Here's the kicker. If the Supreme Court rules in favor of the EPA — that is, if it rules that CO₂ is not a pollutant — the liability for paying damages could shift. "In that case," says one insurance executive, "the pollution exclusions arguably would not still apply."

It's unclear if the EPA would commence regulating corporate CO₂ emissions if the Court decides against it. But if the EPA wins, insurers may lose. Indeed, if the Court rules that CO₂ is not a pollutant, insurers might be left to cover huge monetary awards handed out in global-warming lawsuits.

Based on the current docket, there won't be any shortage of those. "The lawyers are getting creative," says a spokesperson at the Insurance Information Institute. — J.G.

Tomorrow's Forecast: Materially Adverse

In the spirit of transparency, companies are increasingly disclosing information on climate risk. According to research by Friends of the Earth, which examined the 2005 annual reports of 112 oil-and-gas, auto, insurance, and petrochemical companies, nearly half reported on climate change, compared with 26 percent in 2000. And many filers indicated the effect of future carbon mandates. "Most companies that describe the regulations say this could materially affect their operations," says Michelle Chan-Fishel, who conducted the research. Progress Energy, for example, classified any future climate regulatory actions as "a business risk to our operations," and added that further requirements to reduce CO₂ emissions "could be materially adverse...if associated costs of control or limitation cannot be recovered from customers."

Here's how respondents broke down the financial risks posed by climate change (of companies that reported on climate change):

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