Emissions & Carbon Trading Global Law Firm

Carbon trading is a market-based system aimed at reducing greenhouse gases that contribute to global warming, particularly carbon dioxide emitted by burning fossil fuels.

Carbon trading can be: (i) regulatory or compliance emissions trading markets where emission allowances are required to satisfy regulatory 'cap and trade' obligations, thereby encouraging reductions in emissions, or (ii) on voluntary carbon markets where voluntary credits are issued by accredited projects producing reductions in or avoidance of emissions.

We advise clients in all aspects of regulatory and voluntary carbon market trading, regulatory requirements of trading schemes and investments into carbon reduction projects and project developers.

We act for a wide variety of project developers and investors, financial participants and corporates.

Our deep bench expertise covers advising on:

net zero and other targets, and how to build carbon offsetting into target implementation.
assistance on selecting offset partners.
structuring of purchases/purchasing arrangements and documenting transfers of credits to ensure ready supply of offsets and risk mitigation.
establishment of standalone projects for offset purchases, and minority investments in project companies/developers, including all necessary documentation.
legal due diligence on offset projects.
trading allowances, credits and environmental attributes on the regulated markets.
carbon reduction obligations for operators under emissions trading schemes.
establishment of carbon trading platforms and carbon exchanges.
all aspects of carbon finance including derivative products and securitization, and carbon funds.
disputes involving carbon credits.

Recent client highlights

World first plastic and carbon credit-linked bond: Advised Citigroup Global Markets Limited as arranger of the first bond for which interest amounts are linked to, and contingent upon, the generation of plastic waste collection credits and plastic waste recycling credits, issued by the IBRD. A portion of interest on the bond is also linked to, and contingent upon, the generation of VCUs.
Carbon offset project loan: Advised Asian Development Bank on the US$6.5 million financing of Greenway Grameen Infra's carbon offset project in India, involving the production and distribution of one million improved cookstoves to rural households in Madhya Pradesh and Odisha states.
World's largest biochar carbon removal project: Advised Biocare Projects on its long-term carbon removal project with ASX-listed timber company Kiland Limited.

Carbon offsetting arrangements: Advised easyJet on carbon offsetting agreements in relation to its commitment to offset the carbon from all domestic and international flights.
EU Emissions Trading System: Advised RWE, easyJet, Administrators for British Steel and Administrators for Calon Energy on the EU Emissions Trading System.
Voluntary credits: Advised a sovereign wealth fund on purchasing voluntary credits to offset emissions.
Global carbon commodities exchange platform: Advised Xpansiv on Blackstone's US$400 million investment in its global carbon and environmental commodities exchange platform. Xpansiv provides market data for carbon offsets.

Forestry project, DRC: Advised a sovereign wealth fund and Macquarie on their potential investment in a forestry project in the DRC including the due diligence of the project.
Natural capital investment, UK: Advised Pollination Climate Asset Management (CAM) on the setup of its debut fund for investment in Natural Capital Projects and related carbon agreements.
Forestry investments, Germany: Advised global car manufacturers on investments in forestry projects and an investment in an offsetting developer including due diligence.

Enabling the Voluntary Carbon Market in the Context of the Paris Agreement

This paper considers the state of the Paris mechanisms and the VCM, examines actual and perceived barriers to its scaling and identifies recommendations for the way forward.

Carbon Trading in China: Relaunch of the Certified Emission Reduction Scheme

On 22 January 2024, China officially relaunched the China Certified Emission Reduction (CCER) scheme, which is a milestone step in establishing the voluntary carbon market in China (the National CCER Scheme). The framework of the voluntary standard applicable under this scheme is similar to other internationally recognised voluntary standards (such as Verra and Gold Standard), whilst the implementation details are subject to PRC specific regulatory requirements.

Find out more about Carbon Trading in China: Relaunch of the Certified Emission Reduction Scheme

What happened at COP28 - the UAE consensus

Following intense negotiations, COP28 has ended in a package deal which is being referred to as the "UAE Consensus". Clifford Chance hosted a webinar on 19 December outlining what happened at COP28 drawing out key outcomes from the negotiations and the many announcements and commitments made in and around COP28, focussing on implications for businesses. Here are some of the highlights of the "UAE Consensus" and other commitments made in and around COP28.

Find out more about What happened at COP28 - the UAE consensus

Extension and Reform of the EU Emissions Trading System

On 16 May 2023, legislation extending and reforming the EU Emissions Trading System was adopted. The revisions bring shipping into the EU ETS for the first time, establish a parallel emissions trading system for buildings and transport, and make a wide range of other changes to the EU ETS aimed at implementing the EU's 'Fit for 55' initiative. This briefing looks at the key changes.

Find out more about Extension and Reform of the EU Emissions Trading System

10 questions on the EU Carbon Border Adjustment Mechanism

The EU has adopted a Regulation establishing a Carbon Border Adjustment Mechanism (CBAM) to deal with the long-standing problem of ‘carbon leakage’ that impedes the EU’s decarbonisation plans. It is part of the Commission’s ‘Fit for 55’ initiative published in July 2021 that will help towards achieving the EU’s target for a 55% reduction in greenhouse gas (GHG) emissions by 2030 (against 1990 levels). Here we answer 10 key questions about the new Regulation.

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Going beyond carbon reductions: The proposed EU carbon removals certification regulation

On 30 November 2022, the European Commission adopted a proposal for a Regulation to create a first EU-wide voluntary framework that would certify high-quality carbon removals. The draft Regulation is part of the EU's drive to be the world's first climate-neutral continent by 2050. The proposal requires third-party verification and certification of the compliance of carbon removals with the QU.A.L.ITY criteria and the related certification methodologies that will be set out in delegated acts. This regime does not apply to the storage of carbon emissions which are already covered by the mandatory EU ETS.

Find out more about Going beyond carbon reductions: The proposed EU carbon removals certification regulation

ISDA releases new documentation for secondary market trading in voluntary carbon credits

Voluntary carbon credits ("VCCs") play an important role and incentive for parties investing in projects that aim to reduce carbon emissions or remove carbon from the atmosphere. Market interest in VCCs has also expanded in response to an increasing demand for offsetting carbon credits by entities who have climate change goals outside of mandatory schemes. Standard documentation for secondary trading in VCCs is key to increasing trading activity and building liquidity. With this aim in mind, ISDA has now published documentation to cover secondary trading in VCCs - the 2022 ISDA Verified Carbon Credit Transactions Definitions ("VCC Definitions").

Find out more about ISDA releases new documentation for secondary market trading in voluntary carbon credits

Energy Transition TV: What's on the horizon for Carbon Trading?

Dr. Mathias Elspass outlines why carbon trading will take centre stage.

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