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Sub practice
Sub practice

Emissions and Carbon Trading

Carbon markets are playing a critical role in global decarbonisation efforts. For governments and international businesses committed to Net Zero goals, carbon credits make up an important piece of the puzzle.

Carbon related regimes are continuing to evolve across the globe. Governments and policymakers are revamping regional and domestic carbon trading schemes and deploying wider carbon-based policy measures. Voluntary carbon markets are expanding and expected to grow rapidly in the coming years. The common aim is to price carbon accurately and reduce greenhouse gas emissions, helping to tackle climate change.

These developments present new opportunities for businesses, particularly in respect of their Environmental, Social and Governance (ESG) strategies. At the same time, however, there are numerous challenges to navigate. Market participants need to be aware of different approaches to carbon pricing and markets across jurisdictions, varying expectations for companies in certain sectors, new technologies and governance frameworks influencing markets, as well as carbon price volatility.

Financial institutions and corporates alike must navigate these challenges to participate in and benefit from the carbon markets.

To discuss how we can help, get in touch with our experts.

Allen & Overy experience in emissions trading

Since the earliest days of the carbon markets, Allen & Overy’s multi-jurisdictional carbon and emissions trading practice in Europe, Asia Pacific, Africa and the Americas has expanded to meet client demand.

Pioneers in the carbon markets

We operate at the forefront of the emissions trading field. Our global team is advising on and drafting documentation for, the trading of emissions credits and the development of climate change projects worldwide.

Clients such as ISDA, the Equator Principles Association, RMI (formerly Rocky Mountain Institute) and other trade bodies turn to A&O to help drive their industry shaping sustainability and climate projects.

Strategic and transactional expertise

We have experience working with clients in both the public and private sectors on climate change projects.

This includes advising on the EU ETS, UK ETS, the Kyoto Mechanisms (Clean Development Mechanisms, Joint Implementation and International Emissions Trading), Carbon Border Adjustment Mechanism (CBAM), on both the buy and sell side of Emissions Reductions Purchase Agreements and Project Development Agreements.

A key aspect of our work involves assisting clients on how to best structure carbon-related projects. For instance, in the context of a traditional finance structure or novel carbon funds or bonds. We provide support on the full range of documentation required to bring these projects to fruition.

Forward-looking advice

The utilisation of carbon allowances or credits is a key aspect of our clients’ ESG strategies. Our emissions trading group not only assists our clients in achieving their goals through transactions and climate change projects. We also advise them on how carbon trading fits into their wider sustainability objectives.

Recently, our team has been advising clients on the potential impacts of mandatory greenhouse gas emissions reporting in their annual reports. We are tracking the latest developments in emissions trading regulation and best practice around the world and ensuring our clients stay ahead of the curve.

Emissions trading experience highlights

International Finance Corporation (IFC)

International Finance Corporation (IFC)

in setting up a carbon facility designed to facilitate the growth and supply of voluntary carbon credits to be sold internationally.
Several multinational companies

Several multinational companies

on the CBAM proposals and the implications for their products and markets including an analysis of the equivalent carbon pricing mechanisms required for the purposes of Art 9 of the draft CBAM Regulation.
Numerous corporates

Numerous corporates

on their compliance with emissions legislation including emissions permit restrictions; controls on greenhouse gas emissions; offsetting; the allocation of carbon allowances; trading under the EU emissions trading scheme; a variety of emissions reduction schemes (such as the UK’s CRC and SECR).
The developer of a voluntary carbon credit platform

The developer of a voluntary carbon credit platform

on the development of the trading methodology, terms of trade and terms of use for the platform and related issues concerning the regulatory status of the voluntary credits.
International Swaps and Derivatives Association (ISDA)

International Swaps and Derivatives Association (ISDA)

on the EU and UK ETS ISDA documentation.
A major global financial institution

A major global financial institution

on development of its form of documentation for physically-settled spot and forward trading of voluntary carbon credits.
A global financial institution

A global financial institution

acting as a placement agent, on environmental matters associated with the IFC’s USD152m Forests Bond, a first-of-its-kind form of note that gives investors the option of receiving coupon payments in either voluntary carbon units (VCUs) or cash.
An international bank

An international bank

on their German law documentation for entering into derivatives transactions on emissions allowances.
A non-EU family office

A non-EU family office

on the trade with emissions allowances in the EU and the UK, including the opening of a trading account.

News and insights

Hedge maze

Publications: 01 June 2023

First of its kind "derivative action" climate case falls at the first hurdle

In a judgment handed down on 12 May 2023, the English High Court has refused permission for UK environmental NGO ClientEarth to continue "derivative claims" on behalf of Shell against its directors in…

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Bird's eye view, trees

Publications: 25 May 2023

Climate transition plans - charting a greener future

Climate transition plan – do you have one? Mandatory disclosure of climate transition plans is on the horizon – with the UK Government announcing its goal to set a ‘gold-standard’, and appointing the…

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View of treetops

Publications: 23 May 2023

UK Green Finance Strategy - what to expect in 2023

In what was dubbed ‘Energy Security Day’, on 30th March 2023, the UK Government released an extensive suite of publications outlining plans to support the country’s legally binding net-zero target by…

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A large road intersection surrounded by green shrubs

Publications: 17 May 2023

European Commission publishes proposal for the Green Claims Directive

It’s not easy being green: the European Commission has published its long-awaited proposal for the Green Claims Directive to enhance consumer protection against greenwashing.

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Recognition and accolades