Related Practices

• Energy & Energy-Related Practices
• Project Development & Finance
• Tax

Related Teams

• Climate Change

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Climate Change: Carbon and Other GHG Credit Trading

Our attorneys have advised on all aspects of greenhouse gas trading, and how to harness and monetize the emissions related value of investment.

We have a great depth of experience in drafting and negotiating contractual arrangements for our clients both in the energy and GHG emissions field as well as other aspects of the domestic and international energy industry, including trading and marketing of GHG emission allowances and credits, GHG emissions-related commodities and products, their underlying markets and regulation, and contractually allocating and hedging specific risks inherent in their purchase, sale and production.

Our clients in this practice area span the spectrum, from entities making investments in projects through the Kyoto mechanisms of Joint Implementation (JI) and Clean Development Mechanism (CDM), to those currently engaged in the global trading of energy and energy-linked commodities and products. We regularly advise both the American and European energy marketing affiliates of large independent power companies and regulated utilities, the energy trading and procurement divisions of regional electric utilities and gas distribution companies, and financial brokers active in promoting emissions trading globally.

With the European Union implementing the world's largest carbon dioxide emissions trading regime, distinguished by mandatory caps for large industrial sources on carbon dioxide emissions, emissions trading is no longer just an intriguing experiment for power generators in Europe, it is a necessity.

We offer comprehensive legal services including guidance and advice on:

• Emissions Trading under the EU ETS, International Emissions Trading Association (IETA) and International Swaps and Derivatives Association (ISDA) single or master trading agreements).
• The secondary trading of Certified Emissions Reductions (CERs) and Emission Reduction Units (ERUs).
• The voluntary offset markets and trading in verified emission reductions (VERs).
• Corporate climate change policies and carbon trading strategies

In support of our clients’ various energy trading, marketing and risk management activities, Troutman Sanders has developed, negotiated, customized and advised on energy-related ancillary credit support documents.

Our climate change-related business experience includes the following:

• Troutman Sanders, an active member of ISDA, was a participant in ISDA’s working group to draft the initial ISDA EU Emissions Allowance Transaction Long-Form Confirmation. The firm has worked with ISDA toward harmonization of the ISDA and EFET Agreements, contributing extensively to ISDA’s role in the industry harmonization process resulting in its recent release of new allowance trading documentation:  
• A form of Part [6] to the Schedule to an ISDA Master Agreement for EU Emissions Allowance Transactions and
• A form of Confirmation of OTC Physically Settled EU Emissions Allowance Transaction (Short Form).
• The firm has advised clients on membership and access agreements on, as well as, where applicable, the purchase of seats on all major global energy commodity exchanges:
• New York Mercantile Exchange (NYMEX)
• Chicago Board of Trade (CBOT)
• UK’s International Petroleum Exchange (IPE), now known as the Intercontinental (ICE Futures)
• NordPool Power Exchange for Europe’s Nordic energy markets
• European Energy Exchange (EEX)
• Amsterdam Power Exchange (APX)
• Powernext
• EXAA
• The firm advised the Metropolitan Atlanta Chamber of Commerce in developing an emissions credit banking and trading program which was adopted and implemented by the State of Georgia Environmental Protection Division.
• The firm advised a prominent emissions credit broker regarding its engagement, on an exclusive basis:
• By a project development company, to provide marketing and brokering services relating to the forward sale of nearly five million potential Certified Emission Reductions (CERs) created as a result of an HFC decomposition project in South Korea, and
• To provide marketing, brokering, asset management and other advisory services in respect of all CERs resulting from an energy company’s conversion and/or replacement of a fleet of vehicles to use liquefied petroleum gas (LPG) instead of conventional gasoline and diesel fuels at various locations in India.

• The firm served as transactional and regulatory counsel to a greenhouse gas broker and registry agent with respect to the purchase, sale, and exchange of emission reduction credits resulting from conversion of an Argentine single-cycle gas-fired power facility to combined-cycle. The project was the first fossil-fuel project recognized by the U.S. as producing net emissions reductions. We assisted the client in forming relationships with the environmental community and domestic regulators. We also negotiated monitoring and compliance agreements.
• The firm developed a comprehensive analysis and strategy for a client seeking to monetize emissions reduction credits through reforestation. This strategy involved an analysis of the value to the client of various carbon sequestration approaches, the emerging international view of sequestration under the Kyoto Protocol, and U.S. legislative and administrative initiatives in the area.
• The firm worked with an emissions credit broker to assist in the sale of emissions reduction credits resulting from the reduction of methane emissions from ruminant animals. Our work involved the preparation of transactional documents and development of a strategy to promote the sale of such credits.
• The firm advised a client regarding ownership of emissions reduction credits resulting from an industrial process. The client manufactures a product using carbon dioxide that would be emitted as a waste product but for the process, raising novel questions of “additionality” and “sequestration.”
• Troutman Sanders attorneys also advised both Powernext and Clearnet in revising the terms of their spot and derivatives market documents and concluding the terms of an endorsement agreement with EFET necessary for its participants to gain optimal close-out netting rights under French law.
• The firm has advised clients with weather-sensitive risk profiles in the review, negotiation and purchase of over-the-counter weather derivatives, both on a stand alone basis and under one or more master swap agreements. We have also advised clients creating a market in weather derivatives on form documentation, policies and procedures relevant to this product market.
• The firm has assisted numerous clients in developing, reviewing and negotiating documentation for transactions involving the certification of traded energy from green and renewable sources, as well as derivative trading in the renewable and green certificates themselves, unbundled from an underlying energy supply.