Law Times

PAGE 10 FOCUS November 24, 2008 • Law Times business reality is that even U.S. President George W. Bush has started to see the light — albeit a little late in the game. Almost a year ago, he signed the En- ne indication of the speed at which environmental considerations are moving from social concern to ergy Independence and Security Act of 2007 into law. Unfortunately, the po- litical gerrymandering that preceded the legislation's passage took its toll. "It would be a misapprehension to con- Energy Act's importance 'primarily symbolic' O BY JULIUS MELNITZER For Law Times following: • requiring automakers to boost fleet- wide gas mileage to 35 miles per gal- lon by 2020, a 40 per cent increase over current fuel economy standards; The law's main features include the • creating a renewable fuel standard re- quiring transportation fuel to contain 36 billion gallons of renewable fuel by 2022, a five-fold increase; clude that the Energy Act is a significant step on the road to a comprehensive energy policy or energy independence," says Mark Stermitz, counsel with Christensen, Glaser, Fink, Jacobs, Weil & Shapiro. "While it is a strong pronouncement about the impor- tance of renewables as part of our energy portfolio and the most definitive thing to come out of Washington in quite a while, its importance is primarily symbolic." Still, there's no doubt that the act is significant legislation. Apart from moving the U.S. toward greater energy independence and security, the stated purposes of the legislation are "to increase the production of clean renewable fuels, to protect consumers, to increase the efficiency of products, building, and ve- hicles, to promote research on and deploy greenhouse gas capture and storage options, and to improve the energy performance of the federal government." • funding a "Recoverable Waste Energy Inventory Program" with $200 mil- lion in annual grants for projects that produce electricity or thermal energy from energy waste recovery; • creating a "Short Sea Transportation Program" to relieve landside conges- tion along coastal corridors; and • providing $200 million annually for competitive awards for development of new techniques for carbon capture and sequestration, and another $200 million annually for programs specific to large-scale capture of carbon diox- ide from industrial sources; • mandating an international outreach program to promote the export of clean and efficient energy technologies to countries like India and China. But critics say that the law is as notable for what it leaves out as for what it man- dates. "The act as passed eliminated key com- ponents that were in the original version," says Radha Curpen of Osler Hoskin & Har- court LLP's New York office. "The most im- portant are a rollback of the tax breaks to oil and gas companies, an extension or creation of tax incentives for renew- able energy sources, and the implementation of a national renewable energy mandate." Understand- ably, the reaction from the business community has been mixed. "The big winners were the ethanol and biofuel sectors," Stermitz says. Indeed, the total amount of biofuels added to gasoline must increase to 36 billion gallons by 2022 from the current 4.7 billion gallons. A further 16 billion gallons of the 2022 total must come from cellulosic ethanol. Renewable fuel manu- factured at new facilities must achieve at least a 20 per cent reduction of life cycle greenhouse gas emissions. The act also promotes investment in Mark Stermitz the fact that no one knows what a carbon regulation and emissions trading scheme might eventually look like in the U.S. And finally, there remains a bitter divide in the busi- ness community about the merits of promoting renewables. "Supporters of the renewable fuels infrastructure and en- courages the development of new bioen- ergy sources. Still, major uncertainties remain, espe- cially for investors in a shaky economy. "There are serious concerns about the economic viability of ethanol," Stermitz says. "And while biofuels can be produced on a smaller scale and therefore more eco- nomically, no one's quite sure of the envi- ronmental benefits." Adding to the uncertainty for investors is dency on oil imports," Curpen says. "Op- ponents, like the Independent Petroleum Association of America, say the legislation will increase our reliance on foreign sources of energy by making new domestic explo- ration and production more costly and that it establishes the precedent of funding one energy source at the expense of another." When all is said and done, however, tra- ditional oil and gas interests have done well by the Energy Act. After all, the original ver- sion of the law would have eliminated tax breaks worth $13 billion to the industry and made it part of the funding of a $21 billion tax package for alternative energy. "It would be a misapprehension to conclude that the Energy Act is a significant step on the road to a comprehensive energy policy or energy independence," says Stermitz. Act, like the Renewable Fuels Association, believe that investing revenue in renewable energy sources will foster a new industry, create more jobs, and help reduce American depen- LT Gross income appears to be primary factor Continued from page 9 target," Haverbeke says. Vandenberghe also believes that there will be changes. "But the changes won't be in the broad overall targets, because the states agreed on these in March 2007," he says. "Where the changes will come is in the apportionment between nations and in the pace and manner of implementation." A fundamental criticism of the plan is that it doesn't consider a country's ability to produce renewable energy as a factor in allocating its goal; in- stead, gross income appears to be the primary factor. "This may not make sense in cases where southern states have more access to solar energy re- gardless of their wealth," Vanden- berghe says. "The same is true of coastal nations and wind power." Finally, large companies fear that the heavy burden imposed on the richer countries will lim- it their ability to grow in these nations. "carbon leakage," and close ex- amination reveals that dealing with it is at the heart of the plan's potential for success. When Barroso announced It's a phenomenon known as "Larger companies are start- ing to think they should get out of Europe to countries where such limitations do not exist," says Dominique Grisay, a part- ner at Exelia in Brussels. Law Specialists*on Your Team! Our team of environmental lawyers includes 5 Environmental Law Specialists* Get Our Environmental w Specialistson Your Team! Get Our Environmental We help you help your clients. Call us. the EC's plan, he conceded that its cost could adversely affect the competitiveness of energy- intensive industries in the EU by seeking to relocate. An inter- national agreement, he added, would be the best solution to the problem. But it might not be the easiest, as the most recent climate change summit in Bali demonstrated. "The Kyoto Protocol is about all that survived the Bali sum- mit because the participants couldn't agree on much else," Haverbeke says. next round of negotiations follow- ing up on the Kyoto Protocol. "I doubt that Europe will go ahead with its scheme if there is not a general willingness to share efforts," Haverbeke says. What's clear is that other countries will have to buy into an emissions trading system as the cornerstone for fighting cli- mate change. Which puts the focus on the The difficulty is that the EU is already way ahead of the www.willmsshier.com * Certified by the Law Society of Upper Canada ENVIRONMENT, ENERGY & RESOURCES LAW www.lawtimesnews.com Juli Abouchar 416 862 4836 Doug Petrie John Willms 416 862 4821 Donna Shier 416 862 4822 Marc McAree 416 862 4820 416 862 4835 pack. Its existing system is the first such system in the world and applies not only to all 27 EU member states but also to Norway, Iceland, and Liechten- stein, the other members of the European Economic Area. The system covers over 10,000 installations in the en- ergy and industrial sectors re- sponsible for almost half the EU's carbon emissions and 40 per cent of its overall green- house gas emissions. Recently, the EC unveiled a plan to bring the aviation sector into the system in 2011. The climate change plan proposes to bring still more industries, like aluminum and ammonia producers, into the sector. It also adds nitrous oxides and perfluorocarbons to the list of restricted gases. The EC, however, is not con- vinced that the international community will co-operate, or at least not in a timely fashion. Indeed, the climate change plan envisions a process by which the EC will determine which sec- tors can pass on the costs of the Emissions Trading System pro- gram without significant loss of market share to less carbon ef- ficient installations outside the EU. Even if an international agreement evolves, the plan en- visages adjusting the process for industries particularly exposed to global competition or putting in place a carbon equalization sys- tem to neutralize the distorting effects from imports. As it turns out, then, the dif- ficulties in getting international agreements are not that differ- ent from the difficulties expect- ed in getting internal approval of the EC plan. LT Law Times #MS07-06B – 7-7/8" x 4-7/8"

• Cover
• Lipton Makes a Move
• Queens Park
• Focus On Environmental Law