By Bret A. Stone and John R. Till
It seems like everyone is talking about “sustainability.” The past few years have been witness to a whirlwind of change in the environmental community. With celebrities driving hybrid cars and Hollywood studios purchasing carbon credits, being green has gone mainstream. In addition, environmental laws regarding climate change and greenhouse gas emissions have been put on the books in California and it looks like federal regulations are soon to follow. Furthermore, the United States Supreme Court has determined that the EPA has the authority to regulate CO2 emissions as a potential threat to human health. Among other things, this means that public interest groups may be able in the future to bring lawsuits against those they claim are emitting excess greenhouse gases. So the question arises, is “sustainability” good business sense or is it just another legal requirement? This article, written by a lawyer that recycles, reuses, conserves, composts, and bikes to work explores both.
Climate Change Laws
On September 27, 2006 the California legislative body and the governor passed Assembly Bill 32 into law, leading the nation and world towards the economic benefits of implementing a global warming emissions cap. The effects of global warming on California could be disastrous (e.g., loss of the Sierra snowpack and rising sea levels). As the tenth largest emitter of carbon dioxide pollution in the world, California has chosen to lead the charge by committing to reduce its global warming emissions to 2000 levels by 2010 (11% below business as usual), to 1990 levels by 2020 (25% below business as usual), and 80% below 1990 levels by 2050.
Reducing emissions from the tailpipe alone will not be sufficient to accomplish these goals. Emission reductions will also have to be achieved through measures designed to reduce energy consumption in a wide variety of building operations and manufacturing, and to transition to alternative fuel sources – such as solar, wind, and biodiesel. These changes from business as usual will create business opportunities, jobs, and innovation.
To begin with, businesses will likely have to determine their current “carbon footprint.” Regulations will be put in place to monitor, verify, and report all direct and indirect greenhouse emissions. Domestic and international standards for accomplishing these emissions surveys have been available to companies for several years.
Cities and counties that are taking this seriously are already implementing strategies to consider sustainability issues in land use decisions. With the enactment of SB 375, “sustainable communities strategies” to reduce greenhouse gas emissions by reducing vehicle miles traveled are going to have a major impact on land use decisions. Indeed, climate change has quickly become a part of the CEQA environmental review process. Mitigation measures may need to be considered to offset increased greenhouse gas emissions caused by proposed development plans. Real estate and land use attorneys who previously were content to work on subdivision maps and entitlements will need to expand their team to include professionals knowledgeable on climate change and to take advantage of smart growth incentives.
One burgeoning sustainable practices is green building. Green building is the practice of increasing the efficiency of buildings and their use of natural resources such as water, wind, solar, use of grey water, green roofs, and building materials and systems with the end goal of reducing the overall impact of buildings on the environment and human health. Furthermore, this push to become more efficient – i.e., more sustainable – in the use of energy by buildings drives innovation and the economy. Green building requirements are already part of many cities’ municipal codes, and the California State Building Code.
Building green brings with it a significant boost in economic and social benefits such as reduced operating costs, improved occupant productivity, comfort, and health, as well as the opportunity to create, expand, and shape markets for green products and services. Real estate values may also increase due to the boost in aesthetic quality. Green building is expected to increase significantly by 2010. The economic recovery package passed in October 2008 extended the tax incentives for green commercial building until 2013. But green building too will have its share of legal challenges. How green is green? Does green mean LEED certified? How should green construction contracts be drafted?
Sustainability legal issues will also arise because commercial tenants are increasingly demanding environmentally friendly rental space, forcing landlords to draft new leases and modify existing leases in a manner that incorporates green design and construction components while containing costs. These requests for “carbon assurances” in contracts will also find their way into agreements to supply products and subassemblies for manufacturing firms and for contracts for purchase of many kinds of infrastructure equipment. The new phenomenon of green leasing exemplifies the “carbon assurance” mechanism driving changes in commercial relationships and presents a number of unique challenges; however, little guidance exists on how to craft a green lease. Careful negotiation and drafting is critical to ensure that leases anticipate and address potential areas of dispute between a commercial landlord and tenant.
In addition, with worldwide focus on environmental protection, companies are marketing their goods and services in ways that tout their environmental consciousness. As a result, there has been an increase in “greenwashing” claims that such marketing is false or misleading. Undoubtedly, “greenwashing” claims will run through many marketplaces. In light of increasing use by the Federal Trade Commission of its green claims regulations to prohibit overzealous, unsupportable, or confusing claims about environmentally friendly or “carbon-neutral” products, lawyers should counsel their clients to make sure their claims of sustainability can be supported.
In a world that is rapidly adapting to the pressures of the environment, it is imperative not to fall behind. Environmental sustainability garners public and government support. The benefits far outweigh the costs. Beyond good business sense, concerns about climate change are generating environmental laws that will soon regulate, among other things, businesses’ carbon footprint. While there are no bright line rules to follow at this time, the direction environmental laws appear to be heading is clear. Preparing now could save fortunes in the future. The world is changing; will you be ready for it?