Energy Regulation Roundup: Q1 2024

Keywords: SEC Disclosure, Emissions Reporting, European Union, United States, China, Sustainability, Liquefied Natural Gas, Net Zero, ARC Advisory Group. 

Overview

The “Global Energy Regulation Roundup” is dedicated to capturing and understanding emerging climate, energy, and reporting measures. Currently, governments across the globe are establishing stricter policies on emissions reporting, trade, and energy. The purpose of this annual report is to encapsulate the past four months of regulations and policy news into one document. Additionally, this can serve as a resource for key stakeholders about approaching regulations and educate individuals and the various industries who may be affected.

European Union

January: New Anti-Greenwashing Law

Lawmakers in the European Parliament adopted a new anti-greenwashing law banning certain commercial practices. These practices include the use of unproven generic product claims, such as “environmentally friendly,” or “climate neutral,” or marketing a product as having a reduced environmental impact based on the use of emissions offsetting schemes. A recent study completed by the EU Commission found that more than half of green claims by companies in the EU were vague or misleading, and 40 percent of the statements were not corroborated with real facts or corresponding data. 

Key aspects of the new law include rules aimed at making product labels clearer by banning the use of generic environmental claims not substantiated with proof, and the regulation of sustainability labels to allow only the use of those based on official certification schemes or established by public authorities. The law will also ban the use of claims based on offsetting schemes that indicate that a product has a neutral, reduced, or positive impact on the environment.

The new legislation must now be approved by the EU Council, which reached a provisional agreement in September with Parliament on the proposals, before passing into law. Once published in the EU’s Official Journal, member states will have two years to integrate the rules into national law.

Additionally, The European Commission is set to recommend the EU reduce its net greenhouse gas emissions by 90 percent by 2040, from 1990 levels, to ensure the bloc can reach net zero emissions a decade later. This will be the EU’s first 2040 target and its current target aims to reach net zero by 2050 and 55 percent by 2030. 

February: Net Zero Industry Act

At the beginning of the month, the EU Commission reached a provisional agreement between the EU Parliament and the Council on the Net Zero Industry Act (NZIA). This agreement will support the EU in becoming a hub for domestic clean technology manufacturing and increasing the capacity of such technologies within the EU. The NZIA aims to position the EU as a competitive player in the clean technology industry and support the creation of green jobs and a resilient economy while also achieving the Union's climate neutrality goal by 2050. 

This Act will ensure the EU manufacturing capacity for net-zero technologies reaches at least 40 percent of expected EU demand by 2030, reducing administrative burden and simplifying permitting for net-zero technologies. The agreement also set an EU carbon capture objective to reach an annual 50 million tons of injection capacity in geological CO2 storage sites in the EU by 2030. The NZIA goals are like those of the United States Inflation Reduction Act, both Acts lay emphasis on domestic manufacturing’s aim of becoming a competitor within the clean technology space.

March: Corporate Sustainability Due Diligence Directive

The European Council has officially approved the Corporate Sustainability Due Diligence Directive (CSDDD), which creates a legal liability for companies relating to environmental and human rights violations within their supply chain. The new due diligence requirements apply to the direct operations of the company, as well as to their subsidiaries and supply chain. EU-based companies, as well as non-EU companies that conduct a set level of business in the EU, could become responsible for the actions of their suppliers. In short, to comply with the CSDDD, companies must identify, prevent, mitigate, and account for negative human rights and environmental impacts within their operations, subsidiaries, and value chain. 

Additionally, Germany, launched a bidding process for subsidies to support energy intensive firms switching to green production in a €4 billion funding round. As part of the country’s ambitious climate neutrality target by 2045, Berlin plans to award companies in sectors, such as steel, glass, paper, and chemicals, 15-year subsidies in return for reducing carbon emissions in production. This program is called the “Climate Protection Contracts” and is approved by the European Commission, with intent to compensate companies for the extra costs of green production in industries where climate friendly production processes are currently not cost competitive.

Quarter Takeaways

• The key aspects of the new anti-greenwashing include rules aimed at making product labels clearer by banning the use of unproven generic environmental claims, and the regulation of sustainability labels to allow only the use of those based on official certification schemes or established by public authorities.

• Germany launched a bidding process for subsidies to support energy intensive firms switching to green production in a €4 billion funding round. Companies in sectors such as steel, chemicals, glass, and paper are eligible. 

• The EU Commission reached a provisional agreement between the EU Parliament and the Council on the Net Zero Industry Act (NZIA). This Act will ensure the EU manufacturing capacity for net-zero technologies reaches at least 40 percent of expected EU demand by 2030, reducing administrative burden and simplifying permitting for net-zero technologies. 

Asia

January: China Issues New Standards for Recycling

China has issued its first set of proposed standards for recycling retired onshore wind turbines, laying the foundation for tackling supply chain sustainability challenges arising from renewable energy generation. The country will generate an estimated 13 million tonnes of wind turbine waste by 2050. 

The proposed standards prioritize the reuse and recycling of wind blades while banning landfilling and burning, according to the report published by the National Energy Administration. The standards will be open for public consultation until the end of May. The country will generate an estimated 13 million tonnes of wind turbine waste by 2050. For other components, such as blade hubs, towers, and nacelles, recycling should involve physically blasting and cutting them into small pieces and using magnetic sorting to extract recoverable metals.

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