By Gabrielle Sigel
Illinois recently became the first state in the Midwest to create an executive advisory council to develop statewide climate change initiatives.
On Oct. 5, 2006, Gov. Rod Blagojevich issued “Executive Order on Climate Change and Greenhouse Gas Reduction” (Exec. Order 2006-11). While the Illinois Executive Order does not immediately create any new legal obligations for Illinois businesses, it establishes a means to create those changes as soon as next year.
The governor’s climate change focus likely will have important impacts on businesses operating in Illinois.
The Illinois Executive Order takes four concrete actions. First, it creates an Illinois Climate Change Advisory Group, chaired by IEPA Director, Doug Scott. By June 30, the Advisory Group must provide proposals and recommendations to reduce statewide greenhouse gas (GHG) emissions. Second, the Executive Order states that Illinois intends to join the Chicago Climate Exchange (CCX), a private, voluntary GHG registry, reduction, and trading system.
Third, Gov. Blagojevich establishes a goal to reduce GHG emissions from governmental activities 6 percent by 2010. Fourth, the Illinois Executive Order requires IEPA to produce an annual report, documenting GHG emissions throughout Illinois.
Climate change is unusual among environmental legal issues because it is not currently the focus of a comprehensive federal regulatory effort. While the Democrats’ new control of Congress may change federal priorities, near-term federal regulation is unlikely.
Instead, businesses are being pressured to deal with climate change issues primarily by states, investors, and customers throughout the supply chain. The Illinois Climate Change Advisory Group may be an important first step towards state regulatory and other legal initiatives in the Midwest.
The Climate Change Advisory Group will have representatives from business, labor unions, environmental groups, agriculture, and energy, and will also include scientists and economists. In addition to the IEPA Director, two of those representatives have been announced publicly. Howard Learner, executive director of the Environmental Law and Policy Center, will represent environmental groups. Labor unions will be represented by Michael Carrigan, secretary-treasurer of the Illinois AFL-CIO.
Wide array of options
The Advisory Group will start work in January and must produce its proposals in six months. At this early point, the Advisory Group has not formally developed its recommendations. However, if Illinois were to follow or join the activities of other states, it has a wide array of options from which to choose.
One tactic that several other states have used to address climate change is litigation against GHG emission sources. For example, in September 2006, California’s Attorney General filed a lawsuit demanding a jury trial in state court against six major car companies. Relying on federal and state common law nuisance theories, the complaint seeks monetary damages for past, ongoing, and future damages and expenses due to global warming. (California v. General Motors, et al., No. C0605755.)
California’s recent litigation is similar to a lawsuit filed by the state of Connecticut and several other states against electric utilities alleging the utilities created a public nuisance due to global warming. (Connecticut v. American Electric Power, Inc., 406 F. Supp. 265 (S.D.N.Y. 2005).) Rather than seeking damages, as California is, the plaintiffs in Connecticut v. American Electric Power sought an emissions cap and emission reductions under a permanent injunction. The district court dismissed the complaint, ruling the plaintiffs raised non-justiciable political questions. The case is now pending before the Second Circuit.
Illinois also has several non-litigation models that it may choose to follow. The most well-developed climate change program is one created by the Regional Greenhouse Gas Initiative (RGGI), comprised of seven Northeastern and Mid-Atlantic states (with at least two more likely to join). RGGI will (i) create a mandatory carbon dioxide (CO2) cap-and-trade system for the area’s power plants, (ii) require that statewide emissions be maintained at current levels through 2015, and (iii) require further reductions of 10 percent by 2020.
California has enacted legislation that is sure to be considered by the new Illinois Advisory Group. In September alone, Gov. Schwarzenegger signed three bills targeting GHG emissions. The first bill, the Global Warming Solutions Act, caps allowable statewide GHG emissions at 1990 levels by 2020, adopting a much more aggressive baseline than most other programs. If met, this cap would result in a 25 percent reduction in GHG emissions from current levels. California will establish a program requiring sources to conduct emissions inventories and reporting, and will impose penalties for non-compliance.
A second California law requires the state’s Energy Commission to set GHG performance standards, effective June 30, for electricity purchased by local publicly-owned utilities. This law will encourage utilities to rely on clean and renewable energy sources.
The third California energy bill signed in September 2006 sets specific goals for the state’s three largest utilities, requiring them to use renewable sources for at least 20 percent of their energy by 2010.
A more moderate approach to climate change initiatives has been taken by several other states. In Arizona, for example, the governor recently implemented proposals from its Climate Change Advisory Group. In September 2006, Gov. Napolitano issued an executive order setting a statewide goal to reduce GHG emissions to 2000 levels by 2020, and by an additional 50 percent by 2040. The state’s Department of Environmental Quality was directed to develop a reporting mechanism and GHG registry, and to implement California’s GHG standards for vehicles.
In the Midwest, Indiana Gov. Daniels established an Interagency Council on Energy to provide advice on energy policy, plan to improve energy efficiency, and promote Indiana’s production of clean energy. By executive order, the governor mandated that by 2010, at least 10 percent of electricity used in state governmental buildings must come from domestically-produced renewable energy, increasing to 27 percent by 2025. Michigan also has enacted legislation promoting use of alternative fuels.
In addition to those discussed above, other state or regional activities which the Illinois Advisory Group may consider are:
energy efficiency mandates;
tax credits for purchasing clean vehicles;
tax credits for alternative energy systems used in buildings, such as solar heating CO2 sequestration facilities;
encouraging states, such as California, that mandate CO2 caps to purchase energy from Illinois’ clean coal and renewable energy products;
regional cooperation and initiatives, including trading links cooperation agreements with foreign countries, particularly to participate in market-based mechanisms; and
cooperation agreements with foreign countries, particularly to participate in market-based mechanisms.
Environmental initiatives
The Illinois Executive Order was issued against a backdrop of several other environmental and energy initiatives taken by Gov. Blagojevich in recent months. Principal among these is his Energy Independence Plan, announced in August 2006, which seeks to reduce reliance on foreign energy resources while promoting use and conservation of Illinois’ energy resources. Among the energy initiatives in the governor’s plan which affect climate change are support for reduction of vehicle fuel usage and the development of a pipeline to store CO2.
In light of the governor’s prior announcements, his Advisory Group is sure to consider incentives to reduce vehicle emissions, promote renewable energy, and support integrated gasification combined-cycle clean coal technology (also known as the FutureGen program).
With Illinois being the home of 12 percent of the nation’s coal reserves, businesses should expect the state to try to leverage those resources into a win/win for CO2 generators and consumers – encouraging coal use, but with reduced GHG emissions or additional GHG emission offset opportunities.
Given the governor’s pronouncements in this area, businesses should not be surprised when his Advisory Group recommends programs incorporating both performance standards to reduce statewide GHG emissions, as well as incentive programs for reductions and offsets. Counsel for businesses operating in Illinois should calendar mid-year 2007 for details of the governor’s statewide climate change agenda.
Gabrielle Sigel is a partner in Jenner & Block’s Chicago office and is a member of the following practice areas in the firm: environmental, energy and natural resources law; insurance litigation and counseling; construction law; products liability and mass tort defense; and defense and aerospace practices. She may be reached at gsigel@jenner.com. Jenner & Block LLP (www.jenner.com) is a national law firm with offices in Chicago, Dallas, New York City and Washington, D.C. Founded in 1914, the firm has over 400 lawyers offering experience in virtually every area of the law.
Reprinted with permission from Midwest In-House, a quarterly publication of Lawyers Weekly, Inc.
© 2007 Lawyers Weekly Inc., All Rights Reserved.
MWIH / January 2007
