Six months following the release of the Environmental Commissioner of Ontario's report Looking for Leadership – The Costs of Climate Inaction, we look at what, if any, changes have occurred since that report. In this presentation, Gowlings and our multi-disciplinary panel address key issues including: • U.S. federal and state actions in response to climate change • Highlights from the International Bar Association’s Climate Change Justice and Human Rights Task Force Report. • The role of voluntary markets

1. Environmental Law For
Business Seminar:
Climate Change Outlook
Toronto, January 28, 2015

2. 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
LZagar@perkinscoie.com
858-720-5748

43. IBA: Climate Change
Justice and Human Rights
Task Force Report
David Estrin
Counsel

44. 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.”

45. 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

46. 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)

47. 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

48. 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

49. 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

50.  “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

51. 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

52.  “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

53. 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

54. State
State duties and corporate responsibility for carbon
exploitation
Ruggie + Knox frameworks
=
A basis for voluntary and, if
necessary, state-imposed
carbon budget
requirements

55. 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

57. Reframing carbon as a toxic substance
Today Tomorrow
Future carbon resources: toxic just like tobacco

58. “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

59. 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

60. 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?

61. 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
david.estrin@gowlings.com

62. Voluntary Carbon Markets
Environmental Law for Business
Presented by: Mark L. Madras
Certified Specialist (Environmental Law)
Toronto, January 28, 2015

63. Voluntary Carbon Markets
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.
63

64. Voluntary Carbon Markets
• 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.
64

65. Voluntary Carbon Markets
• 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.
65

66. Voluntary Carbon Markets
• 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.
66

67. Voluntary Carbon Markets
• 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.
67

68. Voluntary Carbon Markets
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.
68

69. Voluntary Carbon Markets
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

70. Voluntary Carbon Markets
Voluntary Carbon Standards
• The Gold Standard
• The Verified Carbon Standards
• ISO 14064
• Chicago Climate Exchange
• The Plan Vivo Standard
70

71. Standards that Verify Co-Benefits
• Climate, Community and Biodiversity Standards
• Social Carbon
• American Carbon Registry Standard
71
Voluntary Carbon Markets

72. 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.
72
Voluntary Carbon Markets

73. 73
Voluntary Carbon Markets
Registries:
• Markit Environmental Registry
• Verified Carbon Standard (VCS)
• APX VCS Registry
• CCX
• Canadian Standards Association’s GHG CleanProjects
Registry

74. Voluntary Carbon Markets
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.
74

75. Voluntary Carbon Markets
Biomass Urja Kotdwar, Indian – Gold Standard Biomass project

76. Voluntary Carbon Markets
76
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.

77. Voluntary Carbon Markets
77
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.

78. Voluntary Carbon Markets
Improved Household Charcoal Stoves – Gold Standard Project

79. Voluntary Carbon Markets
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.
79

80. Voluntary Carbon Markets
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.
80

81. Voluntary Carbon Markets
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.
81

82. Voluntary Carbon Markets
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.
82

83. montréal  ottawa  toronto  hamilton  waterloo region  calgary  vancouver  moscow  london
Thank You
Mark L. Madras
Certified Specialist (Environmental Law)
Tel: (416) 862-4296
Email: mark.madras@gowlings.com