December 9, 2008

Climate Change – a new practice group

Awareness of issues related to climate change has led to this topic becoming an area of increasing importance in the legal sector. Accordingly, Mannheimer Swartling is forming a Climate Change practice group that will address the pre-conditions attributable to climate change and will also work toward goals of decreasing the emission of greenhouse gases through trade in emission rights.
“This is another part of our environmental work which our clients will benefit from”, says Bo Hansson, partner and initiator of the group.

Examples of the consequences of climate change are storms, torrential rain, high water levels and floods, high groundwater levels, erosion and landslides. Climate Change is an area which results in new regulations throughout Europe and which leads to changed pre-conditions for companies and organisations. Focus on the environment has become a natural part of many companies both in their daily operations as well as in their long-term planning. It influences business decisions and spawns new legislation which concerns all branches and areas of legal practice.
“The will to actually do something about climate issues exists both among politicians and in the commercial sector. This means that our clients also expect us to be able to address the effects of the measures that are taken and help them identify new, environmentally friendly commercial opportunities. This is an issue which we are increasingly aware of and where we have specialist competence”, says Bo Hansson.
The effects of climate change also lead to different types of disputes. One example which the firm has been involved with is the claims that have resulted from Gudrun, a storm that struck northern Europe in January 2005, destroying the electricity network and devastating large areas of forest.

Group of specialists
Mannheimer Swartling has assembled specialists from different areas within the firm to form its Climate Change practice group. This enables the firm to work proactively and offer an all-round perspective to its clients and provide advice on the business opportunities, problems and strategies which climate change and the measures taken to address it will inevitably lead to. Since legislation related to Climate Change touches on so many different areas, the new group will be connected to just about all the practice groups within the firm. Hans Corell, previously Head Counsel for the UN and currently Senior Counsel at the firm, will also be a member of the group.
“Due to our broad approach and our experience with Climate Change related legal issues, we are unique and can provide our clients with increased value in their business whilst simultaneously making a contribution to the environment”, he says.

The climate year 2009
Next year, the United Nations’ climate conference will take place in Copenhagen. The goal of the conference is that as many countries as possible enter into legally binding climate agreements in order to limit the emission of greenhouse gases. The conference in December 2009 is the last chance for participating countries to draft an agreement that can be entered into before the Kyoto Protocol of 1997 ceases to be valid.
Bo Hansson points out that Sweden has an opportunity to initiate discussion around several interesting issues at the conference.
“ One is that each country receives a mandate to convert emission rights from the national reserve into emission credits in order to stimulate cleantech and renewable projects. The emission credits would help to finance new operations concurrently with a decrease in the number of emission rights. In turn, this would stimulate diminished emission of greenhouse gases due to the increased cost of emission. In other words, each country would be able to create a domestic conversion pressure which would extend beyond what has been agreed at an international level”, says Bo Hansson.

Emission rights
In the firm’s opinion, emission rights derivatives trading is a growth area. The area requires specific expertise which the Climate Change group possesses. Trading in emission rights primarily pertains to CDM projects (Clean Development Mechanisms) and JI projects (Joint Implementation). This area of legal practice mainly involves the drafting of agreements for the purchase, sale and pledging of emission rights and emission credits as well as different types of advice in conjunction with the implementation of the projects. The group’s expertise also includes the financing of and investments in cleantech and renewable energy projects.
Since the projects are often carried out in countries where the firm has offices, the firm can offer a unique full service concept with advice in all areas of international projects.
“Our international offices are exceptionally important here, with their local expertise and knowledge of the domestic markets and their regulations”, says Bo Hansson.

What do the projects involve?
CDM projects can be said to have three purposes. The first is to transfer cleantech knowledge from industrialised countries to developing countries. The second is to achieve the greatest possible benefit for the environment (limitation of emissions) for each euro invested. The third is to achieve a decrease in the emission of greenhouse gases. Most CDM projects are carried out in China, since China was categorised as a developing country at the time that the international treaty was signed.
JI projects can be said to have two purposes which are partly to achieve the greatest possible benefit to the environment (limitation of emissions) for each euro invested and partly to achieve a decrease in the emission of greenhouse gases. JI projects are carried out between industrialised countries and developing countries such as two countries within the EU.
CDM and JI projects, together with the emission rights, form the Cap & Trade system. In summary, this entails that the emission of carbon dioxide within a certain, geographically defined area, may only occur up to a certain limit (the “Cap”). Those industries which require greater volumes than the permissible limit can purchase emission rights on the open market (“Trade”), where each emission right is equal to one ton of carbon dioxide or the equivalent thereof. The emission rights are thus a type of financial instrument which are steered by the requirements of the market. Industrial companies can also participate in CDM and JI projects, whereby they acquire emission credits. These are also a type of financial instrument and one emission credit is also equal to one ton of carbon dioxide or the equivalent thereof.
Trading in emission rights is steered by several statutes and standard agreements which encompass international law, EC law, administrative law, and private law. Within the area of international law, the United Nations Framework Convention on Climate Change and the Kyoto Protocol provide the main guidelines. Within EC law, the Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC the Directive 2004/101/EC of the European Parliament and of the Council of 27 October 2004 amending Directive 2003/87/EC establishing a scheme for greenhouse gas emission allowance trading within the Community, in respect of the Kyoto Protocol's project mechanisms and the Commission Regulation (EC) No. 2216/2004 of 21 December 2004 for a standardised and secured system of registries pursuant to Directive 2003/87/EC of the European Parliament and of the Council and Decision No. 280/2004/EC of the European Parliament and of the Council provide the main guidelines. There is also an Emission Rights (Trading) Act, an Emission Rights (Trading) Ordinance as well as several standard agreements within the area.

Read more about the Climate Change-group.
Facts on the Kyoto Protocol:
The Kyoto Protocol is a convention which was entered into in Japan and entered into force in 2005. The goal of the convention is to decrease the emission of greenhouse gases by at least five per cent from the 1990 levels during the period 2008-2012. The EU countries are to decrease emissions by eight per cent and Japan is to decrease emissions by six per cent. Sweden is one of the countries which has successfully decreased its emissions in accordance with the convention.