The voluntary carbon market has really taken off in the last few years, with the adoption of the Paris Agreement in 2016 and the Glasgow Climate Pact of 2021. It has been fueled also by numerous new net-zero emission commitments by governments and corporates.

Key takeaways

There’s a lot of uncertainty around the legal nature of voluntary carbon credits, including what title can be claimed in them and what security can be taken over them

A two-tier voluntary carbon market labelling/pricing structure may develop: one for credits that comply with Paris Agreement rules, and another for credits that do not

The lack of market standard trading documentation for voluntary carbon credits is both a hindrance and an opportunity

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Before the 2010s, many real estate deals closed without the mere mention of per- and polyfluoroalkyl substances (PFAS) as part of negotiations or in diligence.  Leap forward a decade to 2022 and diligence questions relating to the presence of PFAS on real estate are essentially market, especially for industrial and some commercial properties.  The paradigm shift cannot be attributed solely to one force; instead, a culmination of regulatory, statutory, judicial, and transactional considerations have elevated PFAS to an issue that could seriously impede or even kill a deal. 

Whether involved as a seller, buyer, lender, or another interested party concerned about the liabilities, there are several key considerations, among others, that parties to real estate transactions should be aware of in 2022.

Continue Reading PFAS and Real Estate Transactions: Key Considerations in 2022

Can carbon-neutral fossil fuels can gain credibility and scale up through voluntary efforts, or will market adoption have to be compelled through mandatory regulation?

Key takeaways
1. Fossil fuel producers are looking for interim solutions during the green energy transition
2. Use of the carbon-neutral label is susceptible to being seen as ‘greenwashing’
3. A global regulatory regime to regulate carbon-neutral fossil fuels is not likely soon
4. Industry initiatives to develop voluntary standards are in a nascent stage

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In this article, we take stock of the Carbon Border Adjustment Mechanism (CBAM), and similar initiatives in the United States, Canada, the United Kingdom, South Korea, and China, and what they mean for the energy sector.


Key takeaways:

  1. Importers will pay more to bring carbon-intensive goods into the European Union
  2. The EU CBAM is expected in 2023 and other countries are introducing their own measures
  3. The EU’s measures will likely set the standard, but conflicting regimes will remain
  4. Calculating carbon contents of imports and payments exporting and importing companies to do a lot of extra work
  5. Covered goods do not include energy goods yet

In a highly anticipated decision, the U.S. Supreme Court (Court) rejected U.S. EPA’s (EPA) Clean Power Plan in West Virginia v. EPA on June 30, 2022.  Relying upon the “major questions doctrine,” the Court found that Congress had not intended to authorize EPA to regulate emissions using “generation shifting” (i.e., requirements that power production be transitioned from coal to gas and then from gas to renewables) as a “best system of emission reduction… that has been adequately demonstrated” under Section 111(d) of the Clean Air Act. 

Writing for the majority, Chief Justice John Roberts concluded that the Clean Power Plan’s scheme, which would require a substantial shift in electricity generation from coal-fired power plants to natural gas-fired plants and renewables, was beyond the authority granted to EPA in Section 111(d).  The Court read Section 111(d), its legislative history, and its past use as proof of Congress’s intent to limit Section 111(d) to the application of technological controls on individual facilities. The opinion characterized the generation-shifting aspects of the Clean Power Plan as making a “very different kind of policy judgment” – one that determined how much coal-based generation there should be in the U.S. over the coming decades.  After further analysis, the Court found it was “not plausible that Congress gave EPA the authority to adopt on its own such a regulatory scheme in Section 111(d),” and overturned the rule.

In supporting its ruling, the Court attempted to identify the circumstances under which it would apply heightened scrutiny to regulatory action of the kind involved in this case.  It collected a series of recent cases in which the Court had ruled that a regulatory agency had exceeded its authority by implementing “sweeping and consequential” regulations.  It referred to this body of case law as the “major questions doctrine” (which the dissent noted was a term never before used in any Court decision).  In such major cases, the agency must present more than a “merely plausible textual basis for the agency action” – instead, it must demonstrate “clear congressional authorization” for the power it claims.

The immediate impact of this ruling is limited, as EPA had already advised the Court and the regulated community that it intends to re-write the Clean Power Plan entirely.  The Court also didn’t go as far as some had believed it might by potentially restricting EPA’s right to regulate greenhouse gas emissions altogether.  What does seem clear from this decision, however, is that EPA will need to either closely tie any Section 111(d) limitations in its new Clean Power Plan to technology-based controls, or find new support in the Clean Air Act for its plan.  The ruling also appears to have implications for various other environmental law matters, such as EPA’s proposed new source rule part OOOOc to apply to existing oil and gas sources.  We will cover such impacts in future materials.

On the back of unfortunate geopolitical developments this year, which have drastically changed the path to a carbon-neutral economy, we are pleased to present “Energy transition – An evolving journey” – a thought leadership campaign containing practical insights on the trends, opportunities and challenges in the energy industry going forward.

Please see link to the Energy transition report.

In the report, we see what governments and markets can do to help bring us to a decarbonized world and what role the energy industry will play. Topics considered include:

  • Which clean fuels have the best prospects;
  • The roles of LNG and renewables;
  • Carbon capture and battery storage;
  • A potential nuclear renaissance; rules regulating hydrogen;
  • And how to finance the new world of energy.

We hope you enjoy reading the report and as always, we welcome your feedback and questions. Please feel free to reach out to any of the authors, or to your usual Reed Smith contact.  

Status

Last month, the California Division of Occupational Safety and Health (Cal/OSHA) released a revised discussion draft of a proposed regulation for workplace violence prevention (Proposed Rule). The Proposed Rule would expand existing health care industry workplace violence prevention requirements to all industries. The Proposed Rule includes new definitions with broad applicability and a “one-size-fits all” approach that mandates the same workplace violence prevention rules for essentially all employers statewide. 

Currently, the Proposed Rule is awaiting public comments, which are due on the draft regulations by July 18, 2022. It is uncertain how quickly the rulemaking process will proceed after the July 18 deadline for public comment.

Requirements

Workplace Violence Prevention Plan

If implemented, the Proposed Rule would require employers to “establish, implement, and maintain an effective workplace violence prevention plan” (Plan). The Plan must include effective procedures for accepting and responding to reports of workplace violence and for responding to workplace violence emergencies—including detail on how employees will be alerted of those incidents, plans for evacuating or sheltering in place, and methods for workers to get help from staff, security, or law enforcement. An employer’s Plan must include the following elements:

  • Identification of person(s) responsible for implementing the Plan;
  • Effective procedures to obtain active involvement of employees and authorized employee representatives (i.e., unions) in developing and implementing the Plan;
  • Methods the employer will use to coordinate the implementation of the Plan with other employers;
  • Effective procedures for accepting and responding to reports of workplace violence, and to prohibit retaliation;
  • Procedures to ensure that supervisors and non-supervisors comply with the Plan;
  • Procedures to communicate with employees regarding workplace violence matters;
  • Procedures to respond to workplace violence emergencies;
  • Procedures for employee training;
  • Procedures to identify and correct workplace violence hazards;
  • Procedures for post-incident response and investigation; and
  • Procedures for periodically reviewing the effectiveness of the Plan, including after a workplace violence incident.

Violent Incident Log

The Proposed Rule also requires all employers to record incidents of violence in a Violent Incident Log. Whereas current regulations applicable to the health care industry exempt employers who have not had an incident in the past five years, the Proposed Rule does not provide for such an exemption. The Proposed Rule, instead, requires employers to record information in the log about “every workplace violence incident”—regardless of whether that incident resulted in an injury and regardless of when the last incident occurred. Among other details, the logs are required to include a description and consequences of each incident.

Employee Training

The Proposed Rule requires employers to develop and provide employee training on workplace violence. Specifically, it would require employers to “provide employees with general awareness training on workplace violence” that includes information on the employer’s Plan, accessibility to the Plan, participation opportunities, and how to report workplace violence incidents or concerns to the employer without fear of reprisal.”

Employers that had a workplace violence incident within the previous five years would be required to provide additional training to employees that includes:

  • “Workplace violence hazards specific to the employees’ jobs,”
  • Corrective measures that have been implemented,
  • How employees can “seek assistance to prevent or respond to violence, and
  • Strategies to avoid physical harm.”

Recordkeeping

Finally, the Proposed Rule requires employers to maintain records of workplace violence hazard identification, evaluation, and correction and training records for at least one year, while the Violent Incident Log and records of workplace violence incident investigations must be maintained for at least five years.

These records must be made available to Cal/OSHA upon request and to employees within 15 calendar days of a request.

Are similar state or federal OSHA rules being considered?

Currently, there are no specific OSHA standards for workplace violence at the federal level. However, Section 5(a)(1) of the Occupational Safety and Health Act of 1970—the General Duty Clause (GDC) —requires employers to provide a workplace free of conditions or activities that either the employer or industry recognizes as hazardous and that cause, or are likely to cause, death or serious physical harm to employees when there is a feasible method to abate the hazard. The Occupational Safety and Health Review Commission (Commission) has interpreted the GDC as requiring employers to protect employees from incidents of workplace violence. For example, in Sec’y of Labor v. Integra Health Management, Inc., the Commission held that a healthcare employer had a responsibility to manage the risk of workplace violence when an employee was stabbed by a patient with mental illness and a criminal record after the employer required the employee to work alone with the patient. The Commission reasoned that the employer failed to fulfill its responsibility under the GDC by exposing its employees to the hazard of working with individuals who have a history of violence.

There is currently a bill in the Senate that nurses’ unions and others are pushing Congress to advance. The bill called the Workplace Violence Prevention for Health Care and Social Services Workers Act (S. 4182), is the counterpart to one that passed the House by a 254-166 margin in April 2021. S. 4182 would require federal OSHA to adopt a workplace violence prevention standard, based largely on California’s existing rule, for the healthcare and social services sectors.

Eight states other than California require certain healthcare facilities to have some type of workplace violence prevention program: Connecticut, Illinois, Maine, Maryland, New Jersey, New York, Oregon, and Washington. However, those states have not proposed rules similar to Cal/OSHA’s Proposed Rule, which would be applicable to all industries.

As of 7 February 2022, pursuant to Commission Regulation (EU) 2022/63 (the “Titanium Dioxide Regulation”)[1], titanium dioxide (E171) has been removed from Annexes II and III of Regulation (EC) No 1333/2008 (the “Additives Regulation”), which sets out the regulatory framework for the use of additives in foods in the European Union.

Accordingly, since 7 February 2022, the use of titanium dioxide (E171) as a food additive in the European Union is prohibited. However, food operators will note that the Titanium Dioxide Regulation provides for a 6 month transition period, where foods produced in accordance with the rules applicable before 7 February 2022 may continue to be placed on the market until 7 August 2022. After that date, food products may remain on the market until their date of minimum durability or ‘use by’ date.[2]

The Titanium Dioxide Regulation has been introduced following a series of  European Food Safety Authority (“EFSA”) safety assessments of the use of titanium dioxide (E171) as a food additive, including the most recent food safety assessment issued on 6 May 2021 (the “EFSA Opinion”), pursuant to which EFSA indicated that, based on is assessment of all the available evidence, a concern for genotoxicity could not be ruled out, and therefore concluded that titanium dioxide (E 171) can no longer be considered safe when used as a food additive.[3]

Continue Reading Titanium dioxide (E171) banned as an additive in foods in the EU