Airlines are meeting their climate change commitments


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As politicians and business leaders focus more on climate change, the airline industry is accelerating its progress to become more climate-friendly.

Flights have a huge carbon footprint: on a round trip between London and New York, for example, the CO2 emissions for each business class passenger will be over 1.2 tonnes, according to the Organization’s calculations. international civil aviation. As the industry grapples with the enormous task of decarbonization, airlines are seeking advice from lawyers on how to tackle it.

“It may turn out to be. . . a leap forward for the entire industry, ”said Kevin Lewis, co-director of aviation and airlines practice at law firm Sidley Austin. He has advised United Airlines and American Airlines, among other airlines, on their sustainability goals.

He points out that airlines are developing new technologies and materials, “both for the vehicle itself and everything in it, as well as the fuel and infrastructure to create it.”

Industry commitments: Sidney Austin law firm advised American Airlines on its sustainability goals © Eva Marie Uzcategui / Bloomberg

In October, ahead of the UN climate change conference COP26, major airlines pledged to achieve net zero carbon emissions by 2050 – an ambitious target for a polluting industry whose revenues fell during the pandemic. Aviation accounts for about 2% of the world’s human-made carbon emissions and 12% of transportation emissions, according to the Air Transport Action Group, a nonprofit industry group focused on sustainability.

“The entire industry is committed to a complete transformation from consuming all of this energy in a way that emits a lot of carbon on a set schedule to an industry that does so in a carbon neutral manner.” Lewis said.

Its job is to support companies in their decarbonization projects. “It’s about improving the technology along with the equipment, and then everything that goes inside the plane as well,” he says. “Sustainable fuel is obviously the most important part. “

Clean energy technologies such as electricity and hydrogen are still years away from being able to transport people long distances. Nevertheless, airlines are partnering or investing in companies using emerging technologies.

United was the first U.S. airline to sign a deal with Boom Supersonic, a Denver-based venture capital firm that develops net zero supersonic jets. Boom says its Overture airliners will fly by 2029 on 100% sustainable fuel. United has ordered 15 aircraft, with an option for 35 more. The airline has also pledged to place a billion-dollar order with Archer Aviation, a New York-listed company working on electric flying taxis for use in cities.

In addition to due diligence and researching potential collateral issues, Lewis says, working with technology companies is a key part of attorneys’ efforts on behalf of airlines. “[There is a] a lot of Silicon Valley money in high tech – skills that are brought into what is to some extent an “old” industry, ”he explains.

This year, United formed a new investment arm, United Airlines Ventures, which will only invest in sustainability-focused start-ups in the airline industry. The low-cost US airline JetBlue has a similar investment arm, part of which focuses on promoting sustainable travel.

“You don’t want there to be a lag between what you intend to do and the results you get,” says Lewis. “So this is something that takes a lot of thought and planning.”

The lack of standardization of sustainability goals in the airline industry creates challenges. But, rather than wait for regulations to be worked out, airlines have turned to solutions, such as sustainable fuels and the phasing out of single-use plastics in on-board catering.

“Not only are there no agreed-upon standards for what it means to be sustainable or what kind of relationship to carbon a business must have to be acceptable,” Lewis says, “there is no agreed way to measure it, or attribute it or determine who gets credit for what.

In addition to helping airline executives understand the risks and rewards of start-up investments, lawyers advise companies on public proclamations of their sustainability plans.

“If a company has to be net zero, it’s not a legal standard,” said David Curran, co-chair of the Sustainability and Environmental, Social and Governance practice at the law firm Paul, Weiss, Rifkind, Wharton & Garrison.

“If that’s what they’re saying publicly, it creates a potential risk for them if they don’t support it,” he notes. For airlines, this means that there will also be regulatory and financial risk of misleading customers and investors.


Case studies

Durability. All case studies researched, compiled and categorized by RSGI. “Winner” indicates that the organization has won an FT Innovative Lawyers 2021 award

Durability

WINNER: Sidley Austin
The company is helping United Airlines become a more sustainable business through a variety of projects. These include: United Airlines Ventures, an investment arm focused on sustainable fuels and aircraft; the launch of the Eco-Skies Alliance, a group of companies that purchases approximately 3.4 million gallons of sustainable fuel in 2021; and partnerships with companies working on the development of sustainable fuels or aircraft. Lawyers have adapted the traditional buy and sell agreements the airline works with to account for the risk of adopting these development technologies.

Bracewell

Yurok guides paddle tourists along the Klamath River

© Los Angeles Times via Getty Images

The company has advised Resource Environmental Solutions, a specialist in environmental mitigation, on the deconstruction of a series of dams on the Klamath River in Oregon and California that are damaging the local ecology. The company negotiated a contract with the Klamath River Renewal Corporation. As the first round of dams like this to be deconstructed in the United States, the project had many unknowns, but the contract had to be negotiated at a fixed price in order to get the regulator’s approval. Various stakeholder interests had to be taken into account, including those of two local Native American tribes, the Yurok and the Karuk, who campaigned for the dismantling of the dams.

Cadwalader, Wickersham & Taft
Since January 2020, fund finance lawyer Wes Mission has launched nine environmental, social and governance (ESG) fund facilities in the United States, the largest to date for Bank of America. The $ 4.1 billion ESG credit facility is managed by private equity group Carlyle and pricing is tied to progress in achieving 30% diverse representation on corporate boards of the portfolio within two years of ownership. As a nascent field of finance, lawyers and clients have limited market guidelines to follow to ensure transactions meet legal, policy and regulatory requirements.

Dentons
The company has developed a way for companies to earn carbon offset credits for products with negative carbon output. The lawyers drew on the experience of business advisor Susan Wood, who previously worked for AgCert, a company that produced and sold greenhouse gas emission credits, and the work of Jeffrey Fort in partnership with the environmental nonprofits Delta Institute and Chicago Climate Exchange. Using the company’s method, originally developed in 2018, refrigeration company True Manufacturing was able to earn 2 million carbon offset credits worth between $ 2 and $ 13 each for two technologies that reduce carbon emissions from products.

Orrick

A homeless man closes his tent in front of the headquarters of the Midnight Mission association

© AFP via Getty Images

The firm has advised the California Health Facilities Financing Authority on financing housing developments for the vulnerable and homeless. Rather than directly using the funds from a 1 percent tax increase on people earning more than $ 1 million a year, approved by voters in 2004, the money was raised through two bond issues. These will be repaid using tax revenues over the next 15 years. The lawyers used a service contract, which allowed them to bypass the constitutional debt limit. More than $ 1 billion has been raised to date, which will finance approximately 4,500 homes.

Paul, Weiss, Rifkind, Wharton and garrison
The lawyers helped asset management firm Apollo launch an impact fund that links value to impact performance based on the UN’s Sustainable Development Goals, while aiming for ambitious annual returns.

One project that received an investment was Reno De Medici, a manufacturer of recycled cardboard in Europe. As this form of ESG fund was a new venture for Apollo, the lawyers relied on their market knowledge and network, as well as the firm’s own proprietary databases, to design a fund structure that could deliver the most. impact as well as financial returns.

Pillsbury

A fuel cell badge can be seen on Toyota Motor Corp's hydrogen fuel cell semi-truck.

© Bloomberg

In September 2020, the firm’s energy group launched a dedicated hydrogen practice, with 50 lawyers working with clients on a wide range of aspects of hydrogen energy, from project financing and corporate transactions to regulatory and policy advice. The firm worked with the US Department of Energy on a project to demonstrate how hydrogen can be produced from nuclear power, and with other clients on projects exploring how hydrogen can be used. for automotive fuel. Partner Elina Teplinsky is one of the main advisers to the NGO Clean Air Task Force, which advocates for the adoption of nuclear and hydrogen technology.

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