By David Grande-Cassell
July 30, 2009
“Going green” is quickly moving from a trendy marketing tactic to a legally mandated component of any business’ corporate strategy. For this reason, business owners should be aware of proposed legislation addressing carbon emissions and climate change that could hit the desks of federal and state lawmakers in the coming months. The proposed legislation is a comprehensive overhaul of U.S. energy policy that will fundamentally change the way businesses and consumers buy and use energy and commodities. One of the mechanisms by which this may occur is the proposed federal American Clean Energy and Security Act (ACES).
For business owners, ACES and other proposals come with significant costs, but also with significant opportunities.
ACES was passed by the U.S. House of Representatives on June 26, 2009. Climate change legislation that is similar to ACES is currently pending in the U.S. Senate and is supported by the Obama Administration. ACES has has five main components:
1. A clean energy section that promotes development of renewable sources of energy, carbon capture and sequestration technologies, clean electric vehicles, and smart grid and electricity transmission;
2. An energy efficiency section directed across many sectors of the economy, including buildings, appliances, transportation, and industry;
3. A global warming section that implements a market-based cap and trade program and that places limits on emissions of greenhouse gases while providing initial emissions allowances to various industries; and
4. A consumer and industry-directed section that promotes education and green jobs during the transition to a clean energy economy.
5. An agricultural and forestry offsets section that plays a role in the cap and trade program established in section three.
Most of the key provisions that may affect businesses are found in the global warming section of the bill, which provides for the implementation of greenhouse gas emissions restrictions (including penalties for exceeding emissions allowances after Jan. 1, 2012) and a market-based cap and trade program, in which the right to emit greenhouse gases can be bought and sold on an open commodities market, thus creating an incentive to reduce emissions. The Senate leadership has set a Sept. 28, 2009 deadline for all committees to complete work on the climate change legislation so that it may then be voted upon by the full Senate.
ACES has gained traction recently with the change in administration; however, over the past eight years there has been a lack of federal action regarding climate change. As a result, some states, along with some Canadian provinces and Mexican states, banded together to form various regional initiatives aimed at regulating greenhouse gas emissions and implementing cap and trade programs. Under the regional initiatives, model rules are established, with the goal that each participating state or jurisdiction will then adopt legislation or regulations to implement those model rules within the jurisdiction. One of these regional initiatives is the Midwestern Governors Greenhouse Gas Reduction Accord (the Midwestern Accord). Member states to the Midwestern Accord include Iowa, Illinois, Kansas, Manitoba, Michigan, Minnesota and Wisconsin.
The final recommendations in the Midwestern Accord align closely with the global warming section of ACES, with the major differences being a lower limit on the amount of offsets an emission source can purchase and more detailed instructions on how allowances should be allocated and revenues used. While the Midwestern Accord is progressing toward finalization, with a start date of Jan. 1, 2012, the states have stressed their preference for an economy-wide program and indicated that the regional program will only be implemented if federal efforts are unsuccessful.
Impact on Business
If ACES is signed into law, or if a jurisdiction implements a cap and trade program under a regional initiative, many businesses will be required to begin accounting for and reporting their emissions. Caps on these emissions will be implemented, and businesses will be required to reduce their emissions, purchase allowances for their emissions, or purchase credits to offset some of their emissions. Within this new “carbon-pricing” scheme, there are opportunities for businesses that reduce their emissions through greater efficiency to sell their excess allowances. Additionally, those businesses who, while unregulated under the program, voluntarily reduce their emissions, or find ways to capture or remove carbon from the environment, have opportunities to create offsets that can then be sold to regulated entities.
In this rapidly-changing environment, it is important for businesses to stay aware of pending “green” legislation to take full advantage of potential opportunities and minimize risks. These risks and opportunities will affect all sectors of the economy, including industry, utilities, construction, real estate, agriculture, insurance, finance and land ownership, and will transform the way people do business in the Midwest and beyond. For the latest developments on ACES and other environmental legislation and legal issues of interest to business owners, visit http://www.igreenlaw.com.
David D. Grande-Cassell is an attorney and the managing member of Clark Hill PLC’s Lansing, Mich. office. He focuses his practice on environmental law and litigation in addition to other areas. Kristin Beals Bellar and Rebecca Dukes, also of Clark Hill PLC, contributed to the article.