Cities, regions and businesses all over the world have set targets to achieve net-zero emissions. SEI’s Derik Broekhoff offers recommendations on regulating net-zero standards and criteria for the UN Secretary General’s High Level Expert Group.
A large and growing number of cities, regions and companies have set targets to achieve net-zero greenhouse gas emissions by the middle of the century. However, it is not always clear what a net-zero target proclaimed by one of these actors actually amounts to. A survey last year found that while net-zero targets cover two thirds of the global economy, truly robust targets cover only 5%.
Increasing the percentage of meaningful targets – those linked to science-based emissions pathways, with clear interim targets and plans for action – will require more governance and oversight. Voluntary initiatives like the UN-backed Race to Zero campaign, on whose Expert Peer Review Group I serve, have begun to provide this oversight, setting robust criteria for credible net-zero targets and screening prospective members.
These initiatives are just the start. As a recent report convened by the UN High Level Climate Champions makes clear, credible voluntary standards must be bolstered through regulation and ultimately translated into ground rules for the global economy. Recognizing this, UN Secretary-General António Guterres announced the formation of the High-Level Expert Group on the Net-Zero Emissions Commitments of Non-State Entities (HLEG) at last year’s UN climate change conference, COP26. The HLEG is tasked with making recommendations on setting clearer standards for net-zero pledges and identifying a roadmap to translate these standards into international and national regulations. In comments submitted to the HLEG in August 2022, I identified elements of such a roadmap for corporate voluntary targets.
Better oversight of voluntary #NetZero commitments can only be the beginning. We need regulation on the national and international levels to bolster clear and credible voluntary standards.
Share on XWhen it comes to policing corporate environmental claims, governments have typically employed three main regulatory approaches: sustainability-related disclosure requirements, truthful advertising regulations and government-led certification and recognition programs.
Disclosure requirements typically regulate what information publicly traded companies must disclose, in public reports and/or filings with regulators, related to their current and expected financial performance. These requirements are intended to provide investors and shareholders with fair access to information relevant for making investment decisions. Sustainability-related disclosure requirements stipulate what companies must disclose related to the environmental and social impacts of their operations, along with relevant corporate governance arrangements.
Truthful advertising regulations place legal constraints around what companies are allowed to claim with respect to the qualities, characteristics, or performance of their products and services. Typically, such regulations address product- or service-specific advertising claims, such as whether they are “environmentally friendly,” although they may extend to corporate-level sustainability claims in certain circumstances.
Environmental certification and recognition programs are government-led programs that formally recognize non-state actors (including companies) for exceptional environmental performance. They can take a variety of forms, but typically involve either ecolabelling programs, which are used to certify products that meet technical standards for environmental performance, or corporate recognition programs that provide technical guidance along with recognition for actors who demonstrate exemplary performance in setting and achieving voluntary environmental goals.
Near-term priorities include establishing regulatory disclosure requirements. Over the longer term, regulatory approaches should more explicitly connect voluntary net-zero commitments with larger policy-driven efforts to address climate change.
Ideally, governments would pursue a combination of all three regulatory approaches, starting with near-term disclosure and advertising regulations. Near-term priorities should include establishing regulatory disclosure requirements for:
Over the longer term, it will be important to develop regulatory approaches that more explicitly connect voluntary net-zero commitments with larger policy-driven efforts to address climate change. Governments could promote such a connection through recognition and certification programs that incorporate criteria related to advancing national policy goals and “taxonomy”-style regulations that explicitly demarcate what types of actions and targets are aligned with national (and global) priorities for a just transition to net zero.
In its work to develop a roadmap for translating net-zero standards and criteria into national and international level regulations, the HLEG should consider the following:
To achieve the goals of the Paris Agreement, governments will need to do far more than provide better oversight of voluntary net-zero commitments. By taking these steps, they can directly leverage the ambition of voluntary actors to accelerate a comprehensive transition to net-zero emissions.
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