In the late evening on December 18th, 2009, all eyes were on Copenhagen waiting to see if the Conference of the Parties 15 (COP15) of the United Nations Framework Convention on Climate Change (UNFCCC) would produce a global climate treaty that would require the nations of the world to reduce their output of greenhouse gas (GHG) emissions. The outcome of COP15 was expected to impact every aspect of society, and most prominently, the corporate world. At the end of a two week long negotiating session, Copenhagen produced a non-binding “agreement” void of any real emissions reduction targets or timetables to achieve them. The Copenhagen Accord was a decision made by the 193 nations participating in the Conference to “take note of” for further review in 2010. The Accord recognizes the following major action items:

• There is a scientific case for keeping global temperature rise to no more than 2°C.
• Developed Nations (Annex 1 Parties – the largest emitters) will determine economy-wide emissions reduction targets for 2020 by January 31, 2010. 
• Developing nations (Non-Annex 1 Parties) will determine methods to implement mitigation actions by January 31, 2010. 
• Developed nations will collectively generate USD $30 billion for the period 2010 through 2012 and USD $100 billion from 2012 to 2020 to assist developing nations in their climate change adaptation and mitigation activities.

Although legally-binding emissions reduction targets were not included in the Accord, most nations have proposed unofficial emissions reduction commitments which they claim they will implement through domestic policy. Most nations, like the United States and China, are steadfast in their position to achieve the following goals:

• USA proposed to cut GHG emissions to 17% below 2005 levels by 2020, pending congressional approval (this is equivalent to 4% below 1990 levels).
• China: Proposed to cut CO2 emissions per unit of GDP by 40-45% below 2005 levels by 2020.
• European Union proposed to cut GHG emissions by 20% from 1990 levels by 2020, or 30% if other big emitters take tough action as well.
• India proposed to cut CO2 emissions per unit of GDP by 20-25% from 2005 levels by 2020.

The current emissions targets on the table are expected to lead the world on a path toward a global temperature rise of 3°C. Stronger commitments are needed from the largest emitters, including the United States and China, to reach the goals set out in the Copenhagen Accord. As of January 29th, the United States appears to remain firm on its 17% target reduction in emissions by 2020 from 2005 levels. In a letter to U.N. Climate Officials, President Obama pledged to uphold our target emissions reduction goal set out at Copenhagen, and that more details were to follow pending Congress’ decision on the Climate Bill.

Despite this positive and ambitious first step, it is still uncertain as to when the “details” of the U.S. commitment will be worked out. As climate legislation sits idle in Congressional subcommittees, Corporate America waits with baited breath to follow through on Cleantech investments. In a recent press release, Alstom Power President Philippe Joubert said that “Uncertainty about the legal and regulatory framework around carbon dioxide emissions is holding back needed investments”. In a letter to President Obama, a group of 80 U.S. companies stated that “[Climate] legislation would spur a new energy economy and with it create 1.7 million new American jobs, many in struggling communities across the country” (Environmental Leader, 2010). In addition to the desire for a green light on Cleantech investment, corporations are pushing for Congressional movement on a more flexible and “business-friendly” Climate Bill for fear of being pinned under the strict and expensive regulatory thumb of the EPA.

No matter how the U.S. decides to regulate carbon dioxide emissions, the world will be holding us responsible for upholding the pledge President Obama made to the U.N. Climate Officials this week. U.N. Climate Chief Yvo de Boer said recently that "Whatever route is taken, the president of the United States committed to a 17 percent emissions reduction in Copenhagen. The president of the United States committed to more ambitious emissions reductions for 2030 and 2050. And it is those statements to which the international community will hold the government of the United States accountable” (Greenwire, 2010).

Without the support of congressional legislation, President Obama met the U.N.’s January 31st deadline by confirming to uphold the United States’ pledge at Copenhagen. The details surrounding the implementation of that emissions target and the accompanying timetable are yet to be determined. The waiting game for the creation of solid and defensible action to regulate carbon emissions at home and abroad continues…

On December 7, 2009, the EPA released a statement concluding that greenhouse gases (GHG) threaten public health, welfare, and the environment, and in turn, warrant regulation under the Clean Air Act (CAA). The implications of such a statement will be substantial and far-reaching, as many businesses will soon have to report on and abate their carbon footprints under the EPA’s strict command-and-control regulatory approach.

Greenhouse gas legislation has been in the works for over a year now, however this endangerment finding has done more to strike fear into the hearts of business executives far more than the pending cap-and-trade Bill in Congress. The reason for this comes down to the fundamental differences in the way the regulatory regimes designed to reduce greenhouse gas emissions will be implemented. An NPR news report indicates that “Business groups have strongly argued against tackling global warming through the Clean Air Act, saying it is less flexible and more costly than the cap-and-trade bill being considered before Congress.” (NPR, 2009). The command-and-control regulatory approach under the CAA tends to be a more expensive measure for businesses because it involves a “one-size fits all approach” where the EPA will step in and recommend Best Available Control Technologies (BACT). These technologies typically involve expensive upgrades or retrofits that do not take into consideration other methods that may be more appropriate for the corporation.

The cap-and-trade market-based approach is favored by economists and corporations alike because it allows for more flexibility in implementation. A cap on emissions is determined at the Congressional level, polluters are required to purchase permits, or “allowances” if they are given away for free, to emit greenhouse gases in their operations. Under such a scheme, corporations will have an incentive to reduce their carbon footprint in order to sell their excess permits to those corporations unable or unwilling to reduce their emissions. The cap-and-trade method allows for money to be made, and hopefully, more efficiency measures to be established.

In the time since the EPA’s announcement, numerous business and conservative political groups have been gathering steam in their opposition to the ruling. On December 24th, 2009, the National Cattleman’s Beef Association filed a petition to the rule in the DC Circuit Court of Appeals, citing that “…increased energy costs associated with this ruling will be devastating for agriculture and the public as a whole.” (NCBA, 2009). Earlier in November 2009, the Republican Governor of Texas, Rick Perry, issued a statement to EPA urging that a proposed framework for regulating greenhouse gases be avoided due to its “devastating implications for Texas’ economy and energy industry” (Office of the Governor, Rick Perry, 2009). On January 20, 2010, U.S. Sen. Lisa Murkowski (R-Alaska) is expected to “shut down”the GHG ruling by “seeking an amendment to an unrelated debt bill… or will seek a resolution of disapproval, which would not be subject to filibuster” (Environmental Leader, 2010).

We have yet to see what will come out of this opposition. The good news for corporations is that the EPA ruling has done much to spur talk on the movement of the GHG legislation pending in Congress. For now though, the status of GHG legislation is at a standstill. After a failure at Copenhagen by the world’s nations to reach an agreement on a global climate accord, opinions in the U.S. are that current GHG legislation will suffer a similar fate. Congressional committees have been established to combine elements of the Waxman-Markey House Bill and the Kerry-Boxer Senate Bill to be re-voted on in the House and Senate in the first quarter of 2010. Pundits suggest that if a decision is not made before April 2010, the U.S. should not expect a climate bill to be passed this year, as attention will be focused on the mid-term elections.

Hold on to your hats, this could be a bumpy ride…