Transcript Climate Change.Thurs 2 pm Fupdate

2007 International
Conference
Climate Change:
Whose Ox is Gored?
Washington, D.C. ~ November 7-9, 2007
Whose Ox is Gored?
Panel Members
• MODERATOR: Fred Perez, Vice President
McLarens Young International
• Ken Berger, Executive Vice President
Zurich NA
• Sonia Hamel
Climate Protection Consultant
• William Stewart, Member
Cozen O’Connor
Overview
• Global Climate Change
• Global Warming Litigation
• US States and Regions: Laboratories
of Climate Action
• How the Climate Change Debate is
Affecting Liability for Professionals
Global Climate Change
Global Climate Change
Global Climate Change
Climate Change: The Basics
THE GREENHOUSE
GASES
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Carbon Dioxide (CO2)
Methane
Nitrous Oxide
Chlorofluorocarbons
Greenhouse Gas
Emissions
Equilibrium Global
Mean Temperature
Expectations Agreed Upon By
the International Panel on
Climate Change
• Results of Rise in Temperatures
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Increased storms
Higher sea levels
Widespread increase in flooding
Aggravated Water Scarcity
Increased range of malaria carrying
mosquitoes
Large Scale Famine
Massive Population Movement
Would likely provoke armed conflict
U.S. States and
Regions:
Laboratories of
Climate Action
Overview
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The Context for State and Regional Action
Key State Climate Plans & Policies
Regional Greenhouse Gas Initiative (RGGI)
Western Climate Initiative (WCI)
Other Notable Efforts:
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Emerging Efforts in Southeast & Midwest US
The “National Climate Registry”
Applying State Lessons in the Federal Debate
Signs of Progress at
Sub-National Level in U.S.
• Governors Announcing Bold Targets
• States Enacting Mandatory Caps on
Emissions
• Regional Agreements
• Adoption of Clean Cars Programs to
Limit Vehicle GHG Emissions
• Local Governments Stepping Up
US Emissions: An
International Context
State Climate Action Plans
Governors are Committing to
Real Caps on Emissions
• In July, FL Governor Christ established a statewide goal to
reduce global warming emission to 2000 levels by 2017, 1990
levels by 2025, and 80 percent below 1990 levels by 2050.
• CA Governor Schwarzenegger committed to 80% below 1990
levels by 2050 and signed a bill to reduce emissions to 1990
levels by 2020 (a 25% reduction from current levels).
• NM Gov. Richardson - 2000 levels by 2010, 10% below 2000
levels by 2020 and 80% below 2000 levels by 2050.
• Governors Gregoire (WA), Kulongoski (OR), Napolitano (AZ)
and Blagojevich (IL) have all recently made similar
commitments.
• New England Governors agreement - 1990 levels by 2010,
10% below 1990 levels by 2020 and 75-85% “in the long-term”
Binding Caps
• Early Efforts in Massachusetts and
New Hampshire on power plants
• The Northeast Regional Greenhouse
Gas Initiative (RGGI) on Power Plants
December 2005
• California Economy-Wide Cap, AB 32
Summer 2006
• Emerging Western Climate Initiative
(WCI)
NE Regional Greenhouse
Gas Initiative
• 10 States
• > 650 Power Plants
• Stabilizes
emissions through
2014; 10%
Reduction by 2018
• 13% Below 1990
Levels by 2019
RGGI is Coming
Into Place
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Legislation in 5 of 10 States
Rulemakings underway
Program Launches January 2009
First Auction in 2nd Quarter 2008
The Western Climate
Initiative
• 6 U.S. States + 2 Canadian Provinces-AZ, CA, NM, OR, WA, UT, BC & MB
• Observers include: Alaska, Colorado, Kansas,
Idaho, Nevada, Wyoming, Ontario, Quebec
• August 2007: regional reduction goal: 15% below
1990 levels by 2020 across all sectors.
• August 2008: design of a “regional market-based,
multi-sector mechanism”
• All participants committed to CA vehicle tailpipe
standards
State Legislatures are
Taking Action
• July 2007, NJ Governor Corzine signed the Global Warming
Response Act, requiring NJ to reduce it’s global warming
pollution to “at or below” 1990 levels by 2020 and to 80%
below current levels by 2050.
• June 2007, Hawaii enacted the Global Warming Solutions Act
requiring a redution of global warming emissions to “at or
below” 1990 levels by 2020.
• CA Gov. Schwarzenegger signed into law the Global
Warming Solutions Act (AB 32), the first-ever statewide cap
on global warming pollution. The law reduces annual global
warming emissions in CA by 25 percent by 2020 (equivalent
to 1990 levels).
Vehicle Tailpipe
Standards
• California Statute being
adopted by other states
• Approximately 30%
Reduction by 2016
• Saves more than 8
billion gallons of
gasoline (more than
Florida uses in a year)
• States (14) that have
adopted or are poised to
adopt: AZ, CA, CT, MA,
MD, ME, NJ, NM, NY,
OR, PA, RI, VT, WA
U.S. Mayors’
Climate Protection
Agreement
• Commitments to reduce emissions
7% below 1990 levels by 2012 (Kyoto
Agreement level)
• Led by Seattle Mayor Nickels
• 691 mayors
• All 50 States, DC and Puerto Rico
• Represents 74 million Americans
Building a Framework
for Action
• There is a solution-oriented vision that is
beginning to take root
• A politically sustainable constituency for
global warming solutions is building & will
continue to happen from the ground up
• Solutions are coming into place as we
build the political constituency for federal
efforts
Developments to Watch
• Multi-state “national” climate registry-”The Climate Registry”
• Midwest Regional Potential
• State efforts informing the federal
debate in Washington, DC
How the Climate Change
Debate Is Affecting Liability
for Professionals
Growth in customers looking for
product options or companies
aligned with their
environmental beliefs
• Environmental movement – “mainstream” culture.
• A recent pulse of books, movies and even a worldwide concert
indicate a generation crying louder for green solutions.
• Climate change is no longer a subject found solely in National
Geographic, but appears in current issues of Snowboarder
Magazine, Radical Philosophy, The Economist, The Wilson
Quarterly, the Harvard Business Review and a multitude of
current periodicals.
• The global marketplace desperately requires remedies to
environmental issues and looks to businesses, scientists, and
governmental leaders to provide sustainable products,
services, and policy.
Business Executives Are
Paying Attention –
PWC Survey 2007
List of the Other Top-33 Concerns
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Too much regulation
Natural catastrophes
Management quality
Climate change
Managing the cycle
Distribution channels
Long-tail liabilities
Actuarial assumptions
Longevity assumptions
New types of competitors
Investment performance
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Managing technolgy
Equity markets
Risk management techniques
Back office
Political shocks and pressures
Pricing new risks
Terrorism
Complex instruments
Retail sales practices
Pollution
Interest rates
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Corporate governance
Demographic trends
Contract wording
Capital availability
Security of reinsurance
Availability of reinsurance
Business continuation
Fraud
Merger mania
Too little regulation
Asbestos
Source: Centre for the Study of Financial Innovation and PricewaterhouseCoopers survey: 2007
Potential regulatory targets –
due to energy consumption
and pollution patterns
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Energy and power production
Educational institutions
Chemical producers
Landfills
Cement manufacturers
Manufacturers (general)
Agriculture
Land use
Health care
Construction
Transportation
Shipping / goods movement
Climate change will change
the way we use energy to
power buildings . . . and
buildings themselves
Also see “Green as Houses”, the Economist, September 15-21, 2007
Climate change will change the
way we use energy to power
buildings . . . and buildings
themselves
Potentially changing property risks
Climate change will change the
way we use energy to power
buildings . . . and buildings
themselves
• Institute for Business and Home Safety
• Fortified for safer living standards
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Wind resistant rigid foam panel walls and multiglazed windows
Ice dam resistant
Mold resistant
Water resistant insulation
Growth in customers looking for
product options…
drives product change
•Climate change will change the way we transport
ourselves …
100 mpg
Transportation?
For professionals???
• Land Use
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Discuss San Bernadino litigation with CA
Attorney General’s office
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NEPA / CEQA violations alleged
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Include GHG impacts in land use ?
How can public policy effect
change in power usage
QUICKLY?
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Power grid management ?
• NO – short term
• YES – long term
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Tax incentives ? Maybe
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Rebates ? Maybe
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Building permits ? YES !!!!
Regulation is here ….
Ex: CA state-level public policy
response to climate change
• AB 32 (CA H&S Code Section 38500 et seq.) CA Global
Warming Solution Act
• SB 1368 (CA Public Utilities Code Section 8340 et seq.) GHG
Emissions Performance Standard for Baseload Electrical
Generation
• Enacted September 2006
• Designed to reduce GHG emissions and promote energy
efficient technology and power sources
• Most affected parties and activities – large energy consumers
Impact to the professional
liability underwriting
practices areas ?
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Architects and Engineers
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Increased demand for “green”
and “sustainable” buildings
• New performance demands
for designs
• Change in the standard of
care
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Do you need to offer a “green”
design if the client does not
ask for same ?
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Expansion of concerns for
land use impacts – increased
GHG emissions
Additional NEPA and CEQA
study components
Financial risk ?
Reputational Risk ?
Where is the duty and, if there
is one, to whom does it
extend ? What is due care ?
Disclosure ?
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How much?
What are the applicable
standards ?
• When is the “connection” too
remote ?
See building codes; additional
changes
Environmental
Professionals:
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Directors and Officers
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Lawyers
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Is “carbon” a liability or asset
or both ?
Notice ? Error ? Omission ?
Environmental ? Pollutant ?
Asset ? Liability ? Permitting ?
Accountants
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Liability ? Asset ? ARO ?
Impact to professional
consultancy areas
• OPPORTUNITY and RISK – key is risk management
• Due diligence protocol alterations – current and historical
exposure estimates !
• Must consider change to advisory and scopes
 Especially for land use / development / construction /
power projects
• Carbon “baselines”
 Know what they are and how they vary
 Can you assess same ?
 How can you report ?
 Comparability ?
 What are benchmarks and are they relevant ?
 Know if this data must be disclosed like other
environmental data
Takeaways
• States and cities in the US are moving to
make emissions reductions using a wide
variety of regulatory approaches.
• These reductions are on a par with
reductions made by many other countries
and are creating a framework for a workable
federal approach in the long run.
• Public policy actions are being taken with
respect to climate change: new laws, new
regulations and new actions from attorneys
general and the like.
Takeaways
• The physical realities of climate change are
such that increased incidence of property
damage and bodily injury in many forms are
expected to occur to people and businesses.
• Liability created by the public policy actions
and property damages and bodily injuries
may be covered within certain professional
liability lines of coverage, intentionally or
unintentionally. Other types of liability
associated with climate change may not be
insured within professional liability coverage
or any other insurance coverage for that
matter.
Takeaways
• Climate Change has the potential to
drastically alter risk management
during our lifetimes--and the first wave
of insurance related litigation is likely
to be professional liability claims.
• Because of its financial clout and
expertise in risk assessment, the
insurance industry will be at the cutting
edge of the "green debate."
Audience
Q&A
Many thanks to . . .
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Ken Berger
Sonia Hamel
Fred Perez
William Stewart
Climate Change And
Risk Impacts
Global Warming
Litigation
 Natural Disasters
 Regulatory Inaction
 Public Nuisance