December 2008

Introduction
 
In this edition, we consider how access to the emerging markets for Carbon Capture and Storage will be regulated.  We also look at how the Planning Act in the UK (which has at last received Royal Assent) is expected to assist the achievement of the UK's ambitious climate change targets.  We also review what may be regarded as one of the world's most ambitious environmental monitoring projects from space: The Kopernikus project.

We continue to maintain a varied and good deal flow in this sector, our highlights being:

• Advising a limited company on the setting up of a European carbon credits trading platform, including advice on regulatory, tax and implementation aspects.
• Advising an Italian entity as to the opportunities for the creation of corporate vehicles dedicated to the construction of wind farms in Italy.

We are also pleased to announce our recent merger with Lane & Partners LLP which brings additional skills and resources, in particular to our Energy & Utilities and Aviation sector groups.

We welcome any comments you may have on the topics covered in this Alert, or suggestions for future topics.  If you have any questions on this Alert please contact a member of our Clean Energy, Technology and Carbon Investment team, whose details are provided here.

• 26 November 2008 saw three major pieces of legislation the Climate Change Bill, the Planning Bill and the Energy Bill receive Royal Assent. The three Acts are seen as the route to enabling the UK to meet its ambitious target of cutting greenhouse gas emissions by 80% by 2050 as compared to a 1990 baseline, encourage and speed up 'green' investment, address energy efficiency in homes and tackle the security and longevity of energy supply.
   
• The Climate Change Act 2008 introduces five yearly 'carbon budgets'¹ with legally binding greenhouse gas ("GHG") emissions reduction targets and outlines how these emission targets will be met and introduces reporting requirements for businesses by 2012 in director's reports, with guidance to be issued by 1 October 2009 as to the measurement or calculation of GHG². It will also see the end of 'free' plastic carrier bags. Central to the Act is the introduction of the Carbon Reduction Commitment, being a cap and trade system which will affect all businesses with an annual electricity spend of approximately 1,000,000.
   
• EPCs are now (from 1 October 2008) required upon the construction, sale or letting of all buildings regardless of size and whether residential or commercial. DECs are also required for public sector buildings which exceed 1000 m2 and which are open to the public.
   
• On 13 November 2008 the European Commission published a draft directive, which if adopted, will amend the Energy Performance Buildings Directive. The draft directive proposes extending the scope and also sets cost-optimal levels of building energy performance by June 2017. The current size threshold for minimum energy performance requirements for renovations will be removed and minimum energy performance requirements will be applied to the installation of technical building systems, e.g. heating and lighting. In addition, it proposes that where a building exceeds 250 sq metres and it is frequently visited by the public then any EPC that has been issued must be displayed.
   
• November 2008 also saw the launch of the EU Code of Conduct for Data Centres which is a voluntary initiative aimed at developing energy efficiency performance standards for Data Centres. Data Centres are responsible for almost 3% of electricity used in the UK and this is expected to double by 2020. Defra has stated that over the next 12 months it will be seeking compliance by the main IBM Data Centre it uses. The Code has been developed in collaboration with the industry, including the British Computer Society. The Code sets out energy efficiency best practice, minimum procurement standards and annual reporting of energy consumption. It is estimated that the Code could help save 47m tonnes of CO2 over the next six years and in turn reduce electricity costs by almost 700m. Signatories to the Code will be expected to implement the proposals and several key organisations have already indicated their intention to become a signatory including BT, Telewest, Quest, Microsoft and IOMart.
   
• The UK Treasury has held Europe's first carbon allowance auction in Phase II of the EU ETS with 4 million allowances being sold at a total value of 54m (excluding VAT) equating to 13-60 per allowance. A further 25 million allowances are planned to be auctioned by the UK Treasury in 2009. The UK has commented that it is planning to auction 100% of the allowances for the power sector (the large energy producers) in Phase III of the scheme, which commences in 2013.
• On 12 December 2008 the European Council of Ministers agreed and approved the ambitious "20-20-20" target of a 20% reduction in GHG, below 1990 levels, with 20% of energy from renewables by 2020.