Recent moves by New York Attorney General Eric Schneiderman suggest there may be greater peril to companies in what they disclose, or fail to disclose, to investors about the potential effects of climate change than they may have previously thought.

The attorney general accused Peabody Energy, the largest publicly-traded coal company in the United States, of violating state laws by making misleading statements to investors and the public about the financial risks it faced from climate change and potential regulatory responses.

A two-year investigation led to charges that the company violated New York laws barring false and misleading conduct in statements to investors. Peabody said in filings with the US Securities and Exchange Commission that it is unable to predict the effects of environmental regulations, despite internal company projections that the regulations could reduce the value of its coal sales in the United States by 33% or more. After the investigation, Peabody agreed to file revised shareholder disclosures with the Securities and Exchange Commission that objectively present the risks.

In November, the New York attorney general subpoenaed extensive financial records, emails and other documents from another company — Exxon Mobil — to determine whether the company has made false statements to investors about climate change risks and the impact on its business.

The focus of the investigation appears to be whether the Exxon Mobil disclosures about climate risks as recently as this year are consistent with its own scientific research on the subject. Exxon Mobil denies that it suppressed any climate change research.

Clean Power Plan

A large number of lawsuits have been filed against the Clean Power Plan since the final plan was published in the Federal Register on October 23, 2015.

The Clean Power Plan requires a 32% reduction in carbon dioxide emissions from certain existing fossil fuel power plants by 2030. Initial reductions are not required until 2022, but states are required to submit initial compliance plans to the Environmental Protection Agency by September 6, 2016. States may then request a two-year extension to submit a final plan. EPA will impose a federal plan on states that fail to submit plans or failed to secure EPA approval of their plans.

There are political calculations on both sides. Opponents hope the lawsuits will stall implementation of the plan long enough to allow a Republican to be elected president and then to modify or set aside the plan. The Obama administration hopes that requiring states to have taken steps to draw up their own plans by September 2016 will create a constituency for moving forward with the plan. US voters will go to the polls to elect a new president in November 2016.

A number of states and mining interests tried persuading the federal courts to block EPA from issuing the final plan. Those efforts were rejected by the courts as premature. Thus, opponents of the plan were eagerly awaiting publication of the final plan to open a 60-day period during which petitions for review can be filed in the US court of appeals for the District of Columbia. Petitions for judicial review have now been filed by 27 states, coal mining interests, power companies, rural electric cooperatives and other businesses. Petitions have also been filed by advocates for the Clean Power Plan by various states, environmental organizations, public health interest groups, and renewable energy groups to intervene in the litigation.

The court is expected to announce a timetable for review as soon as late December.

A number of opponents have asked the court for an immediate stay in the meantime. A stay would delay implementation of the Clean Power Plan until the court reaches a final decision on the merits of the case. The court has consolidated the numerous stay requests and ordered that all briefs and responses be submitted by December 23, 2015. The plan opponents have asked the court to rule on the stay request by the spring 2016 before reaching the merits of the case. This schedule means the Obama administration will be able to participate in the international climate talks in Paris in December with the Clean Power Plan intact.

The statutory and constitutional arguments that have been raised thus far by opponents of the plan can be summarized as follows. First, Congress did not give EPA authority under section 111(d) of the Clean Air Act to compel states to restructure their electricity markets by forcing a shift away from coal in favor of natural gas and renewable generation. Second, EPA is barred from subjecting existing fossil-fuel fired power plants from additional regulation under section 111(d) because they are already regulated under section 112 of the Clean Air Act. Third, it is a violation of the 10th amendment to the US constitution for the federal government to regulate how electricity is generated in individual states. When the US constitution was written, the states gave only certain powers to the central government.

Opponents of the plan point to EPA predictions that a number of coal-fired power plants will be forced to shut down within the next year as evidence of irreparable harm if they are not granted a stay. They must show the potential for irreparable harm before the court will grant a stay. One challenge for opponents is that the plan itself delays implementation until 2022. Opponents respond that the states will have to begin overhauling the power sector immediately, including legislation to promote use of renewable energy and natural gas so that they will be on track to start showing reductions in carbon emissions in 2022.

The initial salvo of litigation over the Clean Power Plan is the first glimpse of the significant economic, legal and policy issues that will be vigorously debated as the US government tries to reduce US carbon emissions from the power sector.

Power Effluent Guidelines

Final effluent limitation guidelines took effect on November 3 that will affect wastewater discharges from roughly 1,100 power plants that use fossil fuel or nuclear energy to produce steam as an intermediate step to generating electricity.

The new guidelines will begin to be incorporated into power plant discharge permits beginning in 2018.

The guidelines do not apply to oil-fired power plants or to power plants that are smaller than 50 megawatts in size.

EPA estimates that about 12% of steam electric power plants will have to make new investments to comply with the new guidelines and that the annual compliance cost for all steam electric power plants will be about $480 million. Critics are expected to go to court to block implementation.

  Steam electric power plants discharge large volumes of contaminated water. According to EPA, the discharges contribute approximately a third of all toxic pollutants discharged into surface waters by industrial sources in the United States. The pollutants include mercury, arsenic, lead, selenium and nitrogen compounds.

EPA did a detailed study of the steam electric industry in 2009 that found significantly increased levels of pollutants in wastewater discharges from power plants. The increased pollution is a byproduct of steps that power companies are taking to comply with stricter limits on air pollution.

The new guidelines are the first federal numeric limits on toxic metals in steam electric power plant discharges. They create uniform requirements based on demonstrated treatment technologies and processes. Until now, discharge limits were primarily based on the use of settling ponds that only removed suspended solids and were ineffective for removing dissolved metals.

Numeric discharge limits for arsenic, mercury, selenium and nitrogen will now apply to the following processes and byproducts associated with steam electric power generation: flue gas desulfurization, fly ash, bottom ash, flue gas mercury control, and gasification of fuels such as coal and petroleum coke. The guidelines encourage power companies to commit to meeting even more stringent limits by the end of 2023.

Climate Change

International officials have gathered at a United Nations meeting in Paris to try to reach a global agreement on greenhouse gas emissions. This is the 21st conference of the parties to the UN framework convention, or COP-21.

Before arriving in Paris, 146 countries and the European Union made pledges to shift away from fossil fuels and toward renewable energy, to improve land management and to increase energy efficiency .

However, the pledges fall significantly short of what many scientists suggest is required to keep global temperatures from rising above two degrees Celsius (3.6 Fahrenheit) since the preindustrial era. UN officials suggest that the actions pledged may limit the temperature rise to 2.7 degrees Celsius by 2100, rather than the warming of four or more degrees Celsius that is projected by many scientists.

A benchmark for assessing whether the talks are a success or failure will be whether the final agreement includes language to tighten each nation’s emissions limits automatically every five or 10 years without reopening the entire agreement to renegotiation.

Key pledges include carbon pollution limits for power plants in the United States, expansion of solar and other renewable energy in India, expansion in emissions trading by the European Union and China, and nuclear expansion by seven countries.

Three quarters of developing nations submitted pledges, including major emitters such as Brazil, China, India, Indonesia and Mexico. Many developing nations made offers to cut emissions with or without assistance from developed countries and pledged additional cuts if financial and technological assistance is provided. The remaining one quarter of the pledged emissions cuts turn on whether developing nations receive funding from developed nations.

The negotiations in Paris will focus on reaching a global agreement to reduce projected emissions increases by 2030, but not produce actual aggregate reductions from current levels. The pledges would reduce global average per-capita emissions over the next 15 years by as much as 9% in 2030.

Banks

A new report examining 61 of the world’s largest banks on their management of climate-related risks concludes that few are taking a strategic approach. Investment manager Boston Common Asset Management reports that the world’s largest banks are not prepared for the effects of climate change and argues that lenders are making an insufficient effort to support the transition to a low-carbon economy that is being discussed at COP-21 in Paris.

Banks have a critical role to play in funding the transition. The report concludes that most lenders do not have quantitative targets for increased financing of energy efficiency or renewable energy projects. The key criticism is that many banks fail adequately to assess the carbon risk of their lending and underwriting or to conduct climate-related stress tests.

Of the world’s 10 largest banks, only Citigroup and Bank of China were among the top 10 ranked for climate management.

— contributed by Andrew Skroback in Washington, DC