July/August/ September 2009
Author:
Maria Cull
maria.cull@klgates.com
+44.(0)20.7360.8185
K&L Gates is a global law firm with
lawyers in 33 offices located in North
America, Europe, Asia and the Middle
East, and represents numerous
GLOBAL 500, FORTUNE 100, and
FTSE 100 corporations, in addition to
growth and middle market companies,
entrepreneurs, capital market
participants and public sector entities.
For more information, visit
www.klgates.com.
From the Editor
Over the summer, climate change continued to hit the headlines with negotiations
ahead of the Copenhagen Conference in December taking precedence. Likewise,
the US Federal Cap and Trade Bill was not often out of the news as firstly
Congress and now the Senate debate the Climate Change Bill.
As we move into the autumn, the momentum on climate change continues as the
G20 leaders meet in Pittsburgh to discuss, among other issues, the contribution
developed countries will make to abating climate change in developing countries.
Whether this will provide the foundations for productive negotiations in
Copenhagen will remain to be seen; however, what is clear is that climate change is
one of the key issues on the agenda.
The issues being addressed in all these forums are complex and will take many
hours of negotiation to resolve, with compromises needing to be made by all sides
along the way. However, one thing is clear: regulation is marching forward and
will continue to maintain its current momentum for the foreseeable future.
Closer to home, the direct implications of long-term regulation leading to a low
carbon economy can be seen in policy papers recently published by the UK
government. These papers set out the route the UK government will take over the
next 11 years to achieve its 2020 carbon reduction goals. 2020 is an important
milestone for Europe as it presents an opportunity to judge the success of its initial
efforts to tackle climate change, reduce carbon emissions and increase energy
efficiency. Tom Wallace walks us through these important policy papers in his
article.
This month’s contribution by Christian Hullmann illustrates some of the wider
challenges faced by politicians and industry alike. There are currently questions
over the future of Germany’s carbon capture and storage legislation. Conceptual
technical advancements such as carbon capture and storage will need to be
transformed into cost-effective technologies if the challenging carbon reduction
targets that have been set in Europe are to be met. If legislation does not set a
definite long-term path for the development of technology, investment will not
flow and this will then inhibit the advancement of the technology which many
governments see as crucial in solving the problem of clean energy production.
At a time when climate change policy and legislation is being developed at an ever
increasing rate, the task of evaluating legislation to understand its impacts and
opportunities can seem insurmountable. However, it is now more important than
ever for business to plan for a carbon constrained economy to ensure it is in the
best possible position to compete.
Cleantech Resource: European Edition
Legally Speaking
EU Focuses on Carbon Capture and Storage
While the science and technology of carbon
capture and storage (CCS) may be in its infancy,
there can be no doubting the gathering
momentum behind the EU's determination to
stimulate and regulate the uptake of CCS as a key
part of its strategy to achieve a 20% reduction in
EU CO2 emissions by 2020. The EU sees CCS as
an important bridging technology that will
contribute to mitigating climate change and
estimates that CO2 emissions avoided through
CCS in 2030 could account for some 15% of the
reductions required in the EU.
Of course, CCS is not without its critics and the
UK Government has admitted that there is
significant uncertainty around the costs, technical
requirements and risks associated with CCS. The
UK Environmental Audit Committee has also
voiced its concern that the possibility of CCS
should not be used as a "fig leaf" to give
unabated coal-fired power stations an appearance
of environmental acceptability.
Increased Availability of Funds for
CCS in EU
On 25 June 2009, as part of a wider climateenergy legislative package, the 2009 EU
emissions trading scheme (ETS) Directive came
into force to improve and extend the greenhouse
gas emission allowance trading scheme of the
EU. Generally, the 2009 ETS Directive
elaborates and expands some of the less detailed
provisions of the 2003 ETS Directive however it
also provides that, from the start of 2013,
member states will auction an increasing amount
of allowances to energy-intensive industries,
rather than allocating them for free.
Importantly, the 2009 ETS Directive goes on to
provide that at least 50% of these increased
auction revenues will be used to reduce CO2
emissions and assist in a move to a low carbon
economy, specifically including CCS projects.
While the EU executive have been careful not to
specify up-front how the ETS funds should be
divided among renewable and CCS projects, it
has been reported that a European Commission
official told a stakeholder meeting in Brussels on
29 June 2009 that the ETS could raise €7 billion
in funding for CCS. This would be in addition to
the 300 million carbon allowances made
available by the 2009 ETS Directive to help
stimulate the construction and operation of up to
12 CCS and other renewable energy commercial
demonstration plant in the EU by 2015 and the
€1 billion in public funds directed at CCS
through the EU's economic recovery package. In
addition, while CCS will not be mandatory for
fossil fuel power plants in the EU, CCS will be
promoted by treating stored emissions as though
they were not emitted within the ETS. CCS plant
operators will therefore avoid the cost of buying
carbon allowances.
Funding of the EU - China "Near Zero
Emissions Coal Project"
In addition to the legislative developments in this
area, on 25 June 2009, the European
Commission set out plans to finance the
demonstration of CCS in cooperation with
China. It is estimated that China builds around
one coal power station a week and that coal
contributes 70% of China's energy mix.
Therefore, the EU asserts that CCS is an
important technology in the fight against climate
change and has the potential to cut emission
from power generation in fast-developing and
coal-dependant economies, such as China.
The Commission has set out plans for
establishing an investment scheme to co-finance
the design and construction of a power plant to
demonstrate CCS technology in China and the
Commission has programmed funding of up to
€50 million for the construction and operation
phase of the project, out of a total of €60 million
that has be earmarked for cooperation with
emerging economies on cleaner coal
technologies and CCS. Depending on the choice
of technology used, and assuming China
introduces some form of carbon pricing
instrument, the Commission estimates that the
additional cost of constructing and operating a
new power plant equipped with CCS in China
over 25 years would be in the region of €300-550
million. The Commission has noted that it will
work closely with China, Member States, other
EEA countries and industry to secure the
additional financing required. The Commission
proposes to combine these funding sources in a
public-private partnership, possibly in the form
of a Special Purpose Vehicle. The Commission
hopes that this investment scheme could serve as
a model for other technology co-operation
activities between developed countries and
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Cleantech Resource: European Edition
emerging/developing countries in the context of a
post-2012 climate change agreement.
We wait to see the extent to which CCS features
in discussions at the UN Copenhagen Climate
Change Conference in December 2009 and
whether it will form a significant part of any
agreement adopted.
Germany - Doubtful Future For CCS
Technology
Despite a draft act on Carbon Capture and
Storage (CCS) and Vattenfall's pilot plant for the
fluidization of carbon dioxide (oxyfuel
technique) operated in Brandenburg, it remains
still unclear whether utility companies will see a
legal basis for the permanent storage of carbon
dioxide in the near future. Until the federal
elections held on 27 September 2009, the
coalition parties in the German Federal
Parliament debated details of the draft. With a
new coalition government of conservatives and
liberals now elected it is still to be decided
whether the act will come into force.
The draft act adopted on 1 April 2009 by the
Federal Cabinet regulates the capture, transport
and permanent storage of carbon dioxide in deep
underground rock formations. The act shall grant
operators the necessary planning and investment
security for pilot and demonstration plants.
However, they also have to prove, among other
things, that complete retention of carbon dioxide
in the storage site is guaranteed for an unlimited
period of time. Moreover, comprehensive, stateof-the-art precautionary measures must be taken
to prevent risks for humans and the environment.
After a period of 30 years from the
decommissioning of a plant, and thus about 80
years after its start-up, operators may transfer
their responsibility to the Federal Government but only if they can furnish proof of long-term
safety according to the state of the art in science
and technology. In 2015 the Federal Government
will analyse the experience gathered in
demonstration projects at home and abroad. It
will decide to what extent compliance with the
high environmental and safety standards
stipulated in the act can be proven and whether
CCS is an option that is technologically and
economically feasible. The draft act transposes
the Directive of the European Parliament and of
the Council on the geological storage of carbon
dioxide into German law.
The draft has been welcomed by energy provides
but faced strong criticism from NGOs such as
BUND or NABU. They claim that the CCS
technology needs to be investigated further and
that it is hardly accepted due to the risks
involved in the long-term underground storage of
carbon dioxide. Also, the Federal Environmental
Authority (Umweltbundesamt) stressed that
expectations regarding CCS should be lowered.
According to the authority, energy efficiency and
the use of rebewable energies would lead to
better results in avoiding carbon dioxide.
UK Low Carbon Industrial Strategy
On 15 July 2009, the UK Government published
The UK Low Carbon Transition Plan, The UK
Low Carbon Industrial Strategy (LCIS), The UK
Renewable Energy Strategy and The Carbon
Reduction Strategy for Transport. Together these
set out the policies which the Government
believes may help drive the transition to
decarbonising the UK economy, including in the
areas of energy efficiency and renewable energy.
The LCIS estimates that the global market for
low carbon and environmental goods and
services was worth £3 trillion in 2007/08 and
could grow to an estimated £4.3 trillion by 2015
as international action on climate change gathers
momentum and could grow by more if boosted
by an ambitious global climate change
agreement at Copenhagen this December.
Of the policies outlined by the Government, the
LCIS is perhaps the most interesting as it
identifies the areas of the low carbon sector
where the UK can excel and describes what it
believes needs to be done to unlock this
potential. It will be of particular interest to those
sectors developing low-carbon technologies and
to those providing "green" services as it gives an
indication of the areas of low carbon opportunity
and long-term competitive potential for British
based firms to which the Government is
committed.
While the LCIS considers in some detail the
opportunities, challenges and actions that the
Government will take-on in a number of low
carbon industries, perhaps the clearest indication
of the Government's strategy and approach is the
following summary of where it will spend the
£405 million identified in the
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Cleantech Resource: European Edition
2009 Budget to help establish Britain as a market
leader in low carbon industries and advanced
green manufacturing:
•
Wave and tidal power: £60m will go to wave
and tidal power, with support for a new
Wave Hub demonstrator facility in Cornwall
and a £22m Marine Renewables Proving
Fund to support testing.
•
Offshore wind: £120m to develop Britain's
offshore wind industry. This will be spent on
building new manufacturing facilities,
developing new technologies and improving
testing facilities.
•
Civil nuclear power: The Government will
spend up to £15m to establish a Nuclear
Advanced Manufacturing Research Centre
with a consortium of organisations. The
centre will enable 30 companies led by RollsRoyce to develop processes for making
components and other prerequisites for a new
generation of nuclear power stations.
•
Ultra-low carbon vehicles: A further £10m
will be spent on electric vehicle-charging
infrastructure and to establish a government
office to deliver policy on low-emissions
vehicles.
•
Renewable construction materials: Up to
£6m to build 60 or more low-carbon
affordable homes with innovative, highly
insulating renewable materials such as
biomass products to help show the viability
of the materials.
•
Renewable chemicals: £12 million for a new
open access demonstrator facility for
fermentation of up to 10 tonnes for industrial
biotechnologies, and a fund of £2.5m over
the next two years to support SMEs in using
the facility.
•
Low carbon manufacturing: The
Manufacturing Advisory Service, which
provides companies with help on
implementing more efficient production
processes, will receive an extra £4m to
expand its service to advise manufacturers
competing for low-carbon opportunities.
•
Low Carbon Economic Areas: The
Government wants to help individual regions
of the UK develop low-carbon industries that
capitalise on their strengths. The LCIS
announces that south-west of England will
be the UK's first Low-Carbon Economic
Area (LCEA) for marine energy and the
government will grant it £19.5m. LCEAs are
a partnership of organisations led by the
Regional Development Agency and local
councils dedicated to developing green
industry in the region. Other LCEAs will be
established for technologies such as carbon
capture and storage and offshore wind.
•
UK Innovation Investment Fund: The
Government will invest up to £150 million
to cornerstone the UK Innovation
Investment Fund to address the funding gap
for growing low carbon companies. The
Government hopes to leverage additional
private sector investment and its ambition is
to build this into a fund of up to £1 billion
over the next 10 years.
Delivery is now the challenge and there are
many technical, environmental and commercial
barriers that must still be addressed to reduce the
uncertainty that surrounds many of these areas.
However, the LCIS does provide a useful insight
for manufacturers and investors alike into the
current focus areas for possible investment in the
UK and those technologies that the Government
views as key going forward.
K&L Gates Takes the Lead on LEED
Accreditation
With more than 60 lawyers in the United States
and London having earned accreditation as
Leadership in Energy and Environmental Design
Accredited Professionals (LEED-AP) from the
U.S. Green Building Council (USGBC), global
law firm K&L Gates LLP now offers one of the
largest groups of LEED-accredited lawyers in
the industry. To date, approximately 750 lawyers
have achieved LEED-AP accreditation,
according to the Green Building Certification
Institute’s LEED Professional Directory.
Setting the industry standards for sustainable
building and development, the USGBC’s LEEDAP accreditation equips lawyers to work with
design, construction and operations professionals
to ensure that sustainability goals are effectively
implemented according to the Council’s LEED
Green Building Rating System. In addition,
companies seeking LEED Certified facilities
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Cleantech Resource: European Edition
often require legal representation to ensure that
leases, construction contracts, and operational
agreements comply with green building
standards. The USGBC projects that green
building will grow to become a $60 billion
industry by 2010.
Charlotte partner Walter D. Fisher, a leader of
K&L Gates’ real estate practice area,
commented: “Sustainability and green building
practices are imperative for the future of real
estate and economic development. That is why
K&L Gates committed itself to supporting these
lawyers in their efforts to become accredited and
established a Sustainable Development practice
group to help them take that experience to clients.
Passing the LEED-AP exam and understanding
the elements, applications, and processes that the
LEED standards outline helps us to more
effectively assist our clients with related legal
issues.”
“K&L Gates’ new LEED-APs hail from several
legal disciplines, including real estate,
environmental, land use, corporate, and
construction,” said San Francisco real estate
partner Louise C. Adamson, who was K&L
Gates’ first LEED-AP and helped lead the
firmwide accreditation effort. “This allows us to
enhance our holistic and interdisciplinary
approach to sustainability, combining the whole
range of legal issues impacting a company’s
sustainability efforts. And since our team of
LEED-APs includes both seasoned lawyers and
junior associates, K&L Gates can provide fresh
and innovative advice for years to come.”
Conferences and Events
Clean Energy Seminar
23 November 2009
K&L Gates, the Brazilian Chamber of
Commerce and the Brazilian Embassy will be
hosting a clean energy seminar followed by a
cocktail reception at the London offices of K&L
Gates on Monday, 23 November 2009. Maria
Cull will be speaking along with invited speakers
from the Brazilian business community.
For further details please contact Christian Major
at christian.major@klgates.com.
Webinar: Renewable Energy Funds - New
Frontiers for the Funds Industry
December 3, 2009
Presented via Webinar
Event Web site
PRESENTERS: Kay A. Gordon, Philip J.
Morgan
SPONSORS: Celesq
To register online for any of the above events,
please go to www.klgates.com/events
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K&L Gates is a global law firm with lawyers in 33 offices located in North America, Europe, Asia and the Middle East, and represents
numerous GLOBAL 500, FORTUNE 100, and FTSE 100 corporations, in addition to growth and middle market companies, entrepreneurs,
capital market participants and public sector entities. For more information, visit www.klgates.com.
K&L Gates comprises multiple affiliated partnerships: a limited liability partnership with the full name K&L Gates LLP qualified in Delaware and
maintaining offices throughout the U.S., in Berlin and Frankfurt, Germany, in Beijing (K&L Gates LLP Beijing Representative Office), in Dubai,
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limited liability partnership (also named K&L Gates LLP) incorporated in England and maintaining offices in London and Paris; a Taiwan
general partnership (K&L Gates) maintaining an office in Taipei; and a Hong Kong general partnership (K&L Gates, Solicitors) maintaining an
office in Hong Kong. K&L Gates maintains appropriate registrations in the jurisdictions in which its offices are located. A list of the partners in
each entity is available for inspection at any K&L Gates office.
This publication is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied
upon in regard to any particular facts or circumstances without first consulting a lawyer.
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