I heard about this via kottke.org and found it pretty shocking. Most of the response on the internet has been somewhat bimodal, with positions of meh and dismay.
Grist offers a somewhat more balanced response.

…While the environment desk itself is fairly new, the Times has been a bulwark of robust climate coverage for decades. While it’s not clear if the reassigned environment desk reporters will still maintain a focus on the environment in their reporting, other areas of the paper will gain new reporters with a deep knowledge of and concern about environmental issues. The Times will still continue to turn out good climate coverage.
Part of the (justifiable!) hand-wringing over the move stems from the poor reporting of climate issues elsewhere. Earlier this week, a study revealed that the number of newspapers that maintain a weekly “Science” section dropped from 95 in 1989 to 14 currently. (The Times is one of the 14.) Television news continues to give climate coverage short shrift, especially in the context of policy and politics. With public opinion suggesting that Americans link the threat of global warming with information about its effects, it’s understandably disconcerting to think that one of the most vocal outlets on the subject is changing its approach.
There’s one thing that is certain. As the months and years pass, every other bureau of the New York Times will have to deal with the effects of a changing climate: business, international, health, even sports. Having reporters close at hand who are well-versed in the subject will be an asset to the paper. The problem is less with how the Times staffs its environment coverage and far more with how few other outlets knowledgeably cover the environment at all.
While I tend to agree with Grist’s take on the issue, a couple things stand out. First, we won’t really know how this will impact the paper’s coverage of environmental issues and climate change for weeks or months.
Second, and importantly, much of the uproar has surrounded potential impacts on coverage of climate change. The Times has been a stalwart source of information on other environmental news, as well — including political positions and opinions on the environment, global environmental change, environmental health,the relationship between industry and the environment, and the like. While climate change is perhaps the most pressing of our ongoing environmental concerns, it is certainly not the only one.
I worry that some the Times’ nuanced coverage of other environmental issues may suffer from this move. Moving knowledgeable reporters to other desks in the news department could help bring an environmental perspective to more stories. But it may also lead to weaker coverage of the environment — one can imagine environmental voices getting drowned out by other concerns and editorial decisions. Time will tell.