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!
-
- >
- 和
- >/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: