Carbon fought the law, and the law won

27 Jan 2022

Carbon fought the law, and the law won

Harold Hutchinson | Head of UK Research at Investec

Tim Malloch | Senior Associate at CMS Cameron McKenna Nabarro Olswang LLP

A year ago, in an article titled Climate Change – no place like home, Harold speculated that the law might end up being a valued friend to meet the climate threat. In today’s blog, co-authored with legal expert Tim Malloch, he revisits this theme.

 

The latest Intergovernmental Panel on Climate Change (IPCC) evidence makes clear that keeping the global average temperature rise to well below 2°C relative to pre-industrial levels, in line with the Paris Agreement, represents a huge challenge. The chances of staying within the higher ambition 1.5°C limit move against us with every new data point, and some observers fear we will breach the 1.5°C temperature ceiling before 2030. 

The camel trek from COP26 in Glasgow to the forthcoming COP27 in Egypt seems painfully slow as the environmental clock counts down against us. Is there a catalyst to ensure humanity does not run out of time?

We believe there is, and it was pinpointed recently by Inger Andersen, Under-Secretary-General of the United Nations and Executive Director of the UN Environment Programme:

“Beyond developing national framework legislation, we need a root and branch analysis and strengthening of laws relevant to all sectors. Tax laws. Company laws. Securities laws. Trade practices laws. Environmental laws. Energy laws. Land-use and planning laws. Transportation laws. You name virtually any law, and countries likely need to climate-proof it.”

To put us on a sustainable climate path that decouples carbon emissions from economic activity, we need to walk the walk, not talk the talk. This involves national legislation that introduces specific and focussed compliance obligations, not just long-term targets, allowing a coalition of the willing to put credible economic pressure on free-riding nations. 

With nearly 70% of the global population expected to live in urban environments by 2050 according to the World Health Organization (WHO), local laws also have a critical role to play. New York recently enacted rules to stop any new gas boilers or heaters being installed in new residential buildings from December 2023 (and high rise buildings from 2027), showing determination to tackle the ‘hard to abate’ heat sector.  

Beyond the city boundaries, new legislation on land use is needed to regenerate nature. Côte d’Ivoire has committed to restoring its forest cover to at least 20% of the national territory by 2030 through tightening its land laws. 

Climate-proofing of the law has an important role to play at the corporate level, and we expect this to create the largest single challenge for boardrooms in the decade ahead.

Climate-proofing of the law also has an important role to play at the corporate level, and we expect this to create the largest single challenge for boardrooms in the decade ahead. We are familiar with the traditional target of environmentalists – the fossil fuel sector – but the issues are wider and more nuanced. The climate issue is central for all companies, large and small, embracing the full supply and value chains in which they operate. As Sir Dieter Helm, Fellow of New College, Oxford, wrote recently in the Financial Times: 

 “We are all complicit in climate change, and we should all pay to fix it.”

Thus, at national, local and corporate levels, we believe the law has a critical role to play. A market is nothing without its rules, and the right climate rules can turn what are sometimes perceived as sticks into carrots. At the global level, treaties to encourage the flow of technological IP and finance from countries which have both in abundance to those that do not remain essential. 

We cannot duck this aspect of climate justice. Whether the existing Conference of the Parties (COP) process is the right political framework for this is an open question, but the need for ratified global treaties to ensure intellectual and financial capital transfers from the developed to the developing world is a sine qua non to resolve climate issues. 

As we have learned to our cost in the last two years, there are some issues where no one is safe until we are all safe. Climate law can guarantee that lesson does not slip our memory.


Tim Malloch
Tim Malloch

Tim Malloch is a Senior Associate at CMS Cameron McKenna Nabarro Olswang LLP advising on a wide range of high-value commercial disputes. In a previous role at ClientEarth, he helped persuade the UK government to abandon its plans to build a new generation of coal power stations. He has cycled from Ushuaia, Argentina to Prudhoe Bay, Alaska – a two-year trip that raised money for Médecins Sans Frontières. Tim and Harold are friends and have maintained an active dialogue on environmental issues for many years.

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Disclaimer: The blog does not aim to give investment advice, but is designed to afford relevant longer-term context to investors, encouraging a broad perspective where uncertainty is high and a spirit of learning is important. The views expressed are those of the author, not those of Investec.