WR ESG Alert: New climate lawsuit against the Norwegian government and expansion of the EU Emissions Trading System
In this month's ESG alert, we highlight that shipping activities have been incorporated into the EU Emissions Trading System, and that provisional agreement has been reached at EU level with respect to the Critical Raw Materials Act, the EU Nature Restoration Law and an EU Regulation to reduce energy sector methane emissions. We also report on the latest climate lawsuit against the Norwegian government.
Environment
Incorporation of shipping into the EU Emissions Trading System
On 22 November 2023, the Commission adopted the Implementing Regulation (EU) 2023/2599, laying down rules for the administration of shipping companies by administering authorities under the EU Emissions Trading System (ETS). The Implementing Regulation entered into force on 26 November, following its publication in the EU Official Journal.
The Implementing Regulation explicitly designates the "shipowner" as the default party responsible for fulfilling obligations under the ETS. Should another entity, such as the technical manager or bareboat charterer, seek to assume this responsibility, the conditions set out in the Implementing Regulation must be fulfilled.
To formally transfer responsibility to a technical manager or bareboat charterer, said entity must adhere to the new Implementing Regulation's requirements. This involves consenting to assume all duties and obligations outlined by the ISM code and the ETS. Moreover, it necessitates the provision of a documented agreement, signed by both parties, clearly demonstrating that the shipowner has duly authorised the entity to ensure compliance with ETS obligations. The Implementing Regulation sets out further requirements for the information that needs to be included in the documentation to be submitted to the authorities.
Political agreement on the Critical Raw Materials Act
On 13 November, a political agreement was reached between the European Parliament and the Council on the Critical Raw Materials Act (CRMA). The Act sets out a series of comprehensive actions to ensure the EU's access to a secure, diversified, affordable and sustainable supply of critical raw materials. The Act will also contribute towards enabling Europe to meet its 2030 climate and digital objectives. This is regarded as essential to safeguard and further Europe's competitiveness, including in green and digital industries.
The new rules will help increase domestic capacities for critical raw materials along the supply chain. The agreed benchmarks specify that the EU should have the capacity to extract 10%, process 40%, and recycle 25% of its annual consumption of strategic raw materials by 2030.
In terms of recycling, the deal also ensures that the EU will progressively take waste into account to determine recycling objectives. The compromise also includes the objective to mitigate demand through resource efficiency and technological progress. The EU should additionally diversify its imports of strategic raw materials, so that it does not rely on a single source of supply for more than 65% of its consumption.
The political agreement reached by the European Parliament and the Council is now subject to formal approval by these bodies. The proposal is marked as being EEA relevant.
Agreement on the Nature Restoration Law
On 9 November 2023, a provisional agreement was reached between the European Parliament and the Council on the Nature Restoration Law. This law is a key element of the EU Biodiversity Strategy, which calls for binding targets to restore degraded ecosystems, in particular those with the most potential to capture and store carbon and to prevent and reduce the impact of natural disasters.
The law should set in motion a process for continuous and sustained recovery of nature across the EU's land and sea areas. As an overall target to be reached on EU level, Member States will put in place restoration measures in at least 20% of the EU's land areas and 20% of its seas by 2030. By 2050, such measures should be in place for all ecosystems that need restoration.
The law will help the EU and its Member States meet the restoration target they committed to under the Kunming-Montréal Global Biodiversity Framework at the biodiversity COP15 in December 2022.
Norwegian climate lawsuit (Norwegian)
On 28 November 2023, proceedings commenced at the Oslo District Court for yet another climate lawsuit against the Norwegian government. The claimants, Greenpeace and Natur og Ungdom (Nature and Youth), are seeking interim relief against the Plan for Development and Operation (PDO) of three oil fields in the Barents Sea. The claim thus focuses on a later stage in the extraction process compared to the previous climate lawsuit, which solely focused on the allocation of concessions.
At the heart of the lawsuit is the assertion by environmental organizations that the PDO decisions were made in contravention of the directives set forth by the Supreme Court in the plenary judgment of the first Norwegian climate case in 2020 (HR-2020-2472-P). The first climate case underwent three rounds of court proceedings from 2017 to 2020, and ended with the majority siding with the Norwegian government. The Court rejected the NGOs' claim and found that the constitutional protection of the environment applies as a substantive limit to governmental action, and only in very limited circumstances.
However, the court did make significant statements regarding the responsibility to evaluate the climate impact of new projects. Notably, it was unanimously established that the state bears an obligation to evaluate the global climate impacts of new oilfields during the assessment process when these fields are under consideration by the Ministry of Petroleum and Energy. This affirmation by the court has empowered the same NGOs to once again challenge the state in court. The challenge is based on what they claim is the absence of an adequate assessment of consumption emissions for any of the approved new oil projects, subsequent to the Supreme Court's judgement.
Following the Supreme Court ruling in the first climate case, the Ministry of Energy and Oil formulated guidelines for evaluating the climate impact encompassing both production and petroleum products (Scope 3) as integral parts of the approval process for new field developments. Additionally, any new development plans submitted for approval are mandated to incorporate an assessment of the financial climate risks associated with the proposed development.
A crucial aspect of the new climate case will involve scrutinising whether these updated and newly developed practices align with the requirements set forth by the initial climate lawsuit.
EU Regulation to reduce energy sector methane emissions in Europe and in global supply chains
On 15 November 2023, and as part of the "Fit for 55" package, a provisional agreement was reached between the European Parliament and Council on a new EU Regulation to reduce energy sector methane emissions in Europe and in the global supply chains of European companies.
The Regulation aims to prevent unnecessary methane emissions into the atmosphere and to minimise leaks of methane by fossil energy companies operating in the EU. The Regulation:
- Mandates regular reporting by operators to authorities on methane emissions at the source, including for non-operated assets.
- Imposes obligations on oil and gas companies for regular equipment surveys to identify and fix methane leaks within specific EU timelines.
- Prohibits routine venting and flaring in oil and gas sectors, allowing non-routine cases only for unavoidable situations like safety concerns or equipment malfunctions.
- Places limitations on venting from thermal coal mines starting in 2027, with stricter regulations to be enforced post-2031.
- Requires inventory and monitoring of emissions from closed, inactive, plugged, and abandoned assets in oil, gas, and coal sectors, with the prompt adoption of mitigation plans.
In addition, the Regulation addresses methane emissions linked to import of oil, gas and coal. Key measures include establishing a methane transparency database for public access to emissions data reported by importers and EU operators, and mandating the Commission to create methane performance profiles for countries and companies, aiding importers in informed decision-making. Additionally, a global monitoring tool and rapid alert mechanism will be instituted to track high-emitting sources globally, with the Commission empowered to request swift action from concerned countries. From January 2027, new import contracts for oil, gas, and coal must adhere to similar monitoring, reporting, and verification standards as those applied to EU producers, guided by specified methane intensity methodologies and maximum emission levels outlined in the Regulation.
The provisional agreement requires formal adoption by both the European Parliament and the Council. Once this process is completed, the new legislation will be published in the Official Journal of the Union and enter into force.
As of today, Norwegian authorities have not yet made a determination regarding the EEA relevance of this legislation.
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.