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In another policy switch from the Bush to the Obama administration, the Environmental Protection Agency is taking new steps to address climate change. In April the EPA started a process that will allow it to regulate greenhouse gas emissions from new motor vehicles, and it's expected to soon do the same for emissions from factories, power plants, and other industrial facilities.

But before any new regulatory scheme becomes official, businesses need to determine how their operations might be affected. So in-house lawyers are working closely with engineers and consultants to assess the size and scope of their companies' emissions.

"You have to look around the corners and anticipate what's coming," says William Donohue, associate general counsel for Exelon Corp., the Chicago-based utility. "Climate change legislation is coming, and when it does, it will be a big thing."

There's no time for procrastination, Donohue and other lawyers agree. On April 17 the EPA released an endangerment finding that says carbon dioxide and five other heat-trapping gases are pollutants that harm public health. The move came in response to a U.S. Supreme Court 2007 decision in Massachusetts v. EPA, which said that the agency has the authority under the Clean Air Act to regulate the gases.

The endangerment finding obligates the EPA to establish emission standards for certain types of new cars and trucks. Experts say the agencies will soon make similar findings that will start the process of regulating stationary sources of emissions, such as power plants and factories.

Any future scheme to cut emissions probably will be a mixture of regulations issued by the EPA and legislation enacted by Congress. Lawmakers have already introduced a cap-and-trade bill that would set limits on carbon emissions. "The real question is what specific mix you will see," says Robert McKinstrey, a partner in Ballard Spahr Andrews and Ingersoll's climate change and environmental practice groups. "I predict you will see a system, at least the outlines of a system, sometime early in 2010."

The EPA's move to regulate new car emissions didn't surprise managing counsel Elizabeth Gibson and her colleagues in Toyota Motor Corp.'s law department. They've been preparing for new standards ever since Massachusetts v. EPA, says Gibson. So Toyota's legal staff has been working with other departments in the company to help push for a national auto emission standard.

Their efforts may have paid off. In May, President Barack Obama announced tough new nationwide rules for automobile emissions and mileage standards. "We are confident there will be some sort of resolution," Gibson says.

At the same time, Toyota has been preparing for increased regulation of emissions at its U.S. factories. For years, the company's lawyers have been working with its engineers and consultants to measure and reduce the factories' carbon footprint. "As you can imagine, this has been a very complicated effort," Gibson says.

New reporting requirements could be on the way for companies, too. In March the EPA proposed a rule that would require some 13,000 U.S. facilities to start reporting their greenhouse gas emissions to the agency in 2011. If approved, the rule will affect a wide range of businesses, including utility companies, car manufacturers, petrochemical suppliers, and even landfill sites.

In-house lawyers at Exelon are helping that company assess and analyze its carbon emissions to see what might have to be reported under the proposed rule, Donohue says. He believes other legal departments should be doing the same thing, even if they don't think the EPA's proposal will apply to their company.

Donohue explains that they could discover unexpected business opportunities. For example, a company could actually make money by reducing its emissions and selling its offsets in a future cap-and-trade system. "There will be opportunities and low-hanging fruit, certainly," Donohue says.

And in-house attorneys shouldn't just be thinking about what they might have to report to the EPA. Experts say it's possible that new legislation would require companies to disclose more information to the Securities and Exchange Commission, too, about the financial risks of climate change.

While the shape and scope of any future greenhouse gas regulations are uncertain, in-house lawyers should prepare for the inevitable. "The U.S. is now serious about climate change, and it means something big is going to happen," Ballard Spahr's McKinstrey says. "Because we are very good at enforcement."

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