EU: EU Reaches Provisional Agreement on Methane Regulation
On November 15, 2023, the European Parliament and European Council provisionally agreed on a regulation to reduce methane emissions. If passed, the regulation would require fossil gas, oil, and coal companies to measure, report, and reduce their methane emissions. The regulation aims to eliminate avoidable methane emissions.
The regulation was first proposed in December 2021 as part of the EU’s effort by 2030 to reduce greenhouse gas emissions by 55%. To achieve this goal, the regulation would require operators to survey their equipment regularly, ban venting and flaring (the process by which industrial installations dispose of gas) outside of emergency situations, mitigate emissions from inactive assets, and regularly report on methane emissions. The regulation would also tackle emissions from oil, gas, and coal imported into the EU. To this end, among other measures, the European Commission would set up a global “methane emitters” monitoring tool and a rapid alert mechanism to identify high methane-emitting sources.
Before coming into force, the European Parliament and Council must formally adapt the provision agreement.
EU Commission Press Release
Proposed EU Methane Regulation
Asia: Hong Kong Stock Exchange Postpones Amendments to Listing Rules on Climate Disclosures
On November 3, 2023, the Hong Kong Exchanges and Clearing Limited (“HKEX”) announced that it will postpone introducing amendments to its climate disclosure rules by a year, to January 2025. The delay aims to give companies more time to prepare.
In 2022, HKEX introduced several new disclosure requirements for listed companies (as reported here), requiring reporting on gender diversity, board independence, and ESG. In April 2023, HKEX published a consultation paper proposing to amend the rules to mandate all listed companies in Hong Kong to provide enhanced climate-related disclosures (more on this here). The aim is to align disclosures with the International Sustainability Standards Board’s climate-related disclosures standard.
Global: Climate Reports Indicate That More Efforts Needed to Combat Climate Change
On November 14, 2023, ahead of COP28’s start on November 30, 2023 in Dubai, three climate reports present the latest data on climate change efforts worldwide:
- The Nationally Determined Contributions Synthesis Report, published annually by the UN Framework Convention on Climate Change, showed that Paris Agreement signatories have been slow to implement the agreement’s central goals. Even if fully implemented, the current nationally determined contributions of the 195 countries would manage only to slow the increase in greenhouse gas emissions in 2030 compared to 2010 levels (from 11−14% to 9%). Although an improvement, the commitments fall short of the consistent 43% decreases needed to meet the 1.5-degree target.
- The National Climate Assessment, the fifth edition report on climate change published at the U.S. Congress’s direction, notes that the effects of anthropogenic climate change are far-reaching and worsening across every U.S. region. While noting that the United States is experiencing an unprecedented intensity of weather disasters, the report also finds that rural communities are taking more actions to adapt to climate disasters.
- The State of Climate Action 2023 Report prepared by the World Resources Institute, a nonprofit organization, offered a similar pessimistic outlook. The report notes that: (i) the world is falling behind in 41 out of the 42 indicators of climate progress; (ii) government funding for fossil fuels has increased for the first time since 2018; and (iii) the global rate of deforestation and the carbon intensity of steel production is increasing, among other issues. On the upside, electric vehicles accounted for 10% of all new vehicles sold in the last year. The report estimates that, by 2030, the sale of electric vehicles could see an exponential increase, accounting for at least 75% of sales.
NDC Synthesis Report
State of Climate Action 2023
National Climate Assessment
EU: CSDDD Proposal Exempts Financial Institutions from Initial Phase
On November 10, 2023, the EU Council reportedly proposed to exclude financial institutions from the scope of the Corporate Sustainability Due Diligence Directive (“CSDDD”).
This proposed exclusion has been a divisive point during negotiations. While Parliament views the inclusion of financial institutions as a matter that Member States should decide, the Council previously had pushed for financial institutions to be in CSDDD’s scope. The Council’s new proposal reportedly will seek to overcome this impasse by introducing a clause allowing the EU to review the framework to cover the financial sector at a later stage.
The CSDDD, expected to be formally adopted in 2024, will require companies to conduct due diligence along their supply chains to identify, prevent, or stop adverse impacts related to human rights and the environment (more on this here). The directive will apply both to EU companies and non-EU companies operating within the EU.