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Global rules on foreign direct investment (FDI)
Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
United Kingdom | Publication | October 2019
On July 18, 2019, Governor Anthony Cuomo signed New York State’s ambitious Climate Leadership and Community Protection Act (the Act) into law. The Act calls for a dramatic decrease in greenhouse gas emissions to combat the grave threats posed by climate change identified by the law. During New York Energy Week in June 2019, the New York office of Norton Rose Fulbright hosted and moderated a discussion by a panel of renewable energy experts on the challenges and likely impacts of the Act and some of the measures required to meet the aggressive timeline and formidable challenge of complying with the most far-reaching U.S. climate change legislation to date.
New York’s Climate Leadership Act establishes mandatory and aggressive targets to reduce greenhouse gas emissions and sets out procedures and a consultation process to transform New York to achieve those targets. New York intends to take a leadership role (at least in the United States) in developing a way to achieve net zero greenhouse gas emissions.
While agriculture is not New York State’s primary industry or business sector, farm production reportedly contributed nearly US $2.4 billion to New York State’s gross domestic product in 2017, and agricultural production, support services, and manufacturing contributed more than 145,300 jobs to New York State’s economy in 2014, according to a Cornell University research study cited by the New York State Department of Labor. New York State’s top agricultural commodities by sales are, in descending order: milk; corn; hay; apples; and cattle and calves. In 2017, New York State was among the top three U.S. states with respect to milk production and was the top ranking producer among U.S. states for cottage cheese production (accounting for nearly 27 per cent of the U.S. total). Given the importance to the state of agriculture (by which we mean the raising of plants, animals and byproducts), New York’s treatment of agriculture in the process of implementing the new Climate Leadership Act may be a relevant precedent for other jurisdictions.
The Act sets certain goals
The Climate Leadership Act calls for an initial two-year consultation and study process during which the State must generally consider
The Act establishes a New York State climate action council (the “Council”) which is ultimately tasked with developing a plan to meet the Targets. The Council, co-chaired by the commissioner of the New York Department of Environmental Conservation (“DEC”) and the president of the New York State Energy Research and Development Authority, will consist of 22 members including New York State agency commissioners, the chairperson of the Public Service Commission, the presidents of the New York Power Authority and the Long Island Power Authority, the New York Secretary of State, two non-agency expert members appointed by the governor and eight members appointed by leaders of New York’s legislature (the State senate and the state assembly). The Council will have advisory panels and will be aided by a “just transition working group” that will help the Council deal with some of the considerations discussed above regarding the impact of the transition on jobs, workers, businesses and communities.
Within two years of the Climate Leadership Act’s enactment, the Council must develop and approve a scoping plan (the “Scoping Plan”) outlining the Council’s recommendations and providing a path for New York to meet the Targets. Within three years, the Council must submit the final Scoping Plan to the governor and the state legislature and make it available to the public via the Council’s website. Within four years, the DEC must promulgate rules and regulations to ensure compliance with the Climate Leadership Act and assist state agencies in promulgating additional rules and regulations as necessary.
In addition to setting out actions to achieve the Targets, the Scoping Plan must, among other things
The Council’s recommendations will not be based solely on the industry experts and government officials that make up the Council and its advisory panels. The Act requires that in preparing the Scoping Plan, the Council must solicit public comments and hold at least six regional public comment hearings on the draft Scoping Plan. These meetings are to be split geographically between upstate (which are more rural areas) and downstate (which includes New York City).
While the Council will not itself promulgate rules or regulations, the New York State Energy Planning Board is required to incorporate the Council’s recommendations into its annual state energy plan beginning with the first energy plan issued following the Council’s approval of the Scoping Plan. Once adopted and made effective by state rules and regulations, the plan to achieve the Targets must be continually reviewed and must be updated at least every five years.
The Act provides for periodic reassessment of interim goals, the methods to achieve those goals and consideration of relevant developments (including best practices and new technologies) from around the world.
This new law could have had a lot of different names – calling it the “Climate Leadership [Act]” shows it is trying to take a bold step forward, but the second part of the title – “and Community Protection Act” – should be paid attention to as well. The word “community” as used here has a broad meaning covering how and where people live and work, so there is certainly room for people to forcefully argue to protect not just local physical surroundings but also jobs, industry, wages and communities of all sizes, and New York State recognizes that its agriculture business is something that is important to its economy and many of its residents for many reasons.
The text of the Act provides few specifics when it comes to meeting its aggressive specified Targets, although the Scoping Plan does require the Council to establish measures to achieve Targets of
In support of the efforts that will be required to satisfy the Targets, New York announced the approval of two offshore wind projects simultaneously with Governor Cuomo’s signing of the Climate Leadership Act into law. The 880 mega-watt (MW) Sunrise Project, developed by Bay State Wind (a joint venture between Danish firm Orsted and Eversource Energy), and the 816 MW Empire Wind project, developed by Danish firm Equinor, will both begin construction off the coast of Long Island in 2022, with both wind farms scheduled to begin commercial operations by May 2024.
The Act is clearly relying to some extent on wind and solar energy, but also recognizes the need for other sources, in particular hydroelectric, which can provide a substantial baseload source of electricity. Hydropower, largely from the Canadian province of Quebec, already supplies a substantial amount of renewable energy to upstate New York, and the Mayor of the City of New York has announced plans to bring available hydropower from Quebec to satisfy a substantial portion of the future clean energy needs of New York City, thereby substantially helping New York State meet its future clean power needs.
The impact on New York’s agriculture industry is difficult to gauge and will depend greatly on the details of the Scoping Plan, the rules promulgated by the DEC thereunder, and on any potential amendments that might be made to the existing text of the Act. The Act addresses agriculture expressly in several of its provisions
Agriculture presents its own special issues regarding greenhouse gases in the U.S.
Farmers throughout New York are already utilizing many techniques to control greenhouse gas emissions, in part due to existing economic incentives that could be expanded by the Council and the DEC. For example, New York recently announced an additional $2.3 million round of funding to the Climate Resilient Farming Grant program, which has provided New York farmers with grants totaling over $8 million since 2015 to implement projects to mitigate greenhouse gas emissions, promote energy savings and better cope with extreme climate change-related weather events such as flooding. These grants have supported projects such as
One area of New York’s Climate Leadership Act has already drawn attention for the way it treats agriculture – the limitations on what can be considered an acceptable carbon offset. While the Targets mandate that 85 per cent of New York’s total energy needs must ultimately be supplied by zero-emission sources, the remaining 15 per cent can be met via approved projects which offset greenhouse gases. Many developing agricultural practices such as those outlined above might be used in this regard.
But the Climate Leadership Act: (1) excludes from offset programs waste-to-energy technologies such as biofuels and (2) requires that any offset program must generally be located near the source of emissions being offset, preventing farmers from profiting from offset programs that are not needed to offset local emissions. Biofuels are also excluded from the definition of “renewable energy systems” and therefore will not be considered an acceptable source of electricity in meeting the Targets regarding generation of electricity.
Potentially hampering the implementation of such offset mechanisms further is the exclusion of any offset program (such as increased cover crops) that would have been undertaken in any event within five years. This has already attracted negative comments and may be an issue for possible future amendments because various agriculture lobbying groups will want farmers to obtain benefits from these emissions offsets. The exclusion of biofuels is also being questioned.
Watching how New York addresses these questions should be fascinating. Over the years, as New York implements and refines its plans to achieve the Targets set by the Act, numerous choices will be confronted, some unique to agriculture and some inevitable as new technologies develop and new problems arise.
There are the relatively simple questions of
Then there are some more difficult choices
The implementation of New York's Climate Leadership Act over the coming years will produce an interesting precedent for how other parts of the U.S. and the world might deal with similar issues, impacting agriculture and all aspects of life and will provide many opportunities for new technologies and new ideas to be developed and appropriately applied.
Publication
Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
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