Harmonizing regulatory and litigation approaches to climate change mitigation: incorporating tradable emissions offsets into common law remedies.

• Author: Engel, Kirsten H.

INTRODUCTION

Within the past several years, state attorneys general filed two high-profile common law tort lawsuits against major sources of greenhouse gas (GHG) emissions. In 2003, the attorneys general of New York, California, Connecticut, Iowa, New Jersey, Rhode Island, Vermont, and Wisconsin and the City Attorney for New York filed suit against five major electric power generators located in the Midwest. The plaintiffs alleged that the defendants' fossil-fuel-fired generating facilities constitute a public nuisance under state and federal common law and requested that the defendants abate carbon dioxide emissions at each of their plants. (1) In 2006, the State of California sued six major vehicle manufacturers, claiming that the "massive" quantities of GHGs emitted by automobiles produced by the companies contribute to the public nuisance of global warming. California is requesting monetary damages as well as other appropriate relief. (2)

Perhaps the most striking feature of these lawsuits is their bold attempt to address a modern environmental problem of global proportions--climate change--through the parochial apparatus of the common law tort system. This is all the more remarkable as the international community, the federal government, and state regulators are simultaneously struggling to address climate change, with a mixed record of success. Although nations representing approximately one-third of the world's emissions are now subject to the Kyoto Protocol, the United States--the world's largest national emitter of GHGs--has neither ratified Kyoto nor adopted a mandatory program to control domestic emissions. Some states within the United States are attempting to fill this gap with state-level regulation and, now, state-initiated common law litigation against individual emitters.

Commentators generally agree that state-by-state regulation is not a substitute for a comprehensive federal program. Nevertheless, the question remains whether state-level actions to address climate change can help bring us closer to the development of a mandatory federal climate change program. A follow-up question is whether, if so, state-level positive regulation and state-level common law litigation may be harmonized in a manner so as to reach this goal more effectively and efficiently. Because some aspects of these questions are the subject of prior scholarship,(3) this Article will focus on two particular aspects of these larger questions: 1) in what way is common law litigation similar to or different from state-level positive regulation in terms of its potential to influence the development of a federal regulatory regime, and 2) what are the benefits of and barriers to adopting, in the common law context, the same remedies being considered and adopted in the regulatory context?

I argue here that, like state positive climate change regulation, state-initiated climate change litigation fills a niche created by the need to address this global environmental problem in the absence of federal action. Both can function as an intermediate step between no regulation and a federal program. While it is possible both may survive, both may also be preempted by an eventual federal regulatory program. Under the dominant theory regarding the influence of state-level action upon federal legislation, state-initiated common law climate change litigation now being pursued is likely to be just as, if not more, effective than positive regulation in terms of its potential to trigger a federal regulatory response. This is largely because the tar gets of the state-level litigation are out-of-state companies, a characteristic that is likely to accentuate the dynamics that could trigger a federal regulatory response. In sum, state-level litigation should be thought of as a component of a state-level regulatory program with at least the same potential for influencing the creation and content of a federal regulatory program as state positive regulation.

Second, I will argue that not only should common law and positive regulatory remedies be harmonized in the circumstances presented by climate change, but a unique characteristic of GHGs--their fungibility--makes possible incorporation into common law remedies the leading compliance option being employed and considered in the regulatory context: the use of tradable emissions offsets. Such an option would be in contrast to the usual remedy in a public nuisance suit: alterations in the defendant's own operations that abate its contribution to the public nuisance. (4) The option to use third-party-generated emissions offsets allows the defendant to maintain its current operations unchanged and pay another source of GHGs to abate its emissions. This remedy achieves the same environmental result as an unadorned abatement requirement, but at a potentially cheaper cost. In addition to efficiency, however, incorporation of this option into common law remedies might actually trigger a GHG emissions trading market. (5) Such a market could function until the time that a federal regulatory program is enacted. Given that a federal program is likely to institute emissions trading, any market so created would enhance the success of the subsequent regulatory program.

Harmonizing state regulatory and litigation approaches to climate change in a manner that could possibly jumpstart an emissions trading regime will make the best use of this intermediate time period during which Congress is considering the enactment of a GHG emissions cap-and-trade program but has yet to amass the consensus needed for such a program to become law. While Congress continues to debate the merits and design of a cap-and-trade program, (6) other governments that are subject to the Kyoto Protocol, most notably the European Union (EU), are already implementing such a program. (7) Each day that passes in which the United States lacks a comparable program accentuates the gap between the developing carbon-trading expertise of U.S. businesses and regulators and those of other nations.

While this disparity works to the United States' comparative disadvantage, it also has certain short-term advantages. By serving as a source of preapproved emissions reduction credits, the existence of the EU trading market (as well as the voluntary markets that have recently appeared in the United States) helps make possible a judicially initiated emissions trading market, (8) Thus, a judicially prompted GHG emissions trading market uses both time and opportunity wisely; with the help of more-developed emissions trading regimes in other parts of the world, it fills the existing federal regulatory gap with the very same policy that the federal government is likely to adopt, thereby smoothing the transition to that inevitable policy result.

Much of this Article is devoted to providing a rationale for courts' incorporation of emissions offsets as a compliance option in public nuisance climate change litigation, the potential barriers to courts' willingness to adopt this remedy, and strategies to overcome judicial reluctance. While it will be necessary at times to discuss some aspects of the plaintiffs prima facie case for public nuisance, such as the manner in which the fungibility of GHG emissions reduces the plaintiffs burden of establishing causation, I have left the comprehensive analysis of these elements of the plaintiff's case to the more-capable talents and labors of others. (9)

1. A COMPARISON OF THE RELATIVE EFFICACY OF STATE POSITIVE REGULATION AND COMMON LAW LITIGATION IN PROMPTING A FEDERAL REGULATORY RESPONSE

   1. The State-Level Response to the Federal Climate Change Policy Gap

      For at least the past decade, states have been at the vanguard of policy and regulatory responses to climate change, filling a gap left by a lack of leadership on behalf of the federal government. (10) The federal government has failed to take an aggressive stance on climate change mitigation; Congress has yet to enact a program for mandatory reductions and the Bush administration's reliance upon voluntary emissions reductions and its targeted increase in GHG intensity (11) is not expected to reduce such intensity beyond that achieved by usual business trends alone, (12) Although, as a result of the Court's ruling in Massachusetts v. EPA, (13) the EPA is now under court order to consider regulating vehicle GHG emissions under the Federal Clean Air Act, it is probably unlikely that federal action compelled by litigation will produce aggressive action, at least any time soon. Nevertheless, state climate regulation is piecemeal, of varying levels of stringency, and thus far has not added up to a whole lot of aggregate emissions reductions. (14) Thus state and local climate change mitigation poses a threshold question that needs to be addressed prior to considering the special situation of common law litigation: does it make any sense for subglobal actors to address a global environmental problem, especially one that results from the degradation of a global commons such as the earth's climate system?

      Unquestionably, a global environmental problem warrants an international response. (15) Climate change is the result of a global tragedy of the commons; it is the combined result of GHG emissions from billions of sources around the world which, in total, exceed the earth's natural carrying capacity. (16) As with common-pool environmental resources smaller than the troposphere, achieving reductions in the exploitative activity by way of a cooperative solution among the largest users is more efficient than relying upon independent adoption of unilateral reductions by a fraction of such users. (17)

      That said, the emphasis on an internationally negotiated solution may still be overstated. Depending upon the size of the nation's emissions, unilateral reductions may, in fact, be economically rational even if less efficient than reductions made pursuant to an international...