Policy news round up - April 27 2023

Here is our rundown of the top policy stories from the past 2 weeks:

1. Only 5% of FTSE 100 companies have ‘credible’ climate transition plans, says EY

• Summary: Just 5% of the UK’s largest public companies have published climate transition plans that are “credible” or sufficiently detailed under draft British government guidance, despite most businesses saying they are committed to slashing their greenhouse gas emissions. Full story here.
• So what: The UK government's shift from 'guidance' to ‘requirements’ that companies have adequate plans in place will only be hastened by evidence that companies are struggling to prioritize this agenda under the current voluntary approach.

2. NZ may have to spend ‘multiple billions’ buying overseas carbon offsets to hit 2030 climate goals, a Treasury report says

• Summary: New Zealand could spend NZD 7.7-9.9 billion (US$4.8-6.1 billion) over the period 2024-2030 on purchasing carbon credits overseas to meet its Paris climate targets, a new report has suggested. Full story here. 
• So what: New Zealand under Jacinda Ardern became a climate action leader, so they have more ambitious targets than most countries—but they also have some domestic legislation in place to achieve those targets. That they are falling short and could face such a big bill in the next few years suggests that many other countries will be relying on Article 6 beyond the ten who have already expressed an interest.

3. EU should consider importing removals to meet 2040 targets, says official

• Summary: There should soon be a discussion on whether the EU can meet 2040 emissions targets on its own or need to import mitigation outcomes such as removals, a European Commission official told an event Thursday—though stressing that this was not necessarily a view held across the EU executive. Full story here.
• So what: Though it's still just being floated as a possibility, the EU buying removals from other countries to meet its 2040 target would be both geopolitically significant and market-shaping, because their volumes could potentially be so large and they would have to buy not just on the basis of price (and hopefully quality), but also a whole host of diplomatic and optical factors as well. 

4. Thailand To Introduce Carbon Tax In 3 Major Industries

• Summary: Thailand plans to impose a carbon tax on three major sectors of the economy: transport, energy and industry. With the help of this measure, Thailand’s Excise Department believes it will help the country meet its goal of reaching net zero carbon emissions by 2050 and net zero greenhouse gas (GHG) emissions by 2063. Full story here.
• So what: Thailand is pushing hard to establish itself as a carbon pricing and carbon trading hub in the region, adding more competition for countries trying to establish themselves as regional leaders in the space.

5. Etihad Must Stop Running Two Ads in the UK Due to Greenwash Rule

• Summary: UAE-based Etihad Airways can no longer run two recent advertisements in the UK after the nation’s advertising regulator found its environmental claims were “exaggerated.” The ads, promoted on Facebook in October last year, suggest the airline is “taking a louder, bolder approach to sustainable aviation,” but failed to back up the claim, the ruling said, noting that “there were currently no initiatives or commercially viable technologies in operation within the aviation industry which would adequately substantiate an absolute green claim such as ‘sustainable aviation’”. Full story here. To learn more about the net zero journey of the aviation industry, read here. 
• So what: These high-profile regulatory actions are rapidly on the rise, and will prompt companies—and especially their marketing departments—to think much more carefully about the claims they make, and how they can mitigate the risk of being called out. 

6. G7 sets out Principles of High Integrity Carbon Markets

• Summary: G7 sets out principles for high-integrity carbon markets, with a focus on VCMs, which cover (i) supply-side integrity, (ii) demand-side integrity, and (iii) market integrity. Full text here.
• So what: An Annex to the main climate communique (next story), these principles are noteworthy because they are both comprehensive (focusing on both supply-side and demand-side integrity) and raise the bar on environmental integrity, for example by calling on all baselines to be "consistent with the Paris Agreement temperature goal and achievement of global net-zero emissions by 2050" - which no baselines currently are. These principles could go by the wayside (as most G7 communique texts do) but they could also become a common reference point for the plethora of market integrity initiatives floating around.

7. G7 adopts ambitious communique on climate change

• Summary: G7 agrees to a broad-based and ambitious set of climate commitments, including on carbon pricing. Full text here. .

• So what: This communique goes further than any previous G7 communique and includes the commitment that "We will work together, and with partners beyond the G7, to expand the ambitious use of carbon markets and carbon pricing." Also includes a commitment to 'advance' the climate club proposal previously agreed, though no specifics.

8. European Parliament adopts groundbreaking new ETS rules 

• Summary: European Parliament approves sweeping reforms to tighten up the EU Emissions Trading System (ETS) - leaving the UK ETS in the dust. Reforms agreed upon include (i) introducing a Carbon Border Adjustment Mechanism (CBAM) from 2026, (ii) bringing new sectors in the ETS (shipping, buildings, road transport), (iii) ending the free allocation of some allowances by 2026. There are still a couple of hurdles before these rules are fully confirmed, but they are unlikely to result in any significant changes beyond what the Parliament agreed. Full text here.
• So what: The reforms approved this week would significantly strengthen the ambition of the EU ETS, the world's most important compliance market. Carbon Pulse noted that the price gap between the EU ETS and UK ETS allowances widened on the news, reflecting lagging ambition in the UK's system. But the direction of travel is clear - compliance markets in major economies are growing in breadth and depth.

9. Hundreds of billions more needed to protect tropical forests, warns new report

• Summary: At least $230bn a year is needed to protect and restore forests by the end of the decade, according to the Energy Transitions Commission, an influential think tank backed by the UK government. Of this total, at least $130bn is needed to protect tropical forests (though the report notes the figure could be much higher), and around $100bn is needed for nature-based removals. The report also suggests where the money could come from, with around $80bn expected to come from carbon markets. Full story here.
• So what: The very thorough analysis presented by the Commission provides useful and detailed evidence about the need to support nature-based solutions.

10. Indigenous rights group files formal complaint over huge Guyana REDD+ issuance

• Summary: An activist group for Indigenous peoples has lodged a grievance with a jurisdictional REDD+ standards body over claims that the Guyanese government did not receive consent from communities to distribute tens of millions of avoided deforestation carbon offsets. Full story here.
• So what: This is very embarrassing for ART TREES - the jurisdictional forest crediting standard - and the LEAF Coalition which relies on it. It's also the world's first HFLD issuance, the first significant jurisdictional issuance and the largest issuance ever (around 7.5mt a year). The controversy points to the need for thorough due diligence on all jurisdictional credits.