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Climate change is doing more than raising Earth’s temperature: It’s altering the practice of corporate law. Attorneys within the climate change practices at law firms around the nation say factors as varied as the regulatory uncertainty about carbon dioxide emissions, hedge fund interest in energy efficiency and the roaring market for solar energy are bringing new considerations into the bread-and-butter work of litigating, due diligence and routine financial disclosures. “The problems of climate change and clean technology cut across all areas of law,” said Robert L. Graham, chairman of Jenner & Block’s environment practice. “We have clients at the forefront of renewable energy and energy efficiency technology, so that’s IP. “We have clients confronted with shareholder demands concerning climate change, so that is corporate and securities law. All of it is what lawyers do but the difference is the uncertainty. We don’t know what the law will be on the federal level,” he said. And that uncertainty ranges from the courtroom to the shoreline. Tom Lindley, head of Seattle-based Perkins Coie’s environment practice from the firm’s Portland, Ore., office, represents a client interested in purchasing paper mills. But the client is worried that the mills, located on river banks, may be inundated or isolated by sea levels projected to rise two to three feet in coming decades. “Climate change is a big deal, right now, for transactional due diligence. Do you locate anything near a shore anymore?” Lindley asked. “If you build a plant with a 50-year life and before that waves are going to be crashing closer and roads and railroads are negatively impacted, someone did horrible due diligence.” Climate change concerns have stalled the sale of a major power plant sought by a client of Jenner & Block’s Graham. “An issue for them is whether this plant will get licensed when it is scheduled to,” Graham said. “The federal permitting process might require an environmental assessment of the impacts of [carbon dioxide] emissions and the alternatives. Investors want to know if they are going to have to lower the emissions of a power plant, and what does that mean to the business?” Pete Fontaine and Bill Stewart of Cozen O’Connor in Philadelphia recently released an analysis warning that corporate officers and directors have to anticipate an obligation to disclose carbon emissions in the near future. Both attorneys say the U.S. Supreme Court ruling a year ago that carbon dioxide is a pollutant subject to regulation put not just the Environmental Protection Agency (EPA) but the corporate world on notice. Massachusetts v. EPA, 127 S. Ct. 1438 (U.S.). “It will be a hard argument in the future for any corporate officer or director to claim the science was too vague in 2007, nobody knew what to do, when five justices of the Supreme Court said you can’t ignore this problem anymore,” Stewart said. Fontaine noted that “[o]ur fundamental point is that there is regulatory and economic risk associated with the policies and initiatives emerging to address climate change, regardless if you agree or disagree with the science. “If you do any work for companies subject to SEC regulations, you need to have a handle on how climate change might impact on material risk disclosure,” Fontaine said. Carbon as a liability Bankers, insurers and shareholders are challenging corporations to recognize carbon emissions as a liability, said former New York Governor George Pataki, who with John P. Cahill, his former commissioner of the New York Department of Environmental Conservation, heads the climate practice at New York’s Chadbourne & Parke. There is a large and growing demand for lawyers savvy about climate change investment opportunities and liabilities, he said. “Every major investment bank or commercial bank has a clean energy fund,” Pataki said. The investment banks are looking where and how to invest, he said, lending on the basis of risk to carbon dioxide exposure. “There is a great deal of legal involvement structuring the deal, helping with everything from permitting to financing to closing, protecting intellectual property rights and providing proactive advice to clients who could face risk or see opportunity,” Pataki said. Pataki and Cahill helped create the Regional Greenhouse Gas Initiative (RGGI) that now links nine Northeast and Mid-Atlantic states in a regional carbon dioxide “cap and trade” program for power plants. A national “cap and trade” system would require the government to set a national “cap” on carbon dioxide emissions and require major sources of emissions, such as coal power plants and factories, to reduce emissions below the cap. Companies that did not reduce emissions enough would have to buy emission credits from companies that produce excess credits through emission reductions. Carbon-emission trading makes energy efficiency a key consideration for mergers and acquisitions, Cahill said. “There may be tremendous opportunities to reduce that carbon footprint and create value through carbon credits. In order to do that you have to know the various regulatory structures, whether it is RGGI here in the Northeast or what is developing in the Midwest,” Cahill said. “A climate change practice integrated with M&A [mergers and acquisitions] better serves our clients,” he added. “Firms that don’t have the deep appreciation of the impacts of climate change when looking at a significant transaction are missing both opportunities and risks.” Reed D. Rubinstein of Greenberg Traurig’s Washington office said climate change regulation is already regarded as a certainty by corporations, while the potential to profit on carbon markets is tantalizing though less certain. “If we listen to the three people left standing in the presidential race, there is not that much difference about climate change,” he said. “Changing carbon emissions from free to a liability changes everything for a lawyer guiding companies through the M&A process and helping them to comply with, and take advantage of, carbon regulation.” Corporate America has accepted that the federal government will soon regulate carbon dioxide and now wants lawyers who can help shape the outcome, said Jeff Holmstead, for years director of EPA’s Office of Air and Radiation and now at Bracewell & Giuliani. “A lot of our clients support a cap-and-trade system because it seems the most efficient way to get these reductions, but the big concern is the timing and if it fits with what the technology can do,” he said. The market for legal services needed to facilitate the investment and manage the risks created by climate change is potentially enormous, said Stewart. “There is some discussion of possibly having a $1 trillion carbon market in the United States by 2020,” Stewart said. “If 1% is spent legal fees, that is $10 billion, which in one year is half of the total of asbestos legal fees in the lifetime of the litigation.”

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