2022 In Review: Legal, Financial, and Socio-Economic Developments for a Carbon Neutral Future
As we commemorate Earth Day on Saturday 22 April 2023, we decided to zoom out and reflect on the developments that have taken place in the past year in support of environmental protection.
Here are the major legal, financial and socio-economic developments which take us a step closer towards our carbon neutral goals.
Europe’s New Climate Regulation
The European Union is working with governments, civil society, and the private sector to implement a range of legal frameworks to encourage the reduction of greenhouse gasses.
We’ve detailed Europe’s major legal developments below:
- Europe’s increased target of reducing emissions by 62% by 2030 aims to encourage companies to transition towards cleaner technologies and processes.
To achieve this goal, the EU plans to implement a range of policies and measures, including increasing the use of renewable energy, improving energy efficiency, and introducing carbon pricing.
They will also work to support the development of new technologies and innovations that can help to reduce emissions.
2. The EU passed a bill aimed at reducing deforestation caused by the importation of agricultural products.
The bill requires companies which import products such as soy, palm oil, and beef to prove that they have been produced in compliance with environmental and social standards.
This will be achieved by developing a due diligence system that requires companies to carry out risk assessments and take steps to mitigate any negative impacts of their operations on forests and communities.
The bill also includes provisions for promoting sustainable land use and protecting the rights of indigenous peoples and local communities.
Here, the EU will develop a legal framework that incentivizes companies to source their agricultural products from sustainable and responsible sources, while also promoting transparency and accountability in supply chains.
3. The EU’s CO2 border tax will incentivise companies in countries with high emissions to reduce their carbon footprint.
The tax would be based on the carbon footprint of the imported goods and would be applied to a range of sectors, including cement, steel, aluminum, fertilizers, and electricity, and would be gradually phased in starting in 2026.
The policy aims to level the playing field for EU companies that have already made efforts to reduce their carbon footprint, and to prevent “carbon leakage” where companies move production to countries with less strict emissions regulations.
The methodology for calculating the carbon footprint of imports is still being developed, but it is expected to be based on the emissions associated with the production of the goods, as well as emissions from the electricity used in production.
Hopefully, this measure will also encourage other countries to adopt similar policies and take more significant steps towards reducing their emissions.
The Adoption of The International Biodiversity Framework
The Kunming-Montreal Global Biodiversity Framework is an international agreement that sets out a plan to halt and reverse the decline of biodiversity by 2030.
Some of the key targets of the framework include:
- Protecting at least 30% of the world’s land and oceans by 2030.
- Halving the rate of pollution and reducing the amount of plastic waste entering the oceans by 50% by 2030.
- Promoting sustainable agriculture and fisheries to ensure food security while protecting biodiversity.
The adoption of this biodiversity framework represents a significant milestone in the effort to protect the Earth’s ecosystems and the species that depend on them.
Growth in The Climate Finance Market
Carbon credit retirements reached a new high of 1.7 billion tonnes in December 2022, a significant increase from the previous record of 1.2 billion tonnes set in December 2021.
This surge in retirements is likely due to increased corporate and governmental commitments to decarbonization, as well as the rising cost of carbon credits.
The increased demand for carbon credits is also reflected in higher prices, with the price of European Union Allowances (EUAs) hitting a record high of €100 per tonne in December 2022.
Furthermore, the emergence of a carbon removal industry is an exciting development, as it provides a pathway for removing carbon from the atmosphere and storing it in a way that is safe and sustainable.
A handful of companies have pledged nearly $1 billion to support solutions costing less than $100 per tonne.
These investments demonstrate that there is growing interest in this area, which is likely to drive innovation and progress towards achieving a net-zero carbon economy.
Growing Consumer Trend Towards Sustainability
The strong demand for electric vehicles, offshore wind, and heat pumps in 2022 shows that consumers are increasingly interested in clean energy technologies.
As these technologies become more affordable and accessible, their adoption is likely to accelerate, contributing to the global transition towards a low-carbon economy.
During 2022, climate scolding became more widespread, with celebrities and companies calling out the private jet flights of the super-rich.
These instances demonstrate an increase in public awareness around carbon emissions.
Although there is still much work to be done, it’s crucial to acknowledge and commemorate the progress being made to combat the climate crisis. Such advancements inspire us to persist in our collective efforts towards establishing a sustainable future.
