A range of tactics are needed to achieve a low-carbon world | White & Case srl
Countries and companies are increasingly committing to net-zero targets that would require them to drastically reduce their carbon emissions in a relatively short timeframe. The transition to a low-carbon world will not be easy, given the dependence of global economies on access to carbon-intensive energy, materials and products. Innovation will continue to accelerate progress, but success will depend on the ability of stakeholders to adopt a variety of approaches, many of which are new and rapidly evolving.
We have worked with companies across all industries that are at different stages of their energy transition journey. Below, we highlight some areas we’ve focused on in 2021.
Renewable energies are accelerating
Technological advances continued to drive down prices for critical applications, such as solar and wind generation. But 2021 has also seen significant developments in areas that will enable the deployment of renewable energy.
In the United States, the Build Back Better Act contained numerous incentives for the renewable energy sector, including expanded tax credits for a range of renewables and funding for the nationwide construction of electric charging stations to accelerate the transition to electric vehicles. The Biden administration has also implemented reforms that open up US waters along the Atlantic and Pacific coasts to offshore wind, and many non-US companies with offshore experience are already helping to accelerate offshore development in the US. . Similar initiatives are underway in regions around the world.
As adoption accelerates, renewable energy projects are growing in size and complexity. In 2021, funding for what will be the world’s largest single-site solar project in Abu Dhabi closed. And the demand for electrification will continue to grow as businesses adopt cleaner technologies.
Managing the flow of electricity from the growing number of non-traditional, intermittent and distributed sources requires the development of new infrastructure, such as microgrids and battery storage facilities, which raise new construction challenges. and procurement.
Ultimately, success will require continued focus on the tip. When it comes to the future of renewables, policymakers and regulators around the world are creating incentives for hydrogen development, which could revolutionize fuel-intensive sectors such as heavy industry and transportation.
And if the batteries will allow the energy transition, the extraction of the minerals used in their production entails environmental costs that mining development projects must take into account. Stakeholders should ensure that battery materials are recycled, reused, and reused, and not discarded in a way that would compound the problems the batteries would help solve.
Traditional energy sources adapt
Traditional fuels remain essential to sustaining the economy, even as renewables proliferate. Natural gas is particularly important because it is relatively clean, which is why countries continue to build LNG facilities to import gas for power generation and other uses.
Carbon capture, use and storage will allow companies to extract carbon from emissions and channel it to productive uses or sequester it so that it is not released into the atmosphere. In both cases, the overall volume of carbon emitted is reduced.
And the trend towards distributed generation could revitalize nuclear power, which does not emit carbon. Companies and governments around the world, including the United States and the United Kingdom, are signaling their support for small modular reactors that can be installed in a wide range of environments to meet targeted energy needs.
Governments and the private sector have an important role to play in financing the energy transition. Governments can invest in R&D to develop proof-of-concepts for new technologies, share the risks associated with investments in green energy infrastructure, support the private sector through clear policies and regulations, and fund development projects. green/energy transition.
The energy transition is also driving mergers and acquisitions as companies adjust their portfolios to reflect changing strategic goals. There was a significant increase in M&A in the US power sector, M&A in offshore wind in Europe, and global SPAC activity related to electric vehicle companies.
In the US and UK, shareholder activism is likely to spur other ESG-focused campaigns and deals, as activist funds like Third Point and Engine No. 1 increasingly push for a action based on the logic of the energy transition. And in Japan, shareholder activists are increasingly concerned about ESG issues.
Climate litigation is on the rise
It has been clear for some time that sustainability requirements fuel legal risk. Climate change disputes have evolved beyond claims based on damages to become a new and diverse category of climate change actions. Two high-profile cases in Europe that could dramatically expand liability and impose broader restrictions on companies highlight the evolving nature of climate disputes around the world.
Although climate change litigation is on the rise globally, few cases have so far been filed in Africa. Yet the success of rights-based litigation in Europe is likely to influence the future of climate litigation in Africa, with more cases expected in the coming years.
The global increase in climate change-related actions has amplified pressure on legislators, regulators and legal institutions to facilitate the pursuit of such actions, and many regulators have responded with procedural changes designed to promote the use pragmatic legal remedies.
Arbitration is increasingly recognized as a potential forum for resolving disputes related to climate change. And new voluntary rules and guidelines on how to manage risk related to climate change issues are also being developed, highlighting the growing attention climate change is attracting in corporate governance.