Now that China has signed the Copenhagen Accord, savvy law firms need to develop climate change expertise to stay ahead of the curve. ALB investigates the evolution of the climate change practice

China, together with another major emitter of greenhouse gases - India - has agreed to support the Copenhagen Accord. This Tuesday, it formally joined the more than 100 countries that have chosen to associate themselves with the non-binding Accord.

Last December, Copenhagen was host to the United Nations Climate Change Conference (COP15), where a motion to "take note of the Copenhagen Accord" was achieved by the delegates. The Copenhagen Accord sets a goal of keeping temperature rises below 2 degree celsius, and a goal of pledging US$100bn per year from 2020 to help developing countries adapt to climate change.

Uncertainty still exists around the legally binding power of Copenhagen Accord and its application at a national level, but climate change is an issue which will only intensify as time passes. Businesses are already feeling the pressure to operate in an environmentally sustainable manner and many are developing their operations with this in mind. "The Chinese government has done a lot in terms of promoting climate change and a low-carbon economy," said Ying Ding, an associate at Norton Rose focusing on carbon finance and renewable energy projects in China. "Climate change is quite a popular concept in China and it is considered as one of the top environmental issues. It has a close relationship with energy security, so it has to be a priority."

Baker & McKenzie, which has a well-established global environmental and climate change practice, sees a promising future for the climate change legal practice in China. "Governments around the world, and China is no exception, are increasingly incorporating climate change, the environment, and sustainability issues into their laws, regulations, and policies," said Beatrice Schaffrath, co-head of Baker & McKenzie's China Environmental and Climate Change practices. "Thus, climate change issues now have the potential to have a profound impact on clients' bottom lines both in terms of costs - for example, environmental taxes and levies - and in terms of cost-savings - such as subsidies for renewable energy projects and incentives for increased energy efficiency."

Practising climate change
Climate change can cut across a number of legal disciplines, from litigation to project finance and intellectual property. A variety of clients require climate change advice - hence the vast potential of the climate change practice. The commercial opportunities created by climate change initiatives have translated into opportunities for legal work and climate change practices are emerging in law firms as clients demand new information. "As climate change is a relatively new area in China, I think this fresh field is going to get more and more active in the near future," said Michael Yu, partner at Global Law Office.

Some larger international firms, such as Baker & McKenzie and Norton Rose, have developed an expertise in both global and regional climate change policies and regulatory matters. It is this expertise which adds value when clients are looking to make investments in clean technology, renewable energy projects or the carbon market.

"What really counts is legal certainty to make investment decisions," said Tim Baines, associate at Norton Rose. "For clients who are particularly focused in this area and do a lot of carbon trading, it is essential to keep abreast of the regulatory environment and they look for detailed advice on exactly what is going on and they expect us to be on top of it."

The concept of a climate change practice is still relatively new among domestic firms. Nevertheless, there has been an increase in the number of renewable energy projects in China and legal work is being generated as domestic firms assist with the process of qualifying for CDM status. "We work for several kinds of CDM projects such as wind power plants, hydro power projects and natural gas power projects," said Zhu Hongwen, partner at Sunshine Law Firm. "We advise the client from the very beginning, when they want to check whether their project is qualified for CDM, until the [certified emission reduction] is issued and then to delivery and payment."

The majority of Zhu's clients consists of Chinese owners of these projects and Sunshine Law Firm has built a reputation for work in this area as a result of the number of CDM projects it has advised on.

In China, there is a particular need for specialised knowledge of renewable energy law and an understanding of the framework which regulates clean development mechanisms (CDM). "The knowledge of CDMs is very helpful when you do project finance work or when you practise law relating to the energy sector because CDMs are a very important revenue stream for those projects," said Ding. "In many projects it is a consideration and I think the specialised knowledge in climate change will play a role."

Domestic firms also have the opportunity to work with international firms on climate change matters. As international firms are unable to advise on PRC law, domestic law firms are called in to assist on domestic legal issues and provide final legal opinions. Global Law Office is one domestic firm that has worked with international juggernaut Norton Rose on climate change matters. "From the lawyers' perspective, it is a win-win situation," said Yu. "PRC law firms are still growing and we are trying to be more aggressive on the international market... All CDM projects have a cross-border nature and, like an IPO, this sort of transaction normally requires PRC counsel as well as international counsel."

Few corporates will be able to avoid often complex climate change issues in the future. This being the case, eventually firms will need to address their capabilities in the area if they are to avoid disappointing a growing tide of advice-hungry clients. ALB

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