Welcome to the inaugural issue of Commodities Trading News and Trends, the first in a series aiming to help commodity market participants identify and adapt to the market news and legal developments that impact their commodity trading. Each issue will feature summaries and insights into current topics, ranging from developments in renewable energy to recently enacted federal and state laws andregulations. Our goal is to help you successfully navigate the shifting currents while remaining competitive. Please enjoy this issue.

Renewables

• The US offshore wind industry continues to expand as three states agree to collaborate on a large-scale project off the Atlantic coast. Maryland, Virginia, and North Carolina have agreed to collaborate on offshore wind projects, offering an alternative model for states to pursue their climate related goals. This collaboration has two related aims: to advance regional offshore wind projects and to promote the Southeast and Mid-Atlantic United States as a hub for offshore wind energy and industry. These are not the only Atlantic states acting to develop an offshore wind industry. For example, in June 2020, New Jersey announced its plan to begin constructing in 2021 the country’s first port dedicated to building wind turbine; in the summer, New York’s Governor Andrew Cuomo announced the largest combined clean energy solicitations issued to date in the US. But these are individual, state-level efforts. The Maryland-Virginia-North Carolina collaboration presents a regional, rather than state-level, model; other states may be attracted to this approach because of the economies of scale it offers. As a memorandum of understanding between the participants describes, the states’ wind project pipeline could support up to 86,000 jobs, bring $57 billion in investments, and provide up to $25 billion in economic output by 2030.
• Foreign governments impact US LNG exporters. Negotiations on a multibillion-dollar liquified natural gas import contract between a US- based LNG development company and ENGIE, a French energy and services group, reportedly ended after the French government expressed concerns over the contract’s environmental impact. The French company’s decision arrives despite the US company’s anticipated ability to reduce its carbon dioxide equivalent emissions at its proposed LNG facility by approximately 90 percent. European Union countries intend to accomplish the EU’s goal of carbon neutrality by 2050. Recently, the head of the international relations and enlargement unit at the European Commission’s energy directorate commented that the “LNG trade and gas will remain the main topic of our cooperation with the US in the years to come,” which suggests to us that the failed negotiations may be just the first sign of a growing reluctance to engage with US LNG exporters. Now, not only may fossil fuel companies see less enthusiasm from institutional investors – some of whom are increasingly divesting away from such companies – but international commitments may also affect contractual relationships between LNG exporters and their customers. One solution available to US LNG exporters, as recently seen, is for them to develop a relationship with their EU customers similar to that between a French oil and gas company and a foreign oil and gas company in which the parties will explore opportunities to partner in joint research, development, and deployment endeavors to address CO2 emission reductions and carbon capture, utilization and storage.

Carbon

• As private businesses address climate change, NGOs and carbon registries exercise diminishing influence over carbon offset markets. The days of NGOs and carbon registries regulating the carbon offset market may be coming to an end. As key actors call on governments to step in and regulate the carbon offset markets, the impact of NGOs and carbon registries is weakening. With the climate crisis accelerating, many private businesses are taking steps to address climate change by mitigating their GHG emissions and investing in clean energy alternatives. A key component of this private-sector push is the sustainable-finance movement, which is now a core business for the largest banks and fund managers. But the proliferation of private standards and the lack of consistent and binding guidelines and regulations have left the playing field uneven, and investors are calling for the clarity of government intervention.

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