Corporate America Feels The Heat

When a group of state attorneys general filed a public-nuisance lawsuit against several Midwestern utilities in July 2004, many litigation experts argued the plaintiffs were being too creative for their own good. After all, the "nuisance" over which the states were suing--global climate change--thus far hasn't been definitively proved, and even if it were, pinning the liability on any given party seems impossible.

Nevertheless, along with other lawsuits and policy developments, this public-nuisance suit might represent a canary in the coal mine of environmental policy--portending regulation to come.

June 7: The national science academies of 11 countries, including the U.S., issued a statement declaring "significant global warming is occurring," that it is caused chiefly by human activities, and prompt action by all nations is justified. U.K. Prime Minister Tony Blair visited the White House and publicly called upon President Bush to support mandatory GHG restrictions. Blair spent most of June lobbying leaders of industrialized nations to support a joint statement to be issued at the July G8 Summit in Scotland. Behind the scenes, the Bush administration negotiated to soften the statement.

In the U.S. Senate, lawmakers debated policy measures to address global warming. An omnibus energy bill the Senate passed on June 28 included two climate-change titles. The first, sponsored by Sen. Chuck Hagel (R-Neb.), authorized incentives to promote emissions-reduction technologies, directed the administration to develop a "national climate change strategy" and created a market for tradeable GHG emissions credits.

"Not everyone is happy with us for it, but we acknowledge that man-made activities are increasing carbon and affecting the global climate," says Marc Manly, chief legal officer for Cinergy Inc., a major coal-burning utility company based in Cincinnati. "We are telling the world that we are planning and investing on the assumption that some day there will be a cost to carbon emissions."

Such initiatives support the Bush administration's contention that voluntary measures are working, and thus mandatory regulation is unnecessary.

The Bush administration has created frustration and embarrassment for Tony Blair, who identified climate change as a key priority for his term as president of the G8 this year.

Such situations have served to isolate the Bush administration from its political allies. Even faith-based groups have parted ways with the president on climate-change issues. The U.S. Catholic Conference of Bishops, the National Association of Evangelicals and the National Council of Churches joined with scientists to call for GHG constraints. And a growing list of business leaders is calling upon the government to enact mandatory GHG restrictions--in part to level the playing field between competitors, as well as to resolve questions about how and when GHG emissions will be regulated.

In addition, an organization representing the Inuit peoples who live in the polar regions of Alaska, Canada, Russia and Greenland plan to file a petition before the Organization of American States (OAS) alleging the U.S. is violating the human rights of the region's residents by refusing to engage in a multilateral process to abate global-warming.

What makes the Inuit case significant is the plaintiffs are alleging demonstrable and increasing harm. "They are losing property and the ability to hunt," says Donald M. Goldberg, a senior attorney at the Center for International Environmental Law (CIEL) in Washington, D.C. "Villagers are having to relocate."

Facing risks with such broad ramifications, U.S. companies can scarcely afford to disregard the potential impact of climate change on their businesses. Companies need to plan for new environmental compliance requirements, litigation risks and insurance costs. Ultimately, the greatest forces for GHG reductions might prove to be corporate directors and the investment community.

A Friends of the Earth survey of SEC filings last year in five industry sectors likely to be affected by climate change showed that on average, 39 percent of companies reported impacts from climate-change trends.



Michael T. Burr

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