A recent lawsuit filed by eight state attorneys general will take the industry to the place where bad policy meets with bad economics.
Jonathan Lesser, Ph.D., is a principal with the firm of Bates White LLC in Washington, D.C.
We all want cleaner air and less pollution. Growing up in an era of acid rain, smog alerts, and, more recently, the threat of global warming and environmental apocalypse, the urge to "do something" today is natural. And because regulations to address air pollution under the Clean Air Act have evolved through a slow, complex, and convoluted process for more than 50 years, that urge has naturally turned to litigation. But regulation by litigation is a terribly expensive and ineffective policy tool. For electric utilities, which remain at the center of many environmental policy battles, litigation is a "lose-lose" proposition that can mean higher costs and less financial security far into the future.
Nevertheless, electric utilities remain a tempting target. So perhaps it is not surprising that last July a coalition of eight state attorneys general, led by New York's Elliot Spitzer, filed a class-action lawsuit against five of the largest electric utilities in the nation.1 The suit alleges that the five utilities — American Electric Power, Cinergy, Southern Co., Tennessee Valley Authority, and Xcel Energy — which operate numerous coal-fired generating plants, are harming the states' residents because of the plants' carbon dioxide (CO2) emissions. The suit deems these plants' emissions, said to account for 10 percent of all carbon dioxide emissions in the United States, a "public nuisance" because of carbon dioxide's contribution to global climate change. It demands that these utilities be ordered to reduce their CO2 emissions by an unspecified amount, although it suggests that a 3 percent annual reduction would "achieve a fair share of the carbon dioxide emission reductions necessary to significantly slow the rate and magnitude of warming."