Sunday, October 24, 2010

BC Opens Consultation Period on Cap-and-Trade Regulations

While California's low carbon regime faces an existential crisis (see previous post California Dreaming: Why Ontarians Need to Wake-Up to Proposition 23), its Western Climate Initiative (WCI) partner British Columbia is moving full speed ahead with its introduction of a greenhouse gas (GHG) offset and emissions trading regulation. 

The BC Ministry of Environment announced on October 22 that a public consultation period had begun on its proposed regulations for large GHG emitters. The Ministry is seeking comments from stakeholders including First Nations and the general public on the proposed regulation. The consultation period will last for 45 days and end on December 6, 2010. The timing is in line with BC's commitment under the WCI to meet a planned start date of January 1, 2012 for linking a live cap-and-trade system with the other WCI members including seven US states and the Canadian provinces of Manitoba, Ontario and Quebec.

A cap-and-trade system will permit these governments to issue allowances to entities that emit GHGs and then if those entities reduce emissions below their limits, the entities will be able to sell or bank surplus allowances for future use.

For further information on the BC consultation process, please click here.

For a more in-depth review of the process, please check out my colleague Svend Andersen's site GHG Accounting.

California Dreaming: Why Ontarians Need to Wake-Up to Proposition 23

The UK’s George Monbiot recently declared the international process to address climate change to be broken beyond repair and called on like-minded folks to begin a dialogue that could provide an alternative path to reducing global greenhouse gas (GHG) emissions. Since attending COP15 in Copenhagen, I have shifted my faith to local and regional actions that encourage the experimentation and development of locally appropriate responses to emission reductions. For instance, British Columbia is committed to creating carbon neutral municipalities and Ontario has witnessed the implementation of its Green Energy and Green Economy Act. I’d like to see this turn into a novel kind of race-to-the-bottom whereby these movements lead to successful initiatives that prompt neighboring jurisdictions to outdo each other in reducing their GHG emissions.

For Ontarians interested in seeing our province continue its participation in this race, I suggest you turn your attention to events transpiring in California. As the 2010 U.S. midterms draw to their climactic conclusion on November 2, California voters face a few choices that could radically impact on how (or if) climate change is addressed at the state, national, continental and perhaps even global level. When they go to the polls, Californians will be asked to choose a new governor and cast their votes on Propositions 23 and 26, which could all impact the development of climate change solutions.

Last week, I furthered my understanding of the issues at stake by listening in on the Climate Action Reserve’s October 21 webinar that included as speakers California State Senator Fran Pavley and Erin Rogers, Western Region Manager for the Union of Concerned Scientists.

All three choices facing California voters turn on how much support its landmark 2006 Global Warming Solutions Act, also referred to as Assembly Bill 32 (AB 32), will continue to enjoy from the state government. AB 32 is bipartisan piece of legislation designed to reduce the California’s overall GHG emissions in the year 2020 back to 1990 levels.

The choice of the Guvernator’s successor is significant because of the proposed approaches to the implementation of AB 32. The Democratic nominee has vowed to move “full speed ahead.” On the other hand, the Republican candidate is more inclined towards suspending all activity on AB 32 for at least a year until the economy improves.

Similarly, approval of Prop 23 would suspend the implementation of AB 32 until the state’s current 12.4% unemployment rate drops to 5.5% for four consecutive quarters (a phenomenon that has occurred exactly three times in the past 40 years). Rogers predicts this will not happen for at least the next 6 - 11 years. This would create a situation where the affected programs might not even start until past their 2020 end date. She cautions this would create huge uncertainty in the state’s business climate as its clean energy initiatives are put on indefinite hold (or cancelled outright) and the development of a GHG cap-and-trade system is effectively terminated.

The timing is particularly discouraging as the state’s Air Resources Board is preparing to release its draft rule for a proposed compliance carbon offset market in the next couple of weeks. This is consistent with its obligations under AB 32 to adopt a cap-and-trade regulation by January 1, 2011 and put the program itself into operation in 2012. While creating a large offset market in California, it would also link up with six other Western U.S. states and four Canadian provinces in the Western Climate Initiative (WCI). Rogers believes if this process is blocked through the passage of Prop 23 that it “will spell the demise of the WCI initiative.”

The WCI’s stated objective is to reduce overall member GHG emissions by 15% from 2005 levels by 2020. A cap-and-trade system is the lynchpin of this process. And with just over half of all emissions among WCI members (approximately 480 million tonnes), California is the keystone of the proposed trading system. Ontario is the next largest emitter at 190 million tonnes and has actually put in place its enabling legislation (see Environmental Protection Amendment Act (Greenhouse Gas Emissions Trading), 2009) but it has not yet announced the specifics of its proposed system. The incentive to do so diminishes considerably without the market liquidity provided by California’s inclusion.

Rogers identified Prop 26 as a “backdoor approach to achieving same goals of Prop 23.” Prop 26 has a lower profile, but could be just as harmful to the low carbon economy transition. This proposition claims to stop “hidden taxes on goods like food and gas,” but it actually redefines certain “fees” as “taxes.” According to Rogers, this will make it impossible to levy fines on organizations causing an adverse environmental or health impact.

According to California law, taxes go to government general funds, while fees must go to address problems linked to the activity the fee is attached to. Thus, passage of Prop 26 could be another way to block the state’s cap-and-trade system, as a fee would be levied on GHGs. At the very least, the resources required to run the AB 32 program would be tied up in litigation for the foreseeable future.

According to both Rogers and Senator Pavley, the majority of funding in favour of these propositions is coming from out-of-state sources. The suggestion is that these organizations are wary of effective climate change policies emerging on a national level once California’s are firmly in place. Senator Pavley contrasted this apprehension with the “$10 billion that has flowed into California for research and development in cleantech, renewable energy and other alternative fuels” since AB 32 came into existence. The powerful signal that the state is open for business would be abruptly switched off. While it is possible that Ontario could continue its North American leadership role as a haven for cleantech investment, widespread business uncertainty in other jurisdictions would undoubtedly make the business case less robust.

Fortunately, Senator Pavley indicated that recent polls show voters are opposed to Prop 23 by a margin of 49-32%. In addition, Rogers assured listeners that the campaign against both propositions  recognizes the harm that Prop 26 could also inflict and resources are now being marshaled to ensure the same fate befalls that proposition. Over 1000 California-based groups and business, 45 newspaper editorials and 118 PhD economists are endorsing the “no” vote.

As Ontario moves into an election year, politicians of all stripes are no doubt watching California to see which way the wind is blowing. With growing public concern emerging around the province’s green energy strategy, GHG mitigation proponents could use some sunny news from California to indicate there remains sufficient support for the development of a North American cap-and-trade system. Otherwise, it’s a rather hollow victory if the race’s fiercest competitor has dropped out.

Sunny Days,
~Rob

PS  A big shout-out to Joseph Pallant at Carbon Project Solutions for putting this issue on my radar over a nice cuppa in Van earlier this month.

Monday, October 18, 2010

Canada's Role in Exterritoriality Environmental Liability Issues

Just over a week ago, I had the honour of attending the International Bar Association's Annual Conference in Vancouver as a panel speaker on the topic of Establishing National Young Lawyers' Associations and discussed how social media could play a useful role in that process (procrastination can apparently be considered useful). While participating on this panel was a definite highlight of the week, there was another aspect of the conference that left an indelible impression on me.

As a "young" lawyer, I was given the privilege of undertaking the role of rapporteur (fancy law-speak for "note-taker") during a full-day session on the issue of Environmental Responsibility of Resource Companies Under Host Country and Home Country Laws put on by the IBA's Section on Energy, Environment, Natural Resources and Infrastructure Law (lawyers are huge fans of long names for their committees). I do not profess to have any expertise in this area of law, but as my friends will note that has never stopped me from spouting my thoughts.

And I thought this was an incredible session co-chaired by experienced lawyers David Estrin of Toronto and Eugene E. Smary from Grand Rapids, Michigan. They assembled an international panel of legal and non-legal speakers that:
  • brought first-hand accounts of environmental and access to justice challenges in developing countries that host foreign-based resource development with an emotionally stirring focus on the plight of residents in the Niger delta;
  • discussed cases in EU, US and Canadian courts arising from host country environmental contamination claims in Africa, Southeast Asia and South America;
  • provided a platform for the mining and petroleum industry perspective; and
  • discussed the need for and efficacy of a Canadian private member's called Bill C-300 "An Act Respecting Corporate Accountability for the Activities of Mining, Oil or Gas Corporations in Developing Countries".
The gist of the panel discussion was to review the growing rationale for greater access to justice based on international law principles and identify plausible mechanisms for achieving this for host country environmental claims. These jurisdictions are seeking not only more accessible statutory and civil remedies in the home countries of resource companies, but also the potential enforcement of home country environmental standards within host country boundaries. The issue arrived on the IBA's radar at the 2009 annual conference where Nigerian members spearheaded addressing this significant challenge facing their citizens and others living in the developing world.

The stirring case for action was articulated by the Nigerian representatives who punctuated their point with the presentation of this video created by Friends of the Earth:



Canada has a special role to play in the development of extraterritorial liability for resource-extraction companies for at least two reasons:
  • according to the speakers, 75% of global exploration and mining companies are represented on Canadian stock exchanges while many also have their head offices here; and
  • Canada has become a laboratory for holding these companies accountable.
Two recent developments may have resource extraction companies taking note of how Canada is treating their actions abroad. First, in a novel case, at least one Canadian-based company (Copper Mesa Mining), and the stock exchange that listed it (Toronto Stock Exchange), has been taken to court in Canada for allegedly encouraging its security forces to assault local citizens in Ecuador where the latter group opposed the company's proposed open pit mine. While the case was dismissed by an Ontario court in May 2010, the plaintiffs' lawyer Murray Klippenstein has been instructed to appeal the decision.

Second, Bill C-300 is winding its way through the federal parliament with the intent of promoting responsible environmental practices and international human rights standards among Canadian-based resource extraction firms. It would deprive companies that fail to live up to these standards from accessing any support (e.g. grants) from the Government of Canada. However, the panelists agreed that the greatest threat would be reputational to any company found violating its obligations under the proposed statute.

For more information on Bill C-300 and the broader extraterritoriality issue, click here for the National Roundtable's report on Corporate Social Responsibility and the Canadian Extractive Industry in Developing Countries or check out the amazing work of Professors Richard Janda and Sara Seck.

Having spent the past year focusing on renewable energy from a corporate/commercial perspective, it was a nice shift to get some of my human rights juices flowing again at this session as I found myself a mass MSN conversation away from making me feel as though I was back in law school.

Friday, October 8, 2010

Sustainable Services for Sustainabilty Entrepreneurs

As someone hoping to assist clean green innovators see their sustainable ideas germinate and flower in our local communities, I was curious to understand the challenges these entrepreneurs face in securing access to legal or professional services.  Having recently been asked by the International Bar Association to present my experience with social media at their annual conference, I thought it made sense to try and find some answers to this question by starting a LinkedIn discussion group.

To my wondrous surprise, a few other people have given some thought to this issue as well. I don't know if we came to the most authoritative of conclusions, but I think some important points were raised and discussed. One contributor even kindly created a direct link here to the full discussion for other members of LinkedIn. However, if you just want the highlights, here is what I learned:
  • Fee Structure:  A fixed price for advice or at least a base price for templates would help start-ups with cost certainty and management of their cash flow (subject to complexity of the task at hand).  Entrepreneurs also suggested they would (i) be willing to do some legwork themselves in order to reduce legal fees; or (ii) like to see service professionals work on a delayed gratification/sweat equity model.  A more innovative approach is to request bids from lawyers on Elance, thus taking advantage of the large cohort of legal professionals that may still be under-capacity in the current economy.
  • Lawyer Selection:  Trust is a key aspect of the lawyer-client relationship and referrals help to build that early on in the process.  Seeking those referrals from local funding sources is a good way to stay in their "sweet spot." However, some people are apparently willing to use LinkedIn as pool of potential providers. Perhaps those lawyers benefiting from effective recommendations are in a good position to attract these seekers. And in the case of start-ups looking to places such as Elance, they should do their due diligence by asking for credentials and references. 
  • Services:  Some of the more common legal requirements of start-ups included (i) non-disclosure agreements; (ii) patent or trademark protection; and (iii) employment contracts. 
  • Timing:  Legal advice and tailored agreements are sometimes overlooked in the early phases of a start-up, but having them "in place at the very beginning is paramount" and "day [one] of a start isn't soon enough for legal." At the same time, experienced founders suggest they may be able to wait until the "right time" before seeking legal advice. Perhaps a rule of thumb for the less experienced entrepreneur is to have a lawyer join the team as it is ready to incorporate, especially if there are multiple founders or investors involved. One tool that was suggested was to check this post: http://startuplawyer.com/incorporation/the-when-to-incorporate-decision-matrix    
A spirited debate broke out around the idea of having professional service providers work for equity and whether it's fair to expect them to take on the same level of risk as the entrepreneur who stands to benefit to a greater degree.  One poster summed it up thusly: "As a service provider, if you put too much time into equity deals that don't pan out, you start getting your meals through the local food bank. I look forward to this being the start of a discussion that helps both lawyers and entrepreneurs understand each other's situations, in turn moving us towards a model that is more sustainable for both sides.
Sunny days,
~Rob

Friday, October 1, 2010

Wakulat | Law in Local Media

SNAP Etobicoke, a free community-based publication, recently published a piece highlighting September's Solar & Conservation Fair on the Lakeshore. SNAP wrote:

Source:  SNAP Etobicoke; Photographer Jerry Lem
Visitors came armed with tons of questions and left with a wealth of information. Experts like Ken Traynor and John Scheffer discussed residential issues while Travis Allan, Scott McLorie, Robert Wakulat, Osman Sediqi and Roberto Garcia discussed commercial applications. Participants enjoyed the various seminars designed to educate, promote, and encourage solar use and conservation. Afterward the smell of sausages cooking on the solar cooker welcomed them outside where commercial vendors were set up to discuss how to install solar solutions in their homes.

I established Wakulat | Law with the express purpose of working with community groups, local businesses and individuals after recognizing the lack of willpower at the international level to address important issues such as climate change. Attending the United Nations Framework Convention on Climate Change in Copenhagen last year made me realize how important it is to work towards more sustainable living at local and regional levels. Moreover, local initiatives are likely to have greater community buy-in and achieve longer term success than top-down edicts from federal or international bodies.

Recently, famous climate change journalist George Monbiot, writing in the UK's Guardian newspaper and his own blog declared the global climate change process to be dead. He has called for a conversation to start on how we can work towards a low-carbon future in a post-Kyoto world.  I believe it starts at home at the dinner table and moves out into our communities from there.

Sunny days,
~Rob

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