A New United Nations Report Finds Paris Agreement Goal is Insufficient to Protect Billions of People From the Effects of Climate Change

In 2015, the Paris Agreement was adopted with a goal of limiting warming to “well below 2°C.”  The United Nations Intergovernmental Panel on Climate Change (IPCC) then embarked on a study of the difference in climate change effects between a 1.5°C warming and a 2°C warming.  A 1.5°C warming would result in increases in extreme temperatures, precipitation, heat-related morbidity and mortality, vector-borne diseases, sea level, droughts, forest fires, spread of invasive species, ocean acidification, and crop failure, but a 2°C raise in global temperature would make these effects markedly worse.  The IPCC report predicts that the half-degree difference in warming between 1.5°C and 2°C will result in coral reef loss of over 99% as opposed to 70-90%, a decrease in fishery yields of 3 million tons as opposed to 1.5 million tons, an increase in people affected by water stress of 50%, and hundreds of millions of additional people “exposed to climate-related risks and susceptible to poverty.”  At a 2°C increase, global changes will occur faster, giving the population less time to adapt.

In the wake of the Paris Agreement, individual countries made commitments to domestic climate change reduction measures.  If every country adheres to its commitment, temperatures would rise by 3°C.  Another round of commitments is due in 2020.  For warming to remain under 1.5°C, the world would have to reduce emissions by 45% from 2010 levels by 2030 and reach zero emissions by 2050.

The State Department accepted the report, but stated that “acceptance of this report by this panel does not imply endorsement by the United States of the specific findings or underlying contents of the report.”  The U.S. government remains committed to withdrawing from the Paris Agreement.

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The U.S. is Progressing Toward Paris Agreement Goals Due to State and Local Actions on Climate Change, According to Bloomberg Report

Last month, California Governor Jerry Brown and former New York Mayor Michael Bloomberg published a report, Fulfilling America’s Pledge, finding that notwithstanding the Trump Administration’s decision to withdraw the U.S. from the Paris Agreement in June 2017, the country is almost halfway to reaching its Paris Agreement target of reducing greenhouse gas emissions 26-28% below 2005 levels by 2025.  The report finds that the bottom-up efforts of state and local governments, businesses, and other actors across the country will continue to drive the U.S. towards meeting its Paris pledge.

The report also identifies readily available, near-term strategies that, if fully implemented at the state and local level, could drive down emissions to 21% below 2005 levels by 2025.  These include rapid deployment of renewable energy resources and electric vehicles, accelerated retirement of coal, deployment of ambitious residential and commercial building efficiency standards, phasing out the use of hydrofluorocarbons, reducing methane emissions from oil and gas facilities, enhancing carbon sequestration activities, and forming state coalitions on carbon pricing.

However, the report notes that “Federal reengagement undertaken as rapidly as possible will be essential in sustaining and accelerating the needed breadth and depth of emissions reductions across all sectors of the U.S. economy, both to close any remaining gap in [emissions reductions to meet 2025 goals] and for long-term decarbonization.”

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Second Circuit Upholds Dismissal of Challenge to New York ZECs

Yesterday, in Coalition for Competitive Electricity et al. v. Zibelman et al.,* the Second Circuit upheld New York’s zero-emissions credits (ZECs) program, a component of its Clean Energy Standard and larger energy reform plan to reduce greenhouse gas emissions 40% by 2030.  The decision comes on the heels of a Seventh Circuit decision issued earlier this month that reached similar conclusions, and affirms the July 2017 ruling of the U.S. District Court of the Southern District of New York.

New York’s ZEC program aims to prevent nuclear generators that do not emit carbon dioxide from retiring until renewable sources of energy can meet a greater percentage of the state’s energy needs.  The ZEC price is based on the social cost of carbon, and is set by the Public Service Commission every two years.  Qualifying nuclear generators are awarded a ZEC for each MWh of electricity they generate (subject to a cap), in addition to whatever revenues the facility receives for selling the electricity.  The New York State Energy Resource and Development Authority (NYSERDA) then purchases ZECs from the selected nuclear plants.  Local utilities are required to purchase ZECs from NYSERDA in proportion to their share of the total state electric load.

Plaintiffs, a group of generators and generator trade groups, alleged that the program was preempted by FERC’s authority over wholesale electricity sales, and was in violation of the dormant Commerce Clause.  The Second Circuit rejected the plaintiffs’ claims.  First, citing Hughes v. Talen Energy Marketing, LLC, the court found that New York’s ZEC program was not invalid under a “field preemption” theory because unlike the program at issue in Hughes, New York’s program did not guarantee generators a rate for wholesale sales distinct from the wholesale market clearing price.  Nor, the court observed, does ZEC eligibility require that a qualifying plant sell its output into the wholesale markets. The court also found that the ZEC program was not invalid under a “conflict preemption” theory, concluding that the program did not cause clear damage to FERC’s goals of using auctions to set wholesale prices and to promote efficiency.  The court recognized that FERC’s reliance on wholesale auctions operates against a “background assumption that the [Federal Power Act] establishes a dual regulatory system between the states and federal government and that the states engage in public policies that affect the wholesale markets.”

Finally, the court declined to consider the dormant Commerce Clause arguments, holding that the plaintiffs lacked standing to bring the claim.


*Spiegel & McDiarmid LLP attorneys Scott H. Strauss, Peter J. Hopkins, and Jeffrey A. Schwarz represented the Chairman and members of the New York Public Service Commission in this litigation.

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2017 Saw Small Decrease in Energy Related CO2 Emissions

According to recently-released data from the U.S. Energy Information Administration (EIA), energy-related CO2 emissions decreased 0.9% in 2017 compared to 2016 levels.  Real gross domestic product increased 2.3% over the same period.

The increasing use of natural gas in fossil-fuel fired generation has of course contributed to these numbers.  Natural gas CO2 emissions surpassed those of coal for the first time ever in 2015 (and continued in 2016).  2017 did have a 1.5% decrease in natural gas CO2 emissions, although the natural gas share of electric generation has still generally been growing.

Increases in non-carbon generation, particularly wind and solar, also have contributed to the decline in carbon intensity of electricity generation.  Nuclear power is still the dominant source of non-carbon generation, although has been declining since 2001.  (Note, the co-owners of Vogtle Units 3 & 4 recently agreed to continue with the construction of the only new nuclear units currently under construction in the U.S.)

EIA also reported on emissions levels in the four-end use sectors: transportation, industrial, residential, and commercial.  Only the transportation sector had increased CO2 emissions in 2017, although transportation emissions are not back to pre-recession levels despite increasing every year since 2012.  Within the transportation sector, increased CO2 emissions were due to jet and diesel fuel—motor gasoline emissions declined.

On the residential side, 2017 CO2 emissions were the lowest they have been since 1987.  EIA reports that residential sector emissions levels are strongly influenced by weather.

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7th Circuit Upholds Illinois’s Zero Emissions Credit Program

Last week, in Electric Power Supply Association v. Star, Nos. 17-2433 & 17-2445, the Seventh Circuit upheld Illinois’s Zero Emissions Credit (ZEC) program, concluding that it is not preempted by the Federal Power Act and not in violation of the dormant Commerce Clause.

Under the Illinois program, eligible nuclear facilities receive ZECs, and coal- or gas-fired generators must purchase these credits from the recipient nuclear plants at a price set by the state to reflect the social cost of carbon emissions.  The price per credit falls if a “market price index” exceeds $31.40 per MWh, and Illinois derives this index from the annual average energy prices in PJM’s auctions and the prices in two of the state’s regional energy markets.  The plaintiffs, an association of electricity producers and several municipalities, contended that the price adjustment mechanism indirectly regulated the wholesale energy markets.

The Seventh Circuit concluded that the Illinois program was not preempted by the Federal Power Act after comparing it to the Maryland program struck down by the Supreme Court in Hughes v. Talen Energy Marketing, LLC.  The Seventh Circuit observed that Hughes “draws a line between state laws whose effect depends on a utility’s participation in an interstate auction (forbidden) and state laws that do not so depend but that may affect auctions (allowed).”  While the Maryland program was preempted because the subsidy there depended on selling power into the wholesale market, here eligibility to receive ZECs depends on generation of power, and not selling the power into Regional Transmission Organization-operated auctions.  As such, the court concluded that ZECs can “influence the auction price only indirectly,” and “a state policy that affects price only by increasing the quantity of power available for sale is not preempted by federal law.”

The court also concluded that the ZEC program does not violate the dormant Commerce Clause rule that “states may not discriminate against interstate transactions.”  It explained that the Federal Power Act’s reservation of authority over local generation to the states and the absence of any overt discrimination—the subsidy’s recipients and payors are both in Illinois—defeated any constitutional challenge to the ZEC program.  The court explained that “Illinois has not engaged in any discrimination beyond what is required by the rule that a state must regulate within its borders.”

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