WR ESG Alert: Carbon Border Adjustment Mechanism enters transitional phase, EU taxonomy news, proposed increase in fines for violations of the Working Environment Act
In this month's ESG alert, we highlight that the EU's Carbon Border Adjustment Mechanism has entered its transitional phase, we note the publication of various recommendations and reports calling for a more environmentally sustainable future and update on public consultations on proposed legislative amendments to the Working Environment Act and the Lawyers Act. We also provide an update on the EU taxonomy and mention Europol's Financial and Economic Crime Threat Assessment.
Environment
Recommendations to make producers responsible for the full lifecycle of textiles – report from a working group to the Ministry of Climate and Environment (Norwegian)
Earlier this year, The Ministry of Climate and Environment established a working group with the task of developing proposals on how to design a producer responsibility scheme for textiles in Norway. The working group presented its final report on 10 October 2023.
The working group consisted of Virke, NHO, Avfall Norge, Samfunnsbedriftene, Fretex, Framtiden i våre hender, and Naturvernforbundet. The Norwegian Environment Agency (Nw: Miljødirektoratet) participated as an observer. In addition, the working group received input from a reference group consisting of representatives from manufacturers, the textile industry, academia, the industrial sector, and the municipal sector.
Carbon Border Adjustment Mechanism (CBAM) starts to apply in its transitional phase
On 1 October, CBAM entered its transitional phase. In this phase, CBAM will only apply to imports of cement, iron and steel, aluminium, fertilisers, electricity and hydrogen.
EU importers of those goods will have to report on the volume of their imports and the greenhouse gas (GHG) emissions embedded during their production, but without paying any financial adjustment at this stage. While importers are asked to collect data for the fourth quarter of 2023, their first report will only have to be submitted by 31 January 2024.
The transitional phase will serve as a learning period for all stakeholders (importers, producers and authorities). It will allow the European Commission to collect useful information on embedded emissions in order to refine the methodology for the definitive period, which starts in 2026.
EU Taxonomy News
(i) EU taxonomy stakeholder request mechanism
On 17 October 2023, the European Commission and the Platform on Sustainable Finance launched the EU taxonomy stakeholder request mechanism to capture and address suggestions from stakeholders regarding EU taxonomy activities. The questionnaire allows stakeholders to submit suggestions based on scientific and/or technical evidence on new economic activities that could be added to the EU taxonomy or on potential revisions of technical screening criteria of existing activities.
The stakeholder request mechanism will run continuously, allowing respondents to submit their input on a rolling basis. On 15 December 2023, all submitted requests will be processed by the Platform’s Technical Working Group. After 15 December, the tool will continue to run, and a second cut-off-date will be communicated as soon as possible.
The Platform will analyse and consider relevant requests in the context of their recommendations on potential revisions to the EU taxonomy and/or additional economic activities, as part of the work of the Platform’s Technical Working Group.
(ii) Formal adoption of two delegated acts
The four-month scrutiny period by the European Parliament and the Council of the two delegated acts to the EU taxonomy, adopted in June 27, ended last Friday 27 October 2023. This means that the following acts are formally adopted:
- a Delegated Act with the technical screening criteria (“TSCs”) for the remaining four environmental objectives (circular economy, water and marine resources, pollution prevention and control, and biodiversity and ecosystems), including some amendments to the existing Taxonomy Disclosure Delegated Act.
- a Delegated Act which amends the existing Taxonomy Climate Delegated Act to include climate adaptation and mitigation TSCs for additional economic activities and some changes to existing climate TSCs.
The delegated act with TSCs for the environmental objectives includes 35 activities in eight economic sectors, notably:
- Environmental protection and restoration activities
- Manufacturing
- Water supply, sewerage, waste management and remediation activities
- Construction and real estate activities
- Disaster risk management
- Information and communication
- Services
- Accommodation activities
The Delegated Act amending the existing Climate Delegated Act sets out TSCs for additional economic activities including 12 new activities covering six sectors, plus several updates to existing activities in the Climate Delegated Act.
(iii) Links to Taxonomy Delegated Acts and Annexes
- Text of the Environmental Delegated Act and amending the Disclosures Delegated Act
- Annex I: Sustainable use and protection of water and marine resources
- Annex II: Transition to a circular economy
- Annex III: Pollution prevention and control
- Annex IV: Protection and restoration of biodiversity and ecosystems
- Annex V: Amendments to Annex I, II, III, IV, V, VI, VIII and X of the Disclosures Delegated Act
- Annex VI: Revised Annex VI of the Disclosures Delegated Act
- Annex VII: Revised Annex VIII of the Disclosures Delegated Act
Norwegian Official Report on the transition to low emissions (Norwegian)
On Friday 27 October 2023, the Climate Committee 2050 presented the Norwegian Official Report (NOU) ‘The transition to low emissions – climate policy choices towards 2050’. The report outlines what it will take for Norway to achieve the goal of becoming a low-emissions society by 2050.
One of the Committee's main messages is that the transition to a low-emissions society depends on the decisions made today, and that postponing the transition could lead to a more expensive, abrupt and demanding transition at a later stage.
The report provides clear and comprehensive insight into the necessity of establishing a roadmap for reaching net zero emissions. This roadmap should feature firm priorities and utilise the full spectrum of available tools, including legal instruments.
We recommend that Norwegian entities, as well as those operating within the Norwegian market, review this report. By doing so, they can gain a better understanding of the challenges faced in Norway and potential solutions for achieving net-zero emissions. This, in turn, will facilitate the evaluation and handling of associated transition risks.
Social
Proposal to increase maximum fines that can be imposed for violations of the Working Environment Act (Norwegian)
On 21 October, the Ministry of Labour and Social Inclusion published a consultation for a proposal to increase the upper limit on fines that can be imposed for violations of the Working Environment Act. Among other things, this would include violations of the provisions relating to whistleblowing in Chapter 2A of the Act.
Specifically, the Ministry has proposed raising the maximum potential fines from today's limit of 15G (approximately NOK 1.78 million) to 50G (approximately NOK 5.93 million) or 4% of annual turnover, whichever is greater.
The consultation will close on 22 December 2023.
Governance
Proposed revisions to the Lawyers Act and proposal for a new Lawyers Regulation (Norwegian)
The Ministry of Justice and Public Security has launched a consultation on its proposed revisions to the Lawyers Act (Nw: advokatloven) and proposal for a new Lawyers Regulation (Nw: advokatforskrift).
Most of the proposed revisions are relatively minor and technical, although there are some more substantive changes, including permission for insurance companies to register as a legal practice, a record-keeping requirement for lawyers and certain provisions specifically for in-house lawyers.
The consultation will close on 2 January 2024.
Europol publishes 2023 Financial and Economic Crime Threat Assessment
In September 2023, Europol published its Financial and Economic Crime Threat Assessment, which focused on the following key topics:
- The drivers of today's financial and economic crimes,
- Money laundering, criminal finances and corruption as the engines of crime
- The world of frauds
- Intellectual property crime and counterfeiting
The report also highlighted the issue of sanctions evasion and its links to organised crime, including money laundering schemes and the use of cryptocurrencies to evade sanctions.
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.