Editor's Note: This is the firstarticle in a three-part series that will examine a trio of emergingthreats in 2011, each with the potential to impose seismic changeupon the risk-management landscape.

By William F. Stewart

In September 2009, all three branches of the United Statesgovernment were racing headlong toward efforts to mitigate thethreat of man-made global warming.

The executive branch sought toimpose greenhouse-gas emission limitations; the House passedlandmark cap-and-trade legislation; and two appellate courtsrecognized a viable cause of action against carbon-dioxide emittersfor "climate nuisance."

Less than two years later, with the economic downturn and the2010 midterm elections in the rearview mirror, the executive andlegislative branches have slammed the brakes on their respectiveclimate initiatives. The focus has shifted to the judiciary.

The case at the center of the climate- change controversy isConnecticut v. American Electric Power Co., et al.

In AEP, several states and environmental groups filedsuit against power companies, seeking an abatement of "the publicnuisance of global warming."

The plaintiffs alleged that the utilities' combustion of fossilfuels has contributed to elevated levels of atmosphericCO₂ which, in turn, has led to beach erosion, droughtsand floods.

After a New York federal district court dismissed the suit ongrounds that the regulation of greenhouse-gas emissions was apolitical question best left for the legislature, the SecondCircuit Court of Appeals reversed. The appellate court's decisionto let the nuisance case against the utilities proceed sentshockwaves through the energy industry, opening the door for anuntold number of climate-change claims and lawsuits.

Last fall, the U.S. Supreme Court advised that it would hear theappeal over whether the AEP plaintiffs' federal nuisanceclaims are viable. Argument is set for April 19, 2011.

Among the critical issues is whether the judiciary is the branchof government best suited to regulate greenhouse-gas emissions.

Interestingly, both the Obama administration and severalconservative organizations have opposed climate litigation on thegrounds that the elected branches of government are in a betterposition to provide a comprehensive, non-patchwork approach toestablishing a national, sustainable-energy strategy.

If affirmed, AEP threatens to open up a Pandora's boxof global-warming suits, as well as associated coverage litigation.Under the Second Circuit's ruling, any entity with "special"climate-related harm—harm that is different in kind or in scopefrom the general public—would have standing to pursue large GHGemitters.

The AEP decision has the potential to substantiallydamage the national economy and may be the most importantenvironmental case in a decade.