Climate Law of 2021 in the EU

The most significant practical change brought about by the new Climate Law is that the European Union has turned all the ‘blah blah blah’ narrative into a legally binding net-zero climate target for 2050, a 55% CO2 reduction target for 2030, and set up a mechanism for keeping track on the progress.

Regulation 2021/1119 EU, commonly known as Climate Law of 2021, paves the road for Green Deal (read more about the EU Green Deal and what it means for industries), which is a bundle of legislation aimed at enabling the EU to hit the emissions reduction targets it has agreed to by signing the Paris Agreement and submitting to UN’s Sustainable Development Goals.

The law gives the Commission a mandate to review existing EU regulations and directives in order to ensure that they are in compliance with the new Climate Law and to propose revisions. Additionally, the Commission has a duty to assess the consistency of any draft measure or legislative proposal against the climate targets.

Why is the EU Climate Law being passed now?

The directly applicable Climate law already entered into force on 09.07.2021. Following it, the European Union published the “Fit for 55” legislation package that contains concrete measures, to be enacted across society in order to achieve the emissions cuts the EU has committed to by the year 2030.

The main motives behind the new climate law include:

Providing predictability and consistency in policy for investors and economic actors in the European market area
Ensuring that the transition to climate neutrality will be irreversible.

EU Climate Law creates a basis for real and concrete climate action on the union level.

The key idea is, that on the basis of this regulation, all future EU policies will complement the climate targets and ensure that they are met in a cost-effective and socially fair manner. Additionally, it is the first piece of legislation that really makes climate commitments legally binding for all the EU Member states and sets a course, that dictates the direction in which future regulation within the EU will develop.

The aim of the Commission is to work in close cooperation with different sectors of industry in order to ensure a smooth and swift transition to a sustainable society. The commission is already engaging with different industries in order to create sectoral roadmaps for achieving the climate targets set in the Climate law 2021.

What’s in it for business?

The freshly adopted Climate Law will have a notable impact on most fields of
industry, including transport, energy, metals, agriculture, construction, consumer goods, and many more. This piece of legislation is merely the starting shot for the race towards a green overhaul of the whole system, driving industries, the marketplace, and consumption towards sustainability with a strong regulatory push.

The legally binding emission reduction targets will quite soon turn into national-level legislation. While for some companies this will translate to innovation and opening up of new opportunities, for those who are not looking to adapt and review their existing business models in a rapidly changing environment, it will mean new compliance challenges.

European Union Climate Law of 2021 has been passed by the European Parliament and Commission

In less than a year’s time, by July 30, 2022, the Commission shall adopt guidelines setting out common principles and practices for the identification, classification, and prudential management of material physical climate risks at all stages of any EU-supported project or program. In practice, for businesses working in cooperation with the public sector, this means a greener working field, with direct effects on the ways EU-related public procurement applicants will be assessed.

Awareness of the current changes in the higher-level legislation and the timeline of those changes enables companies to either embrace or mitigate the effects of the current and upcoming Green Deal, and to adapt to the changing legislative environment.