WR ESG Alert: An autumn of public consultations to further sustainability
In this month's ESG alert we describe three recently published public consultations in Norway, relating to (i) a revised CO2 compensation scheme, (ii) amendments to sustainability reporting in auditor and accounting regulations and (iii) the EU's recent Regulation on reduction of methane emissions in the energy sector.
Environment
Public consultation on revised CO2 compensation scheme (Norwegian)
On 20 September 2024, the Norwegian Environment Agency submitted for consultation amendments to the regulation on CO2 compensation. The proposed amendments reflect the agreement earlier this year between the Norwegian government and several industry organisations.
The CO2 compensation scheme is linked to the EU Emissions Trading System (EU ETS) and allows for member states to partially compensate undertakings in energy-intensive industries for increases in electricity prices resulting from the EU ETS. The ultimate objective is to prevent carbon leakage (where businesses transfer production to other countries with less stringent climate policies).
An important element in the revised scheme includes a commitment for the industries to implement emission reduction and energy efficiency measures corresponding to 40% of the CO2 compensation paid. Also, recipients of CO2 compensation must submit a binding climate and investment plan, together with the application for compensation. Measures in the plan must be implemented by 2034 and be approved by the Norwegian Environment Agency. In addition, the existing CO2 allowances price floor will be removed.
The revised scheme includes an annual maximum of NOK 7 billion in CO2 compensation for eligible industries, a cap that will be subject to inflation adjustments. Since the establishment of the measure in 2013, Norwegian spending under the CO2 compensation scheme has drastically increased, primarily driven by a rise in the price of emission allowances.
The deadline for responding to the consultation is 8 November 2024.
Public consultation on the EU Methane Reduction Regulation (Norwegian)
On 4 August 2024, the EU Methane Reduction Regulation entered into force in the EU (2024/1787/EU). The general objective of the regulation is to preserve and improve the environment by reducing methane emissions from fossil energy produced or consumed in the Union. The regulation follows up the European Green Deal, and the Global Methane Pledge launched at COP26, i.e. the US and the EU initiative to reduce global methane emissions by 30% by 2030.
Key deliveries are:
- Enhanced methods for measuring, reporting, and verifying methane emissions within the energy sector.
- An immediate mandate to reduce emissions through compulsory leak detection and repair, along with a prohibition on venting and flaring practices that release methane directly into the air.
- Transparency requirement for methane on imports.
Operators are mandated to do regular surveys of the equipment to detect leaks. Detected leaks must be repaired promptly. The regulation bans venting and routine flaring, permitting venting only under exceptional or unavoidable circumstances for safety reasons. Flaring is allowed only if re-injection, on-site utilisation, or transport of the methane to a market are not technically feasible, with stricter rules governing how it can be conducted.
Transparency requirement involves gathering information on whether and how exporting countries or companies are measuring, reporting, and mitigating methane emissions. The increased market transparency on fossil energy imports into the EU is, according to the Commission, a key tool to incentivise a wider uptake of methane emissions mitigation solutions around the world.
The Norwegian Ministry of Energy released a public consultation on the package on 3 September 2024. According to the Norwegian EEA Factsheet, the decision on EEA relevance is yet to be made.
Public consultation – Amendments to Auditor and Accounting Act Regulations (Sustainability Reporting) (Norwegian)
On 9 September, the (Norwegian) Ministry of Finance issued a public consultation on a proposal from the Financial Supervisory Authority, outlining changes to auditor regulations, the Accounting Act, and various other financial market regulations. The changes are made to align with new sustainability reporting rules stemming from the Corporate Sustainability Reporting Directive (CSRD).
At the request of the Ministry of Finance, the Financial Supervisory Authority has evaluated the need for regulatory changes arising from the proposals in Prop. 57 L (2023–2024). Since the CSRD mandates that sustainability reporting be audited, new requirements for auditors' expertise in sustainability are necessary. Accordingly, the proposed changes to the auditor regulations emphasise practical training requirements for additional certification as a sustainability auditor, in line with new provisions in the Auditor Act, along with regulations on practical examinations and transitional arrangements for existing auditors.
Minor changes have also been proposed to other regulations, including those related to the Accounting Act and the Securities Trading Act. Most of these adjustments address the impact of changes in statutory provisions concerning the threshold for company categories.
The consultation deadline is 7 October 2024.
Wikborg Rein's monthly ESG alerts will cover key developments on topics of relevance under the ESG umbrella. The WR ESG Alerts intend to offer a focused perspective on environmental and social issues, emphasising material developments and their implications. However, this may not encompass all aspects of the broader ESG spectrum and will generally not cover governance-related updates.
The WR ESG alerts primarily cover regulatory developments within Norway and the EU. We endeavour to keep you informed about the evolving landscape of ESG regulations, although it is essential to verify and cross-reference information, considering the dynamic nature of regulatory environments. Please note that the information shared in the WR ESG alerts is for informational purposes only and should not be construed as legal advice.