CHAPTER 5 ENERGY & CLIMATE CHANGE: REGULATION AND GEOPOLITICS

• Jurisdiction: Derecho Internacional

International Mining and Oil & Gas Law, Development, and Investment (April 2017)
CHAPTER 5
ENERGY & CLIMATE CHANGE: REGULATION AND GEOPOLITICS
James A. Holtkamp
Les E. Lo Baugh, Jr.
Timothy Bagshaw
Partner, Holland & Hart
President, E Cubed Optimizers LLC
Associate, Holland & Hart
Salt Lake City, UT
Murrieta, CA
Salt Lake City, UT

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JAMES A. HOLTKAMP is an attorney in the Salt Lake City, Utah office of Holland & Hart LLP. His practice is focused on environmental issues, with an emphasis on air pollution control, energy project development, and climate change. He has written and spoken extensively on climate change issues and has worked on avoided deforestation issues in Central America, litigation concerning the development of climate change regulations under the U.S. Clean Air Act, and the development of renewable energy and fuels. He spent a year in South America, overseeing legal work in Chile and Argentina for a major multinational entity. Mr. Holtkamp is also a Senior Fellow at the Wallace Stegner Center for Natural Resources and the Environment at the University of Utah College of Law, where he has served as an adjunct law professor. Early in his career he worked on the staff of the U.S. Senate Watergate Committee and as an attorney for the U.S. Department of the Interior before entering private practice. He was president of the Rocky Mountain Mineral Law Foundation from 2005 to 2006. He received his B. A. in 1972 from Brigham Young University and his J.D. in 1975 from the George Washington University, where he was Articles Editor of the George Washington Law Review. He is fluent in both English and Spanish.

LES E. LO BAUGH, JR., is the President of E Cubed Optimizers, LLC. He is a seasoned senior executive with four decades of experience in the energy, environmental, governmental, and corporate arenas. He has been a partner at major U.S. and international law firms. He began his career as a legislative aide at the U.S. Senate working with several senator offices drafting and analyzing proposed environmental, business, regulatory, tax, and other areas. This included such notable matters as the Endangered Species Act, Clean Air, Water, Offshore Drilling Act, Noise Abatement, and Tax Reform. Mr. Lo Baugh has served as advisor to corporate, governmental, and regulatory entities. Twice he served as an expert witness before Congress on energy and SEC matters. At Fulbright and Jaworski (Norton Rose Fulbright), Mr. Lo Baugh was the partner in charge of the firm's Pacific Rim energy and environmental practice. He has been the chief environmental officer and chief compliance officer of two Fortune 500 companies, as well as general counsel of two public utilities and other companies, including alternative energy, real estate, oil & gas, pipelines, and retail. His work includes numerous corporate restructurings, acquisitions and sales. Mr. Lo Baugh has assisted many companies with their strategic planning, negotiated mergers and been lead counsel on various multi-billion dollar projects. He has written and extensively spoken around the world on energy, environmental and other issues, including climate change, energy and international trade. He was a founder of the Native American Service Agency and has served on several boards. He is president of the Hiawatha Institute for Indigenous Knowledge, a Native American foundation dedicated to environmental stewardship and the preservation of indigenous knowledge and culture.

TIMOTHY M. BAGSHAW is an associate in the Salt Lake City office of Holland & Hart LLP. His practice focuses on environmental and natural-resources issues, with an emphasis on state and federal water, air, and waste compliance issues and litigation. He has graduated Vassar College (B. A.), the University of Wisconsin-Madison (M. A., Ph.D., ABD), and the University of Utah (J.D.), where he served as Executive Articles Editor of the Utah Law Review. Before joining Holland & Hart in 2015, he served one term as law clerk to the Honorable J. Frederic Voros Jr. of the Utah Court of Appeals.

Introduction

Economic stability and growth are dependent on the availability of energy. Historically, fossil fuels have been the predominant energy source, but their extraction and use have collateral impacts on climate change. Energy, like climate change, is a global matter that affects all countries and peoples. Without adequate energy, economies stagnate or wither, quality of life declines, human hardships magnify, political instability grows, and vulnerability to outside intervention increases. Energy, economics, environmental quality, and political stability are like the four legs of a stool: each of these interrelated factors must be adequate to support a stable and growing country. Possessing energy resources sufficient to meet its needs is a great political asset for a nation; to not have sufficient energy resources is a political weakness that makes nations vulnerable domestically and internationally.

In the past several decades, the import and export of energy resources, especially fossil fuels, has become a chess piece among international powers. Countries with highly developed economies have "enjoyed" higher per capita energy use and have in turn "contributed" more to climate-change problems than countries with less-developed economies. At the same time, less-developed economies strive to achieve higher economic development which equates with greater energy usage. Without sufficient energy, a country's economy cannot grow, and its populations will suffer a lower standard of living. From a social-justice standpoint, such countries argue that it is unfair for the highest per capita contributors to climate change to expect struggling economies to bear the burden of what the former largely created.

This paper proceeds in four parts. Part I discusses the recent Paris Agreement and in particular its strengths and shortcomings as a vehicle for curbing climate change. Part II discusses climate-change mitigation from an international perspective by examining the different national approaches of Latin American nations. Part III analyzes climate-change mitigation in the American context, focusing on state and regional mitigation efforts in California and the Regional Greenhouse Gas Initiative. Part IV concludes.

I. The Paris Agreement

Climate change poses an urgent problem admitting only of a global solution. On December 12, 2015, the Conference to the Parties of the Convention of the U. N. Framework Convention on Climate Change (UNFCCC)--including many of the world's leading fossil-fuel emitters--unanimously ratified the Paris Agreement (the Agreement), the product of at least six years of negotiations.¹ The Agreement establishes a global plan to curb greenhouse gas (GHG) emissions. Laurent Fabius, the Conference head, called the Agreement an "ambitious and balanced" plan and an "historic turning point" in the quest to halt global warming.² U. N. Secretary General Ban Ki Moon said that the Agreement "promises to set the world on a new path to a low-emissions, climate-resilient future."³ While the Agreement represents a high-water

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mark for global consensus on climate change, certain non-binding mitigation provisions raise questions about whether it has the teeth to bind countries to substantive change sufficient to achieve its objectives.

The Agreement sets forth a bold agenda. It aims to hold "the increase in the global average temperature to well below 2?C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5?C above pre-industrial levels."⁴ To this end, "[e]ach party shall prepare, communicate and maintain successive nationally determined contributions [NDCs] that it intends to achieve,"⁵ where each successive NDC "will represent a progression beyond the Party's then current [NDC] and reflect its highest possible ambition, reflecting its common but differentiated responsibilities and respective capabilities, in light of different national circumstances."⁶ The Agreement requires countries to inventory emissions and climate-change impacts and to "track progress made in implementing and achieving" its NDCs.⁷ Recognizing the particular difficulties that developing countries face in curbing emissions, the Agreement also imposes different obligations on developed and developing countries and provides for financial support to developing countries.⁸

Compared to earlier, less successful attempts at forging a formal international climate-change consensus, the Agreement was indeed a remarkable achievement.⁹ Its objectives are based on ambitious emissions-reductions goals. The Intergovernmental Panel on Climate Change (IPCC) has translated the 2?C figure into a carbon "budget" consisting of a limit on all additional cumulative emissions for the rest of the century.¹⁰ If cumulative emissions do not exceed the budgeted range between 630 and 1,180 gigatons of CO₂ equivalent, IPCC estimates that it is "likely" that average global temperatures will stay below the 2?C threshold.¹¹ To have a "likely" chance of staying within this budget, IPCC estimates that global GHG emissions must be 40% to 70% lower by 2050 and "near zero" gigatons of CO₂ equivalent or below by 2100.¹²

However, the Agreement's non-binding enforcement provisions risk undermining these projections and thus the Agreement's central objective.¹³ The foundation for achieving the

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Agreement's objectives are the NDCs that each country develops based on its own climate-change agenda. The NDCs have the advantage of flexibility; all signatories determine for themselves at the national level what actions they will take to achieve the Agreement's reduction objectives.¹⁴ Moreover, each country must submit its NDCs for scrutiny by fellow signatories, civic organizations, and the media.¹⁵ So far, so good. But while each party "shall prepare, communicate and maintain...