of Electric Utilities Companies: Looking down the line at carbon asset risk," targets the electric utility industry, with the purpose of setting out "guidance for constructive engagement by investors with the boards and management of electric utilities." A close understanding of IIGCC's conclusions and the guidance it is giving investors will allow utilities to better respond promptly and robustly to investor inquiries. 

Renewable Energy and Carbon Markets   

In Hughes v. Talen Energy Marketing, LLC, 136 S.Ct. 1288 (2016), the Supreme Court invalidated a Maryland program aimed at incentivizing new in-state power generation as preempted by federal law. The Court found that the program, which centered around the capacity auction administered by PJM Interconnection, the regional transmission operator overseeing the grid, inappropriately intruded on the Federal Energy Regulatory Commission's exclusive authority to regulate interstate wholesale electricity sales. Questions remain regarding the potential impact of the decision on similar state arrangements designed to promote certain types of power generation. 

Climate Change Litigation   

The Center for Biological Diversity and Friends of the Earth have sued EPA in the U.S. District Court for the District of Columbia alleging "unreasonable delay" in "issuing an endangerment finding" regarding aircraft greenhouse gas emissions and promulgating regulations to curb such emissions. The U.S. Court of Appeals for the District of Columbia Circuit dismissed a challenge brought by two large corn-producing states to EPA's new vehicle emissions model, which notably discourages the use of ethanol in gasoline. A federal magistrate judge in Oregon denied motions to dismiss a "public trust doctrine" lawsuit filed against the federal government by a group of children and climate change activists. 

Climate Change Regulation Beyond the U.S.

On April 22, 2016, 175 nations signed the Paris Climate Pact at the United Nations in New York City. The Pact takes effect once at least 55 nations representing at least 55 percent of global greenhouse gas emissions formally ratify the accord. Under Australia's Direct Action Plan, the government pays for emission reductions or abatements through a series of reverse-auctions conducted by the Clean Energy Regulator via an Emissions Reduction Fund. Beginning July 1, 2016, the Fund will be complemented by a "Safeguard Mechanism" to ensure that such purchases are not offset by emission increases elsewhere. The Conseil d'Etat, the French administrative supreme court, has rejected challenges to France's Energy Economy Certificate scheme. 

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