Paul Gutermann and Kenneth Markowitz presented at Carbon Expo 2008 in Cologne, Germany. Mr. Gutermann discussed the ongoing battle in the United States between state and federal authorities over climate change initiatives. Mr. Markowitz presented on the challenges associated with ensuring compliance across market-based systems.

Mr. Gutermann’s presentation explored how states like California and the members of regional initiatives in New England, the West, and the Midwest run the risk of conflicting with federal programs or entering areas of exclusive federal power. Regional cap and trade programs are most susceptible to challenges under the Commerce, Compacts, and Supremacy Clauses of the U.S. Constitution.

Read the rest of this entry »

For further information about this topic, please contact Akin Gump.

With numerous exchanges now trading various carbon-related financial instruments (CERs, EUAs, futures, etc.), carbon investors face new questions regarding where, when, and how to get involved in the carbon trading market.

ClimateIntel prepared a table to help market participants track and evaluate these choices.

For further information about this topic, please contact Akin Gump.

China’s wind power generation rose 95.2% to 5.6 billion kw hours in 2007, from a year ago, reported the Xinhua News Agency. A report released by the government said that China had wind power facilities with a combined installed capacity of 6.05 gigawatts at the end of 2007, up from 2.67 gigawatts in 2006. The country achieved the goal set for the 2010 three years ahead of schedule. Wind power projects under development will make up for a combined installed capacity of 4.2 gigawatts.

According to the Medium and Long-Term Development Plan for Renewable Energy in China published by the National Development and Reform Commission (”National Development Plan”), China will generate 15% of its energy from renewable sources such as wind by 2020. To achieve the goal, the government plans to increase its wind power equipment to a combined installed capacity of 10 gigawatts by 2015, and to 30 gigawatts by 2020. Shanghai Daily reported that the 2020 target is likely to be increased by the government to as much as 100 gigawatts, which, according to WSJ Environment Capital, would be greater than the total global current installed wind capacity.

The rapid increasing utilization of wind power for electricity generation has been driven by the following factors:

Read the rest of this entry »

For further information about this topic, please contact Akin Gump.

Further demonstrating its leadership on climate change response, California’s Secretary for Environmental Protection signed an agreement with the United Nations Development Programme (UNDP) to support China’s efforts to address climate change. Pursuant to the agreement, California will share valuable information, such as academic research, effective policy initiatives, lessons learned and technological innovations, with the Chinese provincial governments to support their efforts to develop strategies and actions to mitigate global climate change. California is currently developing its own program to cut greenhouse gas emissions by 30% by the year 2020.

Governor Schwarzenegger issued the following statement about the agreement: “California alone cannot solve climate change - this is a global problem that requires a global solution. America has to lead, and we are doing so even with or without Washington. California is not waiting for the federal government to take action but instead we are forming agreements and building relationships with countries like China to fight climate change.”

For further information about this topic, please contact Akin Gump.

The UNFCCC Compliance Committee recently suspended Greece from trading carbon credits under the Kyoto Protocol. The Committee determined that Greece does not reliably observe and measure greenhouse gas (GHG) emissions, as required by Kyoto. This marks the first time that a country has been sanctioned under the UN system for inadequate GHG reporting.

Greece is now ineligible to participate in the Kyoto Protocol’s flexibility mechanisms, meaning it cannot buy credits to meet its own emissions targets or sell credits from domestic projects that generate excess emissions allowances.

Read the rest of this entry »

For further information about this topic, please contact Akin Gump.

Ahead of the United States in adopting a national scheme to cap and reduce greenhouse gas (GHG) emissions, Canada recently announced the final regulatory framework for its Turning the Corner plan to reduce GHG emissions by 20% from 2006 levels by 2020. Promulgated pursuant to the Canadian Environmental Protection Act of 1999, draft regulations to implement the Turning the Corner plan are expected in the Fall of 2008. In announcing the plan, Canada noted that its performance in reducing emissions “has lagged behind most OECD countries for well over a decade.”

While Canada’s Turning the Corner plan is analogous in many respects to the leading U.S. legislative proposal to cap and reduce GHG emissions – S.2191, the America’s Climate Security Act of 2008 (ACSA), introduced by Senators Lieberman and Warner – one major difference is the lack in Canada’s plan of a mechanism to address the competitive impact to Canadian manufacturing firms of imports produced under less stringent GHG emissions standards. According to the Turning the Corner plan, the final regulations will cover 16 industrial sectors, including refineries, chemical and fertilizer plants, and the cement, steel, and pulp and paper industries. Many of the products produced by these industries compete in Canada’s domestic market (and abroad) with products produced in China, India, and other countries that currently are not planning similar curbs on domestic GHG emissions.

Read the rest of this entry »

For further information about this topic, please contact Akin Gump.

The European Climate Exchange (ECX) opened trading yesterday for emissions credits that extend beyond the Kyoto compliance period. The Kyoto Protocol, which went into force in 2005, will sunset in 2012. International negotiations are currently underway for a successor agreement that will run from 2013-2020.

ECX opened the futures markets for the December 2013 and 2014 settlement periods, with credits for 10,000 tons of carbon emissions being purchased by an undisclosed party for 27.7 Euros (approximately $42) per ton. These credits may be used in the European Union Emissions Trading System (EU-ETS) for compliance with future emission reduction obligations to which the European Union is expected to commit. The European Commission recently issued proposed Directives for governing the next phase (Phase III) of the EU-ETS, beginning in 2013, with the intent that the market will continue even if there were no post-Kyoto agreement in place.

London is, in many respects, the center of the carbon trading market. As recently as six weeks ago, publications such as the Financial Times and the Times of London published articles expressing doubts about the market. Two of the most critical problems facing the carbon market relate to the process for issuing credits under the United Nations process and uncertainties over the structure of the post-Kyoto regulatory system. While the inefficiencies of the Clean Development Mechanism certification process remain, this trade reflects confidence that, at least in the EU, there will likely be a functional carbon market beyond the expiration of the Kyoto Protocol.

For further information about this topic, please contact Akin Gump.

At yesterday’s hearing before the House of Representatives Select Committee on Energy Independence and Global Warming, Administration officials and representatives of civil aviation organizations leveled strong criticism against European Union (EU) plans to bring civil aviation into its Emissions Trading System (EU-ETS). Under proposed directives issued in December 2007 and January 2008, the EU has laid out a plan to cap and reduce the greenhouse gas emissions of air carriers operating in the EU – including foreign-based carriers flying into or out of EU airports.

As noted by Committee Chairman Ed Markey (D-Mass.), civil aviation accounts for 12 percent of U.S. transportation CO₂ emissions and three percent of U.S. total CO₂ emissions. According to the U.N. Intergovernmental Panel on Climate Change (IPCC), civil aviation represents at least three percent of the total anthropogenic impact on climate change.

Witnesses at yesterday’s hearing – entitled “From the Wright Brothers to the Right Solutions: Curbing Soaring Aviation Emissions” – described a range of technology and policy measures, centered around increasing fuel efficiency, that are best-suited to curb aviation emissions. But the witnesses were uniform in condemning the EU plan to subject aviation to mandatory emissions reductions.

Read the rest of this entry »

For further information about this topic, please contact Akin Gump.

Trade lawyers and environmentalists have long debated whether international trade rules under the General Agreement on Tariffs and Trade (“GATT”) and, since 1995, the World Trade Organization (“WTO”), permit imported goods to be regulated on the basis of the conditions under which they are made. The debate centers around so-called processes and production methods, or “PPMs.” While some trade law experts believe that GATT and WTO rules permit PPMs under certain circumstances, the weight of opinion seems to be on the side of those who believe they do not.

Current legislative proposals in the United States and the EU to regulate imported goods based on their “carbon footprints” are stirring up the old debate about the legality of PPMs under international trade rules. In the United States, the most prominent such proposal was introduced by Senators Lieberman and Warner as part of the America’s Climate Security Act of 2007 (“ACSA”). Under ACSA, importers of certain greenhouse gas (“GHG”)-intensive goods would be required to provide special international allowances to cover the emissions associated with the manufacture of the imported goods. EU leaders have discussed the possibility of imposing “carbon taxes” or comparable import measures, but to date no such similarly sweeping requirement has been formally proposed or introduced.

Notably, however, the EU’s recent Proposed Directive on the Promotion of the Use of Energy from Renewable Sources took a step in this direction by setting forth environmental sustainability criteria for biofuel that could create disincentives for the importation of biofuel produced under conditions that harm carbon sinks such as forests and grasslands.

Read the rest of this entry »

For further information about this topic, please contact Akin Gump.

This past weekend, the Guardian reported on a “green ultimatum” from the EU that could force US airlines to either capture the environmental costs of carbon emissions from aircraft or to face restrictions on flying permissions to EU airports.

According to the Guardian, EU Transportation Commissioner Jacques Barrot intends for the issue of carbon credits to play a significant role in the negotiation of a second phase of the EU-US Open Skies Agreement, a treaty that permits any EU airline and any US airline to fly between any point in the EU and any point in the US. The first phase of the agreement goes into effect on March 30, 2008, and discussions on the second phase are scheduled to begin in May 2008.

The Guardian notes that, under the Open Skies policy, “EU states can suspend flights from the US to Europe if insufficient progress is made on a second phase by 2010.” European air carriers have expressed competitiveness concerns over an EU Directive designed to progressively incorporate aviation emissions into the European emissions trading scheme — beginning with flights between EU airports in 2011 and expanding to any flight arriving at or departing from EU airports in 2012. The announcement by Mr. Barrot suggests that the EU may try to level the playing field for European carriers through multilateral treaties, in the absence of an international agreement on carbon emissions from civil aviation.

For further information about this topic, please contact Akin Gump.