This week, UN member nations are gathering in New York to meet for the General Assembly, with a focus on climate change and Sustainable Development Goals (SDGs). Yet among the largest emitters, China, India and the US, President Biden will be the only leader in attendance. This is an ill portent for one of the final large international meetings before COP28.
António Guterres, UN Secretary General, was quoted in the New York Times saying “We will be gathering at a time when humanity faces huge challenges, from the worsening climate emergency to escalating conflicts…[and] People are looking to their leaders for a way out of this mess”. For now, it seems like the people will be looking in vain.
The EU has launched a new consultation process for its Sustainable Finance Disclosure Regulation (SFDR) that may lead to a major revision of its green taxonomy. According to ESG Clarity, this process may lead to the creation of entirely new designations to replace Articles 8 and 9, or substantial revisions to the framework.
From the outset, the EU has stressed that Articles 8 and 9 are not meant to be product labels, but refer to increasing disclosure requirements given to funds that call themselves “green” or other related titles. However, increasingly, these articles have become a shorthand label for these funds more broadly.
According to reports, the consultation has said that “[t]he fact that Articles 8 and 9 of the SFDR are being used as de facto product labels, together with the proliferation of national ESG/sustainability labels, suggests that there is a market demand for such tools in order to communicate the ESG/sustainability performance of financial products.”
This consultation will close towards the end of the year on December 15th.
As of this year, carbon markets or emission trading systems (ETS) cover almost 20% of the world’s economy, led by China’s massive nationwide ETS. Yet they still generate controversy. These markets are designed to encourage reductions in emissions by placing a cap on a company’s permitted annual emissions. If a company exceeds this cap, they are required to purchase credits from other companies who have emitted underneath the cap – a strategy proponents argue produces a market-based incentive to reduce carbon emissions.
Despite its size, critics have argued that China’s ETS is not fit for purpose and has not, as of yet, led to an overall decline in emissions from China’s power companies, the targets of the system. Without proper enforcement and ambitious targets, these systems can be deeply ineffective.
The same can be said for the so called Voluntary Carbon Market (VCM), a system where companies voluntarily agree to purchase credits to cover their emissions beyond a certain point. Semafor recently reported that the industry is broken and in urgent need of change, with several scandals about the actual effect of many carbon credit companies vastly undermining trust.
In theory, these markets could produce positive outcomes, but they still have some way to go.
Adding to the global wave of climate litigation, six young people have brought a case before the European Court of Human Rights, arguing that inaction from 32 EU nations on climate change has caused them material damage and breached their human rights. In particular, they pointed to increasingly severe wildfires that have occurred within the last five years, most recently this summer.
This lawsuit bears a resemblance to a similar case earlier this summer, brought by young people in Montana, USA, against their state government, which argued the state’s pursuit of fossil fuel energy had breached their constitutional right to a “clean and healthful environment”. While this case may be overturned on appeal, the judge hearing the lawsuit ruled that the state must consider climate change when approving new fossil fuel licences.
If won, these cases may open an avenue for others to pursue litigation to achieve action climate.