Climate Change Regulation 2024

The Continuing Growth of Climate Change Law and Regulation

Climate change law continues to entrench itself within lexicon of national statutes and regulations, as an important driver and enabler of domestic climate action. This year, countries continued to refine their regulatory frameworks, with many focusing on financial and carbon market aspects. Countries have also continued to develop bespoke climate change framework or sector-specific laws. The breadth and depth of these laws, as documented in this year’s edition, continues to demonstrate the ability of climate legislation to apply to almost every sector of the economy. Of these developments two important trends have been noted this year. The first is the publication of a number of climate-related strategies and policies across jurisdictions and the use of legal instruments as directives for their development, content and review. The second is the development of regulations and decrees for domestic carbon markets, as countries move to develop national rules to incentivise their domestic markets and formalise their Article 6 Paris Agreement frameworks and approaches.

We have seen climate change legislative frameworks developed apace that seek to account for this intersectionality and accommodate co-operative climate governance, embed mitigation and adaptation policy ambitions and use fiscal measures to enhance green technologies and low carbon activities.  Finance ministries have also been prolific in the development of laws on ESG and sustainability-related disclosures and reporting, following the International Sustainability Standards Board (ISSB)’s inaugural standards on sustainability-related financial information and climate-related disclosures which were published in 2023. We have also seen these ministries seek to define the nature of carbon credits for the purposes of further regulation, for example as securities in Indonesia.

Climate litigation has also continued to rise in prominence. There have been a number of international cases to watch, which will undoubtedly influence domestic court action. This year, the European Court of Human Rights found that Switzerland had failed to give effect to climate-related human rights under the European Convention on Human Rights. The International Tribunal for the Law of the Sea also issued the first of three advisory opinions on climate change and international law in May this year. There is also much anticipation around the International Court of Justice’s Advisory Opinion on state responsibility and liability for climate change, which is presently underway.

In this year’s edition of Climate Change Regulation, contributors have also sketched the continued proliferation of domestic cases on climate action on a wide array of topics including fraud, greenwashing, information disclosure, and climate principles and norms (in the absence of framework legislation). Authors have noted that the introduction of new regulations are also likely to spur new law suits on the level of ambitious of the government’s targets, emissions caps, and the relationship of these targets to science. Some have also highlighted the maturing of corporate disclosure regulations, noting the rise in cases on carbon emissions data fraud, for example in China.

These developments remain deeply consequential for the private sector. Not only are companies facing regulatory limits on their greenhouse gas (GHG) emissions, but they are required, amongst other things, to: engage with the impacts of changes in global trade, particularly the Carbon Border Adjustment Mechanism (CBAM); account for mitigation and adaptation as new developments are planned; reconfigure their supply chains and contractual relations within a net-zero world; navigate fiscal measures to respond to climate change; and harness market opportunities to reduce or offset their emissions. Similarly, they must remain abreast of new technical and scientific information and operate in the context of a highly volatile energy market. They must do this all whilst engaging with the transitional risk of new laws and policies designed to respond to climate change at a national, regional and global level.

The contributions in this issue continue to engage with both the global and national approaches to climate change, looking to see how countries are interfacing with and implementing the United Nations Framework Convention on Climate Change (UNFCCC) and Paris Agreement, and also to what extent they are developing, refining and implementing domestic laws that give effect to national climate priorities.

An overview of these contributions demonstrates that countries are increasingly focusing on enshrining emission-reduction targets (and in some cases adaptation targets or goals) or processes for establishing such targets in national laws. These are often legally intertwined with National Committees or Councils and related procedural duties, as well as domestic climate planning instruments, as is the case of Austria.

Laws have also continued to adopt a sector approach to regulation, often requiring Ministers of relevant sectors (eg waste, energy, or industry) to develop bespoke climate change plans, a measure that is closely related to the integration of national emission-reduction targets within law or policy. The chapters by Brazil and South Africa are good examples of this.

A heightened focus on the voluntary carbon market and its integrity and impact on local communities this year, the domestication of Article 6 Rules of the Paris Agreement, the CBAM in the European Union, and the desire of developing countries to harness the market’s opportunities as they look to shore up local sources of climate finance, has also seen a monumental shift in regulation of this sector. This has dovetailed with country approaches to introduce national carbon pricing, be it in the form of a carbon tax or an emission trading scheme, often incorporating elements of the carbon market within it. The contributions from China, Portugal and Brazil are all good examples of these developments.

Many countries are also continuing to firm up their climate disclosure obligations. EU countries are in the process of implementing EU Directives relating to ESG and the Corporate Sustainability Reporting Directive, and some authors have noted moves by national governments to give effect to the IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures, for example in Brazil.

Contributors also looked into the question of director liability or shareholder liability, with most expressing academic views on how this could potentially be argued in court using existing legislation, given that there is little precedent of this taking place. The outcome of the case of ClientEarth v Shell last year in the United Kingdom for alleged climate risk mismanagement attracted considerable attention, but does not appear to have slowed interest and debate on this question in other jurisdictions or on other grounds.

As the risks associated with non-compliance with climate-related legal obligations rise, so have acquiring entities sought to include climate change considerations within due diligence processes for corporate transactions. In some cases, this includes not only legal non-compliance, but due diligence on issues that may pose a reputational or other financial risk. This primarily voluntary approach is driving greater levels of awareness within the private sector of climate change regulatory requirements, and the inclusion of climate change-related conditionalities and contractual terms within transactional documents. The chapters in this report assess national trends in this regard, and briefly comment on the types of considerations that are canvassed within due diligence reports.

This voluminous publication demonstrates that the breadth and complexity of climate legislation and jurisprudence is increasing. We anticipate seeing not only more frequent and complex forms of litigation on these fronts, but also bespoke regulatory developments to respond. 

In this highly diverse context, this publication seeks to extend the awareness and knowledge of global and national legislative climate developments and encourage a cross-pollination of ideas on what has worked and why. We remain continuously grateful to the diverse body of authors who shared their time and insights in compiling these thoughtful contributions.