Five leaders in law, recycling, clean technology and public policy participated in IBJ’’s “Going
Green” Power Breakfast on Feb. 18 at The Marriott downtown.
The discussion came as Indiana considers economic opportunities in energy and climate change.
Terry Hall, head of the clean energy and carbon markets team at Indianapolis law firm Baker & Daniels.
Carey Hamilton, executive director of the Indiana Recycling Coalition.
Andrew Hsu, head of the Lugar Center for Renewable Energy at IUPUI.
Paul Mitchell, president and CEO of Indianapolis clean-tech consortium Energy Systems Network.
David Pippen, senior policy director (now general counsel) to Gov. Mitch Daniels.
Moderating the panel was IBJ reporter Chris O’Malley. The following transcript was edited for space.
Corporate filings and litigation
IBJ: Terry Hall—tell us about the new Securities and Exchange Commission guidance on how companies must disclose climate risk, and the litigation risk for high-emitting companies?
Hall: There’s been a disclosure requirement for public companies for quite some time related to their 10-Ks and 8-Ks, essentially describing risks the company sees and opportunities it sees. In January, the SEC announced it was going to put in interpretive guidance to public companies related to encouraging them or requiring them to disclose risks associated with climate change. In February it actually issued that guidance, a new section under the SEC guidelines. It essentially tells public companies—but I would advise private companies to take this into consideration, too—to assess the effect of domestic law and regulations, whether it’s actually existing or whether it’s pending.
And if you can’t make that determination, which is where we are right now, you have to assume in your disclosure that the regulation or the law is going to be passed, and so you make a disclosure as far as what kind of effect that may have on your business. Also in the management section you have to address how the risks and opportunities related to climate change or global warming will affect your business.
That can be if you are a major manufacturer and you have a lot of facilities on the coastlines and the coastlines are expected to see greater, more severe catastrophic climate events, then you’re supposed to take that into consideration. But it’s not all gloom and doom. If you are a company that sees an opportunity in the changing industries and the changing markets related to either pricing carbon or the renewable energy industry, then you are to disclose those opportunities as well.
Finally, if you are an international company and subject to international treaties or regulations or the laws of other countries, you are supposed to make a disclosure related to the risks and opportunities as you operate overseas, and also for foreign companies registered here in the United States, they also need to make the same kinds of disclosures.
IBJ: If Congress does not pass cap-and-trade legislation, what might the Environmental Protection Agency try to accomplish in the form of regulation?
Hall: When my clients talk to me, either they’re in the renewable energy business or they’re not in the renewable energy business, but they’re potentially a large carbon emitter or they are just concerned about it. The advice that I give depends literally these days on the day as to what’s going on related to federal legislation, or if they’re in a particular region. That uncertainty causes a lot of disruption in business, and the clients that I’m talking to, whether they’re utilities or manufacturers, at some point we just need a resolution. We need some kind of basis to make long-range and even short-range business decisions. One way to look at this is that a lot of the rest of the industrial world is going forward with a price on carbon and a clean energy economy focused on renewables, focused on reduction of emissions.
Here in the United States we are struggling through a conversation that democracies often have related to if we are, when we are, what we are, when we’re going to do it.
In Congress, a bill passed in the House related to carbon regulation, and in the Senate there are two bills proposed and they’re very different. The second one is getting a lot of traction. It’s not cap-and-trade, it’s called cap-and-dividend. And then there’s the EPA.
The EPA has authority under the Clean Air Act to regulate air pollutants. Under the Bush Administration the EPA was asked to determine whether greenhouse gases were a pollutant. The EPA made a determination that it was not. The Supreme Court in 2007 essentially overturned that regulatory decision and said, “No, you can go back and look at whether you can regulate greenhouse gases under the Clean Air Act.” The EPA under the Obama Administration went back, looked at that, determined that it did have the authority to regulate greenhouse gases under the Clean Air Act.
Beginning in January of this year, all businesses and industry that is emitting carbon dioxide or other greenhouse gases have to start counting their emissions because they’re going to have to report to the EPA for the first time in March 2011. The EPA also made the determination that greenhouse gases posed an endangerment to society, and so it’s marching forward with regulation. And if Congress doesn’t act, the EPA will begin to regulate under the Clean Air Act, which unfortunately is not a very good mechanism for regulating.