Climate Change

The Supreme Court will soon decide whether to hear two cases that could dictate the future of climate change tort suits.  Such suits have proliferated in recent years: several dozen active cases assert state tort law claims—like nuisance, trespass, and strict liability—against oil and gas companies for fueling and misleading the public about climate change. 

In the early hours of December 14, 2023, the Council of the EU (“Council”) and the European Parliament (“Parliament”) reached a provisional political agreement on the Corporate Sustainability Due Diligence Directive (“CSDDD”). Described as a “historic breakthrough” by Lara Wolters, who has led this file for the Parliament, the CSDDD will require many companies in the EU and beyond to conduct environmental and human rights due diligence on their global operations and value chain, and oblige them to adopt a transition plan for climate change mitigation.

Given the CSDDD’s relevance for companies’ ongoing compliance planning on environmental and human rights matters, this blog aims to advise clients on the basic elements of the CSDDD agreement based on press releases from the CouncilParliament, and the European Commission (“Commission”), even if much uncertainty remains. Although a political agreement has been reached, the text of the agreement is not publicly available and a number of details of the legal text will need to be finalized in follow-up technical meetings. Covington will publish a more detailed alert on “how to prepare” for the CSDDD once the full text is available (likely in early 2024).

In Short

After intense negotiations since the Commission published its proposal in February 2022, the Directive is set to lay down significant due diligence obligations for large companies regarding actual and potential adverse impacts on human rights and the environment, with respect to their own operations, those of their subsidiaries, and those carried out by their business partners.Continue Reading Provisional Agreement on the EU’s Corporate Sustainability Due Diligence Directive (CSDDD): Key Elements of the Deal

What You Need to Know.

  • After two days of intense negotiations, world leaders adopted a draft decision that sets out international climate priorities in response to the findings of the first Global Stocktake under the Paris Agreement.  The decision covers several thematic areas, including mitigation of greenhouse gas emissions, adaptation and resilience in the face of climate change, financing and means of implementation and support for climate projects, and loss and damage funding for climate-vulnerable nations.  The text of the draft decision can be found on the UNFCCC’s website here.
  • The most highly scrutinized and heavily debated aspect of the agreement was the path forward on the use of fossil fuels, greenhouse gas emissions from which, the decision notes, have “unequivocally caused global warming of about 1.1 °C.”  Recognizing the need for deep, rapid, and sustained reductions in greenhouse gas emissions in line with 1.5 °C pathways, the decision calls on Parties to contribute to the following efforts related to the energy transition and fossil fuel use:
    • Tripling renewable energy capacity globally and doubling the global average annual rate of energy efficiency improvements by 2030;
    • Accelerating efforts towards the phase-down of unabated coal power;
    • Accelerating efforts globally towards net zero emission energy systems, utilizing zero- and low-carbon fuels well before or by around mid-century;
    • Transitioning away from fossil fuels in energy systems, in a just, orderly and equitable manner, accelerating action in this critical decade, so as to achieve net zero by 2050 in keeping with the science;”
    • Accelerating zero- and low-emission technologies, including, inter alia, renewables, nuclear, abatement and removal technologies such as carbon capture and utilization and storage, particularly in hard-to-abate sectors, and low-carbon hydrogen production;
    • Accelerating and substantially reducing non-carbon-dioxide emissions globally, including in particular methane emissions by 2030;
    • Accelerating the reduction of emissions from road transport on a range of pathways, including through development of infrastructure and rapid deployment of zero and low-emission vehicles; and
    • Phasing out inefficient fossil fuel subsidies that do not address energy poverty or just transitions, as soon as possible;
  • While coal has been mentioned in previous COP decisions, the language on “transitioning away from fossil fuels” represents the first time that countries have agreed to language that explicitly curtails all fossil fuels in the nearly three-decades-long history of the UN climate summit.  Though hailed by COP28 President Al Jaber and other world leaders as a “historic package to accelerate climate action,” the decision, and how it was adopted, was not without its critics.
    • UN Climate Change Executive Secretary Simon Stiell pushed the world to strive for more action.  “COP 28 also needed to signal a hard stop to humanity’s core climate problem—fossil fuels and their planet-burning pollution.  Whilst we didn’t turn the page on the fossil fuel era in Dubai, this outcome is the beginning of the end.”
    • Anne Rasmussen, lead delegate for Samoa, complained that delegates of the small island nation nations weren’t even in the room when President Al Jaber announced the deal was done.  Garnering the longest applause of the session, Rasmussen declared that “the course correction that is needed has not been secured” and that the deal could “potentially take us backward rather than forward.”

Continue Reading COP28 Final Negotiations Recap: A Global Agreement to Transition Away from Fossil Fuels

 What You Need to Know.

  • Azerbaijan is poised to host COP29 next year after receiving regional backing.  If formally confirmed, Azerbaijan’s COP Presidency would resolve months of deadlock.  It will also trigger criticism that next year’s COP will again be hosted by a nation heavily dependent on fossil fuel exports.
  • Brazil has been formally chosen to host COP30 in 2025.  The venue will be the city of Belém, located in the Amazon rainforest.  As Brazil’s Minister of the Environment and Climate Change, Marina Silva, commented: “With its immense biodiversity and vast territory threatened by climate change, the Amazon will show us the way.”
  • The UNFCCC has released a revised draft text of the negotiated outcome of the first Global Stocktake under the Paris Agreement.  The revised draft no longer mentions the “phase out” of fossil fuels and instead mentions the “substitution of unabated fossil fuels” and “tripling renewable energy capacity . . . by 2030.”
  • The inclusion of “phase out” language in the final agreement has been one of the yardsticks by which commentators have suggested the success or failure of COP28 should be measured.  Accordingly, the new draft was met by significant criticism, including by the European Union’s representatives who called elements of the text “unacceptable.”  Negotiations now center on finding a compromise, almost guaranteeing that discussions at COP28 will continue beyond the official close of the conference on Tuesday, December 12.
  • Following the official theme of the day, 154 nations signed the COP28 UAE Declaration on Sustainable Agriculture, Resilient Food Systems, and Climate Action.  The Declaration commits to “expedite the integration of agriculture and food systems into our climate action” and to “scaling-up adaptation and resilience activities and responses in order to reduce the vulnerability of all farmers, fisherfolk, and other food producers to the impacts of climate change.”  The contributions of the agriculture and forestry sectors, both as a source of emissions and as carbon sinks, are continuing to gain attention as an important part of the global efforts on climate change.

Continue Reading COP28 Day 10 Recap: Food in Focus, and a Look Ahead to COP29 and COP30

What You Need to Know.

  • The thematic focus of the day’s programming was on nature, land use, and ocean, including events on scaling effective solutions that protect, restore, and beneficially manage nature ecosystems, addressing drivers of nature loss, empowering Indigenous Peoples and local communities, and creating resilient livelihoods.  As part of this discussion, the United Nations Environment Program (UNEP) launched a report highlighting that nearly $7 trillion of public and private finance each year supports activities that directly harm nature—thirty times the amount spent annually on “nature-based solutions,” or actions to protect, conserve, restore, sustainably use, and manage natural resources that simultaneously provide human well-being, ecosystem, and resilience and biodiversity benefits.
  • Late Friday evening, various news organizations reported that the head of the Organization of the Petroleum Exporting Countries (OPEC) sent a letter to its thirteen members as well as ten additional countries (altogether known as “OPEC plus”), highlighting the increased pressure to reach an agreement to phase out fossil fuels at COP28.  The letter urged the OPEC plus nations to “reject any text or formula that targets energy i.e. fossil fuels rather than emissions.”
  • Various high-level officials from international organizations or countries central to the energy transition made statements in favor of reaching an agreement to curb fossil-fuel production.  Dr. Fatih Birol, Executive Director of the International Energy Agency, noted that it is “imperative” that countries agree to an “orderly and just decline in fossil fuels in line with our international climate goals.”  These comments were echoed by Xie Zhenhua, China’s climate envoy, who noted China’s desire to see an agreement that would reduce fossil fuel consumption, and Alok Sharma, the president of the COP26 summit in Glasgow, who stated that “If you’re going to keep 1.5C alive” countries need both “language on a phase-out of fossil fuels” and “a credible implementation plan.”
  • The Netherlands launched a coalition to phase out fossil fuel subsidies, along with Austria, Belgium, Ireland, Spain, Finland, Antigua and Barbuda, Canada, France, Denmark, Costa Rica, Luxemburg.  The coalition has three pillars: (1) publishing a list of their fossil fuel subsidies before COP29; (2) working together to identify and address international barriers to phasing out fossil subsidies; and (3) shaping an international dialogue to share knowledge, develop national strategies for phasing out fossil benefits, and seek joint action to minimize carbon leakage.

Continue Reading COP28 Day 9 Recap: Nature, Land Use, Oceans, and Nature-Based Solutions

What You Need to Know.

  • The UNFCCC has released a draft text of the negotiated outcome of the first Global Stocktake under the Paris Agreement.  The draft text currently includes four options to address the question of “phasing out” versus “phasing down” the use of fossil fuels, with the strongest option’s wording being “[a] phase out of fossil fuels in line with best available science.”  Options with weaker wording would call on the Parties to the Paris Agreement to take action towards “phasing out unabated fossil fuels and to rapidly reducing their use so as to achieve net-zero CO2 in energy systems by or around mid-century.”
  • The distinction between “abated” and “unabated” fossil fuels and the meaning of “abated” are being hotly debated, with many commentators warning about the potential of creating a loophole through legal ambiguity.  This draft text will form the basis of intense high-level negotiations between global leaders over the next days.
  • Vanuatu and Tuvalu have renewed calls for a Fossil Fuel Non-Proliferation treaty to address the climate crisis.  Such a treaty is being promoted by supporters as an alternative to the COP process if world leaders cannot agree to phase out fossil fuels.
  • The governments of Armenia and Azerbaijan—until recently at war with each other—issued a joint statement acknowledging not only a “historical chance to achieve long-awaited peace in the region” but confirming that as a “sign of good gesture” Armenia would support Azerbaijan’s bid to host COP29.  Hours later, Russia reportedly blocked Azerbaijan’s bid, according to EU diplomats.  If countries cannot agree, Germany will be the default host country.  Looking further ahead, COP30 in 2025 is widely expected to be hosted by Brazil.
  • December 8 was “Youth Day,” and featured events focused on empowering and elevating the voices of young people in the climate negotiation process.  Shamma Al Mazrui, COP28’s “Youth Climate Champion” and the UAE’s Minister of Community Development, stated in remarks, “when young people have a seat at the table and a voice in decision making they become agents of change.”
  • Leading up to COP28, a “Global Youth Statement” that synthesizes collective climate policy demands and proposals of young people, was provided to the UNFCCC and COP28 Presidency by YOUNGO, the official children and youth constituency of the UNFCCC.  The statement includes demands for a “just, equitable and secure transition to a fossil fuel phase-out” and more financial support for vulnerable communities to address the impacts of climate change.

Continue Reading COP28 Day 8 Recap: Empowering Global Youth and a Look Towards Final Negotiations

What You Need to Know.

  • With a focus on multilevel action, urbanization, and the built environment and transport, the events of Day 7 of COP28 highlighted efforts to transition to low-carbon and resilient infrastructure, particularly in urban areas.  This thematic focus is significant; according to the UN Environmental Programme, cities are responsible for an estimated 75 percent of global CO2 emissions, primarily from transportation and buildings.

Continue Reading COP28 Day 7 Recap: “A Bullet Train to Speed Up Climate Action”

What You Need to Know.

  • Two years ago, governments at COP26 agreed to “phase down” the use of unabated coal. This year, countries remain split on specific language concerning fossil fuels more broadly.
  • draft version of the climate agreement for COP28 provides three different options for the future of fossil fuel use.  The first requires the parties of COP28 to commit to “an orderly and just phase out of fossil fuels,” while the second would instead commit to “accelerating efforts towards phasing out unabated fossil fuels and to rapidly reducing their use so as to achieve net-zero CO2 in energy systems by or around mid-century.”  The third option would contain no text on this point.  Saudi Arabia’s energy minister has already rejected any language that would phase out fossil fuels.  And at the same time, NGO reports have sharply criticized the outsized role of fossil fuel lobbyists at COP28, especially at a time when the stakes are high for the energy transition.  
  • As COP28 reaches its midway point, the United Nations World Meteorological Organization (WMO) released a new report finding that between 2011 and 2020, more countries reported record high temperatures than in any other decade.  Glaciers shrank more than ever from 2011 and 2020 and the Antarctic ice sheet lost 75 percent more mass compared to the previous ten years.  The report concludes there is no sign of immediate warming reversing, and that each decade since the 1990s has been warmer than the previous one. 
  • Amidst this sobering backdrop, six of the world’s largest dairy companies—Danone, Bel Group, General Mills, Lactalis USA, Kraft Heinz, and Nestle—joined the Dairy Methane Action Alliance.  Initiative members will annually account for and publicly disclose methane emissions within their dairy supply chains and publish and implement a methane action plan by the end of 2024.  This private sector action on methane joins EPA’s announcement just days ago of a final rule that will reduce methane and other harmful air pollutants from the oil and natural gas sector.
  • Six more countries joined twenty-seven previously announced nations to sign on to the Global Memorandum of Understanding on Zero-Emission Medium- and Heavy-Duty Vehicles.  The agreement calls for signatories to commit to working together to enable 100% new zero-emission medium- and heavy-duty vehicle sales by 2040 at the latest, with an interim goal of at least 30% new sales by 2030.
  • The U.S. Department of State announced a suite of Export-Import Bank financial tools to support the deployment of small modular reactor nuclear energy systems and help U.S. exporters compete in this global market.  Additionally, the United States, Canada, Japan, France, and the United Kingdom announced their collective intent to support increased deployment of zero-carbon, peaceful nuclear energy by expanding nuclear fuel production capacity across trusted, high-quality suppliers free from manipulation and influence.

Continue Reading COP28 Day 6 Recap: Draft Agreement Lays Out Options Concerning Potential “Phase Out” of Fossil Fuels

What You Need to Know. 

  • “We very much believe and respect the science,” said COP28 President Al Jaber on Monday after it had been reported that he had earlier commented that there was “no science” behind requiring the phase-out of fossil fuels to limit global warming to 1.5C. President Al Jaber went on to say that “the phase down and the phase out of fossil fuel is inevitable.”  This statement comes after heavy criticism from climate activists and scientists of President Al Jaber’s earlier comments, further emphasizing the centrality of the “phase down” vs. “phase out” debate as a wedge issue at this COP.
  • According to the UAE COP Presidency, the first four days of COP28 have seen a collective commitment of USD $57 billion in climate finance from governments, businesses, investors, and philanthropies.  Although still falling short of the global investment needs, these collective pledges show the continuing growth in climate-focused capital around the globe.
  • The U.S. Commodity Futures Trading Commission (“CFTC”) has issued proposed guidance regarding the listing of voluntary carbon credit derivative contracts, the first guidance specifically targeting the voluntary carbon market (“VCM”) by a federal U.S. regulator.  The proposed guidance outlines certain factors a CFTC-regulated exchange, or designated contract market, should consider when addressing requirements of the Commodity Exchange Act (“CEA”) and CFTC regulations that are relevant to the contract design and listing process.  The proposed guidance will be open to public comments until February 16, 2024.

Continue Reading COP28 Day 5 Recap: Climate Finance Continues to Grow and Carbon Offsets Face More Regulation

What You Need to Know.

  • The fourth Day of COP28 saw the first-ever Health Day at the United Nations Framework Convention on Climate Change conference.  In collaboration with the World Health Organization, Health Day included programing that showcased the links between the impacts of climate change on human health and methods for identifying and scaling adaptation measures to address these impacts.
  • Tensions and debate remained high around whether the world should commit to “phase out” or merely “phase down” fossil fuels.  On the same day that the Guardian reported statements from COP28 President Al Jaber that “[t]here is no science out there, or no scenario out there, that says that the phase-out of fossil fuel is what’s going to achieve 1.5C,” UN Secretary-General António Guterres noted that the Day 3 pledges by several major oil and gas companies to reduce methane leaks from their pipelines by 2030 “clearly fall short of what is required” and “say[] nothing about eliminating emissions from fossil fuel consumption . . . .”
  • The UN’s High Level Expert Group on Net-Zero Emissions Commitments of Non-State Entities launched a Taskforce on Net-Zero Policy to ensure the credibility and accountability of net-zero commitments.  Taskforce constituents include, among others, the Principles for Responsible Investment (PRI), the United Nations Environment Program – Finance Initiative, the United Nations Conference on Trade and Development, the Vulnerable 20 Group, and the International Financial Reporting Standards.  The taskforce’s objective is to share knowledge, practices, and insights that advance net-zero aligned policy.
  • During the World Climate Action Summit (WCAS), various governments and organizations unveiled $1.7 billion in new initiatives to further both climate and biodiversity goals, including $1 billion from a coalition of international institutions led by the Asian Development Bank.
  • On Day Two of the Business & Philanthropy Climate Forum—COP28’s multistakeholder engagement platform for the private sector—business and philanthropy leaders made additional pledges and announcements on renewable energy and green economy programs, commitments to preserving nature, a methane abatement accelerator, and  initiatives to decarbonize health supply chains.
  • The U.S. Department of State, the Bezos Earth Fund, and The Rockefeller Foundation presented the core framework of the Energy Transition Accelerator (ETA), a carbon finance platform aimed at catalyzing private capital to support energy transition strategies in developing and emerging economies.  The ETA aims to connect willing sellers and buyers employing high-integrity carbon crediting to support faster energy transition.

Continue Reading COP28 Day 4 Recap: The First COP Health Day