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By Paul Davies and Andrew Westgate

Market research has long recognized China as the largest investor in its own domestic renewable energy industry. According to Bloomberg New Energy Finance, China invested US$102 billion in 2015 alone. However, a report by the Institute for Energy Economics and Financial Analysis (IEEFA) found that China’s dominance in renewables is rapidly growing overseas as well.

The report details China’s robust international investment activity. In 2016, for example, China made 11 outbound clean energy investments exceeding US$1 billion for a total of US$32 billion — a 60% increase from 2015. China also ranked as the fifth-largest investor in renewable energy projects in other emerging markets in 2016, totalling US$19.7 billion since 2005. However, according to the report, China still directs a majority of its investments in renewables towards the United States, Germany, and other developed countries.

The report also found that China currently accounts for one quarter of global renewable energy capacity and one third of all global investment in renewables. Chinese manufacturing has altered the economics of renewable power worldwide, making solar generation cost-competitive with electricity from fossil fuels such as coal and natural gas. As a result, official figures indicate that coal consumption, the main component of China’s carbon emissions, fell in 2016 for the third year running.

By Paul Davies, Michael Green and Ei Nge Htut

On 13 July 2017, Principles for Responsible Investment (PRI) launched guidance on incorporating environmental, social, and governance (ESG) provisions in private equity fund terms. The publication, Incorporating Responsible Investment Requirements into Private Equity Fund Terms (the Guidance), followed a year-long consultation period with PRI signatories, expert counsel, and industry associations. The Guidance aims to demystify the concept of ESG provisions, outline the terms of these provisions and work towards a consistent industry approach on this aspect of responsible investment.

The Guidance identifies current and emerging best practices, as well as possible limitations. In particular, the Guidance offers practical solutions to limited partners (LPs) and general partners (GPs) that are considering how they may integrate responsible investment into fund terms. The Guidance includes:

By Paul Davies and Andrew Westgate

On 22 June 2017, Chinese legislators released draft proposals to combat soil pollution in China at a bimonthly session of the Standing Committee of the National People’s Congress. The legislation complements the State Council’s ambitious plan to address soil pollution – an area not specifically covered by Chinese environmental law at present. Both  the Council’s plan and the corresponding draft legislation are a response to a series of highly publicised incidents, including one in Jiangsu Province where nearly 500 school students fell ill after exposure to contaminated soil. These incidents have focused public attention on the issue of soil contamination, which had previously received little attention due to the more obvious air pollution issues in Chinese cities.

The proposed law is similar to the United States Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA or Superfund), in that the law requires landowners to investigate soil contamination where it is identified and imposes liability for soil contamination cleanup on the parties responsible for the pollution — or, if the responsible party cannot be found, on the landowner. The proposed law also establishes a pollution cleanup fund for situations in which the responsible party or landowner either cannot be located or lacks the funds to pay. In cases where the contamination occurred prior to the passage of the new law, a landowner held responsible may also apply to the cleanup fund for reimbursement of the remediation costs. In addition, the proposed law calls for regulators to establish tax benefits for soil remediation, standards for soil monitoring, reporting of contamination data, limits on the release of hazardous substances on farmland, and for more stringent environmental impact evaluations of construction projects (including the prohibition of construction on polluted land until the land has been remediated to the applicable standard).

By Paul Davies, Michael Green and Ei Nge Htut

The High Level Expert Group on sustainable finance  (the Group), which the European Commission (the EC) established, published its interim report on 13 July 2017. The report sets out the key steps required to create a financial system that supports sustainable investment, as well as identifying areas for financial policy reform. The EC vice presidents welcomed these initial recommendations. In addition, the EC praised the recommendations’ “great potential” to enable the bloc to lead on green finance.

The Group acknowledged that the recommended investment requirements (including the €177 billion required annually to meet the 2030 climate and energy targets) might appear “overwhelming”. However, the Group emphasised that private capital is currently “available and willing” to back such recommendations.

The Group’s recommendations include:

By Paul Davies, Andrew Westgate and Ei Nge Htut

In reforming and updating its environmental laws, China has until recently been focusing on air pollution. Attention is now turning to addressing water and soil pollution as well. For example, the Chinese government is now considering more robust penalties for those responsible for water pollution, indicating that the government could ban the building of homes and schools in areas with contaminated soil.

China’s issues with air pollution are well-known, with some urban areas experiencing particulate pollution levels exceeding those found in forest fires. A new study from Nanjing University’s School of the Environment estimates that smog kills 1.1 million people a year and is responsible for a third of deaths in China. As a result, the Chinese government is increasingly open to innovative prevention strategies. A recent example is the Liuzhou Forest City — designed by Stefano Boeri, an Italian architect famed for his “Vertical Forest” plant-covered skyscrapers. The Liuzhou Forest City will house up to 30,000 residents and is due for completion by 2020. Built across 175 hectares along the Liu River in Liuzhou, the Liuzhou Forest City will feature one million plants and 40,000 trees of over 100 different species that are intended to absorb 10,000 tonnes of carbon dioxide and 57 tonnes of pollutants annually, producing 900 tonnes of oxygen in the process. In addition to reducing air pollution, it is predicted that the plant life should reduce average air temperatures, create a noise barrier, and provide a habitat for wildlife. A high-speed electric rail line with geothermal energy-powered air conditioning and solar panels for electricity will connect the new development to the city of Liuzhou.

By Jörn Kassow and Eun-Kyung Lee

On June 9, 2017, the European Commission (EC) published its Action Plan to Streamline Environmental Reporting (COM(2017) 312), summarising the findings of its review of reporting requirements following the 2015 ‘Better Regulation Initiative.’

As part of this 2015 Initiative, the EC carried out a fitness check focused on assessing environmental reporting and monitoring. While environmental as well as regulatory monitoring and reporting provide essential facts for informed decision-making and implementation review, the EC acknowledges the need to balance the demand for better information with the related costs for Member States and businesses. The estimated cost of reporting obligations — solely for the authorities involved — amounts to approximately €22 million a year.

In its recently published action plan, the EC summarised the findings of its fitness check and outlined a roadmap for action. In summary, the EC found that there is room for improvement, particularly in terms of effectiveness, efficiency, and coherence of reporting obligations. The EC also concluded that the content of environmental reporting could focus more on strategic, quantitative, and regulation-driven information, e.g., by using key indicators to reduce the amount of textual information currently requested.

By Paul Davies, Elisabetta Righini and Rosa Espin

Shiny transparent capsule filled with colorful spheresOn 28 April 2017, the European Commission (the EC) published a “roadmap” on the strategic approach to pharmaceuticals in the environment, particularly in the aquatic environment.

Concurrently, the EC launched a 12-week open public consultation to address the environmental pollution caused by human and veterinarian pharmaceutical substances.

Under the title “Strategic approach to pharmaceuticals in the environment”, the EC aims to implement Article 8c of Directive 2008/105/EC, as amended by Directive 2013/39/EU, according to which the strategic approach shall include proposals to improve the procedure for placing medicinal products on the market more effectively to reduce the environmental impacts of medicines. In addition, by September 2017, the EC shall propose measures at the EU and/or Member State level recommending the reduction of discharges, emissions, and losses of such substances into the aquatic environment.

This initiative aims to:

  • Identify remaining knowledge gaps and uncertainties, and present possible solutions for filling them
  • Explore how to address the challenge of protecting the environment (and human health via the environment), while safeguarding access to effective and appropriate pharmaceutical treatments for human patients and animals, considering inter alia opportunities for innovation

By Paul Davies and Andrew Westgate

As a world leader in the manufacturing of electronic devices, China is beginning to reform its rules and regulations to ensure that the resulting framework is able to keep pace with the rapid developments now taking place in this sector both in China and globally. Two recent developments in this regard are discussed below.

Battery Waste. In December of 2016, the Ministry of Environmental Protection (MEP) issued the “Battery Waste Pollution Prevention Technology Policy.”[1] The policy, which applies to all kinds of battery waste, does not impose specific requirements, but instead defines key policy priorities for regulators to develop standards for battery waste. Priorities reflected in the policy include the following:

By Paul Davies and Rosa Espin

Spain is leading the fight against climate change with a proposed new Climate Change and Energy Transition Law.

The Spanish government regards climate change as one of the greatest challenges facing the country. Since 22 April 2016, the Paris Agreement (which sets out a global action plan to avoid climate change by limiting global warning to well below 2ºC), has been open for signature. Spain formally ratified the Paris Agreement in early 2017 and must now seek to implement measures to achieve the ambitious targets that it faces.

As an important consequence of these targets, in December last year the Spanish Climate Change Commission passed a proposal which urged the Government to develop a draft law on Climate Change and Energy Transition. This draft law will enable Spain to achieve its climate change and energy goals and promote competitiveness in the country. This proposed law is expected to regulate existing and future climate related measures, taking into account the climate change targets for the years 2030 and 2050.