Practice Areas: Climate Change

Carbon Due Diligence

Pricing carbon will fundamentally change the competitive landscape of business, facilitating the need for an integrated and responsive approach to evaluating carbon risk. The convergence of climate-related drivers – putting a price on carbon, regulations, investor attention, and technology innovation – are shaping value creation and risks for business. McGuireWoods’ targeted legal services facilitate value creation and mitigate the risks of clean-energy development across the project value chain.

Cost uncertainty – undergirded by carbon risk – will accelerate in light of an evolving framework of cap-and-trade regimes, renewable energy portfolio standards, energy efficiency regulations, and related climate and energy polices. McGuireWoods has created an enhanced diligence framework for clients to better assess the risks and opportunities around future carbon policy. The complexity and impact of carbon pricing on business necessitates inquiry: How will carbon related regulations impact financial performances? To what extent will carbon offset policies mitigate carbon risk? What impact will permitting and siting have on client liability? Our enhanced diligence framework is reflective of the specific carbon footprint of the project/transaction and the regulatory regime under which the client operates. Companies that have a deep intrinsic understanding of the drivers and risks to value should be able to achieve a competitive advantage in light of the evolving regulatory framework.

Regulatory costs will increase as climate-related drivers take hold. [For example, factoring in regional asymmetry in carbon prices is imperative when analyzing operating cost variables.] [An evaluation of allowance and credit pricing in specific jurisdictions further accelerates the need to act now.] Carbon due dilligence is critical to recognizing and adapting to these risks. Our enhanced diligence process supplements the traditional due diligence by probing deeper into the risks surrounding future carbon policy.

Our services:

• provide a due diligence framework based on applicable regulations, protocols and methodologies to help clients accurately assess risk and mitigation options;
• clearly define carbon and climate change risks and opportunities throughout the transaction;
• evaluate the impact of permitting, siting and related land use issues on transactional liability;
• evaluate allowance and credit pricing in specific jurisdictions;
• advise on integrating the carbon diligence framework into existing diligence processes;
• identify regional asymmetry in carbon regulation and pricing that may affect operating cost; and
• provide analysis on the full range of economically viable options available to mitigate transactional risks.