Climate Change

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

What You Need to Know. 

  • After a year of preparation and months of anticipation, the twenty-eighth annual United Nations Conference of Parties to the United Nations Framework Convention on Climate Change (COP28) opened in Dubai on November 30, 2023.  Live and recorded coverage of the plenary sessions can be found on the UNFCCC COP28 website.
  • UN Climate Change Executive Secretary Simon Stiell opened the conference with a powerful call to action and reminder of what is at stake at COP28.  “Remember this.  Behind every line you work on.  Every word or comma you wrestle with here at COP.  There is a human being, a family, a community, that depends on you.  Turn the badge around your necks into a badge of honour, and a life belt for the millions of people you are working for.  Accelerate climate action.  Teach it to run.”
  • With a standing ovation from attendees, delegates approved the operationalization of a fund to assist developing countries in responding to economic and non-economic loss and damage associated with the adverse effects of climate change.  COP28 President Dr. Sultan Ahmed Al Jaber praised the approval of the loss and damage fund—the first time a decision has been adopted on the first day of any COP—as setting “a clear ambition for [delegates] to agree [to] a comprehensive, ambitious GST [Global Stocktake] decision over the next twelve days.”
  • The fund will initially be hosted by the World Bank for an interim period of four years, at which time an independent assessment of the World Bank’s performance as a host will be conducted.  World leaders must now nominate and appoint a board to operationalize the fund.  The UNFCCC also must formulate and post a final decision reflecting today’s approval.
  • Funding commitments for the loss and damage fund are mounting, with contributing countries facing a mix of peer pressure and political constraints.  National contribution pledges to date include: UAE ($100 million); UK ($51 million); US ($17.5 million); Japan ($10 million); European Union ($245 million, including $100 million pledged by Germany).

Continue Reading COP28 Day 1 Recap: A Call for Action and Historic Decision on Loss and Damage Funding

What You Need to Know. 

  • After the opening day, action at COP28 shifted to the World Climate Action Summit (WCAS), where world leaders convened to deliver national statements and carry out initial negotiations on the Global Stocktake and expanding climate financing.  Concurrently, business leaders and philanthropists gathered at the Business and Philanthropy Climate Forum to discuss how the private sector and philanthropy can contribute to climate action.
  • UN Secretary General António Guterres opened the WCAS by urging countries to speed up their net zero timelines to 2040 for developed countries and 2050 for emerging economies and accelerate towards a “just, equitable transition” to renewable energy.  In his speech, Mr. Guterres laid out a hard line on phasing out fossil fuels, saying that “The 1.5-degree limit is only possible if we ultimately stop burning all fossil fuels.  Not reduce. Not abate.  Phase out – with a clear timeframe aligned with 1.5 degree.”
  • Fifty oil and gas companies representing more than 40 percent of global oil production joined the Oil and Gas Decarbonization Charter, which commits signatories to align around net zero by or before 2050, zero-out methane emissions, eliminate routine flaring by 2030, and to continue working towards emission reduction.  COP28 President Dr. Sultan Ahmed Al Jaber praised the declaration as “a great first step” while also highlighting that national oil companies, which represent 60 percent of the signatories, “can and need to do more” to keep the Paris Agreement’s 1.5 degrees Celsius target within reach.  More than 300 environmental organizations lambasted the declaration in a letter to the COP28 Presidency, stating that voluntary efforts without any accountability mechanisms are “insufficient” and that “the only safe and effective way to ‘clean up’ fossil fuel pollution is to phase out fossil fuels.”
  • The United States Environmental Protection Agency issued a final rule designed to sharply reduce methane and other harmful pollutants from the oil and natural gas industry.  The final rule includes standards to reduce methane and volatile organic compounds (VOCs) from new, modified, and reconstructed sources as well as guidelines for states to follow in developing their plans to limit methane from existing sources.  The timing of the announcement is indicative of the Biden-Harris Administration’s goal of using COP28 as a platform to elevate pollution-reduction measures in the United States and galvanize global action.
  • 117 countries signed the Global Renewables and Energy Efficiency Pledge, agreeing to  triple the world’s installed renewable energy generation capacity to at least 11,000 GW by 2030 and collectively double the global average annual rate of energy efficiency improvements from around 2% to over 4% every year until 2030.  And twenty countries signed the Declaration to Triple Nuclear Energy with the goal of tripling nuclear energy capacity from 2020 by 2050. 
  • The UAE announced the establishment of ALTÉRRA, a $30 billion climate fund in collaboration with BlackRock, Brookfield and TPG.  The fund will allocate $25 billion towards climate strategies and $5 billion specifically to incentivize investment flows into the Global South.  ALTÉRRA aims to mobilize $250 billion globally by 2030.
  • Vice President Kamala Harris announced that the United States would pledge $3 billion to the Green Climate Fund (GCF).  The pledge by the United States was joined by pledges from Estonia ($1 million), Portugal ($4.4 million), and Switzerland ($155 million). The GCF was established by the UNFCCC at COP16 in 2010 to accelerate the development of climate mitigation and adaptation projects in developing countries by mobilizing financial flows form the private sector to climate-smart investment opportunities.

Continue Reading COP28 Day 2­–­3 Recap: The World Climate Action Summit and Expanding Commitments to Climate Financing

On 26 June 2023, the International Sustainability Standards Board (“ISSB”) published its inaugural International Financial Reporting Standards Sustainability Disclosure Standards (the “ISSB Standards”) (read our previous blog post on this here).  In August 2023, the UK Financial Conduct Authority (“FCA”) published Primary Market Bulletin 45, confirming its intentions…

Continue Reading Corporate Reporting in the UK: The International Sustainability Standards Board

On 26 June 2023, the International Sustainability Standards Board (the “ISSB”) issued its inaugural International Financial Reporting Standards (“IFRS”) Sustainability Disclosure Standards (the “Standards”), heralding progress in the development of a global baseline of sustainability-linked disclosures. The Standards build on the concepts that underpin the IFRS Accounting Standards, which are required in more than 140 jurisdictions, but notably not in the United States for domestic issuers subject to regulation by the Securities and Exchange Commission (“SEC”), which must apply US Generally Accepted Accounting Principles (“US GAAP”).  Despite broad investor appetite for  transparent, uniform and comparable disclosure rules, the scope of required sustainability disclosure and timing for adoption of the SEC’s pending climate disclosure rule remains unresolved.

  1. IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information (“IFRS S1”) requires an entity to disclose information about all sustainability-related risks and opportunities that could reasonably be expected to affect the entity’s prospects. The effect on the entity’s prospects refers to the effect on the entity’s cash flows, its access to finance, or cost of capital over the short, medium or long term.
  2. IFRS S2 Climate-related Disclosures (“IFRS S2”) requires an entity to provide information about its exposure to climate-related risks and opportunities. Information to be disclosed includes both physical risks—such as extreme weather events—as well as transition risks, such as changes in customer behaviour.

Both IFRS S1 and IFRS S2 are effective for annual reporting periods beginning on or after 1 January 2024. Accordingly, where the Standards have been adopted for a 2024 reporting cycle, relevant disclosures will begin to be published in 2025 in an entity’s general purpose financial reports (subject to transitional provisions), alongside an “explicit and unreserved statement of compliance” when disclosing against the Standards. Whilst the launch of the Standards has been a welcome step, seeking to provide greater uniformity in corporate reporting, individual jurisdictions will decide whether entities will be required to comply with the Standards.Continue Reading ISSB issues inaugural global sustainability disclosure standards

This week’s report by the World Meteorological Organisation makes for alarming reading.  The report warns there is a 66% likelihood of exceeding the 1.5°C threshold in at least one year between 2023 and 2027 and notes that such a rapid change in global temperatures will take the world into ‘uncharted territory’, with an anticipated El Nino weather system likely to push already high temperatures even higher this year.  Since we have already seen the impact of a 1.1°C rise, the conclusions of the WMO report are deeply uncomfortable.

This blog looks at some of the data which give context to the Report’s conclusions.

Gas

Russia is the world’s largest natural gas exporter; the second-largest exporter of crude oil; and the third-largest producer of crude oil.  The Russian invasion of Ukraine spooked global gas markets and pushed prices to record highs – the TTF European gas price peaked at a record €343/MWh in August (equivalent in oil terms to more than $500 a barrel).  But as world gas markets have adjusted, the price has fallen – €75 per megawatt hour at the end of December and under €50/MWh by the end of April 2023.

Like global markets, the EU has demonstrated remarkable agility in its response to Russia’s invasion. In 2020, Russia supplied nearly 43% of all EU energy imports. The EU set itself the target of reducing Russian gas imports to 55 bcm/year by March 2023 (down from 158 bcm in 2021).   At the time, this seemed ambitious, but in the event, the EU easily exceeded that target and, by October 2022, the EU’s Russian gas imports had fallen to 38 bcm (12 % of the EU’s energy consumption).

Last spring, the EU required that Member States’ winter storage be 90% full by the end of autumn.  Again, at the time, that seemed a tough ask in the face of global constraints on alternative supplies. But in any event, the EU easily exceed the target, reaching 96% by the beginning of November 2022.

A combination of factors means the outlook for the EU is more positive than expected:

  • A mild winter meant the EU emerged with record high gas inventories (EU storage was 56% full);
  • The success of demand-side efficiencies (the Commission set a cross-EU efficiency target of 15% reduction in demand: the EU reduced demand by an average 19%);
  • Global gas markets have been nimble in responding to EU demand for non-Russian gas.  New and alternative supplies flowed in from Norway, Qatar, the US and (importantly) Algeria through existing, but under-used pipelines and new LNG capacity;
  • The EU has built new LNG infrastructure at record speed – with Germany opening its first LNG jetty in November 2022.

Continue Reading The Climate Crisis

2022 and 2023 may be remembered as pivotal years for efforts against so-called “greenwashing.”  In this article, we look at some recent developments in the regulation of “green claims” in the UK, the US, and the EU that corporates should be aware of.  We provide a broad summary and comparison snapshot of the UK, US and EU regimes to help companies navigate these rules.  Now is a critical time for companies to get up to speed: authorities in all three jurisdictions are focusing more and more intently on this issue; company reputations will increasingly rise and fall with the strength of their green claims, and national regulators are set to get new powers (including the power to levy significant fines) to tackle companies found in breach.

I.  Summary of recent developments: What’s new in greenwashing?

In January 2022, the UK’s Competition & Markets Authority (“CMA”) launched a sector‑by‑sector review of misleading environmental claims.  The CMA started with the fashion sector, and called out a number of high‑profile, fast‑fashion companies for their practices.  Twelve months later, the CMA announced that it was expanding the investigation to greenwashing around “household essentials”, including food, drink, toiletries and cleaning products.  The CMA’s review is the first concerted application of the CMA’s new Green Claims Code, published in September 2021, which gives guidance for any business (wherever based) making environmental claims in the UK.

Meanwhile, in December 2022, the US Federal Trade Commission’s (“FTC”) launched a review of the “Guides for the Use of Environmental Claims” (“Green Guides”), which was last updated in 2012.  The initial comment period closed on April 24, 2023.  The FTC plans to update the Green Guides to reflect developments in consumers’ perception of environmental marketing claims.  As a part of its ongoing review, the FTC also announced a workshop to examine recyclable claims.  The workshop is scheduled for May 23, 2023 and the public can submit comments on the subject of recyclable claims through June 13, 2023.  For more detail on the review, please see our dedicated blog post, here.

Finally, the EU has proposed two Directives to modernize and harmonize the rules on green claims across the bloc (together, the “EU Green Claims Proposals”).  Currently, EU law does not specifically regulate environmental claims.  Instead, environmental claims are subject only to general consumer protection and advertising rules (set out in Directive 2005/29 on Unfair Business-to-Consumer Practices and Directive 2006/114 on Comparative Advertising).  Admittedly, the EU has published guidance on interpreting and applying the general rules in the context of green claims (see the guidance here, and see our previous blog post discussing the guidance here).  However, in practice, EU Member States approach interpretation and enforcement in a variety of different ways.  On March 3, 2022, the European Commission published a Proposal for a Directive Empowering Consumers for the Green Transition, also known as the “Greenwashing Directive.”  The Greenwashing Directive amends the EU’s existing consumer protection rules, and bans a number of general green claims, such as “climate neutral” or “eco-friendly.”  It also imposes some rules on the use of non-environmental sustainability claims or “social impact” claims, such as “locally produced” or “fair labour.”  One year later, on March 22, 2023, the European Commission presented a Proposal for a Directive on Green Claims (“Green Claims Directive”), which we discussed here.  The Green Claims Directive proposes a new and strict framework, applicable to all companies operating in the EU/EEA, to harmonize the rules on the substantiation of voluntary green claims. 

Below, we outline the key aspects of the different legislative frameworks.Continue Reading The Green Claims Global Drive: Developments in the UK, US and EU

UN General Assembly Adopts Resolution Requesting Advisory Opinion on States’ Obligations Concerning Climate Change

On March 29, 2023, the UN General Assembly (“UNGA”) adopted by consensus a resolution (A/77/L.58) requesting an advisory opinion from the International Court of Justice (“ICJ” or “Court”) on the obligations of states in respect of climate change. The resolution results from coordinated efforts by the Republic of Vanuatu, along with a “Core Group” of states, including Antigua and Barbuda, Bangladesh, Costa Rica, the Federated States of Micronesia, Morocco, Mozambique, New Zealand, Portugal, Samoa, Sierra Leone, Singapore, Uganda, and Viet Nam. The efforts of the Core Group drew on grassroots and civil society support, and the resolution was ultimately co-sponsored by more than 130 UN member states (although not the United States, Brazil, India, China, or Russia).

This marks the latest effort to ask international courts and tribunals to clarify the legal obligations of states in relation to climate change. In the last few months, similar requests for advisory opinions have been submitted to the International Tribunal for the Law of the Sea (“ITLOS”) and the Inter-American Court of Human Rights (“IACHR”).

Questions in the UNGA Resolution

The UNGA resolution observes that “as temperatures rise, impacts from climate and weather extremes […] will pose an ever-greater social, cultural, economic and environmental threat.” It asks the ICJ to issue its opinion on the following questions:

a) What are the obligations of States under international law to ensure the protection of the climate system and other parts of the environment from anthropogenic emissions of greenhouse gases for States and for present and future generations;Continue Reading The World Court Set to Become the Latest Venue for Climate Change Jurisprudence

Perhaps the best way of summarizing COP27 was that, in the end, it boiled down to solving a tension between competing views of global priorities in addressing climate change. The Developed World was primarily focused on improving mitigation  (emissions reduction offers at COP27 in the shape of a welter of improved Nationally-Defined Contributions (NDC).  However, the Developing World was focused on the need to address the impacts of increased global temperatures which climate change is already inflicting on them – the now famous ‘Loss and Damage’ issue (broadly, unavoidable losses and damages caused by climate impacts that are not tackled through adaptation and risk reduction strategies).

The fact that COP27 will be remembered for the historic creation of a Loss and Damage Fund (LADF) perhaps demonstrates a recognition that without addressing climate justice now, it will be difficult to achieve progress on mitigation (even though any delay in taking aggressive emissions reduction action is likely to increase dangerous global warming and therefore cause greater climate-changed-related damage in the future). 

The History of the LADF

The creation of a dedicated LADF was proposed more than three decades ago, by the Alliance of Small Island States (AOSIS). Although discussions on the issue since then had remained superficial and highly technical, in retrospect there were some important developments which prepared the ground for the agreement in Sharm.Continue Reading COP27: Loss and Damage COP