LITIGATION

Election results likely to proliferate climate-related lawsuits -- study

NEW YORK -- Climate-related lawsuits are growing rapidly in the United States, even as federal climate change legislation seems to have been put on hold indefinitely following the results of Tuesday's midterm elections.

The number of lawsuits either supporting or opposing efforts to curb greenhouse gas emissions is set to triple by the end of this year as compared to last year. And by late 2010 or early 2011, the nation could even see some of the more public and contentious climate change legal battles come before the Supreme Court.

The spike in climate legislation is detailed in a new study published yesterday by DB Climate Change Advisors (DBCCA), a New York-based eco-investment advisory unit of Deutsche Bank Group. Data outlined in their report show that the number of lawsuits first doubled from 2006 to 2007 and then seemed to plateau as U.S. EPA began to fine-tune greenhouse gas regulations and Congress debated emissions cap-and-trade legislation.

The failure of federal cap and trade, the return of Republican control in the U.S. House and California's plans to move forward on that state's greenhouse gas law will probably inspire a new wave of lawsuits moving the climate change battle to the courts, analysts at DBCCA predict.

"It is probably inevitable that people are turning to litigation to fill the void left by the lack of legislation, and it is possible that the threat of court action will in some cases galvanize legislators to take action where before they had simply avoided the issue," DBCCA analysts say in the report, titled "Growth of U.S. Climate Change Litigation: Trends and Consequences."

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Though an investment house, the Deutsche Bank unit says investors and its peers on Wall Street should be concerned about this trend, as it could prolong the uncertainty about where and how banks and financiers should put money toward future energy and technology plays.

From fewer than a handful earlier in the decade, the number of climate change lawsuits now rests in the hundreds and could expand into thousands of cases if lawmakers continue to avoid the issue.

The sequel to tobacco litigation?

Bruce Kahn, senior investment analyst at DBCCA, says that in an extreme situation, the development of climate lawsuits could come to resemble the famous history of U.S. tobacco litigation. In that case, thousands of separate legal challenges eventually culminated in massive lawsuits, with the courts, and not Congress, eventually determining the character of U.S. tobacco policy.

The difference, says Kahn, is that climate litigation is growing at an alarmingly fast rate.

"The rate of change relative to tobacco is much faster," he said. "The run-up in tobacco cases took several decades before it became a real big class action suit ... whereas the ramp-up in climate change litigation has been much quicker."

According to figures from the law firm Arnold & Porter LLP cited in the report, as of October, there were 290 separate climate-linked lawsuits working their way through courts, many of them on appeal after having been dismissed earlier. The majority of the cases, 91, are direct challenges by companies and state governments to EPA efforts at regulating greenhouse gases.

The second-highest number of suits, 74, are instances of environmental activists attempting to block the construction or expansion of coal-fired power plants.

The DBCCA study also shows how the number of new climate lawsuits filed in the courts each year is rapidly growing.

'For us, it's fiduciary'

Thus far this year, 108 separate suits have been filed, up from fewer than 10 in 2004. The number of new filings actually dipped slightly last year, from 62 to 48. Though 2010's filings are already double those of 2009, DBCCA analysts think the total number by the end of this year could grow to triple that of last year as post-election challenges to climate change regulations mount.

One possible target of new lawsuits is California's climate law, A.B. 32, which survived after voters struck down a proposition that would have suspended its carbon-cutting rules. Other state programs, such as one New Mexico voters approved this week, will almost inevitably face court challenges in some form as they come online over the next few years, analysts say.

"Most of the regulations in California and other states are at least a year or two from taking effect. Once they do, many will surely be challenged in court," DBCCA predicts. "Challenges have also been threatened to the cap-and-trade programs that are being developed under the Western Climate Initiative and the Midwestern Greenhouse Gas Reduction Accord."

The Regional Greenhouse Gas Initiative, or RGGI, a program run in 10 Northeastern states and currently the only government-mandated carbon dioxide cap-and-trade system in the nation, has faced only one lawsuit since it was launched. That challenge came from an upstate New York power generator that disputed Albany's authority to force it to buy emissions allowances at RGGI's periodic auctions, but the suit was later settled out of court.

Since 2001, about a quarter of all cases have been put forward by environmentalists mostly seeking to block developments they see as exacerbating the global warming problem. But companies and industry groups have been much more active lately, launching 82 of the 108 lawsuits begun this year against new agency regulations.

The trend points to several years of confusion and uncertainty as new state and federal regulations face challenges or activists press governments to regulate greenhouse gas emissions as a public health issue. It's also a sign that investors with stakes in renewable energy or other business segments should be wary.

"For us, it's fiduciary," said Kahn. "We're unable to make good investment decisions with the lack of good policy, so therefore we will either not invest, or hold back our investments, or grow concerned about our existing investments."

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