On March 3 and 14, 2022, the European Financial Reporting Advisory Group (“EFRAG”) published its most recent set of Working Papers on the future of the EU’s European Sustainability Reporting Standards (“ESRS”). The ESRS will establish dozens of sustainability-related disclosure requirements that will be mandatory for thousands of EU companies under the Corporate Sustainability Reporting Directive (“CSRD”) (see our blog on the CSRD as background). Companies subject to the CSRD will be required to include these disclosures in their annual reports, and these disclosures will need to be audited. Importantly, this is the first time EFRAG has provided significant detail regarding reporting standards for topics that fall under the “S” pillar of the ESG (environmental, social, and governance) framework. The European Commission is currently aiming to have the CSRD and ESRS apply from January 2023, with initial reports due in 2024, and EFRAG will hold public consultations on its draft reporting standards in the coming months.
Continue Reading European Reporting Standards for the “S” in ESG: EFRAG’s New CSRD Disclosure Requirements for Workers and Human Rights Take Shape
European Energy & Climate Policy
The IPCC and The Ukraine Crisis
As the world struggles to adjust to the harsh new reality of Russia’s invasion of Ukraine, the most recent instalment of the Sixth IPCC Report slipped out almost unnoticed. And that is worrying, since the assessment in this section of the Report is even starker than previous assessments – noting in particular that in order to avoid global temperatures increasing by greater than 1.5 degrees C above preindustrial levels, the world needs to halve its emissions this decade: a reduction that the world does not currently appear to be remotely on course to do.
However, whilst the IPCC Report and the Russian invasion of Ukraine are not linked, Russian aggression in Ukraine may serve as a catalyst to speed up the European energy transition and accelerate its retreat from dependency on Russian gas and exposure to volatile international oil markets, which could in turn deliver a more rapid reduction in European emissions. In the process, perhaps setting the world on a path to achieving an outcome that currently seems unattainable.Continue Reading The IPCC and The Ukraine Crisis
Gas and Nuclear Activities in the EU Taxonomy Regulation: Under What Conditions Does the Commission Deem Them Environmentally Sustainable?
On February 2, 2022, the European Commission adopted a Complementary Climate Delegated Act (the “CCDA”) listing specific gas and nuclear activities as “environmentally sustainable” for purposes of the EU Taxonomy Regulation, subject to strict criteria. Only certain activities that comply with strict emissions limits and other criteria detailed below may be so designated. Even so, the Commission’s decision to list nuclear and gas activities as “environmentally sustainable” is controversial and may still be blocked by EU Member States and the European Parliament through an upcoming scrutiny period, and may also be legally challenged before the EU Courts. Nevertheless there is a significant chance that the Commission’s criteria to consider the listed gas and nuclear activities as “environmentally sustainable” will enter into force by the beginning of 2023. This would allow such listed gas and nuclear activities to have access to green investors and ear-marked public funds under the EU’s Next Generation EU investment program.
Continue Reading Gas and Nuclear Activities in the EU Taxonomy Regulation: Under What Conditions Does the Commission Deem Them Environmentally Sustainable?
The Commission adopts its new Climate, Energy and Environmental Aid Guidelines (CEEAG)
The European Commission (the “Commission”) formally adopted on 27 January 2022 its new Guidelines on State aid for climate, environmental protection and energy (CEEAG). The CEEAG replace the guidelines that were in force since 2014 (EEAG) and integrate the new objectives of the EU Green Deal of a reduction of 55% net greenhouse gas emissions compared to the 1990 levels by 2030 and of carbon neutrality by 2050. The Commission has estimated that achieving the new 2030 target would require EUR 390 billion of additional annual investment compared to the levels in 2011-2020, an investment that cannot be borne by the private sector alone, and would therefore require public investments.
Continue Reading The Commission adopts its new Climate, Energy and Environmental Aid Guidelines (CEEAG)
Italy Transposes into National Law the EU Single-Use Plastic Products Directive
The Italian Legislative Decree 196/2021 (“Italian Decree”) implementing the Single-Use Plastic Directive (“SUPD”) will enter into force on January 14, 2022. The Italian Decree diverges from the SUPD on significant aspects: it provides a more flexible definition of plastic; delays the entry into force of the ban on prohibited SUPs; and exempts from such ban specific biodegradable and compostable materials. The Decree also imposes specific return obligations on waste plastic bottles.
While the Italian Decree provides companies with additional flexibilities to market their SUPs in Italy, companies should carefully assess the risks that may arise if EU Courts finally hold that the Decree is not compatible with EU law.Continue Reading Italy Transposes into National Law the EU Single-Use Plastic Products Directive
New Definitions for Blue and Green Hydrogen: The European Commission’s Package on Hydrogen and Decarbonized Gas Markets
Last December, the European Commission published its legislative Package on Hydrogen and Decarbonized Markets (“Package”), which proposes new rules aiming to develop a hydrogen market in the EU. The new rules bring much awaited legal clarity to the concepts and role of blue and green hydrogen within the EU’s energy regulatory framework for the climate transition.
In effect, the Commission’s legislative Package is intended to promote the use of blue hydrogen until at least 2030 provided that it achieves the same decarbonization as green hydrogen (i.e., 70% GHG reduction). However, the European Parliament and Council may amend both the proposed definition and conditions of blue hydrogen and the proposed regulative incentives during their consideration of the Package and its adoption through the legislative procedure that will now follow. Moreover, the European Commission will be empowered to develop much of the methodologies implementing the definitions of blue and green hydrogen. Companies intending to engage in blue and green hydrogen operations in the EU/EEA would be well advised to closely follow these developments.Continue Reading New Definitions for Blue and Green Hydrogen: The European Commission’s Package on Hydrogen and Decarbonized Gas Markets
ESG & Sustainability Reporting Developments: Climate Disclosure Prototypes
ESG and sustainability disclosure and reporting requirements for listed and non-listed companies are rapidly taking shape. As announced at COP26, there is now an International Sustainability Standards Board (“ISSB”) tasked with encouraging global uptake of ESG reporting standards. In the EU, the European Financial Reporting Advisory Group (“EFRAG”) is the body tasked with developing mandatory sustainability and ESG reporting standards under the EU’s Corporate Sustainability Reporting Directive (“CSRD”). Both the ISSB and EFRAG have each recently published ESG and sustainability disclosure and reporting “prototypes”. These prototypes are important pieces to an emergent reporting regime that is very likely to become critical commercially—if not mandatory—for many companies. There are also encouraging signs that what has until recently been a relatively disjointed set of standards, is beginning to come together under a more harmonized agenda and institutions.
This blog presents an overview of some of the detailed climate-related disclosure and reporting metrics covered by the ISSB and EFRAG climate prototypes, and highlights critical considerations for companies as more detailed and mandatory ESG and sustainability reporting frameworks begin to take shape.Continue Reading ESG & Sustainability Reporting Developments: Climate Disclosure Prototypes
The Scottish Government’s Draft Hydrogen Action Plan
On the 10th of November 2021, the Scottish Government published its Draft Hydrogen Action Plan (the “Plan”), as a companion document to its December 2020 Hydrogen Policy Statement.
The Plan sets out the Scottish Government’s detailed proposals for the Hydrogen industry in Scotland across the next five years. The aim is for Scotland to have capacity to produce 5 GW of Hydrogen by 2030 and 25 GW of Hydrogen by 2045. This blog sets out the key takeaways from the Plan.Continue Reading The Scottish Government’s Draft Hydrogen Action Plan
European Commission Opens Public Consultation to Define Selection Criteria for Renewable Energy Projects Eligible of EU Funding
The European Commission seeks stakeholders’ feedback until 18 November on its proposal to define cross-border projects in the field of renewable energy generation that would be eligible to receive EU funding under Connecting European Facility instrument.
Continue Reading European Commission Opens Public Consultation to Define Selection Criteria for Renewable Energy Projects Eligible of EU Funding
The UK’s Net Zero Strategy
On 19 October, alongside a number of other important strategy documents (over 2,000 pages in total), the UK Government published its ‘Net-Zero Strategy’ (NZS) which will help achieve the UK’s interim five yearly carbon targets leading up to net-zero by 2050.
Continue Reading The UK’s Net Zero Strategy