Legal Implications of the Paris Agreement for Fossil Fuels

Posted on January 7, 2016 by Michael Gerrard

           The Paris Agreement on climate change reached on December 12, 2015 has a heavily negotiated sentence that, when closely read, seems to call for the virtual end of fossil fuel use in this century unless there are major advances in carbon sequestration or air capture technology. That, in turn, has important legal implications.

           Article 4 Par. 1 says, “In order to achieve the long-term temperature goal … Parties aim to reach global peaking of greenhouse gas emissions as soon as possible … and to achieve rapid reductions thereafter in accordance with best available science, so as to achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century.”

           In other words, what goes up should be taken back down: for every ton of greenhouse gases (GHGs) emitted from a smokestack, tailpipe or chopped tree, a ton should be removed.

The Numbers

           According to the Intergovernmental Panel on Climate Change’s Fifth Assessment Report (2014), fossil fuel use emits about 32 gigatons of carbon dioxide per year. Other sources, such as methane leakage, cement manufacture, and other industrial processes add another 5-7 gigatons carbon dioxide equivalent. Deforestation and other agriculture, forestry and other land use changes (but subtracting emissions sequestered by forest growth) add yet another 10-12 gigatons a year.  This all adds up to about 49 gigatons. However, global carbon sinks remove only about 18 gigatons per year (8.8 to the oceans, 9.2 to land, not including land use changes). 

           Thus the sinks take up about the equivalent of the non-fossil sources. In order to achieve a “balance” between emissions and sinks, we need to just about end the release of GHGs from fossil fuels, though a radical increase in sinks or reduction on non-fossil fuel emissions would provide some slack.

           Assuming that some kind of balance between emissions and sinks can be achieved, would we actually have until 2099 to decarbonize the economy, as these numbers imply is needed?  Not really. Kelly Levin, Jennifer Morgan and Jiawei Song at the World Resources Institute provide here an illuminating overview of what is required to achieve the long-term temperature goal in Article 2 of the Paris Agreement (“holding the increase in global average temperature to well below 2° C above pre-industrial levels and to pursue efforts to limit temperature increase to 1.5° C”). As the WRI post notes, a recent paper in Nature Climate Change suggests that carbon dioxide from electricity would have to be brought close to zero by 2050, and by then around 25 per cent of energy required for transportation would also need to come from electricity (up from less than one per cent now).

           There seem to be only three ways to continue to use fossil fuels for electricity in the second half of the century (and for transport by the end of the century) and still meet the temperature goal:

  1. Capture the carbon before it escapes into the air, and sequester it 
  2. Devise, and deploy on a massive scale, technologies to remove the carbon from the air, and sequester it
  3. Create new sinks, such as through the immediate halt to deforestation and a worldwide program of tree planting

           All three of these raise a question of how long the carbon will be stored; we do not know how long carbon will stay in reservoirs, and we do know that trees do not live forever, and when they burn or die they release their carbon. Moreover, the technologies of carbon capture and sequestration, and of removing carbon from the ambient air, are developing slowly and are nowhere near large scale deployment. (A price on carbon would create an economic incentive to develop and use these technologies, but politicians in most places are unwilling to impose such a price. A large-scale government-funded research effort, such as the ones that put human beings on the moon, could also produce the necessary innovation, but there has been little visible support for such an effort.) Most of the industrial carbon sequestration that now occurs goes toward “enhanced oil recovery” – squeezing oil out of depleted reservoirs – but extracting more oil is not compatible with stopping fossil fuel use.

           Finding the land for large scale tree planting would face its own challenges in a world where sea level rise, persistent drought, and extreme heat will be rendering much land unsuitable for growing food.

           So meeting the demands of society for energy means a combination of aggressive energy efficiency and conservation programs, the installation of renewable energy (and, perhaps, nuclear), and the substitution of electric or hydrogen vehicles for those using petroleum at an unprecedented pace. The Deep Decarbonization Pathways Project has set forth the colossal amount of new facility construction that would be required worldwide to achieve this.

           Legal Implications

           The Paris Agreement calls on all countries to strengthen their pledges to reduce GHG emissions, and to monitor their progress and report it to the world.  It also says that “all parties should strive to formulate and communicate long-term low greenhouse gas emission development strategies.” (Article 4 Par. 19) That looks like strategies under which every country must show how it is controlling its fossil fuel use.

           These provisions are not legally enforceable. However, many domestic laws are, and they will become a powerful tool to force early planning, or at least disclosures. One key example is the securities disclosure requirements for publicly traded companies.  On January 27, 2010, the U.S. Securities and Exchange Commission issued guidance for the disclosure of climate-related risks. It specifically calls on companies to “consider, and disclose when material, the impact on their business of treaties or international accords relating to climate change.” The Paris Agreement is clearly such an accord, and (if it is vigorously implemented) it will have material impact on many companies in the business of extracting, processing and using fossil fuels, or making things that rely on fossil fuels (such as motor vehicles, ships and airplanes). The SEC’s guidance makes clear that management’s discussion and analysis should explore known trends and uncertainties concerning climate regulation.  This includes regulation outside the U.S. that can affect the operations abroad of U.S. companies. Therefore, disclosure can be expected of the effect of severe restrictions here or in other countries on fossil fuel use, including the possibility that most fossil fuel reserves will need to stay in the ground.

           Climate disclosures have received increased attention since it was reported in November that New York Attorney General Eric Schneiderman is investigating ExxonMobil under the New York securities law, the Martin Act, over its statements about climate change, and had reached a settlement with Peabody Energy.

           This is not necessarily limited to U.S.-registered companies. For example, in April 2015 the G20 finance ministers and central bank governors asked the U.K. Financial Stability Board for advice on the financial stability implications of climate change. In November 2015 this Board proposed the establishment of a disclosure task force to develop voluntary disclosures for several climate-related risks, including “the financial risks which could result from the process of adjustment towards a low-carbon economy.”

           Going forward, impact review of energy projects under the National Environmental Policy Act and its counterparts in many states and most other developed countries should consider the phase-out of fossil fuels that is inherent in the Paris Agreement.  For example, a proposal to build or finance a coal mine, a coal-fired power plant, or a coal port should consider whether the facility would need to be closed before the end of its otherwise useful life, and whether the project would be inconsistent with the Agreement. 

           Systematic analysis and disclosure of these risks will lead responsible boards of directors to undertake serious planning to effect an orderly transition to the low-carbon world that 188 countries agreed to in Paris. These disclosures will also help investors decide what companies will thrive in such a world (such as developers of technologies for renewable energy and efficiency), and what companies are failing to prepare for the transition and thus will themselves become fossils.

Fifth Circuit Shuts Down Climate Tort Plaintiffs Again

Posted on May 21, 2013 by Robert Wyman

Climate tort plaintiffs cannot catch a break in the Fifth Circuit Court of Appeals.  In a May 14, 2013, decision, the Fifth Circuit found—once again—that a group of Mississippi Gulf Coast property owners is barred from suing energy companies for tortiously emitting greenhouse gases (“GHGs”). 

The case, Ned Comer, et al. v. Murphy Oil USA, et al., has a long and twisting history.   At one point the case was widely viewed as in the vanguard of a handful of cases with the potential to radically realign the legal framework under which companies emit GHGs. 

Comer was originally filed in the Southern District of Mississippi in 2005.  Plaintiff coastal property owners alleged that the defendant companies’ emissions exacerbated climate change, which intensified Hurricane Katrina, which in turn damaged the plaintiffs’ property.  Invoking the federal courts’ diversity jurisdiction, the plaintiffs sought compensatory and punitive damages, asserting state law claims of nuisance, trespass, and negligence, among other claims. The district court dismissed the claims on the grounds that the plaintiffs lacked standing and that the matter was not justiciable under the political question doctrine. 

In November 2009, a Fifth Circuit panel reversed, in part, the district court’s dismissal of the claims.  The Fifth Circuit panel found that plaintiffs had standing to bring the state law claims, which the court found did not present political questions. 

The Fifth Circuit panel’s decision came in the wake of the Second Circuit’s precedent-setting September 2009 decision in State of Connecticut, et al. v. American Electric Power Company Inc., et al., in which the Second Circuit recognized the validity of federal common law public nuisance claims challenging the emission of GHGs, found that a number of states and private environmental groups had standing to press such claims, and rejected the argument that the claims are nonjusticiable.  Together, these cases were viewed as potentially ushering in a new era in which companies emitting GHGs would need to contend not just with EPA’s regulations but also with common law climate tort claims seeking injunctive relief or money damages.

The new era was not to be.  As to Comer, before the panel opinion’s mandate issued, a majority of the Fifth Circuit’s active, unrecused judges voted to rehear the case en banc.  Under Fifth Circuit rules at the time, this vacated the panel opinion reversing the district court’s dismissal.  Before the Fifth Circuit reheard the case en banc, however, another Fifth Circuit judge was recused, leaving the court with only eight active, unrecused judges.  Five of the remaining eight judges then determined that, with the additional recusal, the court lacked a quorum to proceed, and the judges issued in May 2010 an order dismissing the plaintiffs’ appeal from the district court’s decision for lack of a quorum. 

Plaintiffs petitioned the Supreme Court, seeking review of the Fifth’s Circuit dismissal of their appeal.  The Supreme Court denied the petition in January 2011, at which point one might have expected the case to be over. 

However, the same group of property owners proceeded to file a new complaint in May 2011 alleging many of the same nuisance, trespass, and negligence claims against the same energy company defendants.  The District Court again dismissed the claims, finding them to be barred by res judicata and the applicable statute of limitations, and also to fail to establish proximate causation and be preempted by the Clean Air Act.  In addition, as it had in Comer I, the court found that the plaintiffs lacked standing and that the claims raised nonjusticiable political questions. 

The Fifth Circuit’s May 2013 decision in Comer II upholds the district court’s dismissal of the climate tort claims.  The Fifth Circuit agreed the case is barred by res judicata, and did not address the district court’s other grounds for dismissal.  Despite the procedural quirks of Comer I, the Fifth Circuit found the district court’s decision in that case to represent a final judgment, never modified on appeal.  In addition, the Fifth Circuit found the district court’s final judgment to be on the merits because it adjudicated the jurisdictional issues of standing and justiciability. 

Fall of 2009 may turn out to have been an apogee of sorts for climate tort claims.  In June 2011, the Supreme Court issued a decision in Connecticut v. American Electric Power, holding that the Clean Air Act and the EPA actions it authorizes displace any federal common law right to seek abatement of GHG emissions.  Climate tort plaintiffs in a third case, Native Village of Kivalina v. Exxon Mobil Corp., et al., were also on the losing end of a September 2012 Ninth Circuit panel decision which found the plaintiffs’ claims that climate change would result in erosion and flooding of the island where they live to be a matter that should be left to the legislative and executive branches of government.  The Kivalina plaintiffs petitioned the Supreme Court in February for a writ of certiorari. 

As GHG levels in the atmosphere approach their highest levels in hundreds of thousands of years or longer, the prospects for new legislative or executive branch action are uncertain.  Although California recently implemented an economy-wide GHG cap and trade scheme, which began imposing compliance obligations earlier this year, that program is being challenged in the courts and there appears to be little appetite for comprehensive federal climate change legislation.  EPA proposed in April 2012 a GHG performance standard for new power plants pursuant to its Clean Air Act authority, but the timing for action with respect to existing power plants and other emitting sectors is unclear.  In light of the uncertainty on the regulatory and legislative fronts, and given the massive alleged harms involved, it may be too early to say if the climate tort is essentially finished or will in the future be resuscitated in a new and more potent guise.

The Future of Carbon Dioxide Capture and Geologic Sequestration (CCS) Discussed at International Conference

Posted on January 24, 2012 by David Flannery

I had the privilege to be a speaker at a CCS conference held at the Canadian Embassy in Washington DC on January 19, 2012. The conference was hosted by the Global CCS Institute for the purpose of discussing the strategic directions expected to be undertaken in the development and deployment of the geologic sequestration of carbon dioxide. Central to this issue is the national and international concern over climate change at a time when our nation’s energy supply is so closely tied to the use of fossil fuels.

In his keynote speech at the conference Charles McConnell of USDOE’s Office of Fossil Fuels offered the view that coal must be economically advantaged and environmentally sustainable. Much of the conference was dedicated to a review of the many CCS projects being undertaken around the world in an effort to demonstrate the feasibility of the technology.

A key component of the development of CCS is, of course, the cost of the technology and the opportunities that exist to offset those costs. One such opportunity is the use of capture carbon dioxide to enhance the production of oil (EOR). While many of the speakers at the conference recognized the early value of CCS/EOR projects, both Brad Page of the Global CCS Institute and Steve Winberg of Consol Energy pointed out that EOR capacity is only 20% of the ultimate capacity that will be needed to meet the President’s carbon dioxide reduction target. Other alternatives for the geologic sequestration of carbon dioxide include depleted oil and gas reserves and greenfield deep saline formations.

My remarks at the conference were directed at the significant leadership being undertaken by the various states to address the legal and regulatory uncertainties associated with CCS activities. West Virginia is among those states where a legislatively mandated working group has recommended not only a comprehensive set of regulatory requirements, but also a liability transfer mechanism during the post operational phase of a project tied to the establishment of an operator generated trust fund. That working group has also recommended a comprehensive set of policies related to property issues including a determination that the use of pore space may be considered a public use to be authorized by permit.  Click here for the list of conference speakers.