Navigating Global Climate Legislation: A Comprehensive Overview

Current Global Climate Legislation, by Region

Our world is beginning to be dominated by the threats of the climate crisis. Governments globally are acting to mitigate greenhouse gas emissions and transition towards a future free from fossil fuel reliance. To maintain an understanding of the plethora of global climate legislation that is constantly being enacted and revised, keep reading!

United Kingdom Climate Legislation

The United Kingdom has implemented extensive legislation to maintain their commitment to being net-zero by 2050. Legislation has been enacted to promote clean energy, invest in climate change mitigation, and regulate corporate emissions.

UK Climate Legislation, at a glance

• UK Emissions Trading Scheme (ETS)

  • a limited number of emission allowances are allocated to companies, which they can trade with each other

  • Forces corporations to mitigate their emissions or be subject to financial penalties

    • Emit more GHG → buy more allowances

  • Enacted in 1/2021 to replace participation in the EU ETS

  • Applicable to energy intensive industries, the power generation sector, and aviation

• UK Green Finance Strategy

  • As of 2022, required the largest companies and financial firms (listed companies and large asset owners/managers) to make public how they are responding to financial risks and opportunities from climate change

  • Comply or explain basis, so no financial penalties yet

Read our in-depth guide here to learn more about UK Climate Legislation, how it could affect your corporation, and how DitchCarbon can help you!

European Union Climate Legislation

The European Union has committed to becoming the first climate-neutral continent through their establishment of a European Green Deal. By 2030, the EU plans to reach at least 55% less net greenhouse gas emissions than in 1990. To achieve this feat, they enacted the Fit for 55 legislative package. The EU has also been enacting legislation that requires public and large companies, both in the EU and beyond, to report their carbon emissions. 

EU Climate Legislation, at a glance

• Corporate Sustainability Reporting Directive

  • In July 2023, required that specific companies provide detailed reporting on sustainability issues, publishing basically an Environmental Social Governance Report

  • Applicable to all public and large companies in the EU or those generating a net turnover of €150 million in the EU and which have at least one subsidiary or branch in the EU

  • Three stages of implementation

    • 1 January 2024 for companies already subject to the non-financial reporting directive

    • 1 January 2025 for large companies that are not presently subject to the non-financial reporting directive

    • 1 January 2026 for listed SMEs, small and non-complex credit institutions and captive insurance undertakings

• Fit for 55 

  • Legislative package intended to reduce greenhouse gas emissions by at least 55% by 2030, using 1990 as a baseline

  • includes the EU Emissions Trading System (ETS), Effort Sharing Reduction (ESR), and Carbon Border Adjustment Mechanism (CBAM)

• EU ETS

  • Cap-and-trade system where a limit is placed on GHG emissions from specific sectors each year

  • Created tradable emissions allowances and distributed to market participants

  • Forces corporations to mitigate their emissions (w/in allowances) or be subject to financial penalties by purchasing more

  • Applicable to the power, heat generation, energy intensive industrial sectors, aviation, and the maritime sector

  • Revised in 2021 to reflect an overall target of a 62% reduction in emissions from the sectors involved by 2030

• EU ESR

  • Establishes bank and borrow system, similar to ETS but for the transport, buildings, and agriculture sectors

  • Emission allowances can be banked and used in the future or borrowed from subsequent year allowances

  • In May of 2023, revised regulation was enacted with a proposal to reduce emissions under ESR by at least 40% using 2004 as a baseline. 

• CBAM

  • Enacted to prevent carbon leakage and the offshoring of emissions through imposing a price of carbon emitted during the production of goods entering the EU

  • Mirrors the EU ETS for foreign producers, but with harsher carbon emissions prices

  • Between now and the end of 2025, importers will have to report emissions embedded in their goods subject to CBAM without paying a financial adjustment in a transitional phase

  • CBAM encompasses cement, iron and steel, aluminum, fertilizers, electricity, and hydrogen 

Read our in-depth guide here to learn more about EU Climate Legislation, how it could affect your corporation, and how DitchCarbon can help you!

United States Climate Legislation

Climate legislation in the U.S. is highly susceptible to political agendas and varies among states with differences in the scope and the degree of the legislation. The Biden/Harris Administration maintains climate policy as a key aspect of their political agenda and has proposed legislation to promote the transition to a future free from reliance on fossil fuels. Certain states have committed to mitigating the impacts of the climate crisis and are promoting climate conscious agendas. 

Climate Legislation, at a glance

Federal Legislation

• The Inflation Reduction Act

• The Inflation Reduction Act is the most ambitious investment in combating the climate crisis, aiming to cut U.S. greenhouse gas emissions by up to 41 percent below 2005 levels by 2030 and designating $369 billion in funding for climate and energy-related purposes

• Provides financial incentives for consumers and corporations through tax subsidies

• The vast majority of this funding ($216 billion) is designated towards tax credits to corporations to catalyze private investment in clean energy, transport, and manufacturing

• Enacted in 2022

• Federal Supplier Climate Risks and Resilience Rule

  • An executive order to force federal contractors to publicly disclose their carbon emissions

  • Federal contractors receiving more than $50 million in annual contracts will be subject to these requirements:

    • disclose Scope 1, Scope 2, and relevant categories of Scope 3 emissions

    • disclose climate-related financial risks

    • set science-based emissions reduction targets

  • Federal contractors with more than $7.5 million in annual contracts but less than $50 million would be required to only report Scope 1 and Scope 2 emissions

  • Proposed by the Biden administration in November 2022

California Legislation

• California’s Cap and Trade Program 

• Minimizes GHG emissions by setting a limit on major emitters through extending businesses carbon allowances

• Has been applied to emissions that account for around 80% of California’s GHG emissions

• Each year, fewer allowances are created and the annual cap declines

• Launched in 2013 

• California’s Corporate Data Accountability Act

  • Requires that large corporations that do business in California publicly disclose their greenhouse gas emissions

  • Applicable to businesses that generate over $1 billion in annual revenue and either are engaging in any transaction for the purpose of financial gain within California, are organized or commercially domiciled in California, or have California sales exceeding either the threshold amount for that year or 25 percent of total sales 

  • Corporations must provide annual disclosures for scope 1 and scope 2 emissions starting in 2026 and must report scope 3 emissions starting in 2027