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Monday, January 27, 2014

Severe Economic Disruptions from Climate Change

Severe Economic Disruptions from Climate Change

For many, climate change remains a far off notion that will affect their grandchildren and other “future generations.”  Think again.  Expect your food prices to increase now, if they have not already.  Amidst the worst drought in California history, the United Nations is releasing a report that, according to a copy obtained by the New York Times, finds that the risk of severe economic disruptions is increasing because nations have so dragged their feet in combating climate change that the problem may be virtually impossible to solve with current technologies. 

The report also says that nations around the world are still spending far more money to subsidize fossil fuels than to accelerate the urgently needed shift to cleaner energy.  The United States is one of these.  Even if the internationally agreed-upon goal of limiting temperature increases to 2° C, vast ecological and economic damage will still occur.  One of the sectors most at risk: the food industry.  In California, a leading agricultural state, the prices of certain food items are already rising caused by the current drought.  In times of shrinking relative incomes for middle- and lower class households, this means a higher percentage of incomes going to basic necessities such as food, water and possible medical expenses caused by volatile weather and extreme heat waves.  In turn, this may mean less disposable income that could otherwise spur the economy. 

Disregarding climate change is technologically risky too: to meet the target of keeping concentrations of CO2 below the most recently agreed-upon threshold of 500 ppm, future generations would have to literally pull CO2 out of the air with machinery that does not yet exist and may never become technically or economically feasible or with other yet unknown methods.

Of course, it doesn’t help that a secretive network of conservative billionaires is pouring billions of dollars into a vast political effort attempting to deny climate change and that – perhaps as a consequence – the coverage of climate change by American media is down significantly from 2009, when media was happy to report a climate change “scandal” that eventually proved to be unfounded.

The good news is that for the first time ever, the United States now has an official Climate Change Action Plan.  This will force some industries to adopt modern technologies to help combat the problem nationally.  Internationally, a new climate change treaty is slated for 2015 to take effect from 2020.  Let us hope for broad participation and that 2020 is not too late to avoid the catastrophic and unforeseen economic and environmental effects that experts are predicting.

Myanna Dellinger

Assistant Professor of Law

Western State College of Law

 

January 27, 2014 in Current Affairs, Food and Drink, In the News, Legislation, Science, Television | Permalink | Comments (1) | TrackBack (0)

Sunday, November 24, 2013

Solar Panel Leases – A Brilliant Idea or Keeping Consumers in The Dark?

In California and a dozen other states, it is becoming increasingly popular to have solar panels installed on private properties to reduce household electric bills.  In addition to potentially significant energy savings, solar panels also help private parties mitigate climate change at the very local level.  However, solar panels are expensive.  Instead of buying them outright (an average-size residential system costs about $35,000), many consumers choose to lease the systems instead.  This option typically entails no upfront costs and, as many solar panel providers tout, “low monthly rental fees” that are supposedly offset by utility bills savings and the avoidance of maintenance and upgrading otherwise associated with individually owned systems. 

So is this a contractual win-win situation?  Not necessarily so.  Solar panel leases typically comprise terms that may either surprise the unwary consumer or turn out to be more favorable to the solar panel owners than the homeowners in the long run. 

 For example, state or federal tax benefits, renewable energy credits sold to companies to offset carbon emissions, and state or utility cash incentives go to the solar panel owners and thus not the leasing homeowners.  Some contracts contain escalator clauses increasing the initially low lease payments over time.  What is also often left unsaid, at least upon initial conversations with solar panel providers, is that if a household already has low electricity bills, leases structured as is often typically the case may not pay at all or be financially beneficial enough to justify the risks inherently involved in transactions between consumers and sophisticated energy company for something as new and technologically risky as solar electric panels.  This risk is enhanced by the fact that the contract duration used by many California solar panel providers is no less than twenty years.  Much could happen over two decades in relation to both the technical and financial aspects of these types of contracts: technology could (and likely will) change so that in the years to come, more effective systems are developed that could have produced even greater benefits for homeowners then tied to contracts for “old” technology.  Utilities could reduce their electric rates so that the leases are not as commercially viable anymore.  State and federal subsidies and other rules could change the entire energy field.  Could consumers down the road prevail on an argument that imposing contracts of such durations in field so rapidly evolving is sufficiently draconian to be unconscionable?  Probably not.

 In California as in many - if not most - other states, unconscionability consists of both procedural and substantive elements and are evaluated on a sliding scale.  The procedural element addresses the circumstances of contract negotiation and formation, focusing on oppression or surprise due to, among other factors, unequal bargaining power and the lack of meaningful choice.  Substantive unconscionability pertains to the fairness of the actual terms of an agreement and to assessments of whether these terms are overly harsh or one-sided.  However, substantive unconscionability “turns not only on a ‘one-sided’ result, but also on an absence of ‘justification’ for it.”  Several problems thus abound for consumers attempting this argument.  First, no reasonable argument can be made that leasing solar panels rises to the level of “needed services” or “life necessities” that even perceivably liberal California courts have called for in connection with the lack-of-choice prong.  Second, consumer choice does exist here: homeowners could, for example, simply not rent the panels if not sure of the ultimate advantageousness of the deal.  They could buy the systems outright instead, or ask their utility providers if it is possible to increase the percentage of household power purchased from renewable sources if interested in acting on climate change.  Substantively, twenty years is a long time, but far from uncommon in contractual contexts.  Finally, the solar panel companies have an arguably justified cause for requiring a twenty-year duration, namely installing the equipment at no upfront payment, servicing it over years, and the chance to recover a good return on it.

Myanna DellingerSolar power is one of many solutions that could prove viable in mitigating climate change.  In a nation with as much annual sunshine as the United States, solar power will hopefully quickly become much more prevalent than is currently the case and help us as a nation become more energy independent.  Consumers may be well able to obtain current and significant energy savings if operating solar systems on their properties.  But consumers should realize that twenty-year leases constitute a significant legal commitment that will be difficult, if not impossible, to avoid if better technological solutions should be discovered in the next years to come.

Myanna Dellinger, JD, MA, Assistant Professor of Law, Western State College of Law

November 24, 2013 in Contract Profs, Science | Permalink | Comments (0) | TrackBack (0)

Monday, August 15, 2011

New Collective Bargaining Agreement Ends NFL Lock-Out

Football In March the National Football League Owners (NFL) elected to lockout the players organized through the National Football League Players Association (NFLPA) as the parties could not agree on a new Collective Bargaining Agreement (CBA). This lead to several star players, including Tom Brady and Payton Manning, brining an antitrust suit against the NFL. Four and a half months later, as reported here on National Football Post.com, the two sides have agreed to a new CBA that will last through the 2020 season and the 2021 draft.  ESPN reports that as a condition of the new CBA, all pending litigation needed to be settled.  In the end, as ESPN reports here, NFL players agreed to release their claims without any compensation.  

National Football Post.com provides a detailed summary of the 300-page plus CBA.  The new CBA introduces several changes from the prior agreement, focusing on the players’ health and safety, benefits for retired players, the draft and free agency, compensation for rookies entering the league, and the economics surrounding the salary cap. In order to promote player health and safety, the new CBA reduces the length of off-season programs and organized team activities. If limits on-field practice time and the amount of contact practices, and increases the number of days off for players. In addition, the CBA allows current players to remain in the player medical plan for life and offers enhanced financial protection for injured players. The NFL and NFLPA also agreed to a $50 million per year joint fund for medical research, healthcare programs and charities.

Increased benefits for retired players include the creation of a “Legacy Fund” devoted to increasing the pension for those players who retired before 1993. The two sides also agreed to improve post-career medical options, the disability plan, the 88 plan (which provides assistance to disabled players and those with certain diseases developed due to playing), career transition and degree completion programs, and player care plan.  

Under the new CBA players become unrestricted free agents (UFA) after four accrued seasons in the league. Players can become restricted free agents (RFA) after three accrued seasons in the league. Teams with RFAs have a right of first refusal on players who sign an offer sheet with another team allowing teams the opportunity to match the offer or receive draft pick compensation for the players.

Another new element to the CBA is the creation of a rookie pay scale. Under the new agreement, all drafted players will receive 4 year contracts and all undrafted players receive 3 year contracts. The teams have a maximum total compensation they can spend for each draft class and there are limited contract terms within the rookie contracts. The CBA also contains strong rules against rookies holding out and not signing with the teams, and teams also have the option to extended the rookie contract of a first round draft pick to a fifth year based on an agreed upon tender amount. The money saved by teams based on this structure is creating a new fund starting in 2012 to redistribute the money to current and retired players as well as into a veteran player performance pool.  

The two sides also agreed upon a new salary cap and revenue sharing agreement that will be in place over the length of the new CBA. Starting with the 2012 season the salary cap will now be based on a share of “all revenue,” and the players are to receive 55% of the national media revenue, 45 % of NFL ventures revenue, and 40% of local club revenue.  Player minimum salaries also saw a 10% increase for this year and will continue to increase throughout the length of the agreement.

Finally,  the agreement also stipulates that there is to be no judicial oversight of the CBA, and that if there are disputes the NFL and NFLPA will employ an independent third party arbitrator which they agree upon to settle the dispute. To insure labor peace, the new agreement contains a clause stating that the players will not strike nor will the owners lock out the players during the duration of the agreement.

Boogity, boogity, boogity, Amen.

[JT & Jared Vasiliauskas]

August 15, 2011 in In the News, Labor Contracts, Science | Permalink | Comments (0) | TrackBack (0)