The climate crisis and the ‘significant’ role of lawyers in the energy transition

The 2021 United Nations Climate Change Conference – or ‘COP26’ – ran from 31 October to 12 November in Glasgow, and marked a critical juncture for global leaders to address the climate crisis. In-House Perspective reports on the role of in-house lawyers in this highly significant event.

At COP26, business – and their lawyers – could no longer take a backseat to the negotiations. Instead, they formed a core part of efforts to accelerate the global energy transition.

‘It creates opportunities to be part of the solution,’ says Roger Martella, Education Officer for the IBA Section on Energy, Environment, Natural Resources and Infrastructure Law Section (SEERIL) and Chief Sustainability Officer at General Electric. ‘While COP26 is a negotiation amongst governments, it’s never been more important for companies to be at the table to make sure that they are part of the solution and delivering the technology and innovation that we need to achieve these goals.’

Martella says businesses, both in the energy sector and in other industries, recognise their role now in helping countries meet targets set at previous climate negotiations. ‘That’s a bit of a distinction from the past when maybe companies were just in the room trying to understand what was happening,’ he says. ‘Now they’re trying to make these goals a possibility and make sure they’re contributing to the public good.’

The COP26 discussions clearly endorsed the business model for companies already transitioning to net zero, says Vicky Wells, General Counsel at Anesco, which has installed more than 100 solar farms and 30 energy storage facilities in the UK to date and established the country’s first grid scale battery project. However, as COP26 promises to set the tone for business over the next decade and beyond, she hopes the negotiations will also provide answers for sectors still looking to transition. ‘Every business wants clarity,’ she says. ‘That helps you build a sustainable business and build your business plan. It’s when things change quickly that the problems are caused.’

There was some welcome progress. Negotiators finally agreed on the long-waited ‘rulebook’ that sets out how countries and private entities can generate and trade carbon offset credits. More than 100 states backed a global pledge to cut methane emissions – which account for around a third of current global warming from human activity – by at least 30 percent by 2030.

More than 30 countries also renewed their commitment to stop financing fossil fuel development overseas and instead divert spending towards clean energy initiatives. While global commitments are helpful, states also need to focus on incentivising individual sectors to transition, says Andrea Forabosco, Energy Transition Officer on the IBA Oil & Gas Committee and Senior Counsel on energy transition issues at Shell International. ‘There are a lot of activities at various levels to try and stimulate the financial sector to invest in low-carbon opportunities,’ he says. ‘In my view, an intelligent way to do this is to focus on the sectors that are harder to abate – like aviation and shipping – and create the conditions for sectors to decarbonise.’

Martella says climate targets and transition strategies need to take into account geographical differences as well. ‘We work in 170 countries, and we know that there’s no one-size-fits-all solution to these issues,’ he says. ‘We have to really understand the distinctions of the energy dynamics, the socioeconomic dynamics and the political dynamics of each jurisdiction where you’re working. You have to look at things very locally and regionally. That’s where we have some expertise, with the successes we’ve had in these markets to help add that layer in terms of the analysis that’s warranted.’

Rather than letting the transformation be led by economic drivers, Forabosco says lawyers have a crucial role to play in helping different sectors embrace the energy transition. ‘When we talk about decarbonising the oil and gas sectors, it doesn’t mean necessarily just oil and gas producing companies, but also the entire contracting economy, which means thousands and thousands of people,’ he says.

‘Lawyers have a role in helping clients to transition to lower carbon activities, helping to streamline regulations, helping to streamline contracts so that things actually happen efficiently, especially for a transformation as complex as the energy transition, which needs to move very fast and cannot be hindered continuously by bottlenecks,’ he adds. ‘We need to create an understanding that lawyers are important “Enablers” of this transition.’

Wells agrees that collaboration is the only way forward for all sectors to successfully transition from fossil fuels to efficient, renewable and sustainable energy sources. ‘We have a role to try and collaborate with each other to the greatest extent we can as lawyers,’ she says. ‘That goes down to how you negotiate and how you focus on the big picture for your clients and the big picture so that we can get deals through, so we can get things built and so that we can change things. There are a lot of people trying to fix things in isolation when really we should all be trying to work together.’

Aligning and balancing business and sustainability strategies is part and parcel of Martella’s role at GE, where he manages the company’s environmental, governance and social (ESG) portfolio. As there are increasing moves in the EU, US and other jurisdictions to impose mandatory ESG reporting and disclosures, Martella says lawyers have a responsibility to help businesses attain and exceed these high standards. ‘I believe that ESG reporting is going to get to the same level of rigour as fiscal reporting, and it’s going to be held to the same type of standards, regulatory consequences and obligations. We’re in the midst of a transition towards that and lawyers have a significant role to play in facilitating the success of that transition.’

Note: A previous version of this article can be found at https://www.ibanet.org/climate-crisis-the-significant-role-of-lawyers-in-the-energy-transition