Green Building Law Update

Environmental Law and Sustainability for Business

Unplugged Truth: Greenhouse Gas Emissions from Charging Your Smartphone

By Stuart Kaplow on September 24, 2023 Posted in GHG, greenhouse gas

At a time when government is mandating building owners drastically reduce GHG emissions and plug loads account for as much as 50% of energy consumption in offices, when building occupants are put on an energy diet will charging smartphones be banned from the office?

Which caused us to ponder, “what quantity of greenhouse gas emissions are produced by using an iPhone?”

The question might appear pedestrian but in an increasingly technological world, smartphones have become indispensable parts of our lives that keep us connected, informed, and entertained. We rely on them for communication, navigation, social media, and for so much more. However, as the use of smartphones improves the quality of life for increasing numbers of inhabitants of the planet, so does the call of apocalyptic environmentalism that we must drastically reduce consumption and the resultant GHG emissions. Given that more than 3.5 billion people currently use a smartphone and that number continues to increase dramatically as we get richer, smarter, and more knowledgeable, we thought you might be interested in our response to the question.

In this blog post, we will explore just how much greenhouse gas emissions are generated from charging a single smartphone and, by extension, from all the smartphones in the world. We will also delve into the broader uncertainty over greenhouse gas emission calculations in this context.

As one might expect, the vast percentage of GHG emissions are produced during the manufacturing of a smartphone, but that was not the question.

And as a threshold matter, we do not actually measure or count GHG emissions, we calculate them. And yes, calculating suggests a scheming or ruthlessly determined way. So, let’s show our work, ..

We started with an authoritative source, not relying on the data from smartphone companies found on the outside of the box. According to the U.S. Department of Energy’s Compliance Certification Database, tracking 4,299,243 products and updated every two weeks, the 24 hour energy consumed by an average smartphone battery is 14.46 Watt hours (.. because of more energy efficiency chips current smartphones do not use more energy per hour than older cells phones, but we use them many more hours a day).

That number includes the amount of energy needed to charge a fully depleted smartphone battery and maintain that full charge throughout the day. The average time required to completely recharge a smartphone battery is 2 hours, as reported in a 4 week academic study of more than 4,000 people to assess their smartphone charging habits. Maintenance mode power, also known as the power consumed when the phone is fully charged and the charger is still plugged in, is 0.13 Watts, again according to the DOE. To obtain the amount of energy consumed to charge the smartphone, subtract the amount of energy consumed in “maintenance mode” (0.13 Watts times 22 hours) from the 24 hour energy consumed (14.46 Watt hours).

We then determined carbon dioxide emissions per smartphone charged by multiplying the energy use per smartphone charged by the national weighted average carbon dioxide marginal emission rate for delivered electricity. The national weighted average carbon dioxide marginal emission rate for delivered electricity in 2019 was 1,562.4 lbs. of carbon dioxide per megawatt hour (.. which is actually higher in Maryland, a net importer of electricity including a significant amount of electricity generated by coal), which accounts for losses during transmission and distribution, as available from the authoritative EPA Avoided Emissions and geneRation Tool (AVERT).

Due to rounding, performing the calculations given in the equations below may not return the exact results, but on an annual basis that is 2.3 metric tons of carbon dioxide equivalent per smartphone.

Statisticians might suggest there is a high degree of uncertainty in that calculation, and such is the case in the entire field of GHGs which is quite complex, combining measured and estimated emission data according to regulatory requirements and available information. Maybe it is better to accept the uncertainties inherent in such huge datasets where each of the possible errors depends on the quality and availability of sufficient data to estimate emissions, or on the ability to calculate these emissions and properly account for their forced versus unforced variability.

Possibly instead of only looking at a raw number, we should consider a comparison. On a per smartphone basis that annual carbon dioxide number is substantially the same as 5,853 miles driven in a gasoline powered car.

To appreciate that calculation in context, global smartphone charging is responsible for 8,050,000,000 tons of carbon dioxide equivalent per year. In terms of comparison that is the same as 1,758,000 gasoline powered cars on the road.

Almost as large as those numbers are the unintended consequence of all of this. When government is mandating building owners reduce GHG emissions and plug loads account for as much as 50% of energy consumption in offices, as building occupants are put on an energy diet, in power management plans (.. yes, the U.S. General Services Administration is already experimenting with this) that will be built into leases, charging smartphones be banned from the office?!

As we move forward, it’s crucial to be mindful of the environmental implications of our activities and strive for more sustainable lives, but maybe that means focusing in this instance on the energy source of the electricity used to charge our smartphones or other technology, but not arbitrarily seeking to reduce GHG emission by reducing consumption? Reducing greenhouse gas emissions from smartphone charging may appear to be a big number in terms of repairing the planet, but what about the quality of life for those of us who live here?

A live webinar “How to Count Your Greenhouse Gas Emissions” 30 talking points in 30 minutes, Tuesday, September 26 at 9 am EDT presented by Stuart Kaplow and Nancy Hudes on behalf of ESG Legal Solutions, LLC. The webinar is complimentary, but you must register here.

California Passes Groundbreaking Climate Disclosure Bills

By Stuart Kaplow on September 17, 2023 Posted in Climate Change, Codes and Regulations, GHG

In what has been characterized as a win for the planet but a challenge for businesses across the country, the California legislature passed two first-in-the-nation bills last week, manifesting its leadership in the battle against climate change. With those climate actions, the state that is the home to one out of eight Americans will impact far more people than that by mandating greenhouse gas disclosures by untold numbers of companies across the country that do business with a California corporation.

The California Corporate Data Accountability Act (SB 253) and Greenhouse Gases: Climate Related Financial Risk Law (SB 261) are groundbreaking pieces of legislation that, when signed into law by Governor Gavin Newsom, will establish California on the bleeding edge of climate disclosure and climate financial risk reporting. In this blog post, we’ll explore the significance of these two bills and their potential impact on corporate sustainability and climate resilience.

California Corporate Data Accountability Act (SB 253)

Scope 3 Greenhouse Gas Emissions Reporting Obligations

This bill is set to impose mandatory greenhouse gas emissions reporting obligations on public and private companies with annual revenues exceeding $1 billion that “do business in California.” Here’s why SB 253 (which failed last year falling one vote short in the legislature) is a game-changer:

1. Unprecedented Transparency: SB 253 will usher in a new era of corporate transparency. It requires companies beginning in 2026 to disclose their Scope 1 and Scope 2 GHG emissions from the prior year and then beginning in 2027 to disclose their Scope 3 GHG emissions from the prior year. Scope 3 emissions include “indirect upstream and downstream GHG emissions, other than scope 2 emissions, from sources that the reporting entity does not own or directly control,” which may include “purchased goods and services, business travel, employee commutes, and process and use of sold products.” Today, few organizations have ever attempted to calculate Scope 3 emissions many describe this mandate as batshit crazy.

2. Supply Chain Accountability: Businesses must calculate emissions using the GHG Protocol and reporting must be third party verified. This law firm has provided similar services and expects to offer the required third party assurance audits. Different from bill that failed last year, this legislation now explicitly authorizes “for scope 3 emissions calculations that detail acceptable use of both primary and secondary data sources, including the use of industry average data, proxy data, and other generic data in its scope 3 emissions calculations,” that is making those calculations significantly easier to perform. Failure to report can carry annual penalties of up to $500,000. And recognizing the huge uncertainty around Scope 3, business “shall not be subject to an administrative penalty under this section for any misstatements with regard to scope 3 emissions disclosures made with a reasonable basis and disclosed in good faith.”

3. Climate Action Catalyst: SB 253 equips policymakers with Scope 3 emissions data (.. for most companies Scope 3 emissions represent between 65% and 95% of their broader GHG impact) to create effective climate action plans. It also paves the way for California to set ambitious emission reduction targets in line with global climate goals. This level of transparency will allow investors, stakeholders, and the public to understand a company’s true climate change impact. This law is expected to apply to as many as 5,000 businesses, but Scope 3 reporting will touch many thousands more.

Greenhouse Gases Climate Related Financial Risk Reporting Law (SB 261)

Biennial Reports on Climate Related Financial Risks

Alongside SB 253, SB 261 is another groundbreaking bill that seeks to address climate risks from a financial perspective. SB 261 mandates that public and private companies with annual revenues exceeding $500 million, that do business in California, publish biennial reports starting January 1, 2026, on climate related financial risks. Here’s why SB 261 is a vital step forward:

1. Enhanced Risk Management: SB 261 defines “climate-related financial risk” as “material risk of harm to immediate and long-term financial outcomes due to physical and transition risks, including, but not limited to, risks to corporate operations, provision of goods and services, supply chains, employee health and safety, capital and financial investments, institutional investments, financial standing of loan recipients and borrowers, shareholder value, consumer demand, and financial markets and economic health.”

2. Citizen Protection: The legislature rationalized that the “failure of economic actors to adequately plan for and adapt to climate related risks to their businesses and to the economy will result in significant harm to California, residents, and investors, in particular to financially vulnerable Californians who are employed by, live in communities reliant on, or have invested in or obtained financing from these institutions.” SB 261 sets a state specific reporting model but also allows a company to use the International Financial Reporting Standards Sustainability Disclosure Standards. Penalties for failure to comply will be established by regulation in an amount of up to $50,000 per year. But the real jeopardy will be private claims and lawsuits brought by stakeholders.

3. Resilience Planning: Understanding climate related financial risks is not just about disclosure; it’s about building resilience. In its idealistic application SB 261 prompts businesses to assess vulnerabilities and develop strategies to adapt to a changing climate in a state already prone to flooding, fires, and earthquakes. This law is expected to touch more than 10,000 businesses.

Conclusion

The State Chamber of Commerce has urged a veto for risk of making the state uncompetitive, but more than a dozen of the largest Silicon Valley corporations signed a letter in support of the laws under the theory that they voluntarily calculate GHG emissions and face similar reporting requirements in the EU.

Governor Gavin Newsom who took no position on the legislation while it was pending announced today he will sign both bills into law whereupon California will become the first state in the nation to impose mandatory Scope 3 GHG emissions reporting and climate related financial risk disclosure obligations on nonpublic businesses.

It is suggested this mandatory reporting of Scope 3 GHG emissions by a state that is more than 14% of the entire U.S. economy will provide cover for the U.S. Securities and Exchange Commission to finalize its regulation of Scope 3 emissions. SB 253 generally goes further than the SEC proposed rule when it includes both public and private companies and has many smaller companies reporting Scope 3 emissions than the federal regulations.

This visionary legislation underscores California’s dedication to climate action and its commitment to making businesses responsible for their environmental impacts.

As the world grapples with the need to address climate change, these bills set a precedent for other states and countries to follow, demonstrating that the participation of businesses is a critical pillar of repairing the planet.

Navigating the Urban Landscape: London’s Low Emission Zone vs. NYC Congestion Pricing

By Stuart Kaplow on September 10, 2023 Posted in City, Codes and Regulations, GHG, greenhouse gas

In an era where climate concerns including greenhouse gas emissions from cars are at the forefront of discussions, major cities around the world are taking innovative steps to address this challenge or as others see it, waging a war on cars (the innovation that over the last century has been a social game changer giving people more personal freedom and access to schools and jobs).

As widely reported in the mass media, two of these initiatives are London’s new Low Emission Zone and the proposed Congestion Pricing plan in New York City, but, .. while the two initiatives share the goal of pausing traffic in the central city, they could not be more different in their aims, their approaches, and their potential impacts. In this blog, we’ll explore the advantages and disadvantages of London’s LEZ which went into effect several days ago on August 29, and compare it to the NYC Congestion Pricing proposed but not yet in effect.

London’s Low Emission Zone

Advantages:

1. Environmental Benefits: The primary goal of London’s LEZ, the world’s largest low emission zone, covering all London boroughs and much of the greater area, is to reduce GHG emissions from vehicles as part of a larger kingdom wide effort to fight climate change. By imposing a daily fee on cars built before 2006, the LEZ changes behaviors encouraging the use of newer cleaner vehicles, and reducing tailpipe global warning gases which in turn reduces broader air pollution and its associated health risks.

2. Public Health: Based on a law first introduced in 2008 and then the success of a pilot program initially implemented in the heart of London dating to 2019, the first year of this program alone will reduce GHG emissions by 45% from those vehicles that are no longer there. With cleaner air, residents and visitors to London can expect improved respiratory health and a lower risk of cardiovascular diseases with reduced healthcare costs in the long run.

3. Encouraging Sustainable Transportation: The LEZ operates 24 hours a day, seven days a week, every day of the year, except Christmas Day (.. really, why?) using 1,175 cameras to monitor which cars enter and exit the zone. The LEZ promotes the shift from fossil fuel to the use of greener modes of transportation such as electric vehicles and all electric public transportation to reduce carbon dioxide, nitrous oxide, and methane from motor vehicle exhausts.

Disadvantages:

4. Financial Impact: One of the challenges of the LEZ is the potential financial burden it places on businesses and individuals who own older, noncompliant vehicles who will have to pay $16 a day to travel to the capital. Upgrading to newer, cleaner vehicles or retrofitting existing ones can be costly, especially for struggling businesses and low income individuals.

5. Equity Concerns: While the LEZ aims to improve air quality citywide and warming globally, critics argue that it may disproportionately affect low and moderate income households that rely on older vehicles. The policy could have the unintended consequence of broadening income inequality tied to accessing new expensive innovations in transportation, rolling back the freedom and flexibility of a car.

Proposed NYC Congestion Pricing

Advantages:

1. Reduced Traffic Congestion: The nation’s first congestion pricing will only be effective 6 thru 10 am and 4 thru 8 pm, intending to alleviate traffic gridlock in the high density urban areas south of 60th Street during rush hour. On June 26, 2023, the Federal government gave its approval which provided New York City had 310 days to activate the new system. By charging vehicles for entering certain zones during peak hours, the plan aims to reduce the Manhattan core’s overwhelming traffic volume by between 15% and 20% through incentivizing carpooling, public transit use, or simply arriving or departing earlier or later, thus reducing peak hour traffic congestion.

2. Funds for Public Transit: The revenue generated from a more than $500 million contract to build out a network of sensors on traffic poles to collect the new tolls that are congestion pricing, estimated to be nearly $15 billion, is proposed to be invested in improving and expanding public transportation systems. This provides a dual benefit of simultaneously enhancing the quality and accessibility of mass transit options and reducing GHG emissions.

Disadvantages:

3. Initial Opposition: Congestion pricing schemes often face opposition from low income commuters as well as vulnerable entrepreneurs and struggling businesses who cannot afford the added financial burden of $23 a trip to drive into midtown Manhattan. It can take time for the public to adjust to the new pricing structure and alternatives and some businesses will no doubt move, and the reality is the scheme likely only elongates rush hour before and after the windows without having any significant impact on total car trips.

4. Unintended Consequences: Critics worry that congestion pricing might lead to drivers seeking alternative routes to avoid the charged zones, potentially causing increased congestion in other areas and negatively impacting air quality somewhere else. Some suggest the scheme makes Manhattan’s core a 24 hour City where deliveries are made before and after rush hours, but others express concern that restaurant dining will be negatively impacted, as cars are viewed as a frightening specter.

Comparing LEZ and Congestion Pricing

While both London’s LEZ and the proposed NYC Congestion Pricing aim to reduce congestion, they differ in focus and approach. The LEZ directly targets vehicle emissions and GHG emissions, whereas congestion pricing primarily addresses reducing the number of vehicles at traditional rush hours. Additionally, the LEZ’s focus on GHG emission reductions places more emphasis on vehicle innovation, whereas congestion pricing directly prices some commuters out of the City at certain times of day by imposing charges.

Uptake has been slow in other cities. Madrid implemented a city center low emission zone but stopped enforcing the edict until a court ordered it reinstated and now the mayor has announced an urban area wide plan for 2024.

The analogy to the 1920s, when horses were replaced by the technological innovation of cars as an environmental savior to the horse manure accumulations in both London and New York, cannot be lost in this debate. But was the urban horse problem made to appear only solvable by the new automobile industry paved figuratively by a new gasoline industry and literally by the road and highway construction industrial complex?

In conclusion, London’s Low Emission Zone and New York City’s proposed Congestion Pricing, while coming from very different places geographically and ideologically, represent dramatic strides in urban planning and environmental stewardship. Both approaches come with their own set of advantages and disadvantages, and their efficacy will largely depend upon our acceptance as societies; not unlike our growing acceptance (or not) of driverless cars. As cities continue to seek sustainable solutions for repairing the planet, finding the right balance between environmental protections and economic considerations, social equity for all of the planet’s growing population must remain a key objective.

US Imposes Duties on Southeast Asia Solar Panel Makers Evading China Tariffs

By Stuart Kaplow on September 3, 2023 Posted in Codes and Regulations, Energy, ESG, Federal, Legal, Solar Panel

On August 18, 2023, the United States government announced that solar panels, cells, and modules completed in Cambodia, Malaysia, Thailand, or Vietnam using components from China and exported to the U.S., are circumventing the more than decade old antidumping tariffs on solar panels from China.

To appreciate the scope of the issue, those countries account for nearly 80% of all U.S. solar panel supplies.

After a more than 17 month investigation, the U.S. Department of Commerce made a final determination that certain Chinese manufacturers are “shipping their solar products through Cambodia, Malaysia, Thailand, or Vietnam for minor processing in an attempt to avoid paying antidumping and countervailing duties.” Specifically, Commerce found that five companies were attempting to avoid the payment of U.S. duties by doing minor processing in third countries.

The new tariffs, which will be as high as 254.19% (i.e., 238.96% antidumping duty plus 15.24% countervailing duty) will significantly increase the costs for U.S. solar power installers, but ..

This final decision will not have an immediate impact because pursuant to the Presidential Proclamation issued on June 6, 2022, duties will not be collected on any solar module and cell imports from these four countries until June 2024. Out of apparent concern over the impact on workers in the U.S. solar installation industry, this delay was intended to provide time to adjust supply chains and ensure that sourcing is not occurring from companies found to be violating U.S. law.  However, the Biden administration’s decision to delay the tariffs encountered controversy in Congress and a joint resolution was passed (over the vocal opposition of unions) to reimpose the tariffs in May 2023 but was vetoed.

Under U.S. law, Commerce may conduct a circumvention of tariffs inquiry when evidence suggests that merchandise subject to an existing “unfair competition” order is completed or assembled in third countries from parts and components imported from the country subject to the order. This investigation was launched after one small U.S. based company, Auxin Solar, filed a complaint in February 2022.

This is a separate issue from the more than $1 Billion of shipments of solar panels from China have been interdicted by the U.S. government under the Uyghur Forced Labor Prevention Act since that outright ban on imports of solar supplies produced in the Xinjiang Uyghur Autonomous Region of China became effective in June 2022.

Complicating matters for U.S. citizens and businesses that want to install solar panels, China dominates the vast majority of the world’s solar panel supply chain, controlling at least 86% of solar panels produced in 2022, including 96.8% of polysilicon ingots sliced into wafers, 85.1% of manufacture into crystalline solar cells, and 74.7% of cells wired together and laminated to form modules.

This now final determination specifies that it covers: solar panels and cells that were completed in Southeast Asia from wafers produced in China; as well as modules, laminates, and panels that were produced in Southeast Asia from wafers produced in China, and where more than two of the following components in the modules were produced in China: silver paste, aluminum frames, glass, backsheets, ethylene vinyl acetate sheets, and junction boxes.

In this instance, after a thorough investigation of 8 companies from the 4 countries, Commerce found that 5 of the 8 companies investigated (.. possibly representing as much as 30% of U.S. solar panel supply imports) are attempting to bypass U.S. duties by doing minor processing in one of the Southeast Asian countries before shipping to the United States. Those noncompliant companies are Canadian Solar and Trina Solar from Thailand, BYD Hong Kong and New East Solar from Cambodia, and Vina Solar from Viet Nam.

Domestic solar equipment manufacturing in the U.S. is ramping up, with millions of dollars of federal tax credits and deductions and more and additional recent incentives from the Inflation Reduction Act, but little U.S. production capability exists yet.

Today there are federal tax incentives on solar installations that can offset 50% of many individual solar installation project costs, yes, costs including those 254% inflated charges to pay these tariffs on Chinese panels?

In an odd contradiction, since the tariffs are being paid whether the panels come directly from China or make a stop elsewhere in Southeast Asia, some U.S. solar companies may just buy non Uyghur panels directly from China (.. causing China be the beneficiary of the tariffs imposed on it?).

But increasing numbers of U.S. citizens and businesses are saying “no” to Chinese solar panels on their projects finding the moral equivalence for onsite renewable energy no longer acceptable, despite confused U.S. government policies.

Launch of the Nature Crime Alliance

By Stuart Kaplow on August 27, 2023 Posted in Legal, Sustainability

Last week saw the launch of the Nature Crime Alliance, a new, multi sector approach to fighting criminal forms of logging, mining, wildlife trade, land conversion, crimes associated with fishing, and the illegal activities with which they converge.

The Alliance is significant because this is the first time that such a broad approach to this global challenge has been developed on this scale, including because its founding participants include such diverse members as the government of the United States, the government of Norway, the government of Gabon, the UN Office for Drugs and Crime, Global Environment Facility, Global Initiative to End Wildlife Crime, etc.

Nature crime, as described by the Alliance, constitutes one of the largest illicit economies in the world, inflicting devastation and destruction upon people and planet. The group recognizes that these crimes cannot be eradicated without multi sector cooperation and that there is a pressing need for greater coordination and collaboration among the diverse actors fighting nature crime. Its indirect impact is on the order of $2 Trillion a year, but the harm to people and planet is so much more than even that enormous dollar amount.

“Nature crimes threaten our collective security. They undermine the rule of law, fuel corruption, destroy ecosystems, and drive species to the brink of extinction, all the while providing billions of dollars to transnational criminal syndicates that prey upon the world’s most vulnerable populations. We all must stand together to stop the criminals who are threatening the health of our planet – and that is why the United States is proud to support the Nature Crime Alliance.” Jennifer R. Littlejohn, Acting Assistant Secretary for Oceans and International Environmental and Scientific Affairs, US State Department.

Nature crime includes criminal forms of logging, mining, fishing, wildlife trade, and land conversion. These crimes frequently converge with each other and other forms of international criminal activity. Nature crime is closely linked to terrorism, corruption, modern slavery and other human rights abuses, financial crimes, and other threats to peace and security.

A cynic might ask if the world needs another organization or if this controversy is all a publicity stunt, but we see the Alliance being formed in recognition of the abject failure to have effectively acted in the past, with members including representatives from governments, law enforcement, international organizations, civil society organizations, front line defenders including Indigenous Peoples and local communities, donors, and the private sector. Much more than virtue signaling, your organization can become part of the solution and recognized as a participant in the Alliance.

Participants will work together, through the Alliance, consistent with its Guiding Principles to raise political will, mobilize financial commitment, and strengthen operational capacity to fight nature crime. Through a range of initiatives from solutions focused working groups convening representatives across different sectors, to structured communications channels that enable open dialogue and the sharing of best practices to eliminate ill gotten gains from supply chains, the Alliance is building a new, international, collaborative response to nature crime.

The overarching objective is to halt criminal activities that exploit natural resources worldwide.

That will be accomplished through its mission to raise political will, mobilize financial commitment, and bolster operational capacity to identify, disrupt, and prosecute criminals and syndicates that profit from the destruction of nature.

This is the first time that such a multi sector approach to this global challenge has been implemented on this scale, with the Alliance marking a key moment in the fight against nature crime. We encourage you and your organization to share the determination to end environmental injustice to protect people and repair the planet by joining the Nature Crime Alliance.

Colorado Law Will Lead the Nation in Reducing GHGs from Buildings

By Stuart Kaplow on August 20, 2023 Posted in GHG, greenhouse gas, State

Last week, Colorado established mandatory energy performance standards for large buildings. Buildings are one of Colorado’s top five sources of greenhouse gas emissions.

As directed by a state law enacted in 2021, as HB 1286, the Colorado Health Department’s Air Pollution Control Division developed the newly finalized standards.

The building performance standards law applies to more than 8,000 buildings across Colorado and make no mistake compliance with this new regulatory scheme will cost building owners Billions of dollars, which will result in higher rents and ultimately higher costs to consumers who patronize or live in those buildings.

Most commercial including multifamily buildings 50,000 square feet or larger are subject to this GHG emission reducing mandate. The law only provides for exceptions for single family homes, duplexes, triplexes, storage facilities, standalone parking garages, airplane hangers, or buildings where more than half of the space is used for manufacturing, industrial, or agricultural purposes.

This week’s regulation will drive Colorado’s statutory GHG emission reduction targets of 7% by 2026 and 20% by 2030 for the buildings covered in the program, as compared to 2021 levels. Newer, more efficient buildings may already meet the standards. As part of its target methodology, the state determined about 40% of the 8,000 buildings covered under the program already meet standards for the 2026 target. About 20% of the buildings already meet standards for the 2030 target.

That burden needs to be considered against the backdrop of Energize Denver, a previously enacted Denver ordinance that will require all commercial and multifamily buildings in the city to gradually replace their heating and cooling systems with all electric.

Owners of buildings that do not meet the new state standards will need to use less energy or reduce GHG emissions. However, the regulation is being applauded for providing flexibility for building owners and various pathways for meeting the standards. For example, building owners could optimize energy use in the building, repair or replace inefficient equipment or systems, replace natural gas appliances and heating and cooling equipment with electric only equipment, or use renewable energy. Building owners who can’t meet the standards, and some older buildings will simply not be able to reasonably do so, may pursue a percent reduction pathway or request a timeline or target adjustments through the Colorado Energy Office. Key to protecting the program from being draconian in its application are its waiver and exemption components.

“On top of the potential long-term cost savings and measurable reductions in harmful greenhouse gas pollution, the standards can also help improve safety and indoor air quality in older apartment buildings,” said Michael Ogletree, director of the Air Pollution Control Division. “It’s a major step forward in protecting both public health and clean air.”

Of import, building owners can apply for robust local and state government financing opportunities, grants, tax credits, and other incentives to assist with some costs of implementation. Owners must track their buildings’ energy usage and emissions on an annual basis and make any necessary improvements to comply with the 2026 and 2030 statutory greenhouse gas reduction targets.

One of the few knocks on what is otherwise being heralded as “the” way government needs to move in the future on GHG emissions is that this program exempts nearly all public buildings including school buildings except in the most extreme of renovation projects. Omitting government structures from climate change solutions is not only disingenuous but has the resultant impact of burdening the private sector to further make up for those large number of buildings that will continue to have unabated GHG emissions. The reliance on Energy Star Portfolio Manager as a reporting tool has also been criticized.

There is some irony as this law pushes buildings toward all electric power when Colorado burns more coal than the national average, generating 37% of its electricity from coal (natural gas is the next largest source of power); such that this enactment will result in more coal being burned to keep the lights on and heat warming Colorado, with the unintended consequence of increasing GHG emissions.

The first round of GHG emission reporting had already been made to the state, reportedly giving rise to a new cottage industry of third party reporting on energy data has sprung up largely out of concern for data security and possible cybercriminal activity from ransomware to other malware and the like, including so that there is no direct Internet connection from building owners to either the federal or state government.

While several cities and local jurisdictions have similar enactments, Maryland has the only other statewide GHG emission reduction law. Not only will the new regulations result in Colorado’s law to be the first enforced, but commentators point to the flexibility including alternative compliance paths and waivers not only making this dramatically more efficacious but also significantly more environmentally just than Maryland’s proposed GHG reduction regulations that have also been characterized as risking stalling the state’s economy.

As society moves quickly to imagine and implement new regulatory frameworks to respond to climate change, like energy performance standards, we have advised clients that own real estate in striking a careful balance between the aspirational and implementable, cognizant of what is technologically feasible and fiscally responsible, not to mention the all but certain unintended consequences of humans trying to alter the course of mother nature.

The Colorado building sector will not only lead the nation in GHG emission reduction but also, the strategies developed to implement the Centennial state’s law will be a model for the nation as businesses do their part to repair the planet.

Guidance on Avoiding Greenwashing while Providing Input Down Under

By Stuart Kaplow on August 13, 2023 Posted in Environmental, ESG, Green Washing, greenwashing

The Australian government has issued draft Environmental and Sustainability Guidance describing the obligations under Australian consumer law which businesses must comply with when making environmental and sustainability claims.

The Guidance released on July 14, 2023, sets out what the Australian Competition & Consumer Commission considers to be good practice when making such claims, to help businesses provide clear, accurate, and trustworthy information to consumers about the environmental performance of their business.

The Guidance is hugely instructive not only for companies that engage in business in Australia but given the global nature of commerce, to companies worldwide, including those in the United States; and in particular at a time when companies doing business in the U.S. do not have the benefit of the out of date, and in many respects no longer useful, Federal Trade Commission Green Guides for Environmental Claims last updated in 2012.

As we described in our recent post, H&M Wins Dismissal of Greenwashing Lawsuit, in an era when allegations of greenwashing are de rigueur it is significant to note, properly vetted and drafted environmental marketing disclosures can successfully withstand a challenge. This Guidance provides a literal checklist for that vetting.

Environmental or sustainability claims will only help consumers make informed purchasing decisions if the claims are clear, are not misleading, and do not omit relevant information. A misleading, meaningless, or unclear claim, no matter whether made for marketing purposes or as a required government disclosure, breaches consumer trust and hurts confidence in both the claim itself and sustainability claims in general.

Businesses genuinely pursuing more sustainable products and services often incur additional research or production costs. This fact combined with consumers’ increasing interest in purchasing sustainable products results in false or misleading sustainability claims unfairly disadvantage businesses making genuine claims. This undermines effective competition and can create a disincentive for businesses to invest in sustainability.

In preparation for this updating of the then existing 2011 Guidance, the ACCC conducted a sweep of environmental claims finding that of the 247 businesses across a wide range of sectors viewed with a presence on the Internet, more than 57% of those businesses have potentially made misleading and deceptive environmental or sustainability claims. Companies making vague and unqualified claims topped the list of most common issues, with many businesses describing their products as “green”, “kind to the planet”, “eco-friendly”, “responsible” or “sustainable”. Of the sectors studied in the sweep, cosmetic, clothing and footwear, and food and drink industries had the highest proportion of concerning claims.

The Guidance released from Canberra articulates the following principles and then provides real world examples:

Principle 1: Make accurate and truthful claims

Principle 2: Have evidence to back up your claims

Principle 3: Don’t leave out or hide important information

Principle 4: Explain any conditions or qualifications on your claims

Principle 5: Avoid broad and unqualified claims

Principle 6: Use clear and easy-to-understand language

Principle 7: Visual elements should not give the wrong impression

Principle 8: Be direct and open about your sustainability transition

All businesses, Australian or not, can learn a great deal about mitigating risk in making environmental claims from this new document and, in fact, use it as a checklist.

Moreover, additional information can be garnered from participating in the ACCC online survey, available through September 15, 2023, being conducted so that the agency can assess common difficulties businesses face when making environmental claims before finalizing the Guidance, but also as part of the education process for businesses. Participate in the Aussie online survey here.

Legal experts warn the number of greenwashing claims will continue to grow in the coming years. With the ever expanding support for a transition to a decarbonized economy to solve problems relating to climate change, emissions reduction, recyclability, and the like, consumers are increasingly interested in purchasing sustainable or environmentally friendly products and services. Concomitantly, the use of environmental and sustainability claims, today estimated at more than $240 Billion annually, will continue to be increasingly utilized in advertising.

Sustainability is a topic of importance not only in Australia but internationally and certainly including in the U.S. We have chosen to blog about this legal development some 10,000 miles away, not only because of the surprise that more than half of Australian businesses reviewed were found to have made misleading environmental claims but because assisting businesses in mitigating risk from greenwashing claims (.. often an innocent misrepresentation by a company associated with genuinely pursuing some sustainable action) has become a significant part of what we do.

While American businesses continue to wait for the update to the 2012 FTC Green Guides this draft Guidance from Down Under is the best checklist, we are aware of, for mitigating the risk of greenwashing claims.

A live webinar “Offsets and RECs for Reducing Your GHGs” 30 talking points in 30 minutes, Tuesday, August 15 at 9 am ET presented by Stuart Kaplow and Nancy Hudes on behalf of ESG Legal Solutions, LLC. The webinar is complimentary, but you must register here.

Two China Based Companies Banned as a Result of Forced Labor

By Stuart Kaplow on August 6, 2023 Posted in ESG, Federal, Solar Panel

The increasing number of businesses concerned about modern slavery in their supply chain are paying attention to the U.S. government’s announcement of new enforcement actions “.. to eliminate the use of forced labor practices in the U.S. supply chain and promote accountability for the ongoing genocide and crimes against humanity against Uyghurs and other religious and ethnic minority groups in the Xinjiang Uyghur Autonomous Region.”

The U.S. Department of Homeland Security added two People’s Republic of China based companies to the Uyghur Forced Labor Prevention Act entity list.

Effective August 2, 2023, goods produced by Camel Group Co., Ltd. and Chenguang Biotech Group Co., Ltd. and its subsidiary Chenguang Biotechnology Group Yanqi Co. Ltd. are restricted from entering the United States because the companies participate in business practices that target members of persecuted groups, including Uyghur minorities in China.

Accepting the ongoing hegemonic great power rivalry between the governments of the United States and China, this act is particularly significant for renewable energy because Camel Group, headquartered in Xiangyang City, is among the largest vehicle battery manufacturers in the world and the largest heavy commercial vehicle battery manufacturer. The company is also a leader in the manufacture of energy storage including batteries associated with many home solar power systems.

Of note, Chenguang Biotech Group, headquartered in Handan, produces plant based extracts, food additives, natural dyes, pigments, and supplements from agricultural products; and, is the largest processor of paprika on the planet and also among the biggest makers of red pepper essence which is used in processed food in the United States from frozen pizza to pasta sauce.

These enforcement actions demonstrate the U.S. government’s “.. commitment to holding organizations accountable for their egregious human rights abuses and forced labor practices,” according to Secretary of Homeland Security Alejandro N. Mayorkas. “We will continue to work with all of our partners to keep goods made with forced labor from Xinjiang out of U.S. commerce while facilitating the flow of legitimate trade.”

And while this post describes federal government action, most of the activity we are seeing to protect human rights including substantive human rights standards and ethical purchasing practices are in company contract documents, be it supply contracts, purchase contracts, and similar writings for the purchase of goods and materials. In their simplest form clauses are being inserted in increasing numbers of business contracts many beginning something like, ..

Buyer and seller each covenant to establish and maintain a human rights due diligence process appropriate to its size and circumstances to identify, prevent, mitigate, and account for how each addresses the impacts of its activities on the human rights of individuals directly or indirectly affected by their supply chains, consistent with the 2011 United Nations Guiding Principles on Business and Human Rights ..

The practical effect is that beyond the requirements of federal law, a groundswell of companies acting on moral grounds are not installing Xinjiang Uyghur Autonomous Region sourced solar panels (that may have been imported before or have circumvented the ban). The moral equivalence of U.S. companies and individuals installing solar panels created with government sponsored modern slavery to remedy the ills of climate change, has in the last year shifted sharply in favor of Americans doing the right thing for those in forced labor from Xinjiang.

The federal government began enforcing the UFLPA in June 2022. Since then it has reviewed more than 4,600 shipments valued at more than $1.64 billion under the UFLPA, the single largest category of which have been electronics, and as we blogged some weeks ago, More Than 1,000 Shipments of Solar Panels Seized at the Border.

“The Forced Labor Enforcement Task Force continues to send a strong message to industry that the United States will not tolerate forced labor in our supply chains and that we will always stand up against cruel and inhumane labor practices,” according to the chair of the Forced Labor Enforcement Task Force, Under Secretary for Policy Robert Silvers. “We are committed to the eradication of forced labor around the world.”

Modern slavery and its alternative identity, forced labor, is also claimed against China based companies that control the majority of cobalt and copper mines in Congo where the mining of those key minerals used in electric vehicle batteries uses forced labor and exploits children, including the company Sicomines that is in the supply chain of batteries in popular U.S. sold electric vehicles.

We would be pleased to assist your business in complying with human rights laws and more than that, for those that want to be among the winning companies of the future, we would truly be honored to share practical steps and best practices in anti modern slavery supply chain efforts as we all work to repair the world.

Offsets and RECs: A Powerful Duo for Reducing Greenhouse Gas Emissions and Repairing the Planet

By Stuart Kaplow on July 30, 2023 Posted in Climate Change, ESG, GHG, greenhouse gas

As concerns about climate change intensify, businesses and individuals alike are seeking effective ways to set and meet the goals of net zero energy and greenhouse gas emissions to contribute to a sustainable planet. Two essential but fundamentally different tools that have gained prominence in recent years are Offsets and Renewable Energy Certificates (RECs). These mechanisms will play a crucial role in combating GHG emissions and fostering global environmental sustainability. In this blog post, we will explore the differences between Offsets and RECs including modestly attempting to harmonize definitions of these key concepts and explain why both are essential and efficacious in the fight against climate change.

Understanding Offsets: Offsets refer to the reduction of GHG emissions in one sector to compensate for emissions produced elsewhere. This is often achieved by an organization that reduces its GHG emission footprint by purchasing and retiring emissions through projects that actively sequester GHG or prevent emissions from being released. Although there is no universally accepted definition among governments and standard setting organizations of what an Offset is, these projects can involve renewable energy installations, methane capture from landfills, energy efficiency initiatives, reforestation efforts, or food waste composting and it is widely agreed that they each use as the unit of measure metric tons of CO2 or CO2 equivalent. They reduce or “offset” an organization’s scope 1, 2, or 3 emissions, as a net adjustment valued by the marketplace.

The advantage of offsets is simple: if an individual or organization cannot eliminate all its emissions directly (e.g., a tenant in an existing 80 story office building in an urban setting can only do so much on site), it can support emission reduction projects elsewhere to achieve a goal of net zero. Offsets offer flexibility and scalability, allowing businesses and individuals to contribute to sustainability efforts beyond the four walls and roof of their own operation and such makes sense if climate change is a global problem. We blogged some weeks ago about The Evolution of Environmental Offsets: From Indulgences to Greenhouse Gas Emission Reductions.

Unraveling RECs: Renewable Energy Certificates, commonly known by the acronym RECs, focus on promoting renewable energy generation. RECs are tradable instruments, with the terms set by state and local government regulators and electricity transmission authorities, making some RECs more valuable than others (e.g., U.S. solar REC prices today range from under $5 to more than $500). RECs use as the unit of measure the property rights to the “renewableness” (i.e., all non power attributes) of one megawatt-hour (MWh) of renewable energy generated. When a renewable energy project produces electricity, it generates RECs proportional to the amount of clean energy it feeds into the grid. RECs can lower an organization’s gross market based scope 2 emissions from utility provided electricity which has a huge upside for the planet.

Purchasing RECs enables businesses and individuals to financially support renewable energy projects, which helps increase the share of clean energy in the overall energy mix. This, in turn, displaces fossil fuel energy, reducing GHG emissions associated with power generation.

The Difference Between Offsets and RECs: The primary difference between Offsets and RECs lies in the nature of the GHG emissions reduction they facilitate. Offsets focus on compensating for emissions across various business sectors, including transportation, agriculture, and industrial processes. On the other hand, RECs concentrate on increasing clean energy production from renewable sources such as wind, solar, hydro, and geothermal.

While both Offsets and RECs contribute to reducing GHG emissions, they operate in different domains, giving individuals and companies diverse options to take action against climate change.

The Synergy Between Offsets and RECs: Offsets and RECs work synergistically to combat climate change and repair the planet. By utilizing both mechanisms, businesses and individuals can address a broader range of emissions sources and promote the transition to a decarbonized economy.

Imagine a company that has already implemented energy efficiency measures to minimize its direct emissions. To achieve further emission reductions and become net zero energy and GHG emissions, the company can invest in high quality Offsets from verified projects that tackle emissions in other locations. Simultaneously, the company can purchase RECs to support clean energy generation, indirectly reducing emissions associated with electricity consumption.

The Efficacy of Offsets and RECs: The efficacy of Offsets and RECs lies in their ability to drive real and measurable GHG emission reductions. Offsets’ success depends on the quality of the projects they support and the extent to which they genuinely lead to emissions reductions beyond what would have occurred naturally or through regulations.

Similarly, the success of RECs hinges on the investment they attract into renewable energy projects. Increased demand for RECs incentivizes the development of more renewable energy infrastructure, accelerating the transition away from fossil fuels and decreasing GHG emissions from power generation.

Conclusion: Offsets and RECs are valuable tools for organizations that cannot reasonably generate enough onsite renewable energy to be fully effective in achieving net zero energy and GHG emissions. Critics who demand net zero be achieved by each organization on site are wrong and are at best pie in the sky thinkers or at worst simply unknowledgeable when for example more than 90% of U.S. businesses operate in space they lease in building they do not own. These mechanisms offer accessible, scalable, and credible means to support renewable energy projects and verified emission reduction initiatives, making a positive impact on the environment and the fight against climate change.

Offsets and RECs are two powerful and complementary approaches to combating climate change and repairing the planet. As we collectively strive towards a sustainable future, embracing these tools will undoubtedly play a crucial role in shaping a greener and healthier planet.

Greenhouse Gas Emission Disclosures in Real Estate Contracts and Beyond

By Stuart Kaplow on July 23, 2023 Posted in Environmental, GHG, greenhouse gas

As concerns about climate change move from mainstream society to businesses large and small, the significance of greenhouse gas emissions and specifically the move to decarbonize economies across the globe is receiving increased attention. In response, both voluntary and mandatory GHG emission disclosures in contracts have emerged worldwide, compelling a broad breadth of business sectors, particularly real estate, to integrate these considerations into their company practices and into their contract documents. In this blog post, we begin to explore how GHG emission disclosures are shaping contracts including influencing real estate sales, as well as the impacts across other sectors.

The Rise of GHG Emission Disclosures: Over the last several years, there has been a significant rise in voluntary GHG emission disclosure frameworks, from the Global Reporting Initiative to our firm’s own Net Plus GHG App. These initiatives have to date played a limited but important role in promoting transparency and accountability, as companies are increasingly finding it necessary to measure, disclose, and reduce their GHG emissions.

Mandatory Disclosure Requirements: Increasing numbers of jurisdictions across the United States are implementing mandatory GHG emission regulations. These regulations typically require companies, including real estate developers and property owners, to quantify and disclose their emissions often under the umbrella of building energy performance standards, which focus on the buildings’ energy efficiency or carbon footprint. An example of such a current draft regulation in Maryland is:

Disclosure of Building Benchmarking and Performance Standards Information.

A. Before a buyer signs a contract for the purchase of a covered building, the building owner selling the covered building must:

(1) Disclose to the prospective buyer that the building is subject to requirements under this law;

(2) Transfer the following records to the prospective buyer:

(a) A copy of the complete benchmarking record from the benchmarking tool;

(b) Documentation of data verification;

(c) Documentation of any alternative compliance payments made to the Department; and

(d) Any other records relevant to maintain compliance under this Subtitle.

(3) Provide to the prospective buyer the following information:

(a) Performance baseline; and

(b) Interim and final performance standards.

B. The prospective buyer must indicate, by signing an addendum to the contract or a separate section of the contract printed in boldface type, that the seller has made the disclosures and provided the information required by this chapter.

Additionally, increasing numbers of landlords and tenants must exchange greenhouse gas emission data so that building owners can comply with building energy performance standards laws that require annual GHG emission reporting, something that requires modifications to many leases, commercial and residential, as we blogged about in Does Your Lease Need GHG Provisions?

Implications for Real Estate: Beyond provisions mandated by building energy performance standards, GHG emission disclosures are becoming a fundamental part of real estate transactions. In many states, prospective buyers and tenants now consider a property’s environmental performance and GHG credentials as essential criteria for their decisions (e.g., a buyer will consider its obligations to make improvements to comply with GHG reductions mandated by law in future years, for example replacing natural gas equipment with electric). As a result, disclosures are finding their way into contractual provisions for real estate sales and leases. These provisions can include requirements to disclose past and ongoing energy usage, energy efficiency audits, and even commitments to reduce emissions over time through capital improvements that involve replacing existing equipment with all electric.

Benefits for Buyers and Investors: For buyers and investors, integrating GHG emission disclosures into real estate contracts offers several benefits. Firstly, it provides a clear understanding of a property’s energy efficiency and GHG profile, allowing them to make informed decisions aligned with their sustainability goals and aims for profitability. Secondly, such disclosures enable better risk assessment, ensuring that properties are resilient against future regulatory changes and potential market disruptions related to energy and carbon pricing. Lastly, the inclusion of energy performance provisions in contracts may help incentivize property owners to invest in energy saving technologies and retrofits, leading to reduced operational costs and increased asset value.

Beyond Real Estate Broader Industry Impact: The influence of GHG emission disclosures extends far beyond the real estate sector because the vast majority of U.S. businesses operate in leased space. Industries such as manufacturing, transportation, and hospitality may also be subject to mandatory EPA large source disclosure requirements, but that does not carry with it any private contract disclosure. As a result, these disclosures shape contracts, and agreements across multiple sectors, impacting supply chain decisions, investment choices, and collaboration strategies.

Conclusion: GHG emission disclosures, both voluntary and mandatory, are a response to the new era of environmental consciousness in business. The real estate sector is already seeing building energy performance standards and other disclosures integrated into contracts of sale, leases, loan documents, and other agreements. With stakeholders becoming more attuned to the environmental impact of their decisions, these disclosures play a pivotal role in promoting sustainability, decarbonization, and aligning business practices with climate goals. Beyond real estate, the influence of GHG emission disclosures is extending to nearly all sectors, beginning to transform the way businesses operate and interact with the planet.

A live webinar “Greenwashing: How to Mitigate Your Risk” 30 talking points in 30 minutes, Tuesday, July 25 at 9 am ET presented by Stuart Kaplow and Nancy Hudes on behalf of ESG Legal Solutions, LLC. The webinar is complimentary, but you must register here.