The legal obstacles to clean energy

Katie Kouchakji, IBA Environment CorrespondentFriday 12 January 2024

Global Insight assesses the legal issues associated with clean energy as countries pivot to renewables in response to the climate crisis.

Renewable energy sources are critical to the energy transition, for electricity generation, for heat and for transportation. All pathways to net-zero emissions and keeping the global average temperature increase below 1.5 degrees – compared with pre-industrialisation temperatures – need renewables. Meeting these goals requires a whole-of-society shift in the way we work, travel, stay warm – or cool – and run our houses.

And the shift is underway: in 2022, the world added an additional 340 gigawatts of renewable energy to its electrical capacity, according to the International Energy Agency (IEA). Solar photovoltaic (PV), electric vehicles (EVs) and lighting are the only technologies aligned with the IEA’s net zero emissions 2050 scenario and 2030 milestones, with heat pumps almost on the right trajectory. Other technologies needed include hydrogen, batteries for energy storage, and carbon capture and storage (CCS), alongside a phasing-down of fossil fuel use. Demand-side efforts, including energy efficiency, are also imperative.

The clean energy space, however, is still not without its risks, from an environmental and human rights perspective. Indigenous peoples’ rights, land use, modern slavery and the impact on the environment are just a few of the issues facing projects in this space, both at the actual site itself and in the supply chain for their components.

Renewables without the cost to people

‘Oil and gas [are] hyper fixated on these issues now – and they have been for a while – because they are coming under a very strong microscope’, says Lisa DeMarco, Senior Partner and Chief Executive Officer (CEO) at specialised climate and clean energy law firm Resilient, in Toronto. With renewables, she says, it’s not that there’s a greater focus on issues such as slavery and exploitation of local communities, but that renewables companies are ‘making claims, and if you’re making virtuous claims, you had better be certain that you can assure them throughout your value chain’. Renewable energy, she adds, often seems to be held to a higher threshold, but DeMarco believes ‘that’s because it’s claiming to be something that is more virtuous than other forms of energy, so the veracity of those claims has to be tested’.

‘About five years ago, we started publishing articles that said you don’t get to call yourself sustainable if you have tens of thousands of children in Africa working in mines in your supply chain and that sustainability is more than environment’, says Abigail McGregor, a Melbourne-based partner at Norton Rose Fulbright who has a strong background in advising businesses on the impact of their supply chains on human rights. ‘We really thought that in the race to renewables – which really has escalated very substantially since that time – that people were ignoring other issues.’ McGregor explains that, of course, fossil fuels have significant human rights issues too. ‘It’s just that if you’re going to a different source of energy and justifying that, quite rightly, with the environmental benefits, then you need to find a way for that not to be achieved at the cost of people.’

In the early days, mining for minerals used in batteries was the main source of concern, McGregor says. ‘We wanted to raise the issue of the significant modern slavery and child labour in artisanal mining in Africa’, she says, highlighting that there has been some progress in how this risk is being managed but that it still remains significant.

More recently, attention has turned to allegations of forced labour in the Xinjiang Uyghur Autonomous Region of China. According to Sheffield Hallam University, this region is the source of around 35 per cent of global solar-grade polysilicon and up to 32 per cent of the world’s metallurgical grade silicon – key elements for solar panels. For its part, the Chinese government denies that there is any modern slavery in Xinjiang, describing its activities there as a ‘labour support programme’ in an impoverished area.

‘If you think about the supply chain for a solar panel, it includes silicon and polysilicon, so even if you buy your panel from an EU manufacturer, there’s a good prospect that some of the silicon or polysilicon in your panel manufactured in Germany has come from Xinjiang’, McGregor says. She explains that it’s difficult to source panels that aren’t manufactured in Xinjiang, or from China more generally. This is true ‘particularly outside the US where sanctions exist […] it’s even harder to find a panel that someone can honestly say to you “we guarantee there is no labour from Xinjiang in this panel”, because there is co-mingling of polysilicon. Lack of transparency in supply chains means that it can be impossible to determine where polysilicon has come from.’

She adds that this co-mingling is not uncommon in commodities but is notable because of the significant issue of alleged forced labour. ‘What has resulted is a great amount of concern in relation to whether or not every single solar panel that is underpinning the movement to renewable energy and net zero is doing that at the cost of individuals’, McGregor says. ‘That is a very complicated issue and solving it is very complicated.’

In late 2022, Norton Rose Fulbright partnered with Australia’s Clean Energy Council (CEC) on a white paper examining modern slavery in the clean energy sector to raise the issue at a high level across the industry, and to begin thinking about what each stakeholder – such as investors, government and consumers – could do. The firm is now supporting the CEC and the Anti-slavery Commissioner of New South Wales, one of only two such commissioners globally, along with the UK’s, to develop a code of practice in relation to managing modern slavery risk in renewable energy value-chains.

And while not unique to the solar PV manufacturing industry, there’s a movement to shift manufacturing elsewhere. The research from Sheffield Hallam has highlighted the risk of market bifurcation, that is, one stream that’s guaranteed to be modern slavery-free and one where it’s not guaranteed. But, warns McGregor, this is a complicated solution as it raises questions about whether the modern slavery-free chain is subsidising the other. The US government has taken a more direct approach and has banned imports of solar panels and solar polysilicon from Xinjiang since 2022 due to the allegations of forced labour. ‘There are a number of other governments trying to work out how best to deal with it’, says McGregor.

Another issue she flags is that manufacturing solar panels is very energy intensive – and in China, the process is predominantly coal-fired, due to generous subsidies for the fossil fuel.

Historic inequities

Emily Gerrard, Director at Comhar, an Australia-based legal and policy advisory company, says that environmental, social and governance (ESG) reporting requirements are leading to a significant amount of ‘hard and clear’ disclosure and regulation around renewable energy development as well as broader issues such as modern slavery, anti-bribery and corruption, given the global nature of supply chains. Human rights – particularly those of indigenous peoples – remain a risk too for project development.

Before a project is even implemented, there are often already long-standing structural inequities –economic, legal and societal, for example – that affect people’s capacity to engage with the energy transition, says Jonathan Kneebone, Director of Policy and Engagement at the First Nations Clean Energy Network in Australia. These give rise to issues such as the lack of ability for free, prior and informed consent, while the limited support and capacity of investment that has gone into First Nations communities historically hinders their ability to respond adequately. Kneebone also highlights a lack of access to capital, which prevents proactive and full participation and the reaping of benefits from the transition. The energy transition can help deal with these historic inequities simultaneously, but it needs to be consciously implemented and resourced.

In Australia, Kneebone explains, Aboriginal and Torres Strait people were deliberately excluded from the economy until relatively recently. This prevented the creation of intergenerational wealth and inhibited access to capital, an issue that continues today. In 1992, Australian law recognised the pre-existing native title rights of Aboriginal and Torres Strait Islander people, but this recognition is an ongoing process, while settlers continue to extract wealth from the land. ‘Accordingly, there remains an enormous wealth gap, which means that First Nations groups don’t have the same ability to access capital’, Kneebone says. This, he says, needs to change for First Nations groups to engage fully with the energy transition.

Targeted, and significant, funding and government-backed loan guarantees, along with other innovative financing mechanisms, can help address the issue of access to capital, he says, noting that the clean energy industry stands to benefit from genuine partnerships with First Nations groups, and through First Nations ownership.

Other policy mechanisms, as deployed in jurisdictions elsewhere in the world – such as providing First Nations groups a first right of refusal on developments or requiring tender applicants to demonstrate a mandated percentage of First Nations ownership in proposals – would also see the mutual benefits of First Nations ownership and co-ownership ripple out. ‘Because renewable energy proponents come in and there can be a perception they’re doing a good thing […] there’s almost an assumption that a social licence comes with that, and I think it’s a surprise sometimes when communities aren’t as welcoming or as understanding from the immediate start, and that relationships require early engagement and a certain amount of investment’, says Gerrard.

‘Engagement with native title holders is like any engagement – you’re seeking to use traditional territories to develop something that has an impact’, she says, and while many First Nations communities support the need to transition, they also don’t want their territories or people to be disrespected nor their concerns, such as around land clearing, to be dismissed.

Location, location, location

Any kind of infrastructure development will, by its nature, have an impact on its surrounding environment – and potentially beyond. For example, clearing forests or greenfields for energy developments reduces the locale’s ability to absorb greenhouse gas emissions or heavy rainfalls – and that’s before you get into the implications of the facility’s operations. With renewables, risks include threats to local biodiversity, adverse impacts on the terrain and land competition.

Kunihiro Yokoi, Vice-Chair of the IBA Power Law Committee and a Tokyo-based partner at Anderson Mōri & Tomotsune in Tokyo, explains that while in Japan there have been a large number of renewables projects developed recently, the environmental impact is a concern. Over the past ten years, he says, renewable energy regulation has been under development, but the results have perhaps not been as thorough as they could have been. This has prompted the authorities to consider adopting regulations to require developers to hold public meetings with local communities to discuss proposed projects.

One of the biggest concerns for Japan relates to forest clearing for wind or solar projects. ‘Once a big typhoon or flood happens, that area may have a weakness’, creating the potential for a disaster if appropriate measures haven’t been taken, Yokoi says.

Monitoring and reporting, particularly in relation to the numbers of birds and bats being killed by wind turbines, needs to be ongoing, says DeMarco, while the operations and maintenance throughout the useful life of the asset must be supervised on a regular basis. Both are examples of how monitoring can enhance transparency around renewable energy projects and their impact on the environment. ‘All to say, [these are] fabulous technologies, but where you put them, how and where they are constructed, and how they’re operated are all fairly important’, says DeMarco.

Water spills over the top of Englebright Dam on the Yuba River. Gary Saxe/AdobeStock.com

Their connection to the transmission grid is also key, and subject to the same considerations, she adds, as storage options such as batteries and pumped hydro. For example, says DeMarco, with pumped hydro, some of the issues to consider include the ‘charging’ of the storage and the reservoir safety, as with large-scale hydropower dams. Developers may also need to consider the impact on the seafloor for offshore projects, as well as on all Aboriginals’ rights – in particular the risk that burial and other sacred indigenous lands may be flooded.

Competition for land – for example, with agriculture – can be another challenge. Rooftop solar can help in this regard, but in Japan so far, the capacity is limited, Yokoi says, with there being a stronger preference for offshore wind projects. ‘Japan has relatively less land space compared with other […] countries’, he explains, which means that offshore wind is one of the main methods by which Japan can increase the capacity of renewable energy. ‘But it is in an early stage compared with Europe or other Asian countries, and many regulations and arrangements with local communities are necessary’, adds Yokoi.

Meanwhile, around the world, the infrastructure necessary for a renewables revolution often isn’t quite there yet. ‘In most places, the current architecture of the electricity grid is not conducive to receiving power from renewable energy installations’, explains Don Smith, Editor of the IBA’s Journal of Energy & Natural Resources Law, Council Member of the IBA Energy, Environment, Natural Resources and Infrastructure Law Section and Director of the Environmental and Natural Resources Program at the University of Denver Sturm College of Law. ‘The grid was engineered in a different era where multiple “on ramps” that would accommodate renewables were not needed. The result is an immediate need for updated grids that can accept electricity from the diverse locations where renewables are generated.’

Advocacy for regulation

In Yokoi’s view, one of the roles that lawyers can play in helping to mitigate regulatory risk for renewables is to become advocates for the cause. ‘When developers face some issues, we can assist’, he says, for example by interpreting the regulations. ‘If the regulations aren’t ready, we may assist developers [in persuading] the local government or the [national] government to set up proper regulations’, he adds. Yokoi highlights by way of example that when Japan lacked regulations regarding the use of sea areas beyond ports, the wind power industry – with assistance from lawyers – persuaded the government to establish rules in order to enable offshore wind projects to be developed.

Governance and oversight are also important for CCS, particularly around the storage aspect and in relation to non-permanence risk, ie, that the carbon that’s avoided or removed then reappears. ‘Usually there’s a payment into a long-term liability fund by the entity which is the proponent of the project, or the owner of the project’, says DeMarco, adding that the fund is often managed by a separate organisation, or a body established by the government.

‘Ultimately, it’s naive to think there isn’t a role for the government in the long-term oversight and maintenance of storage. But a lot of that should be paid for up front in association with the development cost’, she says. It’s not unlike the arrangements for nuclear waste – but the substance being stored doesn’t have the same short term safety concerns, DeMarco adds.

Smith adds that the matter of power storage, in general, is a key challenge for renewable energy. ‘Storage is needed to address those times when the wind is not blowing, or the sun is not shining. Battery storage technology is advancing, but much more storage is needed before the intermittency of renewables can be effectively addressed’, he says.

And, similar to conventional fuels, there’s the challenge of waste when renewable energy projects reach the end of their lifetime. ‘Renewables are an interesting space because, by their nature and definition, the resource doesn’t really go away – it’s not like an ore body that once you’ve mined it, it’s gone; the wind will keep blowing, the sun will keep shining in most places’, says Gerrard of Comhar.

Most projects in Australia are too young to have reached end-of-life and the decommissioning or repowering stage, she adds, but in areas in Europe in which renewables – particularly wind energy – have been around for longer, the upgrading and repowering of sites, rather than decommissioning, is more prevalent. ‘The interesting thing will be with solar power and batteries, the decommissioning at the end of their life and the repurposing or recycling of components’, says Gerrard. Given moves by governments to ban certain materials from landfills, there’s a need to handle solar PV panels carefully, as they contain ‘a number of elements that require them to be treated as hazardous waste’.

‘There is a looming crisis around these waste streams and the need to incentivise the uptake and investment in research and development around end of life’, Gerrard says. Efforts are already underway in this field, but more is needed. ‘It needs to not just be about the carrot and hoping that industry sees the size of the prize around being able to recycle [panels] and the benefit of that […] there will need to be regulation around it’, she adds.

Katie Kouchakji is a freelance journalist and can be contacted at katie@kkecomms.com