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Recent Developments in the Environmental Review of Climate Change Impacts
Sedgwick's Real Estate Newsletter
While federal and state laws regulating climate change continue to evolve, the front line of the debate appears to be in the environmental review context. California, a leader in the regulation of climate change issues, recently adopted guidelines requiring analysis of climate change under the California Environmental Quality Act (CEQA) and, in particular, greenhouse gas emissions (GHG). A recent California state court opinion also provides guidance on what constitutes adequate mitigation for significant GHG impacts under CEQA. At least one governmental entity has also established substantive limitations on GHG emissions. The Bay Area Air Quality Management District (BAAQMD) became the first regulatory agency in the nation to adopt guidelines that establish thresholds for GHG emissions. While these authorities are limited to California, and in the case of the BAAQMD's standards to the San Francisco Bay Area, they are the first of their kind to have an effect on climate change regulation in other states and with the federal government.
CEQA Guidelines
Under CEQA, a governmental agency must analyze a proposed development's environmental impacts before issuing permits for that project. The new CEQA Guidelines make clear that an analysis of GHG emissions is generally required in an environmental document prepared under CEQA. See, e.g., CEQA Guidelines § 15064.4(a) ("A lead agency should make a good-faith effort, based to the extent possible on scientific and factual data, to describe, calculate or estimate the amount of greenhouse gas emissions resulting from a project."). While the new guideline does not contain any standards or thresholds to measure the significance of GHG emissions, it does state that the following factors should be considered when assessing the significance of impacts from GHG emissions on the environment: (1) the extent to which the project may increase or reduce GHG emissions compared to the existing environmental setting, (2) whether the project emissions exceed a threshold of significance that the lead agency determines applies to the project, and (3) the extent to which the project complies with specified regulations or requirements adopted to implement a statewide, regional or local plan for the reduction or mitigation of GHG emissions.
While section 15064.4 requires that GHG impacts be addressed in an environmental document, it provides little guidance on how to assess whether the impacts are significant. With the exception of the BAAQMD's standards discussed below, there are currently no substantive, numerical standards for assessing GHG impacts. In the absence of numerical thresholds, some agencies had been relying on a qualitative standard, that is, whether the project would support or contravene the state's goal of reducing GHG emissions to 1990 levels by 2020 (representing roughly a 15 percent reduction in GHG emissions from current levels).
If a project's contribution to GHG emissions is deemed significant, lead agencies must identify feasible means of mitigating the impact to a less than significant level. CEQA Guidelines § 15126.4(c). Measures to mitigate these impacts may include, among others: (1) measures in an existing plan or mitigation program for the reduction of emissions that are required as part of the lead agency's decision, (2) reductions in emissions resulting from a project through implementation of energy-conserving measures or features, (3) off-site measures, including offsets that are not otherwise required, (4) measures that sequester GHGs, and (5) implementation of specific measures or policies aimed at reducing GHG emissions contained in an adopted plan, regulation or ordinance. Id.
Recent Case Law
In the first reported CEQA decision addressing GHG emissions, the court of appeal struck down an environmental impact report (EIR) for a refinery project based on, among other grounds, the impermissible deferral of mitigation of GHG emissions. Communities for a Better Environment v. City of Richmond, 184 Cal.App.4th 70 (2010). The refinery project was estimated to result in nearly 900,000 tons of new emissions of GHGs (equivalent to the GHGs produced by approximately 160,000 cars). Neither the new CEQA Guidelines nor the district's standards were in effect when environmental review of the project commenced. Thus, it was only relatively late in the CEQA review process when the lead agency concluded that the project would result in a significant climate change impact. The agency then imposed a mitigation measure requiring the refinery operator to submit a plan for agency approval containing measures to ensure that the project would create no net increase in GHG emissions.
In ruling that the measure constituted impermissible deferral of mitigation, the court reasoned that the EIR "merely proposes a generalized goal of no net increase in greenhouse gas emissions and then sets out a handful of cursorily described mitigation measures for future consideration that might serve to mitigate" the significant impact. Distinguishing cases where mitigation measures were upheld despite the fact that they were deferred, the court noted that the agency "delayed making a significance finding until late in the CEQA process, divulged little or no information about how it quantified the project's greenhouse gas emissions, offered no assurance" that the mitigation plan would be both feasible and efficacious, "and created no objective criteria for measuring success." The court's ruling emphasizes the importance of identifying and mitigating a project's significant GHG impact early in the environmental review process. If a mitigation measure relies on development of a future plan to mitigate a project's significant climate change impact, it will be important to identify a verifiable goal and establish clear and objective performance standards to support any determination that the significant impact will be reduced to a less than significant level.
BAAQMD Standards
On June 2, 2010, the BAAQMD became the first regulatory agency in the nation to adopt guidelines that establish thresholds for GHG emissions. The guidelines were an attempt to quantify the necessary action to achieve the state's goal of reducing GHG emissions to 1990 levels by 2020. A project that results in emissions exceeding the threshold by definition has a significant impact unless the impact can be mitigated. For commercial, residential and related land use projects, the thresholds are: (1) compliance with a qualified GHG reduction strategy, (2) 1,100 metric tons of carbon dioxide equivalent (CO2e) per year or (3) 4.6 metric tons of CO2e per service population per year. At least for now, the 1,100 metric tons of CO2e standard is the most likely to apply to new development given that very few Bay Area agencies have adopted a qualified GHG reduction strategy and that the service population standard applies only to very GHG-efficient projects. This standard corresponds roughly to a 56-unit single-family housing project, an 83-room hotel, a 53,000-square-foot office building or a 19,000-square-foot regional shopping center. Even relatively small, infill development projects may exceed this low threshold (equivalent to the annual GHG emissions of 200 cars) and, as a result, be required to prepare a full EIR when such projects may have previously qualified for a more streamlined environmental review process. While other agencies are not required to employ the BAAQMD standards, selection of an alternative threshold would need to be supported by substantial evidence in the record. The thresholds apply prospectively for projects commencing environmental review on or after June 2, 2010.
Conclusion
Given the evolving state of climate change and the environmental review of climate change impacts, agencies and developers are well advised to stay current on the state of the law. In evaluating a project's GHG impacts under CEQA, it will be important to quantify the project's estimated GHG emissions and assess whether the emissions are significant using a threshold that comports with the factors articulated in the CEQA Guidelines. This may or may not be a numeric threshold such as the one adopted by BAAQMD, but it will need to be one supported by substantial evidence in the record. In light of Communities for a Better Environment v. City of Richmond, it will also be important to demonstrate that mitigation measures designed to avoid or reduce a significant GHG impact are feasible and will actually accomplish that objective.
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