When judiciaries go green

Climate change has become a hot issue worldwide and, in the absence of desisive legislative, judiciaries are under increasing pressure to make decisions involving greenhouse gas emissions, says Bryan Gundersen at Kensington Swan.

In a recent United States Superior Court decision a judge in Fulton County, Georgia blocked construction of a 1200 MW coal-fired power plant, based predominantly on concerns about its CO2 emissions.

The Georgia decision (released 30 June 2008) marks the first time in the United States that potential greenhouse gas pollution has been cited as a factor in denying permission to build a new coal-fired power plant. The decision was also the first of its kind that hinged on an earlier United States Supreme Court decision finding that the Clean Air Act (U.S) gives the U.S Environmental Protection Agency (EPA) the power to regulate carbon dioxide and other greenhouse gas emissions.

The US position

Although the United States signed the non-binding United Nations Framework Convention on Climate Change in 1992, the Clinton administration chose not to ratify the Kyoto Protocol in 1995. Non-ratification of the Kyoto Protocol meant that the US avoided the requirement to assign mandatory targets to reduce its greenhouse gas emissions. But regardless of this lack of governmental commitment, certain interest groups have remained concerned about the effects of climate change and the increasing need to implement mitigating measures.

An obvious manifestation of this concern is the recent Supreme Court decision of Massachusetts et al v Environmental Protection Agency et al. The plaintiffs in this case comprised 12 US states, and a number of local governments and private organisations. The plaintiffs took an action against the Environmental Protection Agency (EPA) claiming firstly, that the EPA had abdicated its responsibility under the Clean Air Act (CAA) to regulate the emissions of four greenhouse gases, including carbon dioxide; and secondly, questioning whether the EPA has the statutory authority to regulate the greenhouse gas emissions from new motor vehicles, and if so, whether the EPS’s stated reasons for refusing to do so are consistent with the statute.

On 2 April 2008, in one of the most important environmental decisions in years, the Supreme Court ruled that the EPA could not sidestep its authority to regulate the greenhouse gases that contribute to global climate change, unless it could provide a scientific basis for its refusal. Secondly, the court ruled that the EPA does have the authority to regulate heat-trapping gases in automobile emissions. With reference to the first finding in particular, the Supreme Court found that if the EPA cannot find a convincing rationale for not regulating carbon dioxide, then carbon dioxide will become a regulated pollutant.

This decision is in opposition to the Bush administration, which has stoically maintained that the EPA does not have the right to regulate carbon dioxide, or any other heat-trapping gases under the CAA. The Bush administration has also made it clear that even if it did have the right under the CAA, it would not use it.

The Supreme Court decision has already had a significant flow-on effect. This is illustrated in the recent and unprecedented decision of the Superior Court of Fulton County, Georgia which blocked the construction of coal-plant developer Dynegy’s 1200 MW coal-fired power plant ‘Longleaf’. The decision effectively reversed a state decision approving construction. Judge Thelma Wyatt found that the inferior court decision could only be upheld if carbon dioxide was not classified as an “air pollutant” subject to regulation under the CAA. But given that the recent case of Massachusetts v Environmental Protection Agency confirmed CO2 as being an ‘air pollutant’ under the CAA, there was no question that CO2 would therefore be subject to regulation under that Act.

Judge Wyatt went on to find that no effort had been made by Dynegy to identify, evaluate, or apply available technologies that would control CO2 emissions (in accordance with the regulatory requirements prescribed under the CAA), and that permits issued in respect of the power plant contained no CO2 emission limits.

This decision has resulted in much applause from US environmental groups – and the opposite reaction from the coal industry. Industry argues that the decision has the potential to increase the financial risk associated with investing in coal-fired power plants given that coal releases more carbon dioxide per unit of energy than any other energy source. And although commentators from the coal industry agree that greenhouse gases should be regulated, they argue that the decision is premature.

This perspective has some merit, as although Judge Wyatt was correct in following the Supreme Court’s finding that carbon dioxide is indeed classified as an “air pollutant”, there is still ambiguity surrounding whether or not the EPA has jurisdiction to regulate carbon under the CAA. If the EPA can find a convincing rationale for not regulating carbon emissions, it would be at odds with Judge Wyatt’s finding. Indeed, the Georgia decision has been viewed as being merely part of the wider ongoing legal debate concerning whether firstly, the EPA has the authority to regulate greenhouse gases, and secondly, whether it is under an obligation to use that authority.

To halt the construction of a power plant of this magnitude is a bold judicial move – especially in the face of largely unresolved legislative issues. The recent events should at least indicate to the various state legislatures that their courts are moving faster than they are, and potentially in a direction that the Bush administration continues to be opposed to.

The New Zealand position

The decision of Genesis Power Ltd v Greenpeace New Zealand Inc released on 11 December 2007, takes quite a different perspective from that of the US approach.

The issue in this case turned on the extent to which a consent authority, when considering an application for a discharge permit, could take into account the impact of the proposed discharge on climate change. Genesis had applied to the Auckland Regional Council for resource consent for its gas-fired electricity plant. The application was opposed by Greenpeace, who argued that the application needed to consider climate change implications.

An earlier 2007 High Court decision involving Mighty River Power (Greenpeace New Zealand v Northland Regional Council (the “Mighty River case”) had produced an interpretation that was highly unsatisfactory to Mighty River and any other similarly placed applicant (i.e. Genesis). In that case, Greenpeace appealed two decisions of the Northland Regional Council and the Whangarei District Council granting Mighty River consents authorising the operation of a coal-fired electricity generation station. Presiding Judge Williams favoured Greenpeace’s argument, by finding that a conflict existed between section 7 (i) of the RMA, which required that when exercising powers under the RMA, all persons shall have particular regard to the “effects of climate change”; and section 104E of the RMA, which prohibited a consent authority from taking into account climate change effects.

Williams J held that an application for a discharge permit associated with the emission of greenhouse gases and involving renewable sources of energy would likely be more favourably viewed than one which relied on non-renewable sources. He further considered that even if the application involved the use and development of renewable energy the consent authority would not be exempt from considering the effects on climate change.

This was highly unsatisfactory to Mighty River, and although leave to appeal was granted, Mighty River ultimately decided to abandon its plans to construct the power station. Genesis, however, when faced with a similar suit by Greenpeace, sought a declaration from the Court of Appeal that Williams J had decided the Mighty River case incorrectly.

The Court of Appeal (COA) disagreed with Williams J’s finding that a “conflict” existed between sections 7 (i) and 104E of the RMA; and in opposition to the High Court, favoured an interpretation which did not overwhelm the prohibition set out in section 104E. The COA found that in cases involving non-renewable energy production, there was no need for the consent authority to assess the extent to which greenhouse gas emissions would have an effect on climate change. The COA granted the declaration accordingly, and held that the Auckland Regional Council must not have regard to the effects of that discharge on climate change.

A national issue

The New Zealand judicial approach differs significantly from that taken by the US courts, with the New Zealand appellate courts being more inclined to leave the regulation of carbon emissions as a matter for the legislature.

The COA was reluctant to impose a specific ‘block’ on the construction of Genesis’s non-renewable power plant in the same way that their Georgia counterparts were. A possible reason for this differing approach could be that the New Zealand judiciary views the issue of climate change as more of a ‘national’ problem, which is currently being adequately dealt with by the New Zealand government through the (imminent) implementation of the emissions trading scheme, and other associated mitigation of climate change measures.

As already discussed, this form of national guidance continues to be somewhat lacking in the US context, which is arguably why the US courts have taken it upon themselves to force the legislature into addressing the issue with appropriate legislative and/or policy reform.

The current ambiguity is likely to have a highly detrimental effect on the non-renewable energy industry in the US, and it is for this reason that clear lines need to be drawn sooner rather than later.

• Bryan Gundersen, LLB (Hons) is a senior partner at Kensington Swan, and leader of the firm’s energy workgroup. Bryan acknowledges the assistance of Taryn Tuck, also a solicitor at Kensington Swan, in the preparation of this article.