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In Brief: UK government sued over biomass strategy; Germany’s climate budget faces uncertainty

The latest news in ESG policy and regulation

The UK government is being sued by environmental groups over its biomass strategy, which includes plans to invest in bioenergy with carbon capture and storage. The lawsuit is being brought by charity the Lifescape Project and backed by campaign group the Partnership for Policy Integrity, which are contesting the validity of BECCS technology. The groups argue that the government has miscalculated the climate benefits of this scheme, and they warn that burning biomass will only create “negative emissions” if the newly planted biomass can store the same amount of carbon dioxide that has previously been emitted and stored underground.

The UK government has raised the maximum auction price for new offshore wind projects to £73 a megawatt-hour, compared with the previous (failed) auction price of £44. The “contracts for difference” scheme ensures developers of renewable energy projects get a guaranteed government price for the electricity produced to encourage continued investment in the sector. The government has also launched a consultation on how offshore wind developers could receive additional payments if they manage to reduce carbon emissions in their supply chains or improve social benefits.

The government is also reportedly working on plans to introduce a carbon border adjustment mechanism in 2026, similar to the EU scheme. The announcement may be made in next week’s Autumn Statement, the Financial Times reports.

Environmental group ClientEarth has accused UK courts of failing to engage with key climate risk arguments after its request to appeal against the board of Shell was dismissed. In a statement, ClientEarth senior lawyer Paul Benson said: “Courts cannot avoid the important questions that climate change poses to traditional legal conventions. It is imperative that judges of all expertise get to grips with climate science and what the realities mean for companies, the economy and society at large. It was always clear that directors have wide discretion, and rightly so. But this discretion has limits, and the law must allow for directors to be held to account when their actions fly in the face of seismic risk. Neither court decision addressed the crucial question of the board’s climate risk management. Shell has therefore evaded legal scrutiny of its strategy.”

Australia has signed a treaty with the Pacific Island nation Tuvalu that underpins an official migration pathway for Tuvalu inhabitants facing existential threats from climate change impacts. While migration for labour purposes or under refugee protections is common, the pact is considered the world’s first bilateral agreement on climate mobility.

In other news, Australia has launched a consultation on proposals to tackle carbon leakage risk. The consultation, which is open until December 12, considers, among other things, how carbon leakage affects trade and global emissions.

Germany’s climate budget is facing uncertainty after the country’s federal constitutional court ruled that the transfer of €60bn — initially allocated for pandemic support but then reassigned to the country’s climate transformation fund — is illegal because it does not meet “the constitutional requirements for emergency borrowing”. As a result, the German government has frozen all funds under the scheme.

The Dutch Authority for the Financial Markets has warned listed companies it will pay greater attention on net zero commitments in its supervision of 2023 reports. It notes that audit committees and audit firms performing reporting audits should also be mindful of the regulator’s focus.

In similar news, a report has found a significant gap between corporate net zero targets and companies’ support for government climate policy. The study by think-tank InfluenceMap calculated that 58 per cent of the almost 300 companies assessed are at risk of “net zero greenwash” due to their engagement policies.

Final agreement on the rules concerning the EU’s Corporate Sustainability Due Diligence Directive are hinging on whether the financial sector will be included in the remit of the regulation. Member states are reportedly still divided over what extent the sector should be subject to the rules or whether its inclusion should come at a later date. In recent days, supporters of the sector’s inclusion have become more vocal. European Central Bank board member Frank Elderson says: “In the absence of clear reasons to the contrary, which I fail to see, financial undertakings should not be treated differently from other companies, including in the context of the Corporate Sustainability Due Diligence Directive.”

The European Council and European parliament have reached a provisional political agreement on a regulation to track and reduce methane emissions in the energy sector. The regulation introduces new requirements for the oil, gas and coal sectors to measure, report and verify methane emissions, and puts in place mitigation measures to avoid such emissions, including detecting and repairing methane leaks and limiting venting and flaring. It also sets out global monitoring tools to ensure transparency on methane emissions from imports of oil, gas and coal into the EU.

Last week, China — the world’s largest emitter of methane — published its delayed methane plan. Meetings between China and the US this week have raised hopes of new climate collaboration ahead of COP28. Consultancy group Wood MacKenzie has published a report showing much more can and needs to be done on reducing methane emissions globally, and calls for governments to move from voluntary pledges to binding commitments and to introduce tougher penalties and new incentives to drive action.

The EU council and parliament have struck a provisional agreement on the bloc’s Critical Raw Materials Act, which aims to diversify the EU’s supply of raw materials. A detailed overview of the act can be found here.

The parliament and council have also agreed a provisional deal on new rules around environmental crimes, including offences comparable to “ecocide“. In cases where environmental crimes lead to death, individuals could be sentenced to 10 years in prison.

The European parliament’s transport and tourism committee has voted to enhance prevention of ship pollution by updating its rulebook with the international standards developed by the UN-backed International Maritime Organization. Ships found to discharge sewage, garbage, and residues from scrubbers could face further penalties. At present, EU rules only prohibit the discharge of oil and noxious liquid substances.

EU countries will not longer be able to export plastic waste to non-OECD countries in a set of new rules on waste shipments agreed by the parliament and the council. Detection and enforcement of illegal shipments will also be enhanced under the new deal.

The European Commission has approved the use of glyphosate for another 10 years, after member states failed to find a majority to renew or reject the proposal. Glyphosate is a widely used pesticide, but its use has come under scrutiny since scientific studies indicated the substance can have a harmful impact on human health and the environment. EU member states will be able to restrict its use based on their own risk assessment, especially with regards to biodiversity, the commission stated. German conglomerate Bayer is facing greenwashing accusations over its use of glyphosate in sustainable farming.

Meanwhile, the council has given the final approval to the Farm Sustainability Data Network regulation, which will collect on a voluntary basis farmers’ environmental and social data to enhance the sustainability of the EU’s food systems.

Widely used perfluoroalkyl and polyfluoroalkyl substances, known as PFAS, are “the new asbestos” and industry should stop their use, warned the Investor Initiative on Hazardous Chemicals, which represents more than $10tn in assets under management or advice. The organisation wrote to the chief executives of the world’s 50 largest stock-listed chemical companies saying: “Manufacturers and users of PFAS chemicals are exposed to deep liability and insurance risks, reminiscent of those historically linked to asbestos, which could materially adversely harm the long-term value of companies involved in their manufacture and sale.” It is calling for the phase-out of the production and use of PFAS chemicals. Known as “forever chemicals” for their ubiquitous use in products and long existence in the environment, they are linked to a range of diseases.

The EU has pledged, after a meeting between EU climate commissioner Wopke Hoekstra and COP28 president-designate Sultan al-Jaber in Brussels on Monday, to offer a “substantial financial contribution” to the loss and damage fund to help the poorest nations better manage the impacts of climate change. Hoekstra and Jaber also said the climate summit must achieve the “highest possible ambition”, and “must accelerate practical action on mitigation, adaptation loss and damage and climate finance and build a fully inclusive COP28 that leaves no one behind”.

The US has published its Fifth National Climate Assessment, which puts a greater focus on adaptation and resilience building, as well as climate justice and job security.

France will reportedly spend €1bn on polar scientific research between now and 2030 and is lobbying for a moratorium on seabed exploitation in polar regions.

National climate action plans are insufficient to limit global temperature rises to 1.5C above pre-industrial levels and meet the Paris Agreement, says a UN report ahead of COP28. If the latest available nationally determined contributions were implemented, emissions would increase by about 8.8 per cent by 2030, compared with 2010 levels. This figure is a “marginal improvement” over last year’s assessment, which found that countries were on a path to increase emissions by 10.6 per cent by the same date, the UN says. Scientists estimate that to keep global warming to no more than 1.5C, emissions need to be reduced by 43 per cent by 2030.

The OECD has indicated that developed countries may have achieved their long-awaited pledge to contribute $100bn annually to assist developing countries in adjusting to climate change impacts. Based on preliminary and yet unverified data, the target was reached in 2022, while 2021 saw a contribution of $89.6bn.

A service from the Financial Times