The European Union ("EU") is coming closer to adopting mandatory rules for companies that use carbon credits.
- First, the European Parliament and Council are considering for adoption a Commission for a Regulation on a Carbon Removal Certification Framework ("CRCF Regulation Proposal").
- Second, the European Commission ("Commission") is in the process of adopting standards (the so-called "ESRS") for the EU's mandatory ESG reporting regime—the Corporate Sustainability Reporting Directive ("CSRD")—that will also cover disclosures on companies' use of carbon credits (including as emission offsets) and their quality.
These two regulatory initiatives are closely tied to each other. In effect, the draft ESRS that the Commission is considering for adoption require subject entities to disclose GHG removals and GHG mitigation projects financed through carbon credits.
The EU's aim of regulating carbon credits coincides with its push for carbon neutrality by 2050, and a related significant proliferation of companies publicly committing to achieve "net-zero" emissions by mid-century, which has triggered an uptick in strategic purchases of carbon credits in the voluntary carbon market ("VCM").The CRCF Regulation Proposal and the upcoming ESRS will help to expand sustainable and verified carbon removals and encourage investment in technological innovation.
Companies turning to the VCM to reach their net zero goals, and others active in the generation, trading, and use of carbon credits, will want to follow these initiatives closely. Opportunities remain for companies to express views that may shape the final contours of these regulations.
We discuss these developments and opportunities for public comment below.
Regulation for a Carbon Removal Certification Framework
The European Parliament and Council are currently considering for adoption the CRCF Regulation Proposal that the Commission presented in late November 2022.建议书载有规则监测、报告并验证欧盟/EEA内部发生的碳清除的真实性实际中,拟议方案仅用于EU/EEA中的碳清除。
CCRC规程基于四大质量标准(载运QU.A.L.ITYmniker):- 设置量化、额外性和长期存储需求,产品必须符合这些需求才能认证;
- 要求认证方法符合这些需求并授权委员会制定方法学and
- requires companies to subject their certification to independent third-party verification through a certification scheme.
- First, companies must disclose GHG removals and storage from their own operations and their upstream and downstream value chain, and report the underlying calculation assumptions and methodologies!and
- Second, and most important for carbon credits and the VCM, companies must disclose the amount of GHG emission reductions or removals (in metric tonnes of CO2eq) from climate change mitigation projects that financed through any purchase of carbon credits.
- Companies relying on carbon credits for achieving any net-zero targets explain the credibility and integrity of the carbon credits used, and whether and how its claims of GHG neutrality neither impede nor reduce the achievement of its GHG emission reduction targets;
- Companies consider recognized quality standards for preparing information on carbon credits, verifiable by independent third parties, to make public reports, and to provide rules for calculation, monitoring, and verification of the project's GHG emissions;
- Companies disclose information on carbon credits with a breakdown of the following items (see AG 66 for the tabular format in which companies are suggested to present information on carbon credits):
- the share (percentage volume) of reduction projects and removal projects;
- the share (percentage volume) of each recognized quality standard;
- the share (percentage volume) issued from projects in the EU!
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- >
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- >/carbon清除不影响温室气体排减量努力(ESRSE1建议约90-95%温室气体排减量应来自公司自身的企业排减量)。
The draft ESRS E-1 does not reference the CRCF Regulation Proposal, but it requires companies to "apply consensus methods on accounting for GHG removals as soon as they are available." This fits with the Commission's purpose for the regulation of the certification of carbon removals—namely to increase transparency, credibility, and integrity around companies' actions to permanently remove GHG from the atmosphere.
Next Steps
The Commission is set to adopt the draft ESRS as delegated acts by mid-2023. On November 23, 2022, EFRAG sent its draft ESRS to the Commission. Once adopted, the European Parliament and Council have two months to present any objections.之后ESRS将成为强制标准,公司必须报告各种ESG影响(见
委员会拟议的CRCF监管建议草案目前
Thus, the CRCF Regulation Proposal would require carbon credit project developers and potential users to conduct their own assessment of the carbon removal in accordance with the "QU.A.L.ITY" principles and the methodologies prepared by the Commission and then submit that assessment for independent verification through a certification scheme.
The CRCF Regulation Proposal requires certification schemes to be recognized by the Commission. All service providers of certification schemes must submit annual records of their activities to the Commission, and communicate any attempted fraud they identify. Moreover, certification schemes may only use accredited third-party certification bodies to verify project developers' and users' carbon removal assessments. These certification bodies may only be accredited by national accreditation bodies in the EU Member States. Hence, the CRCF Regulation Proposal creates a system of accreditation similar to that of notified bodies under the EU product rules.
At this stage, it is not yet clear how carbon offsets created through carbon removal projects applying the methodologies and certificate schemes set forth under the CRCF Regulation Proposal may serve as an alternative mechanism to meet the EU's GHG emissions reduction targets.根据欧盟委员会对CRCF监管建议的解释性备忘录,部分欧盟排放交易系统(EU-ETS)收入指向创新基金,它帮助企业投资创新清洁技术 — — 包括碳清除 。 CRCF监管建议与推向创新建议相匹配。 然而,看来CRCF监管建议下的碳清除不易交易或服务于EU-ETS下的目的。
此外,欧盟碳清除监管努力显然与全球开发相关联。值得一提的是,2023年1月会议中,国际可持续性标准委员会确认,拟议的s/www.ifrs.org/content/dam/ifrs/meetings/2023/jansb/sb/ap4-climateISSB是国际财务报告标准基金会(IFRS)二大标准设置板之一,并负责开发IFRS可持续性披露标准草案S2要求公司披露实现公司净零目标所必要的碳抵消数,包括用户理解实体拟使用抵消的可靠性和完整性所需某些因素A carbon removal activity's compliance with the CRCF Regulation Proposal (once adopted) would likely be an important marker of credibility and integrity.Interaction with the EU's Mandatory Carbon Credit Reporting Regime for Companies under CSRD
The draft ESRS standards that that the Commission is currently considering also include ESRS E1 on Climate Change ("ESRS E1"), which proposes a set of mandatory climate disclosures for many companies. The ESRS E1 contains two principal disclosure requirements for companies with respect to their GHG removals and GHG mitigation projects that are financed through carbon credits:
In addition, the ESRS E1 also requires that:
In October 2022, the International Sustainability Standards Board ("ISSB") met to discuss comments received and future work pertaining to the ISSB's proposed disclosure standards for Disclosure of Sustainability-related Financial Information ("Draft S1") and Climate-related Disclosures ("Draft S2").
The ISSB's reconsideration of topics addressed in its proposed disclosure standards provides insight into the progress the ISSB is making towards the development of a global baseline of sustainability-related standards. Additionally, the ISSB's clarification of certain proposed disclosure standards might also inform the key debates that jurisdictions worldwide are deliberating as they consider and finalize their mandatory climate-related disclosure requirements.下方归纳ISSB背景关键题目十月会议讨论sp > 回溯ISSB和发布稿
AtUN Change大会(COP262021),国际财务报告标准基金会董事会宣布创建ISSB,这是一个标准制定组织,受IFRS基金会监督ISSB建立的目的是开发可持续性披露标准综合全球基线ISSB整合气候披露标准委员会(“CDSB”)和价值报告基础并基于多重可持续性和与气候相关的披露标准,包括气候相关财务披露工作队(“TCFD”),国际综合报表理事会和可持续性会计准则委员会基于行业的披露标准。
2022年3月,ISSB发布公开评论S1草稿S1和S2草稿,侧重于与气候相关的具体风险和机会ISSB接触草编同同时发布与气候有关的披露提议规则同时并发证券交易委员会和欧洲财务报告咨询组st-and-events/news/2022/ssb-smee-sumary-sep2022.pdfd.ssb复用关键定义术语,包括ISSB标准中应用的“实质性”定义司法框架互操作性温室气体排放度量法范围3披露安全港sb/ap3b-General-Sustainable-Service-Funda-descripts.pdfThe ISSB confirmed its definition of "materiality" will be the same definition found in IFRS Accounting Standards.The IFRS accounting standards define "materiality" as follows:
Information is material if omitting, misstating or obscuring it could reasonably be expected to influence the decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.
If accepted in a global baseline, the ISSB's definition of "materiality" could impact the amount and type of information reporting companies would be required to report under their respective jurisdiction's rules.ISSB的拟议定义与侧重于与气候相关风险和机会的财务报告影响相一致,这些风险和机会是与SEC报告和SASB标准密切相容的物性概念In contrast, the "double materiality" concept reflected in the EFRAG/ ESRS and other jurisdictions' disclosure rules, would require disclosure of information that is both important to a company's financial value and to an understanding of a company's impact on external stakeholders.
In, Interoperability (Agenda Paper 3C & 4D), the ISSB voted in favour of aligning the disclosure requirements proposed in Draft S1 and Draft S2 with the TCFD Framework and in support of a global baseline that would meet the informational needs of stakeholders!要求披露受物性评估并需要披露包括与气候相关风险和机会对实体财务状况、金融性能和现金流量的影响。
p>In,With respect to GHG emissions measurement methods, the ISSB staff suggested providing an accommodation for entities that had been using a GHG emissions measurement method that differed from the GHG Protocol Standards (Agenda 4C, Section 7) in order to enhance the interoperability and flexibility of the ISSB standards.
In, Scope 1 and Scope 2 GHG emissions (Agenda Paper 4A), the ISSB voted in support of the approach and metrics to be used to disclose Scope 1 and Scope 2 GHG emissions including disclosure of absolute gross Scope 1 and Scope 2 GHG emissions generated during the reporting period!独立披露合并计算组和非合并投资者万博体育app手机登录sb/ap4b-climate披露-scos-serve-3-gas-emissions.pdf实体应审议《温室气体协议公司值链》(Cope3)会计和报告标准中描述的15CLE3温室气体排放类别并继续审议解决数据可用性与数据质量的救济方案问题,以及CLE3排放带来的其它挑战.
ssb员工推荐s/ss/www.ifrs.org/content/dam/ifrs/meetings/2022/october/ssb/ap4b-Climate安全管理者合作建立安全港3级温室气体排放披露规定万博体育app手机登录并编写实施指南支持CLEA3温室气体排放披露ssb员工建议,若无可靠信息,实体仍应提供估计值-即manbext网页版emphasizing that data availability is not a sufficient basis to exclude GHG emissions from Scope 3 (Agenda Paper 4B, Section 15).Industry-based Materials
The ISSB tentatively decided to maintain the requirement that entities provide industry-specific disclosures as set out in Appendix B to Draft S2, which is largely based on the SASB Standards.
If the ISSB proposals described above are finalized or recognized as forming a global baseline, they are likely to materially influence the climate-related disclosure requirements and interoperability of such requirements across multiple jurisdictions.
Next Steps
The ISSB will continue to discuss feedback on Draft S1 and Draft S2 in the following months and continue to redeliberate on the proposed disclosures, and aims to publish the IFRS Sustainability Disclosure Standards in the first half of 2023, slightly later than the original target set by the end of 2022.
The ISSB is requesting feedback from stakeholders to set its agenda priorities on:
- new research and standard setting projects for the development of the ISSB's two year work plan, and
- continued work with preparers and stakeholders in interpretation and application of the proposed standards, once published.
If you have questions concerning the material discussed in this client alert or wish to request support in engaging and providing feedback to the ISSB on the exposure drafts, please contact the members of our Securities and Capital Markets and Regulatory and Public Policy practices.