Research Trends and Conclusions: Environment 2009
Helen Lamb -
Lawyers are entering a "new age for environment law", says Robert Falk of Morrison & Foerster LLP.
"We are now at the threshold of a more holistic and integrative approach," no longer dealing exclusively with traditional issues such as air quality, water quality and soil contamination. For example, many lawyers in this field are now working with laws and regulations structured to create market-based incentives for companies to minimise their impact on the climate.
Climate change is a global issue that touches on many areas of legal practice. The changing character of the work in this sector is having a corresponding effect on the services lawyers provide, and climate change and clean technology law is keeping many busy. Numerous firms have established climate change practices and, as its importance increases, Who's Who Legal may in future publish a book focusing specifically on this area.
Paul Sheridan from CMS Cameron McKenna notes "the world of environment law practice is in a very interesting and complex phase" and the specialists featured in this publication are well placed to help clients navigate this new terrain.
The Economy and the Environment
Alongside an impending climate crisis, the world is also facing a global credit crisis. The decline of the global economy has resulted in a decrease in transactional work though Gail Flesher, head of Davis Polk & Wardwell's environmental group, expects to see "a greater focus on environmental aspects of restructuring and distressed assets" in its place, as well as an "increase in complex disclosure work". Many we spoke to were also quick to highlight that compliance work is not affected in a downturn.
Michael Zischke from Cox Castle & Nicholson LLP notes what is probably the biggest shift: "Although the economy is hurting, a renewed federal emphasis on environmental issues in the US, combined with the emergence of climate change as a significant, growing and evolving issue, means that there is plenty of work for environmental lawyers." In his budget speech President Obama underlined this focus: "The Administration is developing a comprehensive energy and climate change plan to invest in clean energy, end our addiction to oil, address the global climate crisis and create new American jobs that cannot be outsourced."
Daniel Weiss from US think tank the Centre for American Progress praises President Obama's fiscal year 2010 budget, which "builds on the $91 billion of clean energy investments in the American Recovery and Reinvestment Act to continue investing in clean energy programmes to create jobs, increasing national security, and reducing global warming". He also identifies the inclusion of revenue in 2012 from the auction of all greenhouse gas emission allowances to major polluters under a cap-and-trade system as the most significant energy proposal in this budget, which aims to raise almost $650 billion between 2012 and 2019, and similar transactions can be expected in the emerging carbon offset markets worldwide. March saw the release of the Waxman-Markey draft, outlining a federal cap-and-trade programme and a range of other measures, which has been positively received by legislators and is being deliberated as this publication goes to press. Clearly, the environment is having an effect on global economics and that steps to combat it may even contribute towards financial recovery.
Climate Change
Climate change is becoming an increasingly important issue for businesses and their lawyers. E Donald Elliott from Willkie Farr & Gallagher LLP in Washington, DC, has seen "an ever increasing number of public companies come to recognise that efforts to combat climate change will affect their businesses in material ways." Roger Martella, from Sidley Austin LLP, agrees: "Upcoming greenhouse gas controls, both domestic and international, will create unprecedented challenges and opportunities for every sector of industry of the economy. Our clients are increasingly recognising the need to be proactive and to begin to prepare for significant impacts and seize opportunities to grow into new areas." Many firms have set up specific groups to respond to this need. Sidley Austin has had informal capabilities in this area for a number of years, but it officially established its climate change group in July 2008. "Counselling on climate change issues in the past nine months has become the leading driver of growth for our environmental and energy practice," says Martella.
It is not just private-sector companies that will be affected by climate change. The public sector is also becoming more aware of how it will be touched by these issues. The Carbon Disclosure Project (an independent not-for-profit organisation) released its first public procurement report in March 2009, citing "the power of the public sector to use procurement to transform the UK to a low carbon economy". Kathy Mylrea from CMS Cameron McKenna highlighted this "greening of procurement for carbon reduction and overall environmental performance purposes" as an area that will generate a great deal of work in the future. Environmental initiatives also play a part in the 2009 UK budget. It includes the world's first binding and near-term carbon budget, committing the UK to cutting carbon emissions by 34 per cent by 2020 and allocating £1.4 billion of new funding to "combat climate change, by supporting low carbon industries and green-collar jobs".
Decarbonising the world economy is top of the agenda for many governments and while the nature of the problem is global, the proposed legal solutions are developing at an uneven pace on regional and local levels. Lawyers will play a pivotal role not only by building on these solutions but by helping to address policy conformity between regions, such as the EU and the US, to help guarantee that clients are not subjected to conflicting rules when working across borders. The difference in approaches between the developed and developing world is also lessening.
"North America and China are more similar in their approach towards climate change than people think," says Martella. They are addressing many climate change issues from the same perspective - energy efficiency and sustainability. The Chinese government recently brought about a new crop of "sustainable economy" rules over the past year. Charles McElwee from Squire Sanders & Dempsey LLP discusses these in greater detail in his article, which follows; the authors from Bennett Jones LLP talk about the development of Canadian energy and environmental regulation in their article. They highlight the Canadian government's position, which views "a new energy economy as a key element of a broader economic recovery", and the US-Canada Clean Energy Dialogue, which aims to "enhance cooperation on a number of issues concerning the development and deployment of clean energy".
Clean Technology and Nuclear Power
Environmentally friendly technology will play a key role in addressing climate change and the cleantech sector is experiencing unprecedented growth. Market research company Clean Edge reports that the worldwide revenues of renewable energy and clean technology companies saw a 53 per cent increase in 2008 over the previous year, reaching $116 billion. It predicts that by 2018 there will have been formidable growth in this sector, with estimated revenues growing to $325 billion and creating 2.7 million new jobs. The Obama administration's interest in "green-collar jobs" is no doubt another contributing factor to the buoyancy of this area. Maria Cull from K&L Gates LLP sees "clients in different communities around the world face similar challenges and opportunities as the new green technology revolution gains momentum."
Cleantech is no longer solely a question of renewable energy, energy security, commodity security and population growth are also considerations. According to Mylrea one of the biggest challenges for lawyers active in cleantech is the speed at which it is developing. Lawyers must be alert to rapid changes to the technology and legal requirements to enable clients to comply with future regulations and policy. The cleantech sector is extremely active in the UK and has recently benefited from the creation of a new fast-track patent "Green Channel" in which applicants that can demonstrate their invention relates to "green" or environmentally friendly technology could have their patent processed in under half the current average processing time.
Nuclear power is once again a growing source of business for lawyers based in the UK. The government has committed itself to having new nuclear power generation operational by 2018 with the prime minister calling for "a renaissance of nuclear power". Nuclear decommissioning in England is also an active field with a number of the lawyers we identify in this book working on decommissioning issues over the last year. More nuclear plants are likely to appear across Europe, although there remains strong opposition.
Enforcement and Legislation in the EU and US
Environment law has always been fast moving - nowhere is this more evident than in the US. Many see the American market as poised for a new and dramatic round of fresh environmental initiatives, as well as renewed and reinvigorated enforcement activity. Russell Eggert from Reed Smith LLP compares the "low emphasis on environmental enforcement under the Bush administration" to the more proactive Obama government, which "will create an up-tick in enforcement proceedings and increased legislation - particularly with regard to climate change, product safety, waste disposal and water quality". In April 2009 the EPA published a widely anticipated "endangerment finding", which identified six greenhouse gases that jeopardise public health and welfare. It also concluded that motor vehicle emissions contribute to greenhouse gas pollution. "The EPA finding will spur consideration of new regulations for mobile and stationary sources and will serve as a major impetus for legislation," says Theodore Garrett from Covington & Burling LLP in his article.
California has already implemented major initiatives for reducing greenhouse gas emissions and many sources regard the state as "ahead of the curve" in the US. Robert Falk places California "at the cutting edge of the ‘new' environmental law movement both in terms of the legal system (through enactments and implementation of monumental legislation such as the Assembly Bill 32 governing greenhouse gas emissions) and through ‘cleantech/greentech' development in its renowned technology, innovation and entrepreneurial sector". Despite California's pioneering stance the perception in Europe is that the European Union is further developed in relation to environment regulation and legislation compared to America - "The US is out of the blocks with the Obama administration, but the EU is already halfway round the tracks," said one source.
Maria Cull notes that,"Although Europe is leading the way with established legislation, America is catching up fast." The cornerstone of the EU's climate change policies is the Emissions Trading Scheme (ETS), which commits to cutting overall greenhouse gas emissions to at least 20 per cent below 1990 levels by 2020. Other targets have been set to achieve this reduction by the same date: to boost energy efficiency by 20 per cent, to increase the share of renewable energy in energy consumption to an average of 20 per cent across the EU and to derive 10 per cent of transport fuels from bio fuels.
A major piece of EU legislation that continues to occupy many practitioners is REACH, the "registration, evaluation, authorisation and restriction of chemicals" - "probably the most important and cumbersome EU regulatory developments of the last 10 years," according to Jean-Philippe Montfort, head of the Mayer Brown REACH team. He says that REACH "affects and will continue to affect for years to come not just chemical companies but every company manufacturing or selling products made with chemicals in the EU. These companies need expert assistance to navigate through the complexity of the REACH requirements."
Lawyers in the US are seeing more work relating to the Comprehensive Environmental Response, Compensation, and Liability Act. William Hyatt from K&L Gates LLP predicts that Superfund work is going to be an active area over the next few years. The American Recovery and Reinvestment Act includes $600 million for the Federal Superfund remedial programme and Garrett notes that "Recovery Act funding can help to increase the speed with which these [Superfund] sites are returned to productive use, and it is also expected to jump-start the local economy by creating jobs".
There has also been a visible increase in environment litigation in the US with a great deal of work stemming from the Clean Air Act and the Proposition 65 law (The Safe Drinking Water and Toxic Enforcement Act of 1986). One west coast source calls the Proposition 65 litigation a "unique Californian animal, which has impacted significantly on the litigation landscape".
It is clear that the regulatory landscape continues to change. As enforcement levels, driven in part by climate issues, are stepped up in the US and across the world more litigation is sure to follow. Increased regulation and enforcement has also affected investors and lenders. Louise Moore from Herbert Smith LLP in London notes that the impact of increased regulation and enforcement on the bottom line of already cash constrained companies has led to investors placing greater emphasis on due diligence but warns that we "must be careful that due caution does not translate itself into undue market paralysis".
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In summary, this is a complex time for environment lawyers. A noticeable drop in transactional work has in part been offset by a rise in litigation, increased enforcement and greater emphasis on climate change. The fast-changing nature of this sector will continue to make lawyers who can provide flexible, up-to-date and practical counsel invaluable to their clients.