Regulatory Updates

There have been a couple of noteworthy developments in recent weeks concerning the mandatory climate disclosure regime enacted by California. These developments relate to SB 253 and SB 261, which mandate that companies doing business in California and exceeding certain revenue thresholds disclose climate-related financial risk information and Scope 1, Scope 2, and Scope 3 greenhouse gas emissions. First, the California Air Resources Board, the agency responsible for implementing California’s climate disclosure regulations, announced that it would “exercise enforcement discretion for the first reporting cycle [] on the condition that entities demonstrate good faith efforts to comply with the requirements of the [climate disclosure] law.” In other words, recognizing the abbreviated timeframe — the first climate disclosures are due in a year’s time — the key regulator indicated that it would exercise forbearance in enforcement as companies adapted to the new disclosure system. Second, a few days later, the California Air Resources Board solicited public feedback concerning the design of the regulation with respect to a number of different parameters — including which companies would be encompassed within the scope of the phrase “doing business in California,” and therefore subject to the mandatory disclosure. All public comments, which offer an opportunity for impacted organizations to provide input, must be submitted by February 14, 2025.

Litigation Updates

The Montana Supreme Court, relying upon particularly protective language in the Montana state constitution, upheld a lower court’s decision that there is a “fundamental constitutional right to a clean and healthful environment [that] includes climate as part of the environmental life support system,” and further ruled that the Montana law at issue violated the Montana state constitution because it “prohibit[ed] environment reviews from evaluating GHG [greenhouse gas] emissions.” In other words, the Montana Supreme Court has now proclaimed that climate change must be taken into account in order to preserve the constitutional rights of Montana residents. Although other climate activists may seek to obtain similarly favorable rulings from other state supreme courts, the language in the state constitution relied upon in the Montana Supreme Court’s decision is especially solicitous of environmental concerns and has only a few parallels among other state constitutions, and so the ultimate impact of this decision may therefore be limited.

The State of Maine has initiated a lawsuit against the major fossil fuel companies for damages related to climate change. This is the latest of around three dozen lawsuits bringing common law and state law tort claims against the largest and most prominent fossil fuel companies. Notably, in addition to bringing common law claims, this lawsuit also seeks damages under Maine law for, among other things, violations of the Maine Unfair Trade Practices Act concerning alleged “misrepresentations made . . . regarding the safety of fossil fuels.” After years of similar litigation throughout the United States, Maine has now decided to embrace this tactic and join this effort. Both state and local government plaintiffs and defendant fossil fuel companies have had certain legal successes in the initial stages of litigation. However, none of these cases has yet had a full adjudication on the merits.

Eleven Republican state attorneys general (of Texas, Alabama, Alaska, Indiana, Iowa, Kansas, Missouri, Montana, Nebraska, West Virginia, and Wyoming) have filed a lawsuit against three prominent asset managers, alleging that these companies colluded to reduce coal output through their holdings in nine coal companies, thereby reducing the supply of electricity and raising electricity prices for consumers in the United States. In effect, the lawsuit alleges that these asset managers engaged in a scheme through their market power — due to their extensive holdings of stock in the relevant coal companies — to reduce coal output, ostensibly in response to environmental concerns. This is an unusual antitrust theory, as it relies upon collusive efforts by minority shareholders to reduce output across an entire industry in the pursuit of additional profits. Based on recent statements by a number of politicians, this lawsuit represents the first, but likely not the last, effort to use the courts to enforce antitrust law against companies and industries that are attempting a coordinated response to the pressures of climate change.