The UK has become the first G7 country to legally oblige its Government to eliminate all greenhouse gas (“GHG”) emissions.
On 26 June 2019, the UK Parliament passed The Climate Change Act 2008 (2050 Target Amendment) Order 2019,1 which amends Section 1 of the Climate Change Act 2008 (“CCA”) to require the UK to reduce its GHG emissions by 100% compared to their level in 1990.2 In doing so, Parliament has followed the recommendation of the UK’s Committee on Climate Change (“CCC”) that the UK should adopt a target of “net-zero” emissions by 2050. We have previously reported on the CCC’s recommendation here and on the Government’s introduction of the amending legislation here.
Having enshrined the net-zero goal in law, the next step will be for the UK Government to put in place policies to give effect to that goal. In its recent annual progress report to Parliament,3 the CCC opined that the UK Government was currently failing to introduce the necessary policies. The CCC stated that “actions to date have fallen short of what is needed for the previous targets [i.e. the incremental steps necessary to achieve an 80% reduction in GHGs by 2050] and well short of those required for the net-zero target.”
The CCC pointed out that:
- only one of the 25 headline policy actions it set for 2018 had been delivered in full, and no progress had been made on 10 of the actions;4
- only seven of the 24 indicators of progress in reducing emissions (consistent with carbon budgets and the 2050 target) that are monitored by the CCC are on track;5 and
- the Government’s own projections indicate that it is not on track to meet either the fourth or fifth carbon budgets (covering 2023–2027 and 2028–2032 respectively). The fourth and fifth carbon budgets were set in relation to the previous, less stringent target of an 80% reduction of GHG emissions by 2050 and have not been updated to reflect the net-zero target.6
For the UK to achieve the necessary GHG emissions reductions, the CCC stressed once again (as it did in its Net Zero report7) that emissions reductions must be made a priority across all levels of Government. The CCC suggested that the Prime Minister could chair regular meetings of a “Climate Cabinet” in order to ensure that a coordinated approach was adopted across Government.8
The CCC sought to put the UK Government’s failures in the context of its international climate leadership. The UK Government is planning to host the UN climate summit (COP26)—the first global check-in to assess compliance with the Paris Agreement—in late-2020.9 In the CCC’s view, for the UK to be a credible host and leader of the UN climate negotiations, the UK Government must back up its net-zero target by developing, over the next 12–18 months, a coherent national policy package that will deliver on this target.10
A second report, also released on 10 July 2019, contains significant reservations about the UK Government’s policy response to the effects of (or adaptation to) climate change. In this second report, the Adaptation Committee of the CCC highlighted that at present the UK Government had not put in place adequate measures to protect the UK and its population from the effects of climate change.11 It noted that few UK sectors have plans that consider the impact of a 2℃ increase in global temperatures (let alone a 3℃ or 4℃ increase), that 12 of 33 sectors have no plans for long-term climate change and its impacts, and that none of the 33 priority areas score well in reducing vulnerability and exposure to climate risk.12 The CCC recommends improving the UK’s national climate change preparedness, including in relation to land use, infrastructure resilience and interdependencies, and climate-related risks and opportunities for business.13
The CCC has emphasised the important role of business and private investment in delivering the net-zero target, and has recommended that future climate policies be “business-friendly.”14 Businesses’ contribution to decarbonisation efforts will be equally important in other jurisdictions.15 Given that the UK has now committed to the net-zero emissions target, and the CCC has recommended that the UK Government adopt a broad policy framework to achieve this goal over the next 12–18 months, businesses in all sectors of the economy—particularly those making investment decisions with longer time horizons—would be well advised to consider carefully the implications that the binding 2050 net-zero target and the CCC’s policy recommendations may have for them. Managing litigation risk in an evolving regulatory environment and ensuring that transactions are climate-resilient will be two areas for immediate consideration.
WilmerHale’s Energy, Environment and Natural Resources team and its International Arbitration Practice will continue to monitor and can advise on developments related to the Climate Change Act and the associated implications for businesses.
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