Realizing the Atmospheric Recovery Plan: The Sky Trust Implementation

University of Oregon School of Law

Environmental and Natural Resources Law Center

Global Environmental Democracy Project

Prepared by ENR Bowerman Fellow Zachary Green

September 2017

© 2017 University of Oregon School of Law Environmental and Natural Resources Law Center

The Environmental & Natural Resources Law Center

University of Oregon School of Law

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Eugene, Oregon 97403

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DISCLAIMER

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This paper was prepared as the result of work by students and faculty of the University of Oregon School of Law’s Environmental and Natural Resources Law (ENR) Center. It does not necessarily represent the views of the University of Oregon, The University of Oregon School of Law, or the ENR Center. The University, the School of Law, and the ENR Center make no warranty, express or implied, and assume no legal liability for the information in this paper; nor does any party represent that the uses of this information will not infringe upon privately owned rights.

AcknowledgmentsThank you to Professor Mary Wood for her guidance on this project, to Heather Brinton and the ENR Center for giving me the opportunity to serve as an ENR Bowerman Fellow, and to Dr. James Hansen for his research on climate change which helped shape this paper.

About this PaperThis white paper was created through the University of Oregon Environmental and Natural Resources Law (ENR) Center’s Global Environmental Democracy Project, an interdisciplinary research project focused on preparing students to be advocates for global change.

About the AuthorThe author of this white paper is ENR Bowerman Fellow Zachary Green. At the time this paper was published, Zachary was a 3L at the University of Oregon School of Law.

ENR Directors and StaffHeather Brinton, ENR DirectorApollonia Goeckner, ENR Program ManagerMary Christina Wood, ENR Faculty Director

About the ENR CenterAs part of the ENR Center’s mission of "engaging the law to support sustainability on earth," the ENR Center administers seven theme-based, interdisciplinary research projects that team law student enthusiasm with faculty expertise in an effort to bring intellectual energy to bear on some of the most challenging and cutting-edge environmental issues of our day. The seven interdisciplinary research projects include the Conservation Trust Project; the Energy Law and Policy Project; the Food Resiliency Project; the Global Environmental Democracy Project; the Native Environmental Sovereignty Project; the Oceans Coasts and Watersheds Project; and the Sustainable Land Use Project. Each academic year, the Center awards one-year fellowships to a select group of University of Oregon School of Law students to work with ENR faculty members on specific research projects within each of the theme-based, interdisciplinary research projects.

About the Global Environmental Democracy ProjectThe Global Environmental Democracy Project is one of seven theme-based, interdisciplinary research projects administered by the University of Oregon ENR Center. The Project is led by faculty leader Mary Wood. The mission of the Energy Law and Policy Project is to prepare students to be advocates for global change by exploring the principles of public participation, freedom of information, and access to the judicial system and how those principles play out when confronting international environmental problems.

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For more information, please visit enr.uoregon.edu/

For media inquiries contact Apollonia Goeckner at appleg@uoregon.edu

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I. Introduction

Climate change impacts are becoming more apparent and significant each year.1 As the severity and occurrence of these impacts increase, so too does the need to mitigate continued CO2 pollution. Congress has been slow to act on climate change;2 thus, addressing climate change judicially is increasingly necessary. Plaintiffs throughout the world are bringing cases against sovereigns to compel government action on the issues of CO2 pollution reduction and climate change mitigation.3 Per the top climate scientists, maintaining 350ppm of CO2 in our atmosphere will help ensure the avoidance of dangerous tipping points and minimize the most devastating impacts of climate change.4 According to 1 U.S. Global Change Research Program, The National Global Change Research Plan 2012-2021: A Triennial Update, 1 (2017), https://downloads.globalchange.gov/strategic-plan/2016/usgcrp-strategic-plan-2016.pdf.2 Karl J.P. Smith, Top U.S. Science Organizations Hammer Congress on Climate Change – Again, SCIENTIFIC AMERICAN (July 1, 2006), https://www.scientificamerican.com/article/top-u-s-science-organizations-hammer-congress-on-climate-change-mdash-again/3 See, e.g., Juliana v. United States, No. 6:15-CV-01517-TC, 2016 WL 6661146 (D. Or. Nov. 10, 2016); Chernaik v. Kitzhaber, 328 P.3d 799 (2014); Qazi Ali Athar, Rabab Ali Versus Federation of Pakistan and Another (2016), https://www.elaw.org/system/files/Pakistan%20Climate%20Case-FINAL.pdf.4 Ex. A: Declaration of Dr. James E. Hansen in Support of Plaintiffs’ Complaint for Declaratory and Injunctive Relief, Juliana v. U.S., No. 6:15-CV-01517-TC, 2016 WL 6661146 (D. Or. Aug.

world-renowned climatologist Dr. James Hansen, we must both reduce our emissions of CO2 and drawdown 100GtC from the atmosphere to achieve energy balance on our planet, remaining at no higher than 350ppm atmospheric CO2.5 This paper seeks to provide a framework for a Sky Trust capable of collecting and dispensing funds for carbon drawdown, which is necessary to achieve energy balance on our planet.

Sovereigns have a duty as trustees of the environment to protect natural resources, the trust res,6 and many courts recognize the res to encompass all natural resources,7 including the atmosphere.8 Two core fiduciary duties owed to the trust res are protection of the trust assets and restoration of those trust assets that have been damaged.9 Restoration of trust assets, when addressing damage to our atmosphere, could be accomplished by carbon drawdown, as proposed by Dr. Hansen.10 To restore trust assets damaged by third parties, the

12, 2015); 350.ORG, https://350.org/about/science/ (last visited Jan. 15, 2017) [hereinafter Hansen Declaration].5 Id. at 22, 23. 6 Mary Christina Wood & Dan Galpern, Atmospheric Recovery Litigation: Making the Fossil Fuel Industry Pay to Restore A Viable Climate System, 45 Envtl. L. 259, 284 (2015) [hereinafter Atmospheric Recovery Litigation].7 Id. at 286.8 Id. (citing Robinson Twp. V. Commonwealth, 83 A.3d 901, 955 (Pa. 2013)(plurality opinion)). 9 Id. at 289. 10 Hansen Declaration, supra note 4.

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sovereign trustees have a duty to recover monetary damages for those assets.11

II. Atmospheric Recovery Plan

An atmospheric recovery plan (“ARP”), funded by those monetary damages, could achieve the carbon drawdown necessary to stabilize the climate system.12 The ARP consists of projects throughout the world that facilitate the drawdown of carbon from the atmosphere; these projects include natural soil and reforestation measures aimed at reducing the amount of CO2 in the atmosphere.13 Specifically, the ARP should include projects involving “1) forest restoration, reforestation, and improved forest management; 2) cropland practices, including reduced tillage, straw and residue retention, and rewetting peat lands previously drained for agriculture; 3) grassland management, including native revegetation, appropriate stocking densities, and soils restoration; 4) livestock, including improvements in feed and improvements in manure management; and 5) integrated systems, including agroforestry practices that may both increase land productivity and reduce nitrogen inputs – and associated emissions.”14 Dr. Hansen’s prescription calls for a reduction of CO2 emissions and a drawdown of carbon from the atmosphere of approximately 100GtC. Thus, to achieve the drawdown of 100GtC and reach a stabilized climate system consisting of 350ppm CO2 in

11 Atmospheric Recovery Litigation, supra note 6, at 290. 12 Id. at 321.13 Id. at 320. 14 Id. at 321.

the atmosphere, the ARP must be implemented.

Assuming victories in the many court cases currently ongoing and future cases that may come to fruition, a trust must be created that can dispense damages collected from favorable court rulings. For purposes of this paper, such an institutional trust will appropriately be referred to as the “Sky Trust.” The institution will follow each Carbon Major’s “exposure” amount,15 the amount of CO2 attributed to each Major’s production of fossil fuels, and as funds are collected, reduce that exposure amount accordingly. The Sky Trust will collect and manage the monetary damages awarded in cases; thus, such a financial institution must be transparent and should only award money for approved projects. The following image summarizes the schematics of the Sky Trust:

15 Carbon Majors are fossil fuel entities responsible for the majority of global industrial CO2 emissions.

-Transparency allows institution to manage, track, and disperse awarded damages

-Each Carbon Major’s “exposure” is reduced as projects are funded (Carbon Majors could be responsible for tracking their

own liability)

-Sky Trust approves and tracks projects aimed at carbon drawdown

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The Sky Trust may consist of multiple institutions that control a portion of the overall trust concept. For instance, one institution may track the Carbon Majors’ liability unless the Carbon Majors are ordered to track their own liability, one institution may track, maintain, and dispense funds awarded from damages, and one institution may manage projects that adequately drawdown carbon. Once the Sky Trust is in place, a court must be able to either award damages to the Trust, which then disperses funds for drawdown projects, or award carbon drawdown projects outright.

III. Courts Can Order Polluters to Pay into Restoration Projects and

Trust Funds.

In order to fund the Sky Trust, a court must be able to order a polluter to restore the damage done to our atmosphere outright. One real-world example of restoration funds that parallels the hypothetical set forth is this paper is that of wetland mitigation banking. The question as to whether a court can enforce a restoration order can be answered by looking at cases involving violations of the CWA’s wetland protection regulations.

In United States v. Donovan, the United States District Court for the District of Delaware found the defendant liable for violating the CWA when the defendant intentionally filled 1.771 acres of wetlands.16 The court stated that “restoration of illegally destroyed wetlands is one type of injunctive

16 United States v. Donovan, 466 F. Supp. 2d 595, 598 (D. Del. 2006)

relief contemplated by the CWA.”17 The court concluded that “the Wetlands Restoration Plan proposed by the Government present[ed] a feasible means of restoring the destroyed wetlands to their previous condition and reviving their ecological benefits.”18 Even though no provision exists in law for atmospheric mitigation like that found in the CWA for wetland restoration, the concept is far from foreign.

Courts awarding damages in the form of restoration projects must be certain that the scope of restoration projects will adequately remedy that damage. In United States v. Bailey, the United States District Court for the District of Minnesota stated that “a restoration plan must: (1) be designed to confer maximum environmental benefits tempered with a touch of equity; (2) be practical and feasible from an environmental and engineering standpoint; (3) take into consideration the financial resources of the defendant; and (4) include consideration of the defendant’s objections.”19 The first two requirements show the importance of establishing a Sky Trust that adequately addresses the damage our atmosphere has suffered.

Likewise, the United States Court of Appeals for the First Circuit held that a restoration order having “an equitable relationship to the degree and kind of wrong which it is intended to remedy” is a valid

17 Id.18 Id. at 599.19 United States v. Bailey, 516 F. Supp. 2d 998, 1015 (D. Minn. 2007) (citing United States v. Sexton Cove Estates, Inc., 526 F.2d 1293, 1301 (5th Cir. 1976)).

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order under the law.20 Thus, a restoration order with the requisite relationship to Natural Resource Damages is a valid exercise of a court’s authority.

In a similar vein, courts can exercise authority over restoration projects when a trustee proposes a project that is arbitrary and capricious. In Gulf Restoration Network v. Jewell, the court found that trustees of the Deepwater Horizon Oil Spill (consisting of state and federal agencies) acted arbitrarily in applying BP early restoration funds toward the construction of a conference center and lodge.21 The Sky Trust, consisting of approved projects that actually reduce carbon in the atmosphere, avoids the potential for mismanaged restoration efforts.

Finally, courts have required restoration orders in common law tort actions.22 Specifically, courts have ordered environmental restoration in trespass and nuisance claims, as well as in “state health and zoning laws in public nuisance actions.”23 Because courts can clearly award restoration projects for natural resource damages under a variety of circumstances, the viability of a Sky Trust lies in the trust’s ability to mimic pathways that already exist.

IV. Alternative Pathways

a. The Volkswagen Settlement

20 United States v. Cumberland Farms of Conn., Inc., 826 F.2d 1151, 1165 (1st Cir. 1987).21 Gulf Restoration Network v. Jewell, 161 F. Supp. 3d 1119, 1123, 1133 (S.D. Ala. 2016)22 See Susan Verdicchio, Environmental Restoration Orders, 12 B.C. Envtl. Aff. L. Rev. 171 (1985). 23 Id. at 173.

Perhaps the most parallel example to the hypothetical Sky Trust discussed in this paper is contained in the recent settlement between the United States and Volkswagen.24 This settlement relates to defeat devices placed on specific models of Volkswagen vehicles that caused an excessive amount of nitrogen oxides (NOx) to be emitted into the atmosphere.25 NOx can cause serious health problems and contributes to both smog and acid rain.26 These issues tend to be more localized than globally disastrous climate change, but aspects of the Mitigation Trust created by this settlement can provide a framework for the Sky Trust.

The Mitigation Trust in the Volkswagen settlement allows for $2.7 billion to be collected by the Trust and distributed as funding for eligible mitigation actions.27 The eligible mitigation actions are designed to reduce those NOx emissions released into the atmosphere by vehicles installed with the defeat devices at issue in this case.28

24 See VOLKSWAGEN CLEAN AIR ACT CIVIL SETTLEMENT, https://www.epa.gov/enforcement/volkswagen-clean-air-act-civil-settlement (last visited May 4, 2017).25 Id. 26 Jeff Cobb, What’s So Bad About the Extra NOx VWs Emitted?, HYBRIDCARS, (Sept. 23, 2015), http://www.hybridcars.com/whats-so-bad-about-the-extra-nox-vws-emitted/. 27 Partial Consent Decree, In re: Volkswagen Clean Diesel Marketing, Sales, Practices, and Products Liability Litigation 1, 13, ¶ 12-13 (No. MDL No. 2672 CRB (JSC), N.D. Cal., Sept. 30, 2016), available as document no. 1973-1, at https://www.epa.gov/sites/production/files/2016-10/documents/amended20lpartial-cd.pdf. [hereinafter Partial Consent Decree].28 Id. at 13, ¶ 13-14.

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Additionally, $2 billion is allotted for Zero Emission Vehicle (“ZEV”) investments.29 Payments to the Mitigation Trust are defined in the consent decree, where the initial payment of $900 million is required within 30 days after the Effective Date, and two subsequent payments of $900 million each are required within one year of the initial payment date and then again within two years the initial payment date.30 Not only is Volkswagen responsible for reporting any violations of the settlement it is responsible for,31 but Volkswagen must also inform the EPA each time a payment is made to the Mitigation Trust.32 A similar system of accountability for the Carbon Majors should exist in the Sky Trust, requiring Carbon Majors to be responsible for tracking their own liability, and the Sky Trust tracking all damages deposited by those Carbon Majors.

The beneficiaries to the Mitigation Trust, as set forth in the consent decree, include the fifty United States, the District of Columbia, Puerto Rico, and federally recognized tribes.33 The selection of the trustee for the Mitigation Trust was based on recommendations submitted by the “Recommending Parties” set forth in the consent decree, consisting of California, Indian Tribes, the fifty states, including the District of Columbia and Puerto Rico, and those recommendations considered at the discretion of the United States.34 The collective recommendations by all “Recommending Parties” had to total 29 Id. at 13, ¶ 7.30 Id. at 13, ¶ 20-28.31 Id. at 21-26.32 Id. at 29. 33 Id. at Appendix D. 34 Id. at 14-15.

between three and five candidates.35 Each recommended trustee had to meet certain criteria in order to be considered.36 After the submission of trustee candidates, the court approved the selection of Wilmington Trust, a company with “significant experience as a trustee for environmental mitigation trusts.”37 Wilmington Trust has also chaired committees working on both the Lehman Brothers and General Motors bankruptcy cases.38 The Sky Trust must also set forth criteria for the selected trustee to ensure transparency and to avoid conflicts of interest among parties to ongoing Atmospheric Trust Litigation.

Wilmington Trust, as trustee of the Mitigation Trust, is responsible for allocating trust funds to the beneficiaries of the Volkswagen settlement. Allocation of trust funds is based primarily “on the number of registered illegal Volkswagen vehicles within the boundaries of the beneficiary.”39 Because NOx pollution can impact areas in a more localized way when compared to CO2 induced climate change, such localized funding for mitigation makes

35 Id. at 14.36 Id. at 15-16 (such criteria included a description of the financial relationship between the candidate and the settling defendant, potential conflicts of interest, and biographical information). 37 Wilmington Trust Selected as Trustee for $2.7 Billion Volkswagen Environmental Mitigation Trust, WILMINGTON TRUST (Mar. 20, 2017), http://news.wilmingtontrust.com/volkswagen-environmental-mitigation-fund-trustee-appointment.htm.38 Id. 39 VOLKSWAGEN CLEAN AIR ACT CIVIL SETTLEMENT, supra note 23 (where those beneficiaries with more registered vehicles are allocated a greater amount of trust funding).

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sense. In contrast, regarding the Sky Trust, localizing trust funds to areas where the most emissions have occurred makes little sense because the problems of climate change are global in nature. Therefore, the more logical approach would be to allocate funds on a localized scale to areas with the most potential for carbon drawdown. By allocating greater funds to areas with the most drawdown potential, successful mitigation is easier to obtain.

Within the consent decree of the Volkswagen settlement there exists a well-defined list of projects approved for mitigation funding, known as “Eligible Mitigation Actions.”40 These mitigation actions include replacing engines with new diesel or Alternative Fueled engines, installing All-Electric engines in vehicles, and incorporating systems that allow Ocean Going Vessel engines to remain off while the vessel is stationary, among many other mitigation actions.41 These actions are designed to reduce the amount of NOx emitted by the targeted vehicles. Specifically, “[t]he total $2.7 billion funding for the mitigation trust fund is intended to fully mitigate the total, lifetime excess NOx emissions from [illegal] vehicles.”42 Similarly, the Sky Trust should consist of projects pre-approved as having the requisite potential for carbon drawdown to achieve stability in the climate.

b. Wetland Mitigation Banking

40 Partial Consent Decree, at Appendix D-2.41 Id.42 VOLKSWAGEN CLEAN AIR ACT CIVIL SETTLEMENT, supra note 23.

Wetland mitigation banking allows a person or entity to “create[], restore[], enhance[], or in some cases preserve[] wetlands to provide compensatory mitigation in advance of proposed discharges into wetlands.”43 Banking may occur when a known project will require an offset, or it may occur based on future, speculative projects.44 Like wetlands mitigation banking, the Sky Trust could incorporate both mitigation projects for retroactive emissions as well as future expected emissions. Wetland mitigation banks are created by “government[al] agenc[ies], corporation[s], nonprofit organization[s], or other entit[ies]” who form an agreement with a regulatory agency.45 Banks must consist of the following four factors:

(1) The bank site: the physical acreage restored, established, enhanced, or preserved;

(2) The bank instrument: the formal agreement between the bank owners and regulators establishing liability, performance standards, management and monitoring requirements, and the terms of bank credit approval;

43 Jonathan Silverstein, Taking Wetlands to the Bank: The Role of Wetland Mitigation Banking in a Comprehensive Approach to Wetlands Protection, 22 B.C. ENVTL. AFF. L. REV. 129, 134 (1994). 44 Id. (Speculative banking allows an entity to have a “reserve” of credit that can be used to fill wetlands in future projects).45 Mitigation Banking Factsheet, U.S. ENVIRONMENTAL PROTECTION AGENCY (Feb. 22, 2017), https://www.epa.gov/cwa-404/mitigation-banking-factsheet

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(3) The Interagency Review Team (IRT): the interagency team that provides regulatory review, approval, and oversight of the bank; and

(4) The service area: the geographic area in which permitted impacts can be compensated for at a given bank.46

The bank instrument, which is theorized in the Sky Trust as project tracking, “identifies the number of credits available for sale and requires the use of ecological assessment techniques to certify that those credits provide the required ecological functions.”47 Likewise, the Sky Trust must identify the number of carbon drawdown credits (reducing a Major’s liability) that a project will restore.

c. Trusts Already Exist to Combat Climate Change

While pathways exist for Natural Resource Damage recovery, such as the Volkswagen settlement under the Clean Air Act or wetland mitigation banking as mentioned above, trusts for climate mitigation are already in existence. Although these trusts are not mirror images of the theorized Sky Trust as proposed in this paper, their aim is the same –mitigating the harmful effects of climate change to our planet and atmosphere.

The Climate Trust, a nonprofit organization developed to help new fossil-fueled power 46 Id.47 Id.

plants comply with the Oregon Carbon Dioxide Standard, provides new plants the ability to purchase carbon offsets.48 The Oregon CO2 Standard requires new plants to offset or reduce their carbon dioxide emissions by 17%.49 The following three alternatives are offered by The Climate Trust for new plants to meet this requirement: (1) the new plant may directly reduce carbon dioxide emissions on-site; (2) the new plant may fund and develop pollution reduction projects; or (3) the new plant may provide funding to other nonprofit organizations that are capable of selecting and managing pollution reduction projects on their behalf.50 The third alternative is the only alternative pursued by new plants to date.51 This alternative closely resembles the approach contemplated by the Sky Trust, as projects in the Trust may be offered by third-parties who are experienced or highly qualified to draw down carbon from the atmosphere.

In Bangladesh, a country especially vulnerable to the effects of climate change, the Bangladeshi Government created the Climate Change Trust Fund (“CCTF”).52 Using “its own resources to finance projects for implementation of [the Bangladesh Climate Change Strategy and Action Plan 2009], [the Government seeks] to reduce the vulnerabilities caused by the adverse effects 48 THE CLIMATE TRUST, https://www.climatetrust.org/about/ (last visited May 1, 2017). 49 Id.50 Id.51 Id.52 BANGLADESH CLIMATE CHANGE TRUST, MINISTRY OF ENVIRONMENT AND FORESTS, http://www.bcct.gov.bd/index.php/83-home/147-home-2 (last visited May 4, 2017).

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of climate change.”53 The Trust has already funded projects for construction to protect river banks, to fortify housing for future cyclones, to improve water control infrastructure, to manage waste, and to increase energy generated by solar power.54 Thus, the Bangladeshi Government, as well as external sources providing funding, are already implementing a trust to combat the impacts of climate change on its vulnerable country.

Likewise, the United Nations Framework Convention on Climate Change created the Green Climate Fund (“GCF”) to “mobilize funding at scale to invest in low-emission and climate-resilient development on our home planet.”55 Headquartered in the Republic of Korea, the GCF was created in 2010 by 194 countries who were party to the Convention.56 Funding into the trust is ongoing, with $10 billion having already been raised.57 Both mitigation and adaptation projects make up the GCF, and the aim is the have a 50-50 split in funding to both project types.58

The mitigation and adaptation projects currently in the GCF cover food security issues, water conservation, renewable and sustainable energy implementation, and low-carbon economy

53 Id. 54 Id. 55 GLOBAL CONTEXT, GREEN CLIMATE FUND, http://www.greenclimate.fund/about-gcf/global-context#mission (last visited Apr. 27, 2017). 56 Id. 57 Id. 58 Id.

transformation.59 Half of the funding for adaption projects goes to the most vulnerable countries.60 Just as it makes sense that the most vulnerable countries receive a larger portion of adaptation funding, the Sky Trust would logically allocate funding to areas with the most potential for carbon drawdown, as mentioned in Section IV(a).

V. Conclusion

In sum, as impacts from climate change become more prevalent and severe, the role courts play in addressing those impacts is increasing. Top climate scientists acknowledge that earth’s energy balance must be restored. To restore that energy balance, not only must CO2 emissions be reduced, but atmospheric carbon must be removed via a plethora of drawdown methods. One of the pertinent questions that must be answered regarding carbon drawdown follows: will the establishment of a “Sky Trust” provide courts a viable pathway in compelling Carbon Majors to pay for carbon drawdown restoration projects? As the above alternative pathways illustrate, the Sky Trust is a viable tool that can be implemented in order to realize the Atmospheric Recovery Plan. Trusts that address the effects of climate change are being formed across the globe and cases against Carbon Majors are being brought in multiple countries. Thus, the time is ripe for a Sky Trust so that Natural Resource

59 PROJECTS, GREEN CLIMATE FUND, http://www.greenclimate.fund/projects/browse-projects (last visited May 1, 2017). 60 GLOBAL CONTEXT, supra note 49.

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Damages can be awarded outright by the courts, and delays in mitigating our destabilized climate can be avoided.

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