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Practice profile: Climate change

Practice profile: Climate change

A spate of domestic legislative activity has kept climate change lawyers well and truly run off their feet, although the economic downturn has not left them completely unscathed, Zoe Lyon writes…

A spate of domestic legislative activity has kept climate change lawyers well and truly run off their feet, although the economic downturn has not left them completely unscathed, Zoe Lyon writes

The economic downturn has seen some practice groups taking a step back from the spotlight, but for climate change teams, it has never shone brighter.

For lawyers in the field - who frequently see issues relating to their bread and butter work splashed across newspaper headlines - the past year has been arguably their busiest yet, and with some clearing up of regulatory uncertainty, activity looks set to ramp up even further.

The legislative landslide

The spike in work has been largely the result of an avalanche of new domestic legislation, notably, the National Greenhouse Energy and Reporting Act 2007 (NGERS), the Carbon Pollution Reduction Scheme Bill 2009 (CPRS Bill) and the Renewable Energy (Electricity) Amendment Bill 2009 (RET bill). The legislation is detailed, and in some parts uncertain, and has left many businesses in need of urgent guidance.

First up, the first NGERS reporting date is just around the corner - in October - and, says Allens Arthur Robinson partner Grant Anderson, it's a complicated act which places some onerous compliance obligations on businesses. "It's an area that's quite complex and it carries with it very heavy penalties for chief executive officers where their company contravenes that legislation," he says.

"You've got the act itself, which is underpinned by fairly extensive regulations, and even more extensive measurement determinations. So, one of the areas that we've been assisting clients on is developing compliance manuals that are tailored to their businesses so they don't need to wade through 250 pages of legislation."

Baker & McKenzie partner Martijn Wilder says businesses vary greatly in their preparedness for the October reporting deadline. "We've seen a group of companies who have been very, very proactive about it, who have treated this is in the way you treat GST implementation - so comprehensive, full implementation, and getting it right," he says. "Then I've had a couple of calls in the last week with people saying 'We've just worked out we have to do something on NGERS and we're just starting on it now'. So there's definitely a range of companies who haven't addressed it adequately."

The CPRS Bill has also been keeping climate change teams busy, both in assisting businesses prepare submissions to Government relating to the nuts and bolts of the scheme, and helping clients to understand its related requirements.

Mallesons Stephen Jaques partner Vishal Ahuja says that a key concern for clients has been dealing with the issue of carbon pass-through - that is, shifting the liability for the cost of carbon permits down the supply chain to end users. "The work has involved analysing existing contracts and creating carbon pass-through clauses for new contracts.

"It's a big issue because we're talking about millions of dollars having to properly flow through the system," he says. "This has been going on for a couple of years now, but with the legislation coming out we've got a bit more detail."

Anderson also points to the CPRS's obligation transfer number (OTN) system as an area that clients are seeking advice on. The OTN system is an administrative mechanism allowing scheme obligations, where practical, to be pushed from entities at the top of the supply chain to those further downstream, and Anderson says it can become complicated.

"We've been assisting clients to work through the implications of that for their particular corporate group structure, because it does have a different impact depending on [the business structure] .... And it's only when you have a concrete situation and you have to apply the provisions to it that the little twists and oddities arise," he says.

Remaining regulatory uncertainty

While his teams' workflows have generally remained healthy, Wilder says the Federal Government's decision to push back the start date of the CPRS for a year (from 2010 to 2011) did have a dampening effect.

"There's no doubt that when the Government announced the delay of the scheme it had an immediate impact on the market. We saw a couple of the deals that we were working on get pulled, and we saw overseas companies who were planning on opening offices in Australia delay that. We [also] saw a lot of the Australian banks and businesses who'd set up climate change teams wind them back or get rid of them," he says.

Ahuja adds that that the delay in getting the CPRS bill passed through the Senate has also had an impact on workflows, however he says he still expects workflows to continue to increase. "With the delay in legislation, obviously the spike [in work] we were expecting has lost some momentum. [But] once the legislation is passed, presumably with some changes, and we get the regulations which will have a lot of the detail, there will be a whole new round of re-understanding and going through the detail," he says.

Similarly, while Wilder believes the RET Bill (which aims to expand the renewable energy target to 20 per cent by 2020) has rekindled interest in renewable energy projects, he says work there has also stagnated pending its passing through the Senate. "A lot of our renewable energy clients have gone on shoestring budgets until the legislation gets passed," he says.

Anderson, however, is confident of its eventual passing and a corresponding resurgence in work. "[The RET Bill] is stuck in the Senate for political reasons ... but I think the Opposition will support it ... because it's an obvious way to move a low-carbon economy," he says. "We're certainly doing a lot of wind farm project work. A lot of [the projects] are not necessarily announced, but they're working away, on the drawing board."

On the international level, Wilder says activity has also stalled - to a degree - in anticipation of the December international negotiations in Copenhagen which are expected to clarify international obligations post-2012.

"A lot of the governments we do carbon buying for are out there post-2012 buying, but most of the financial institutions have taken a deep breath and are waiting to see what's going to happen at Copenhagen," he says. "I think, at an international level, when a lot of the regulatory issues are resolved ... the market will pick up again."

The economic downturn

The lawyers Lawyers Weekly spoke to agreed that the downturn has had a relatively small impact on climate change workflows, with legislative activity acting as the overriding force.

"The fact is, when you've got legislation that's in, and it's new, and it has to be complied with, there's always going to be work," Wilder explains. "The thing you've got to understand about climate change is that while there's always an undercurrent of work there, the rate at which it grows is linked to the rate at which there's administrative change.

"No company is going to reduce emissions unless it's forced to, and now all of a sudden we have law and it's complex and [businesses] need help on it."

However, he acknowledges that climate change teams haven't escaped the downturn completely unscathed. "From my perspective, the height was a year ago. Around the middle of last year the markets were going crazy, people were throwing money at anything, and we had clients who would set up carbon funds or other vehicles and raise money instantaneously. The market just doesn't do that anymore," he says.

"The problem in this financial crisis has been that it's very difficult to get money. We probably have about eight clients setting up some sort of climate-related fund, and while they're still all having varying degrees of success, there's certainly been a slowdown, and the timeframes in which they expect to be able to raise the money in have been blown out."

A legal hot spot

Wilder says that one thing neither regulatory uncertainty, nor the economy, has dampened, is the interest of lawyers in the climate change field. "I probably get between one and four CVs a week from people seeking jobs in the climate area. I get CVs from people who are graduates and people who are mid-career who actually want to give up everything and start again and do climate change work," he says.

Ahuja agrees that there is a lot of interest in the field, and he puts it down to the diversity and topicality of the work. "One of the good things about it is it covers so many areas of law, and ... it's in the papers every day," he says. "It's new and exciting and topical, and there is also an element of being involved in something that you hope will have a positive result."

>> Click here to read more articles from our Practice Profile series

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Practice profile: Climate change
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