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Europe's Green Deal Finalized

Europe's Green Deal Finalized

Tim Mohin
03 May

After a green voting marathon, the EU Parliament closed its final plenary of this term before its June elections. The huge voting sessions yielded a plethora of new policies, including the Corporate Sustainability Due Diligence Directive (CSDDD), which we covered last week. There was also an amendment to the Corporate Sustainability Reporting Directive (CSRD), an EU version of the Inflation Reduction Act, and a host of other agreements. Here is a quick rundown of what went through:

The Net Zero Investment Act (NZIA): This is the EU’s version of the US Inflation Reduction Act. It is designed to improve the competitiveness of EU manufacturing of 19 net zero technologies ranging from battery storage to carbon capture.
Ban on products made with forced labor: Companies will be investigated if there is verifiable information that they have sold, imported, or exported products made using forced labor. If found guilty, the company will have to remove its products from the EU market.
Withdrawal from the Energy Treaty Charter: The Energy Treaty Charter is an international treaty founded in the 90s that allows fossil fuel investors to sue countries for taking ‘unfair’ climate actions in private courts. This gives the EU, and its member states the freedom to enact climate regulations without the threat of litigation.
Common agricultural policy: In light of the winter farmer protests, an update to the common agricultural policy exempts small farm owners from fines, and there will be additional exemptions in the case of extreme weather events.
CSRD update: As expected, the EU Council confirmed a two-year delay for sector-specific and non-EU reporting through the Corporate Sustainability Reporting Directive (CSRD).

The lasting legacy of this five-year EU Parliament will be the Green Deal. Since the Green Deal was announced in 2020, the EU has enacted a myriad of globally leading sustainability policies. Even with an expected rightward tilt in the June elections, these policies are locked in and can only be amended.

However, with the elections looming, future actions to implement the Green Deal hangs in the balance. Foreshadowing how a more conservative parliament may govern, a leading right-wing politician, Nicola Procaccini, said, “Obviously the Green Deal was crazy and sort of a religion.”

With political battlelines drawn, it seems the Green Deal is the most contentious election issue. EU Commissioner hopeful for the Greens Bas Eickhout said in a televised debate, “Let’s make these elections the Green Deal elections.”

US Polarization Deepens

Image by Alejandro Barba on Unsplash

While the EU celebrates the fulfillment of its Green Deal, polarization over sustainability topics in the US has deepened.

Every change in Administration in the last ten years resulted in policy u-turns that not only stymied environmental gains but also hurt the economy. Aron Cramer - CEO of Business for Social Responsibility (BSR) - concludes that these political pivots are also marginalizing the US as the global economy shifts to a low-carbon economy. “Change is costly,” said Douglas Holtz-Eakin of the conservative-leaning American Action Forum. “Even deregulation carries a cost. Doing and undoing these rules four times means four times the cost.”

The economic costs of the “erase-and-replace” of US sustainability policy will cycle again if there is a change of administration in this year’s election. A recent study found that if a Trump presidency gets into power, it would add 4 billion tonnes to US emissions by 2030, and these regulations would likely flip flop:

New EPA Rules: The Environmental Protection Agency's new emissions limits on coal-fired power plants and vehicle manufacturing will likely be rolled back.
Oil and gas lease: Expect an increase in the number of permits, greenlit pipelines, and other fossil fuel projects.
The Inflation Reduction Act: Presumptive presidential nominee Trump has called the IRA “the biggest tax hike in history” and would take steps to block its implementation and/or overturn the law.
Global climate negotiations: Expect the US to withdraw from the Paris Agreement and international climate negotiations again.

Edging Toward Convergence

The two dominant sustainability standards organizations - The International Sustainability Standards Board (ISSB) and the European Financial Reporting Advisory Group (EFRAG) - released new guidance on how their standards work in harmony. The new “interoperability” guidance aims to provide practical support for companies to comply with both.

ISSB Chair Emmanuel Faber said, “Thanks to our deep collaboration with EFRAG, companies can use our joint guidance as a module for providing the global baseline while also providing incremental disclosures required within the European Union.”

The ISSB also released a taxonomy tool for its sustainability and climate-related reporting standards. The tool is built for investors to analyze and compare sustainability disclosures.

The End of Coal

Source: Semafor

After last week’s EPA regulation aimed at coal fired power plant, which is set to virtually end coal emissions in the US by 2039, a G7 agreement solidified coal's demise this week.

Electricity generated from coal has been plummeting in G7 nations across the last decade, as can be seen in the above graph. A new agreement aims to cut emissions from coal in G7 countries to virtually zero by 2035—meaning coal-fired power plants will begin to capture and store carbon starting in the early 2030’s. The G7 meeting in Turin also produced an agreement to increase energy storage capacity six fold by 2030.

However, this deal includes some exemptions for Germany and Japan, which heavily rely on coal and is unlikely to be replicated in the G20, which includes two of the largest consumers of coal, India and China.

California Pressured to Implement Climate Rules

Over three dozen companies signed an open letter asking California Governor Gavin Newsom to prioritize the budget to implement California’s new climate laws (SB 253 and SB 261). The budget has yet to be allocated, and the state has till May 14th to announce funding in its revised budget, or the California Air Resources Board (CARB) will unlikely be able to issue implementing rules in time for a January 1 start date. Even with an available budget, considering the timing and pending litigation, CARB may still have to delay the adoption timeline.

Stop Buying S%$t

This new viral Patagonia movie, beautifully named “The Shitthropocene,” is a 45-minute tongue-in-cheek consumerism documentary that comes with the tagline “Welcome to the Age of Cheap Crap.”

It is an exploration of our consumption habits and the environmental and social implications of them. The satirical swipe at how we currently live is interspersed with expert insights into how we can reverse this trend.

The views expressed on this website/weblog are mine alone and do not necessarily reflect the views of my employer.

Other Notable News:

My company, BCG, released its sustainability report this week. It catalogs all of the tremendous work done across 2023. Some highlights include the 50% growth of our Climate & Sustainability practice, which is helping our clients reduce one gigaton of carbon by 2030. But there are many other environmental and social wins to celebrate.
As a great companion piece to that, BCG’s CEO, Christoph Schweizer, penned this brief on “What Is Happening in Sustainability Reporting?” It spells out why sustainability reporting is more important than ever, even when companies aren’t talking about sustainability and gives executives some tips on how to navigate sustainability reporting.
Japan's financial service agency has proposed ISSB-aligned mandatory disclosure and assurance standards to start in 2027. It will require listed companies to make reports largely in line with the EU's CSRD.
A recent report revealed that 81% of US and UK companies that are not required to comply with the CSRD have indicated they plan to partially or fully align their reporting with the EU’s sustainability disclosure standards.
CSDDD gets support from the agriculture sector. The new compromised version of the supply chain regulation has received endorsement from some of the biggest agricultural trade associations, previously some of the directive's biggest challengers.
The EU has begun investigating greenwashing from 20 airlines for offsetting claims. The investigation will focus on the accuracy of claims by airlines that passengers can pay a little extra to offset their emissions.
CEO of Norways Sovereign Wealth Fund Nicolai Tangen, the world’s largest, said that the ESG backlash will not impact their ESG investing. On the contrary, he believes “the fact that some other people are pulling away gives us a better opportunity to kind of phase in.”

Notable Podcasts:

In this week’s episode of Outrage and Optimism, host Christiana Figueres, Tom Rivett-Carnac, and Paul Dickinson discuss things they are both optimistic about and outraged about. These range from the hopeful idea that Earth Day 2024 will be the beginning of the end of the climate crisis to the disappointment of the current impasse on a global plastics treaty.
In the new episode of the BBC’s The Climate Question, the host explores the new field of climate attribution science with leading climatologist Dr. Friederike Otto. Dr. Otto explores the extent to which extreme weather events such as heatwaves, droughts, or floods have—or have not—been caused by man-made climate change.

Notable Job Opportunities:

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