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
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UK Emissions Trading Scheme (ETS)
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a limited number of emission allowances are allocated to companies, which they can trade with each other
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Forces corporations to mitigate their emissions or be subject to financial penalties
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Emit more GHG → buy more allowances
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Enacted in 1/2021 to replace participation in the EU ETS
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Applicable to energy intensive industries, the power generation sector, and aviation
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UK Green Finance Strategy
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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
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Comply or explain basis, so no financial penalties yet
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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
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Corporate Sustainability Reporting Directive
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In July 2023, required that specific companies provide detailed reporting on sustainability issues, publishing basically an Environmental Social Governance Report
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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
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Three stages of implementation
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1 January 2024 for companies already subject to the non-financial reporting directive
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1 January 2025 for large companies that are not presently subject to the non-financial reporting directive
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1 January 2026 for listed SMEs, small and non-complex credit institutions and captive insurance undertakings
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Fit for 55
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Legislative package intended to reduce greenhouse gas emissions by at least 55% by 2030, using 1990 as a baseline
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includes the EU Emissions Trading System (ETS), Effort Sharing Reduction (ESR), and Carbon Border Adjustment Mechanism (CBAM)
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EU ETS
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Cap-and-trade system where a limit is placed on GHG emissions from specific sectors each year
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Created tradable emissions allowances and distributed to market participants
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Forces corporations to mitigate their emissions (w/in allowances) or be subject to financial penalties by purchasing more
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Applicable to the power, heat generation, energy intensive industrial sectors, aviation, and the maritime sector
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Revised in 2021 to reflect an overall target of a 62% reduction in emissions from the sectors involved by 2030
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EU ESR
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Establishes bank and borrow system, similar to ETS but for the transport, buildings, and agriculture sectors
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Emission allowances can be banked and used in the future or borrowed from subsequent year allowances
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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.
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CBAM
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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
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Mirrors the EU ETS for foreign producers, but with harsher carbon emissions prices
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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
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CBAM encompasses cement, iron and steel, aluminum, fertilizers, electricity, and hydrogen
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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
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The Inflation Reduction Act
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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
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Provides financial incentives for consumers and corporations through tax subsidies
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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
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Enacted in 2022
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Federal Supplier Climate Risks and Resilience Rule
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An executive order to force federal contractors to publicly disclose their carbon emissions
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Federal contractors receiving more than $50 million in annual contracts will be subject to these requirements:
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disclose Scope 1, Scope 2, and relevant categories of Scope 3 emissions
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disclose climate-related financial risks
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set science-based emissions reduction targets
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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
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Proposed by the Biden administration in November 2022
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California Legislation
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California’s Cap and Trade Program
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Minimizes GHG emissions by setting a limit on major emitters through extending businesses carbon allowances
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Has been applied to emissions that account for around 80% of California’s GHG emissions
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Each year, fewer allowances are created and the annual cap declines
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Launched in 2013
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California’s Corporate Data Accountability Act
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Requires that large corporations that do business in California publicly disclose their greenhouse gas emissions
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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
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Corporations must provide annual disclosures for scope 1 and scope 2 emissions starting in 2026 and must report scope 3 emissions starting in 2027
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Enacted October 7th, 2023
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New York Legislation
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New York’s Climate Leadership and Community Protection Act
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Intends to reduce GHG emissions by 40% by 2030 and 85% by 2050 using 1990 as a baseline
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Through the CLCPA, a cap-and-invest program has been implemented, similar to the cap and trade program in CA
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Anticipated that corporations with large greenhouse gas emissions will be required to purchase emissions allowances
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Enacted in 2019
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Read our in-depth guide here to learn more about US Climate Legislation, how it could affect your corporation, and how DitchCarbon can help you!
Asia Climate Legislation
The leading economies in Asia are striving towards eventual carbon neutrality, and utilizing cap-and-trade systems to achieve this feat. China has committed to achieving carbon neutrality by 2060. Intending to generate 1,200 gigawatts of renewable energy by 2025, China is by far the global leader in solar and wind power production. As one of the fastest growing economies in the world, Indian climate policy is incredibly important to ensure that growth can be decoupled from increased emissions. India has committed to be net-zero by 2070 and to have 50% of its electricity generated from renewable energy sources by 2030. Currently, 40% of electricity is generated from clean energy as India is making significant investments in the construction of renewable energy sources, including green hydrogen.
Climate Legislation, at a glance
China
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Emissions Trading Scheme (ETS)
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Implemented to mitigate greenhouse gas emissions in the power sector through utilizing a cap-and-trade system
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Corporations in the power sector are allocated a certain amount of emission permits and can trade these permits with a cap on total allocation.
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Revised in 2021 included clause that all corporations subject to the ETS will have to publicly disclose their carbon emissions
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India
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Cap and Trade System
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Initial stages of the cap-and-trade system intended to increase demand and supply of carbon credits in India, then will evolve into a mandatory emissions reduction structure in which sectors are granted emissions allowances
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In July 2022, the parliament published a bill establishing the framework for a carbon credit trading scheme, enacting the first stage of the cap and trade system
Read our in-depth guide here to learn more about Asia Climate Legislation, how it could affect your corporation, and how DitchCarbon can help you!
More and more small and medium-sized businesses are hearing the same question from their larger customers: What is your carbon footprint? That question now travels down entire supply chains, and it arrives next to tender requirements, certification criteria, and rising customer expectations.
The accounting differences that decide whether your nature investment shows up in inventory, in BVCM, or nowhere at all.
The question reaches a procurement team about three weeks before the next sustainability committee meeting. Someone has read about insetting. Someone else has just signed off on an offset purchase. The CSO wants to know if the two are interchangeable. The answer is no, and the GHG Protocol Land Sector and Removals Standard is the reason why.
This article walks through what each term means at audit-grade specificity, what the standards actually say about how each gets counted, and how to decide which tool fits which target. The insetting vs offsetting question is one of the most-searched in corporate climate strategy, and one of the most poorly answered. By the end of this piece, you should be able to brief a committee on the difference without notes.
The two definitions, in plain English
Offsetting means buying carbon credits generated outside your value chain and retiring them against your residual emissions. The reduction happens somewhere else, financed by you, and the credit is the receipt.
Insetting means investing in emission reductions or removals inside your own value chain, typically with suppliers, where the reduction is directly linked to the products and services you buy. The reduction happens inside the boundary of your Scope 3 inventory, and the accounting treatment is fundamentally different.
The shorthand from the University of Oxford’s Nature-based Insetting Initiative is useful: insetting is what you do with the supply chain you have; offsetting is what you do with the supply chain you do not have.
What the GHG Protocol Land Sector Standard actually says
The GHG Protocol Land Sector and Removals Standard, finalised in 2024 after a multi-year pilot, sets the rules for how land-based emission reductions and removals enter corporate inventories. The Standard distinguishes between inventory accounting (Scope 1, 2, and 3) and project or intervention accounting (a separate methodology for crediting).
For insetting, the practical implication is that supplier-level interventions, when properly measured and attributed, can reduce your Scope 3 category 1 (purchased goods and services) emissions in your inventory. The reduction is not a credit retired against the inventory; it is a lower inventory number, period.
For offsetting, the credit is retired separately. It can be reported as a contribution toward a net-zero claim under the SBTi Beyond Value Chain Mitigation framework or as part of a VCMI Carbon Integrity claim, but it does not lower the inventory number.
A practical consequence: if your Science Based Target requires a 50% absolute reduction in Scope 3 emissions by 2030, insetting moves you toward the target. Offsetting does not. This single point of difference reshapes the procurement decision.
When insetting counts toward Scope 3 (and when it does not)
Insetting counts toward Scope 3 only when several conditions are met:
- The intervention must occur with an entity in your value chain.
- The emissions reduction or removal must be measured against a defensible baseline.
- The reduction must be attributed to your share of that supplier’s output, not double-counted with other buyers.
- It must follow the inventory accounting rules in the GHG Protocol Land Sector Standard, not the project accounting rules used to generate credits.
The most common failure mode is double counting. If your supplier sells the same reduction as a credit on the voluntary market and also reports it to you as a Scope 3 reduction, the math breaks. The Standard requires you to address this risk, typically by purchasing and retiring the supplier-issued credit as part of your inventory or by contractual provisions that prevent the supplier from selling the reduction twice.
When insetting does not count toward Scope 3: when the intervention sits with a supplier you do not buy from, when the baseline is not defensible, when the attribution is unclear, or when the documentation does not survive audit. Those cases default to Beyond Value Chain Mitigation, which is still useful but operates on a different ledger.
The procurement and supplier engagement question
Insetting is harder than offsetting. That is the unfashionable truth most buyers eventually confront. Offsetting is a transaction; insetting is a relationship.
To run an insetting program, you need supplier mapping precise enough to know which farms or facilities sit at which Scope 3 boundary. You need an engagement model that gets suppliers to participate, which usually requires multi-year commitments and shared economics. You need an MRV architecture that measures the right things and produces audit-ready documentation. And you need a contractual structure that prevents double counting and protects both sides.
The trade-off you receive in return is significant. Reductions count against your inventory rather than your residual. Supplier relationships deepen, which protects sourcing continuity. Yield and quality improvements often follow regenerative interventions, which reduces your input cost over time. And the regulatory file, under CSRD, CSDDD, EUDR, and the SBTi FLAG Guidance, is materially stronger.
Choosing the right tool for the right target
A practical decision rule. If your target is a science-based Scope 3 reduction and you operate in a FLAG sector or source FLAG commodities, insetting is the structurally correct tool. If your target is a net-zero claim that includes neutralising hard-to-abate residual emissions outside your value chain, BVCM via high-integrity offsets is the structurally correct tool. Most companies with material Scope 3 exposure need both, in different proportions, sequenced over time.
The sequencing matters. Insetting takes longer to stand up but produces a permanent reduction in the inventory. Offsetting can be transacted faster but does not change the inventory and now sits under tighter claim restrictions. Treat them as complementary tools with different jobs, not as substitutes. The Accountability Framework Initiative and the IUCN Global Standard for Nature-based Solutions both provide useful guardrails for the insetting side, with biodiversity, human rights, and benefit-sharing requirements that go beyond carbon math.
If you are mapping a Scope 3 reduction roadmap and need to scope which interventions count toward your inventory versus which sit in Beyond Value Chain Mitigation, the carbon and sustainability experts at Carbon Credit Capital can help you structure a nature-based supply chain investment program that fits your FLAG exposure, your target architecture, and your audit horizon. Schedule a consultation.
Net zero is often described as a balancing act: cut what you can, account for the rest, and reach zero on the ledger. That framing is useful, but it leaves something out. It treats every tonne of carbon as interchangeable and every route to zero as equally sound, while the science tells a more specific story.
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