Even before the European Climate Law and the Portuguese Climate Law came out, Portugal had already committed to carbon neutrality by 2050 (it was the first country in the world to do so back in 2016) and had also approved a Roadmap for Carbon Neutrality 2050.

Climate-neutrality means that greenhouse gas (GHG) emissions and removals (i.e., the capturing of GHG from the atmosphere and its sequestration through either nature-based or technological solutions) shall be balanced, and this is to be achieved at the latest by 2050.

At the European level, neutrality is to be reached progressively, with intermediate targets: the first in 2030 – reduction of net GHG emissions (i.e., after deduction of removals) by at least 55% compared to 1990 levels. The 2040 target will be set following the first global stocktake (due in 2023) foreseen in the Paris Agreement.

At a national level, the goals are to achieve GHG emissions reductions (against 2005 values) of at least:

1. 55% in 2030, at the latest;
2. 65% to 75% in 2040, at the latest; and
3. 90% until 2050 – with a commitment to assess the feasibility of anticipating the neutrality goal to 2045.
    

For the land use and forestry sector, there is a specific target for GHG net removals of 13 megatons between 2045 and 2050.

So, what is next in the pathway to reach such ambitious targets?

At European level, the “Fit for 55” package presented by the European Commission (EC) with the purpose of bringing EU legislation in line with the 2030 target, was voted on June 8 by the European Parliament. It backed the EC’s proposals on (i) emissions standards for new vehicles, aiming at reaching zero-emission road mobility by 2035, and on (ii) the revision of the regulation on GHG emissions and removals from land use, land use change and forestry (LULUCF). Interinstitutional negotiations with the EU Council will now follow. However, the package also included the EC’s proposal for an enlargement of the scope of the EU’s Emissions Trading System (EU-ETS), which failed to pass and was sent back to the environmental committee for further negotiations (so a new version may be voted at the next plenary session on June 22). The same will happen to two other proposals to which the EU-ETS revision is closely related: the creation of a Carbon Boarder Adjustment Mechanism and of a Social Climate Fund.

At our national level, the Climate Law sets a long list of “to-dos”, some of which are due in February 2023, including (i) the approval of a regulatory framework regarding the sharing of information on climate impact and risk of financial assets, and (ii) an amendment to the Commercial Companies’ Code in order to require companies to consider exposure to climate scenarios and their relevant financial impacts.

The Climate Law foresees several other milestones and requirements with either a direct or indirect impact on businesses. These include the approval by the Government of both mitigation and adaptation plans for priority sectors by the end of 2023 (other sectors will follow suit) and, in February 2024 at the latest, the submission to Parliament of a proposal for a “Green Industrial Strategy”, a framework to support the industrial sector in its path to climate transition.

It is critical for corporations to decode and understand climate laws. Companies must be alert and assess their own positioning – and that of the sectors they operate in – vis a vis existing targets as well as future legal changes, and start working on their own roadmaps to the “brave green new world”.

The focus should be, inter alia, on finding the answers to the following questions:

• What are the foreseeable impacts of a revision of the EU-ETS in the sector we operate in and specifically in our corporation?
• More broadly, how will the amendments under the “Fit for 55” package impact my activity?
• How should I engage with my stakeholders to better adapt to the new legal environment?
• Should my company aim (and claim) to be “net-zero” or to be a “carbon neutral” company instead? By when? And how? What steps and timeline should be set to achieve this goal? What are the risks and where does this take me from a reputational standpoint?
   

Have a great and impactful week!

Angela Lucas
Environment and climate change lawyer, ESG and Sustainability Enthusiastic
Advisor to the Center for Responsible Business & Leadership

This article refers to edition #143 of the "Have a Great and Impactful Week" Newsletter and covers SDG 13. 
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