Climate Change Risk on "Radar" of Insurance Regulators

The U.S. National Association of Insurance Commissioners NAIC) has adopted a proposal requiring insurance companies to disclose to insurance regulators climate change-related financial risks as well as explain what actions the insurers' are taking to mitigate those risks.

Joel Ario, Pennsylvania Insurance Commissioner and chair of the NAIC Climate Change and Global Warming Task Force, says:

"Climate change will have huge impacts on the insurance industry and we need better information on how insurers are responding to the challenge. As regulators, we are concerned about how climate change will impact the financial health of the insurance sector and the availability and affordability of insurance for consumers. This disclosure standard will give regulators the information we need to better understand these risks."

In the future companies generating more than $500 million in annual premiums will be required to file an Insurer Climate Risk Disclosure Survey. The first reporting deadline is May 1, 2010.

Richard O. Faulk, who leads Gardere Wynne Sewell's climate change task force, writes in The Electricity Journal ("Lifting the Veil: Pressures Mount for Climate Change Disclosures," July 2009, p. 59) that the rule in effect enlists "the insurance industry as a 'partner' in the promotion, effecuation, and enforcement of global and national climate change policies."

Businesses simply cannot afford to look the other way when it comes to climate change-related pressures. They are facing up to this (however reluctantly) in the European Union and they better "get on the stick" everywhere else as well. In the U.S. insurance industry, the days of looking the other way are over. Period. Full stop.

Coal State Senators Casey and Enzi Introduce Legislation to Promote Carbon Capture and Sequestration

U.S. Senators Robert Casey, Pennsylvania Democrat, and Mike Enzi, Wyoming Republican, have introduced legislation, the Carbon Storage Stewardship Trust Fund Act of 2009, to "remove a major barrier to private investment in carbon capture and storage."

The major barrier? The long-term liability of carbon storage. Pennsylvania and Wyoming are big coal producing states, and the two senators are keen to protect the interests of their constituents. If a carbon capture and sequestration (CCS) approach can be put into place so that electric utilities can continue to burn coal without emitting carbon dioxide, so much the better for the coal states. At least that is what Senators Casy and Enzi seem to think.

According to the senators:

"A liability framework is needed that will encourage firms to invest in CCS but that will not relieve the private sector of the responsibility for ensuring that best practices are followed. The purposes of this act are to promote the commercial deployment of CCS through the creation of a carbon storage liability trust fund and the sharing of liability between the private sector and the federal government."

Hum...The words "sharing liability" have a funny ring to them.

Sounds as if the senators are asking "big government" to bail out the CCS developers if things go wrong. Would this logic not also apply to a small business person who was taking a chance on a concept that might go bad? Is the federal government going to "share the liability" with these small folks?

No one will ever accuse me of being an economics major, but I thought that private business liked to keep the government at arm's length and that part of the free market system was the freedom to succeed as well as fail. Of course, I'm not being serious but the next time Senators Casey or Enzi rail against "big government," will someone remind them that they are being rather selective when they complain about government programs?

European Union Environment Ministers Call for Climate Change Talks to be Accelerated

Swedish Environment Minister Andreas Calgren said last week that preparations for the U.N. sanctioned climate change meeting in Copenhagen in December must be accelerated. Click here to see Mr. Calgren's comments. From July 1 to December 31 Sweden is serving as president of the European Union, and as such the Swedish ministers speak on behalf of their other EU ministerial colleagues.

Introducing a New Blog Feature: "Meet Our Graduates" Video Interviews

Prospective students frequently contact us about the graduate program. They ask many good questions including: Where are the students from? What do they learn about? What advice do we have for those who are considering the program?

In response to these questions and many more, we will begin posting a series of "Meet Our Graduates" video interviews where those curious about our program can hear first-hand from those who have experienced it.

The first video is with Noemi Nunez, who was born and raised in Mexico and earned her law degree from La Universidad Valle del Bravo in Nuevo Larado, Mexico. In May 2009 she graduated with her LLM in Environmental and Natural Resources Law & Policy. Ms. Nunez provides a personal perspective on program broadly and more specifically what it meant to her.

Stay tuned. We'll be posting more video interviews soon.

Alstom CEO Speaks About Carbon Capture and Sequestration

If the world is going to limit greenhouse gas emissions, it is likely that carbon capture and sequestration (CCS) may play a role.

Pierre Gauthier, Alstom's American CEO, spoke recently to E&ETV's OnPoint program ("Carbon Capture: Alstom's Gauthier Discusses Successful Wisconsin Project," July 21, 2009) about the challenge of CCS.

Among other things, Mr. Gauthier explains three different technologies being used by Alstom.

Sweeping Environmental Law Reforms Approved in France

Last week, the French parliament approved a major overhaul of the country's environmental standards. As reported in The Globe and Mail ("France Passes Sweeping Ecology Law," July 23), "The law stemmed from months of negotiations among environmental activists, farmers, industry officials and bureaucrats in 2007 to work out what President Nicholas Sarkozy called an environmental 'new deal' for France."

Les Verts, the French Green Party, opposed the measure arguing that it do not go far enough.

(Muchas gracias a Sergio Stone, Foreign, International and Comparative Law Librarian at the Stanford Law School for calling this to my attention.)

Colorado Gov. Bill Ritter Testifies Before Congress About "New Energy Economy"

Colorado Gov. Bill Ritter testified recently about the "new energy economy" before the U.S. Senate Committee on Environment and Public Works. Mr. Ritter was joined by governors from other states including Jon Hoeven of North Dakota and Christine Gregoire of Washington.

According to Mr. Ritter, "The new energy economy is energizing Colorado's entire economy, even in the worst downturn in 75 years. This did not happen by accident. It happened through a concerted and aggressive effort, and the new jobs we're creating are real and they are happening in every corner of Colorado."

Mr. Ritter, who was recently ranked by Greenopia as the top state governor for environmental responsibility, said, "We must hand over a world that is more energy secure, more environmentally secure, and more economically secure than it is today.

Now this purpose of this blog is not to promote Mr. Ritter's -- or anyone's -- personal agenda. But it is noteworthy as yet another indication that Colorado is at "ground zero" for renewables, energy efficiency, and the firms that are pushing these into the marketplace.

And before closing, it is worth noting that one of the pioneers in establishing Colorado's renewable energy portfolio -- which was approved by state voters in a 2004 referendum -- was Lola Spradley, the former Speaker of the Colorado House of Representatives. Mr. Ritter is a Democrat; Ms. Spradley a Republican. Speaking conceptually, renewable energy doesn't really have much time -- at least in Colorado -- for party labels.

Deployment of the "Smart Grid:" Transforming the U.S. Electricity Delivery System

Last week the U.S. House Committee on Science and Technology heard testimony about the progress towards transforming the U.S. electricity delivery system. Discussion was focused on the planning, development, and deployment of the "smart grid."

The stakes for successfully implementing a smart grid could not be higher. The U.S. Department of Energy (DOE) has estimated that if the efficiency of the American grid was improved even by five percent, "the energy savings would equate to permanently eliminating the fuel and greenhouse gas emissions from 53 million cars."

Subcommittee chair Brian Baird, Washington Democrat, said, "Even today with tremendous advancements in technology, electrification is considered the greatest engineering achievement of the 20th century. However, parts of this infrastructure are nearly a century old, and our increased reliance on electrical power is straining this system's capacity."

According to the subcommittee:

"The smart grid is a two-way communication system for managing our electric infrastructure hat offers utilities and consumers more information regarding electricity supply, consumption, and price which would ultimately modify patterns of electricity usage. It would give consumers access to real-time pricing, which will enable them to use energy when the price is lowest. For example, if electric use in an area is high, customers will see that the price at that time is higher, and they may choose to limit or delay energy usage until the price goes down, like running the dishwasher later in the evening instead of right after dinner, when the air conditioning and the television are also running."

The National Institute of Standards and Technology smart grid coordinator, George Arnold, told the subcommittee that the institute will deliver the first set of standards to the Federal Energy Regulatory Commission this fall. FERC has the responsibility to adopt interoperability standards.

The complexity of the task at hand was underscored by Mr. Arnold who told the subcommittee that NIST's standards will involve software and hardware standards for nearly 5.4 million miles of transmission and distribution lines, more than 20,000 substations, and nearly 130 million electricity meters linked to more than 3,000 utilities, according to the BNA Daily Environment Report ("Smart Grid Will be Costly, Taking Years But Necessary for Economy, Experts Say," July 24, 2009).

Suedeen Kelly, a FERC Commissioner, testified that, "A critical issue as smart grid is deployed is the need to ensure grid reliability and cybersecurity. The significant benefits of smart grid technologies must be achieved without taking reliability and security risks that could be exploited to cause great harm to our nation's citizens and economy." She noted that in mid-July FERC adopted its smart grid policy statement. However, she cautioned that if Congress intends that all operators associated with the smart grid comply with FERC's standards "additional legislation would need to be considered."

Ms. Kelly explained that deploying the smart grid will be essential to the role renewable energy may play in the future. She said, "Smart grid technologies have considerable potential to facilitate demand response, and demand response can help address bulk-power system challenges, including reliably integrating unprecedented amounts of renewable resources into the grid."

The so-called stimulus bill included more than $10 billion that could be used for grid upgrades. This figure includes $4.5 billion for funding smart grid-related projects.

Smart grid work is also taking place in the European Union in the form of the SmartGrids project.

There seems little doubt now that the smart grid will be part of our electricity future. Consequently, it would be reasonable to conclude that there will be significant opportunities ahead in this nascent industry.

To learn more about the smart grid, read "The Smart Grid: An Introduction", which was published by the DOE.

UK Construction Association President: Climate Change Mitigation Will Mean a "Revolutionary Change in Our Society"

Keith Clarke, chair of the UK Construction Industry Council and CEO of the Atkins engineering firm, says that mitigating climate change is "a moral imperative" that will both challenge and offer opportunities to society and the building industry.

Speaking to the Financial Times ("Atkins Likens Climate Change to Industrial Revolution," July 22, 2009), Mr. Clarke said, "It won't be comfortable. It's horrifying, it really is. But it is extremely exciting to think about a change that has so many unpredictable effects. Intellectually it's about exciting as it gets."

The EU mandated major changes in energy efficiency standards. The U.S. is finally beginning to show more interest, at federal level, in this concept.

You can be sure that a successful businessman like Mr. Clarke does not want his company left behind, and that should tell all of us something about the opportunities directly ahead.