In a world anxious to preserve the environment, 'gas emissions' is no longer a dirty phrase - and lawyers are at the forefront of the trade in quotas.

Linda Tsang reports on the opportunities that demand multi-disciplinary legal expertise

With the world going ever greener, it is a good time to be an environmental lawyer.

And the pace of change in their field looks set only to increase over the next year as UK businesses face a raft of new European directives in the year ahead.

These cover the following: landfill - to reduce waste, encourage recycling and tackle the risk of polluting water and soil from landfill sites; end-of-life vehicles - to improve the handling of scrap cars, introduce strict recycling targets and force take-back and recovery costs payments from manufacturers; waste electrical and electronic equipment (WEEE) - by 2005, manufacturers and importers will be forced to take back and recycle products ranging from light bulbs, mobile phones and hi-fi systems to washing machines; and an emissions-trading scheme - to cut the costs of curbing carbon dioxide emissions, enabling companies that reduce emissions to sell their surplus.

Proposals for new directives are also in the pipeline, covering chemical testing, batteries and environmental liability.

The government is also under fire from the Environment Agency, the waste authority for England and Wales.

Its chief executive, Baroness Young, has said the government's 'faffing about' has increased the threat of illegal dumping of hazardous waste when new landfill laws are introduced this summer.

The agency is braced for a sharp increase in its enforcement duties over the next few years, and is pressing the government to make faster and clearer decisions about implementing EU laws.

The agency is not alone in preparing for the fall-out from EU directives and the Kyoto convention on climate change - lawyers are gearing up too.

The Greenhouse Gas Emissions Trading Directive, which came into force in October 2003, may have the largest potential impact.

It caps emission production within EU member states, but those countries that do not use up their quota of emissions will be allowed to trade their unused allowance.

Under this trading scheme, it is estimated that around 10,000 EU companies will be able (from 1 January 2005 onwards) to buy and sell permits to emit carbon dioxide.

With a second allocation scheme for sulphur dioxide emissions planned by the EU, and the possibility that the US may eventually ratify the Kyoto convention, creating new emission limits, the UK is starting to see developments in environmental law as an aid to making money rather than just another liability.

In response, global giant Clifford Chance set up a group consisting of more than 40 lawyers across 16 European cities under group derivatives partner Claude Brown (see [2004] Gazette, 22 January, 6).

The environmental and climatic trading group aims to exploit the opportunities arising from the new trade in gas emission quotas.

Mr Brown says: 'In the past, we have seen institutions look at emissions as a burden, which they have had to manage, but they can now see them as assets with trading potential.

Both financial institutions and the energy companies are seeing that potential.'

One area being looked at is that of catastrophe bonds, where investors take the risk in relation to the transfer of cleaning-up costs.

He explains: 'There is the potential for a high return, and the liability they are exposed to is limited to the insurance they have bought.

But the potential is wider than that, and banks and finance lawyers will be adapting aircraft and other asset leases to take into account any requirements for end-of-life responsibilities.'

The view from other firms is that their clients have known for years what is in the pipeline and have themselves been busy lobbying the European Parliament, and are braced for what is to come.

Brian Greenwood, head of planning at City firm Norton Rose, and a member and former chairman of the Law Society's planning and environmental law committee, says: 'The imposition of European-wide standards will assist those industrial sectors that have prepared in advance - those that have prudently kept abreast of the increasingly stringent emission limits being set by the environmental regulator.

The directive will, however, strike hard at the unprepared.'

Mr Greenwood, who is a a member of the Confederation of British Industry's environmental working party and president of the City of London Law Society, adds: 'The opportunities for environmental lawyers as a result of this directive - and indeed the numerous other environmental directives that seem to be emerging regularly from Brussels - are legion.

If these opportunities are to be seized, however, the environmental lawyer must not only understand the full implications of this increasingly complex European environmental regime, but must also understand the true impact that this area of law will have on his or her clients.

Mere interpretation of the law is not sufficient.'

Anthony Hobley, a senior associate in the global clean energy, climate change and environmental group at the City office of Baker & McKenzie, says: 'What we are seeing is a fundamental shift, which is addressing the heart of the problem - it can be called end-of-pipe regulation, which covers the environmental issues to deal with what comes out at the end of any industrial process.'

He has already been addressing the potential of emissions trading with clients in the City.

He says: 'This is the first time we have seen the major financial institutions such as JP Morgan, Morgan Stanley, UBS and Citibank look positively at environmental legislation.

'This is a multi-disciplinary, cross-border practice - from tax lawyers to finance lawyers, we are looking at the consequences of the EU allocations which were announced in January.

There are also implications in relation to insolvency and administrators' responsibilities to sell the allowances to generate quick cash.'

And there are developments in other aspects of environmental law, such as litigation.

Justine Thornton, a senior associate at magic circle firm Allen & Overy, says the firm is already involved in one of the first pieces of litigation under the contaminated land regime.

She explains: 'The Environment Agency served a draft clean-up notice in late 2003 on our client and other businesses, and both the industry and environmental lawyers are watching that process with interest to see how that develops, as this is one of the first such notices.

How the agency proceeds and what form that notice takes in its final form may take some time and an appeal may follow.'

She adds that another key issue is the disclosure of documents, currently under scrutiny in two non-environmental cases, one involving BCCI and the other British American Tobacco.

In the wider area of environmental law, there continue to be the major land acquisitions, where the contaminated land regulations mean that lawyers have to advise clients on all aspects of environmental law.

Helen Loose, partner and head of the environmental and health and safety group at City firm Ashurst, says: 'We advise on real estate, corporate acquisitions and finance transactions, and we provide both regulatory advisory services and support advisory services.'

She adds: 'What we have seen is that the complexities of environmental law are now readily appreciated by clients, and that has been a continuing trend.

Environmental law has an ever-widening reach - for example, nuclear decommissioning is another area which has become current.'

Nuclear-related work is set to prove good news for City firm Herbert Smith, which late last year was appointed by the Department of Trade and Industry to advise on commercial aspects of the implementation of the White Paper 'Managing the nuclear legacy'.

The White Paper proposals are aimed at dealing with the clean-up of Britain's public sector civil nuclear liabilities.

The cost of clean-up is currently estimated to total almost 48 billion, and the decommissioning of civil nuclear sites is likely to require on-going management for at least 100 years.

The Nuclear Decommissioning Authority, which will be established to lead the clean-up, is expected to be one of the most significant public sector procurers of services from the private sector over the coming years.

Mr Hobley concludes: 'We are on the cusp of a fundamental change in the way that environmental law is practised, and that is being driven by the fundamental changes in the way that governments in the EU - and globally with Kyoto - are trying to regulate environmental issues.

'There will be an increase in specialisation, and a degree of fragmentation, as environmental law is seen both as a market mechanism and as a wider responsibility in the business world.'

Linda Tsang is a freelance journalist