Lawmakers in the European Parliament and Council announced today that they have reached a provisional agreement on proposed new rules to strengthen emissions standards for heavy-duty vehicles, including a requirement for a 90% emissions reduction for heavy trucks by 2040.

Additional interim requirements covered by the agreed standard include 45% emissions reductions from 2030, and 65% from 2035.

The agreement follows an initial proposal by the European Commission in February 2023 for a revision of the CO2 emissions standards for heavy duty vehicles (HDVs). Trucks and buses account for over 6% of total greenhouse gas (GHG) emissions in the EU, and more than 25% of GHG emissions from road transport.

Among the most significant revisions in the new agreement to the Commission’s initial proposal include an expansion of the scope of the regulation aimed at making nearly all HDVs subject to emissions reduction targets, including smaller trucks, urban buses, coaches and trailers, while allowing exemptions such as small-volume manufacturers and vehicles used for mining, forestry and agriculture, and vehicles for use by the armed forces, fire services, or in civil protection, public order and medical care. Additionally, the agreement extends the scope of the regulation to vocational vehicles such as garbage trucks or concrete mixers from 2035, while also introducing a 2035 100% zero emissions target for urban buses, with an intermediate 90% 2030 goal.

The agreement also includes a requirement for the Commission to review the effectiveness and impact of the amended regulation in 2027, including evaluating the possibility of developing a common methodology for the assessment and reporting of the full lifecycle CO2 emissions of new HDVs, studying the potential role of introducing a carbon correction factor (CCF) to enable the inclusion of renewable fuels and carbon neutral e-fuels in the fleet transition mix, and assessing the role of a methodology for registering HDVs exclusively running on CO2-neutral fuels.

With the provisional agreement reached, the new regulation will need to be endorsed by member states’ representatives on the Council and by Parliament’s environment committee, and then formally adopted by the Parliament and Council before entering into force.

Lawmakers in the European Parliament voted 593-21 on Wednesday to adopt a new anti-greenwashing law banning a series of commercial practices, including the use of unproven generic product claims such as “environmentally friendly,” or “climate neutral,” or marketing a product as having a reduced environmental impact based on the use of emissions offsetting schemes.

The agreement follows the release in March 2022 by the EU Commission of a set of proposals to amend the EU’s existing rules aimed at protecting consumers from unfair commercial practices such as untruthful or aggressive advertising and providing consumers with information on products, to include considerations relating to the green transition. A recent study by the Commission found that more than half of green claims by companies in the EU were vague or misleading, and 40% were completely unsubstantiated.

Key aspects of the new law include rules aimed at making product labels clearer by banning the use of generic environmental claims not backed up with proof, and the regulation of sustainability labels to allow only the use of those based on official certification schemes or established by public authorities. The law will also ban the use of claims based on offsetting schemes that indicate that a product has a neutral, reduced or positive impact on the environment.

The new law also includes rules focused on product durability, requiring guarantee information on products to be more visible, and mandating the creation of a harmonized label to give more prominence to goods with an extended guarantee period, as well as banning unfounded durability claims, prompts to replace consumables earlier than strictly necessary, or presenting goods as repairable when they are not.

The new legislation must now be approved by the EU Council, which reached a provisional agreement in September with Parliament on the proposals, before passing into law. Once published in the EU’s Official Journal, member states will have 2 years to integrate the rules into national law.

In addition to the new law, the EU Commission has also proposed a “Directive on Green Claims,” to protect consumers from greenwashing, aimed at establishing a new set of rules requiring companies to substantiate and verify their environmental claims and labels.

Following the MEP’s vote, Parliament’s rapporteur Biljana Borzan said:

“This law will change the everyday lives of all Europeans! We will step away from throwaway culture, make marketing more transparent and fight premature obsolescence of goods. People will be able to choose products that are more durable, repairable and sustainable thanks to reliable labels and advertisements. Most importantly, companies can no longer trick people by saying that plastic bottles are good because the company planted trees somewhere – or say that something is sustainable without explaining how. This is a big win for all of us!”

The government of Australia announced the release of new draft legislation which would introduce mandatory climate-related reporting requirements for large and medium sized companies, including disclosures on climate-related risks and opportunities, and on greenhouse gas emissions across the value chain.

According to a statement by Australia Treasurer Jim Chalmers introducing the new proposed law, the climate-related disclosure requirements are aimed at helping “maximise the economic opportunities of cleaner, cheaper and more reliable energy and manage climate change risks… giving investors and companies the transparency, clarity and certainty they need to invest in new opportunities as part of the net zero transformation.”

The introduction of the proposed law follows the release of a ‘Discovery consultation’ launched by the Treasury in December 2022 on the development of a climate risk disclosure framework, and a subsequent announcement in June 2023 of plans to implement mandatory climate-related financial disclosure requirements.

In October, the Australian Accounting Standards Board (AASB) released an exposure draft outlining its proposed standards for companies to report climate-related information, which form the basis of the new disclosure requirements. The AASB proposals are based on the recently released sustainability disclosure standards by the IFRS Foundation’s International Sustainability Standards Board (ISSB), while including some modifications in areas such as Scope 3, or indirect value chain emissions reporting, and on reporting requirements for companies that do not have material climate-related financial risks or opportunities.

Under the new requirements, companies would be mandated to report on material climate-related risks and opportunities, metrics and targets including Scopes 1, 2 and 3 emissions, as well as “any governance or risk management processes, controls and procedures of the entity related to these matters.”

The new proposed legislation would apply to all public companies and large proprietary companies required to provide audited annual financial reports to the Australian Securities and Investments Commission (ASIC) that meet specific size thresholds, starting with companies with over 500 employees, revenues over $500 million or assets over $1 billion, as well as asset owners with more than $5 billion in assets, which would begin reporting for fiscal years starting from July 1, 2024. Medium-sized companies (250+ employees, $200 million+ revenue, $500 million assets) would be required to begin reporting for years beginning from July 2026, while smaller companies (100+ employees, $50 million+ revenue, $25 million+ assets) would begin the following year.

The legislation also includes a phased-in approach for Scope 3 reporting, allowing companies an extra year from the beginning of their disclosure requirements to report on the quantity of their indirect value chain emissions, as well as on the application of liability for reporting, with “limited immunity” for sustainability reports for years until the end of June 2027.

The new law would also introduce assurance requirements for climate-related reporting similar to those for financial reports, and require companies to obtain assurance reports from their financial auditor.

The government initiated a consultation for the new draft legislation, with submissions allowed until February 9.

Chalmers said:

“The draft legislation gives companies the opportunity to build capacity to make high quality climate risk disclosures by providing early visibility of the proposed reporting requirements and expand the breadth of entities required to report over time.”

Former Conservative minister Chris Skidmore announced that he will resign his party whip and step down as a member of Parliament as soon as possible, in protest of the government’s plan to enable more licensing for oil and gas production in the North Sea.

In his resignation letter, Skidmore, who served as Energy Minister in 2019 when the UK signed its commitment to achieve net zero emissions by 2050 into law, said that it is a “tragedy that the UK has been allowed to lose its climate leadership,” adding that “the future will judge harshly those that” vote for the government’s Offshore Petroleum Licensing Bill.

When introducing the bill to Parliament in November, the government noted that the UK will continue to require oil and gas for its energy needs throughout the coming decades of the energy transition, and that the proposed legislation required licensing rounds to meet stringent emissions tests, adding that domestic gas production has only around a quarter of the carbon footprint of imported LNG.

In his letter, however, Skidmore, while acknowledging “a role for oil and gas in the transition to net zero,” notes that the IEA and UNCCC have said that reaching net zero by 2050 and limiting temperature rise to 1.5C require ending new oil and gas production beyond what has already been committed, and argues that “there is no case to be made for increasing fossil fuel production at a time when investment should be made elsewhere,” in areas such as renewable energy. Skidmore added that following the initiation of “the global transition away from fossil fuels” set in motion at the COP28 climate conference, the future obsolescence of fossil fuels will cause new oil and gas licenses to create stranded assets, instead of supporting communities “to transition their skills and expertise to renewable and clean energy.”

The resignation marks the latest in a series of challenges for the Sunak government over its climate policies. In September, the government faced criticism from business and investors over its plan to delay or cancel several climate related initiatives, such as pushing back a ban on the sale of new petrol and diesel car sales by 5 years to 2035, easing rules to transition away from oil and gas boilers and towards heat pumps, and removing home energy efficiency requirements. In June 2023, environment minister Zac Goldsmith resigned from his post citing government “apathy” towards climate action.

Skidmore said that the new bill will “send a global signal that the UK is rowing back even further from its climate commitments,” adding that the UK “cannot expect other countries to phase out their fossil fuels when at the same time we continue to issue new licenses or to open new oil fields.”

Skidmore added:

“At a time when we should be committing to more climate action, we simply do not have any more time to waste promoting the future production of fossil fuels that it the ultimate cause of the environmental crisis we are facing.”

The Government of Canada announced that it has launched a consultation on the establishment of a new registry requiring plastic producers to report on the quantity and type of plastic they place on the Canadian market, and tracking plastic across its lifecycle in the economy, from production through end of life.

According to the government’s statement announcing the new consultation, the new Federal Plastics Registry will form part of Canada’s initiative to reduce plastic pollution and waste, with Canadians currently throwing away 4.4 million tonnes of plastic waste annually, with only 9% recycled. The registry is aimed at informing actions to accelerate the transition to a circular economy, providing harmonized plastics data across the country, and making information accessible to consumers and businesses.

Under the new proposed registry, producers will be required to report annually on the amount and type of plastic they place on the market, how the plastic moves through the economy, and how it is managed at end of life. Categories of plastic targeted by the proposed registry cover most of that placed on the Canadian market, ranging from packaging, single-use and disposable products and home appliances to electronics, construction, tires and textiles.

The consultation will seek input on aspects of the registry including its objectives, product categories covered, stakeholders required to report, reporting requirements and timelines, among other issues. The launch follows an initial consultation on the development of the registry completed in 2022. In April 2023, the government published a technical paper on the approach and details of the registry, as part of a series of measures to reduce plastic pollution, which also included consultations into proposed new labelling rules for products, and requirements for recycled content in plastic packaging.

Steven Guilbeault, Minister of Environment and Climate Change, said:

“Canadians are demanding action to tackle the plastic waste and pollution crisis, and the federal government will continue to act. The Federal Plastics Registry is an important tool that will help track and manage plastics across the economy. It will support provinces and territories in making producers responsible for their plastic waste at end of life and help move Canada toward a circular economy for plastics.”

The consultation will run until February, 13, 2024.

The government of Canada announced the publication of its completed new standard on the availability of electric vehicles, mandating annual increases in the proportion of sales of new zero emissions light duty vehicles, including passenger cars, SUVs, and light trucks, with a target to reach 100% zero emissions vehicle (ZEV) sales by 2035.

The new standard was initially announced in draft form in 2022, following the release earlier in the year of the government’s 2030 Emissions Reduction Plan, outlining its strategy to achieve its interim climate goals to cut GHG emissions by 40% – 45% by 2030. The strategy included plans to introduce ZEV sales mandates for light vehicles, alongside other transport electrification moves including funding for charging stations and infrastructure and for EV incentives.

The new rules aim to address one of the key sources of emissions in Canada, with the transportation sector accounting for around 25% of the country’s GHG footprint, according to the government, and light-duty vehicles representing roughly half of the sector’s emissions.

Steven Guilbeault, Minister of Environment and Climate Change, said:

“The establishment of a standard on the availability of electric vehicles materializes a key commitment of our climate plan. Increasing the number of electric vehicles on the roads is another example of steps we are taking to combat climate change, while helping to make the cost of living more affordable.”

The new standard’s targets begin in 2026, with a requirement for at least 20% of new vehicle sales by auto manufacturers and importers to be ZEVs, increasing to 60% by 2030 and reaching 100% by 2035. Government statistics indicate that battery electric and plug-in hybrid sales made up slightly under 8% of new vehicle registrations in the first half of 2022.

The regulation defines ZEVs as battery-electric vehicles and hydrogen-powered fuel cell-vehicles, as well as plug-in hybrid vehicles that meet criteria for their electric-only range.

According to a government statement announcing the completion of the new standard, the regulation aims to help increase the availability of ZEVs for consumers, and forms part of the government plan to support the Canadian auto industry’s battery and automotive supply chain.

The government added that the standard aligns with emerging regulations across North America, particularly the rule announced last year in California requiring all new car, pickup truck and SUV sales in the state to be zero emissions vehicles by 2035, which has been followed with similar standards by 10 other states. Internationally, both the EU and UK have regulations in place targeting ZEV-only new car sales by 2035 as well.

The U.S. Treasury Department and Internal Revenue Service (IRS) announced the release of proposed new rules for hydrogen producers to qualify for clean hydrogen tax credits, a key subsidy aimed at scaling the clean hydrogen industry in order to decarbonize major emissions-intensive sectors.

The proposed rules include stringent qualification conditions aimed at minimizing the lifecycle emissions of clean hydrogen production, including requirements for the production process to be powered by new clean energy capacity, and for producers to certify that the energy used is matched by clean power production on an hourly basis.

Hydrogen is viewed as one of the key building blocks of the transition to a cleaner energy future, particularly for sectors with difficult to abate emissions, in which renewable energy solutions such as wind or solar are less practical.

Around 10 million metric tonnes (MMT) of hydrogen are currently produced in the U.S., and approximately 94 million metric tonnes globally, although the vast majority is extracted using fossil fuels, which create pollutants and GHG emissions. U.S. hydrogen production, for example, is primarily based on extraction from natural gas through steam methane reforming, and currently generates around 100 million tonnes of greenhouse gas emissions per year.

The development of clean hydrogen capacity, such as green hydrogen, which uses renewable energy to power the process to extract hydrogen from other materials, will require massive investments in areas including infrastructure, electrolysis, transport and storage. The electrolysis process is energy intensive, requiring significant amounts of low-carbon electricity to power green hydrogen production.

In June 2023, the Biden administration released the U.S. National Clean Hydrogen Strategy, aimed at significantly ramping the production, use and distribution of low carbon hydrogen for use in energy intensive industries and including a goal to scale U.S. clean hydrogen production and use to 10 million metric tonnes by 2030, and as much as 50 million tonnes by 2050.

One of the administration’s key tools to incentivize the development of clean hydrogen capacity is the Inflation Reduction Act’s Clean Hydrogen Production Credit, a tax credit that includes four tiers  based on lifecycle emissions, starting at $0.60 and going as high as $3.00 per kg for near-zero emissions hydrogen.

Under the rules proposed by the Treasury Department, three criteria are considered for the use of energy attribute certificates (EACs) to demonstrate the use of clean power to qualify for the tax credit, including requirements for the energy to be sourced from new clean power capacity, such as power generators that began operation within three years of the hydrogen facility entry into service, for the power to be sourced from the same region as the hydrogen production, and, beginning in 2028, for the clean energy to be generated within the same hour as the use of the energy by the electrolyzer. Prior to 2028, annual matching will be allowed, to provide time for hourly tracking systems to become more widely available.

Environmental groups welcomed the new proposed rules, while several industry groups maintained that the requirements were overly stringent, and would slow the development of the clean hydrogen industry.

In a statement released following the proposed rules, clean energy transition-focused non-profit group RMI’s U.S. Program Managing Director Leia Guccione, said:

“We applaud the US Treasury for leading a rigorous process that was inclusive of input from a wide array of stakeholders and comprehensive in its considerations of industry and community needs. They have developed guidance that strikes a thoughtful balance between administrative practicality, intentional market-shaping, and environmental integrity while being responsive to the current needs of the American hydrogen industry.”

Hydropower and nuclear industry groups on the other hand argued that the rules would prevent the use of low-carbon power generation that already exists in helping to scale the clean hydrogen sector, slowing the decarbonization of key emissions intensive sectors.

The National Hydropower Association released a statement opposing the new rules, which stated:

“The Administration is needlessly discriminating against existing carbon-free resources, like hydropower and nuclear. Requiring clean hydropower to rely on electricity generation that has not yet been built will hinder our nation’s efforts to address climate change… We cheered the passage of the Inflation Reduction Act as a game changer for our industry, but we cannot let draconian rules defeat the very purpose of this legislative effort.”

The new rule is open for a 60 day comment period, with the Treasury and IRS stating that they will “carefully consider comments before issuing final rules.”

The UK government and European Council announced today an agreement to extend their current rules on electric vehicles (EVs) until the end of 2026, pushing back the application of tougher rules of origin for EVs and batteries by three years, in a move aimed at saving manufacturers and consumers billions in costs, and enabling more time to scale up European battery production.

The EU-UK Trade and Cooperation Agreement, signed in 2020, included local content requirements for electric vehicles and batteries in order for EVs to be able to benefit from tariff-free trade. The rules, aimed at incentivizing investment in domestic battery manufacturing capacity in the EU and UK, was set to be implemented in two stages at the beginning of 2024 and 2027.

While the phase-in dates for the agreement were reflected expected industry capacity at the time of the agreement, supply chain disruptions since the deal, driven most notably by the COVID pandemic and the Russia-Ukraine war slowed the increase in European battery capacity, leading to the EU and UK’s new agreement to cancel the 2024 changes to rules of origin, preventing new tariffs on vehicles that didn’t meet the local content threshold.

Both the EU and UK have initiatives in place aimed at driving a shift to electric vehicles over the next decade, including an EU regulation requiring a 100% reduction in CO2 emissions from new cars and vans registered in the EU from 2035, and a rule in the UK banning new petrol and diesel car sales by 2035 (recently pushed back from 2030).

Following the announced agreement, UK Prime Minister Rishi Sunak said:

“We have been listening to concerns of the sector throughout this process, and I know this breakthrough will come as a huge relief to the industry.

“The UK Government is delivering a pragmatic solution to keep costs down for businesses and for people at home who want to make the switch to electric vehicles.”

While the agreement provides a few years of breathing space for the sector, the European Commission noted a need to boost its efforts to ramp up battery capacity, with the 2027 deadline unchanged by the deal, and unable to be altered. The EU recently announced a €3 billion funding mechanism through its Innovation Fund aimed at ramping battery manufacturing capacity.

Maroš Šefčovič, Executive Vice-President for European Green Deal, said:

“Today’s Decision of the Partnership Council will give legal certainty to European operators. In parallel, the EU will provide significant financial support to European producers of sustainable batteries with a view to strengthening production capacity of batteries in the EU.”

The Government of Canada announced a $200 million investment through the Canada Growth Fund (CGF) in Calgary-based carbon capture startup Entropy, alongside a long-term fixed-price carbon credit purchase agreement for up to one million tonnes per year, aimed at de-risking Entropy’s projects to help decarbonize emissions-intensive, hard-to-abate industries.

Founded in 2020 by Calgary-based natural gas company Advantage Energy and energy-focused professional services provider Allardyce Bower Consulting, Entropy develops modular carbon capture and storage facilities to capture and sequester pre-combustion and post-combustion  emissions at industrial sources. The company’s first commercial natural-gas-fired carbon capture and sequestration (CCS) project at the Glacier Gas Plant in Alberta went into operation last year.

Entropy announced a $300 million investment from Brookfield last year through the Brookfield Global Transition Fund.

According to the landmark Intergovernmental Panel on Climate Change (IPCC) climate change mitigation study released last year, scenarios that limit warming to 1.5°C include carbon dioxide removal methods scaling to billions of tons of removal annually over the coming decades.

Most solutions that capture and store CO2 are early stage and currently limited in scale, however, and involve significant initial development investments. A recent report from S&P Global Ratings highlighted the significant risks facing CCS projects resulting from financial uncertainty.

According to Entropy, the large scale and long-term fixed price of the new carbon credit offtake (CCO) agreement with CGF will help to de-risk and accelerate private CCS development, and with the new deal in place, the company announced a provisional final investment decision of Glacier Phase 2.

Entropy President and CEO Mike Belenkie said:

“Entropy is excited to partner with CGF in re-establishing Canada as a world-leading CCS market. By creating a large-scale CCO to guarantee long-term carbon pricing and adding $200 million to our existing Brookfield funding for third-party projects, Entropy has a clear path to accelerating growth and reducing emissions, right here at home.”

Under the new agreement, CGF has committed to purchase up to 9 million tonnes of carbon credits from Entropy projects over 15 years at 600,000 tonnes per year (tpa), beginning with Glacier Phase 2 at up to 185,000 tpa at an initial price of $86.50 per tonne, and with the potential for an additional 400,000 tpa for other CCS projects.

Patrick Charbonneau, President and CEO of CGF Investment Management, said:

“With its abundance of natural resources, access to high-quality geological storage, and sophisticated engineering know-how, Canada is the best place in the world to build a CCS industry. The CGF Investment Management team is pleased to deliver this inaugural transaction in Alberta’s carbon market, and we look forward to putting additional capital to work across Canada in the months ahead.”

CGF commenced operations earlier this year, capitalized with $15 billion for deployment over the next five years, aimed at helping develop a clean economy in Canada, and attracting private capital to help absorb risks and encourage investment in low carbon projects, technologies, businesses, and supply chains. The fund announced its first investment in October, investing $90 million in Calgary-based geothermal energy company Eavor Technologies.

Following the announced investment in Entropy, Canadian Deputy Prime Minister and Minister of Finance Chrystia Freeland said:

“Today’s investment in Entropy by the Canada Growth Fund is great news for Alberta, for Canada, and for the workers who are helping to build a cleaner, stronger economy from coast to coast to coast.”

The European Commission announced today investments of €2.2 billion in clean energy projects in lower-income member states, with the new disbursements funded by revenues from the EU Emissions Trading System (EU ETS).

Allocations for the projects were made through the EU’s Modernisation Fund. Launched in 2018, with disbursements beginning in 2021, the fund was designed to support the modernization of energy systems and energy efficiency improvements at ten EU countries with lower incomes, including Bulgaria, Croatia, Czechia, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, and Slovakia, using EU ETS revenues.

With the new allocations, the Modernisation Fund’s disbursements to date climb to €9.7 billion, including €2.5 billion announced in June 2023, bringing the program for 2023 to €4.7 billion, supporting 50 projects.

Romania and Czechia were the largest beneficiaries of the program in 2023, with allocations of €2.2 billion and €1.8 billion, respectively, for projects including renewable electricity production, electricity network modernization, rolling stock modernization and gas infrastructure to facilitate replacing coal-powered generation in Romania, and achievement of a higher energy standard for public buildings and coal-to-gas district heating conversion in Czechia.

Maroš Šefčovič, Executive Vice-President for European Green Deal, said:

“With disbursements of €4.66 billion this year across nine countries, we will contribute to advancing towards our 2030 climate and energy targets while reaping the benefits of the green transition. These investments exemplify our commitment to tackle climate change and support Member States on their path to climate neutrality.”

Established in 2005, the European Emission Trading System puts a price on carbon emissions for key GHG intensive sectors, including electricity and heat generation, oil refineries, steel, cement, paper, chemicals, and commercial aviation, among others. Earlier this year, EU lawmakers agreed to increase the EU ETS’ scope, raising the direct emissions reductions required by covered sectors, and expanding the system to new sectors. The EU ETS is now expected to generate revenues of approximately €40 billion from 2020-2030.

Under the revised ETS, the Modernisation Fund will expand to include three new countries, including Greece, Portugal, and Slovenia.

Wopke Hoekstra, Commissioner for Climate Action, said:

“The model of making polluters pay for their emissions, and directing the revenues to investments that support climate action, is at the heart of the European Green Deal. The Modernisation Fund shows how driving down emissions via the ETS helps to speed up the energy transition.”