Emerging legislation and regulation
Recent and proposed legislation to regulate the energy transition offers opportunities for advocates and lawmakers to not only push for a just transition but also to advocate against capture. But they are just the tip of the iceberg of dozens of proposed climate regulations worldwide. Corporate accountability advocates have an opportunity to shape future legislation by insisting on anti-capture provisions.
EU Critical Raw Materials Act (CRMA)
The CRMA was proposed in March 2023 by the president of theEuropean Economic and Social Committee (ECOSOC), Ursula von der Leyen. It would establish the regulatory framework for the selection and implementation of strategic raw material projects in the EU Member States and a coordination mechanism for critical raw material supply chain monitoring, as well as adopt supply chain risk mitigation measures. While the Act presents an opportunity to legislate and regulate critical transition minerals and other raw materials more effectively, as proposed the CRMA leaves a lot to be desired.
According to a civil society opinion piece, “The CRMA should guarantee policy coherence and legal certainty through explicit reference to international due diligence standards set out in the UN Guiding Principles on Business & Human Rights (UNGPs), the OECD Guidelines for Multinational Enterprises and the upcoming Corporate Sustainability Due Diligence Directive (CSDDD) — and ensure they apply to all strategic project promoters in the CRMA.”
Other activists joined in the criticism: “‘The EU Commission is on a mining bonanza! It wants to give way to big, industrial mining across Europe and beyond,’ environmental organizations said after the European Parliament adopted its negotiating position on the [CRMA].”
In March 2024, the Council of the European Union finally adopted the CRMA, marking the final step in the decision-making process.
EU Deforestation-Free Regulation (EUDR)
The EUDR is an EU legislation, which entered into force in June 2023, with a global reach. Companies that import or export affected products into or out of the EU must conduct an in-depth investigation to ensure that the products are not sourced from land that has been deforested or damaged. They will also need to verify that the products comply with the relevant legislation of their country of origin, including human rights and the rights of affected peoples.
This law has already caused the governments of Indonesia and Malaysia, which account for 85% of the world’s palm oil imports, to claim that the rules are too stringent for producers, especially small-scale farmers. It has also increased pressure on both countries to update their own biodiversity and deforestation laws in order to comply.
U.S. Inflation Reduction Act (IRA)
The 2022 IRA is the largest climate bill in U.S. history. It provides incentives, funding, and programs to accelerate the shift towards a clean energy economy and is expected to spur significant adoption of new clean electricity sources.The corporate capture concern regarding the Act is that it will provide billions of dollars in revenue to project developers in the form of direct tax credits, paired with major grants and low-interest loans established in the 2021 Bipartisan Infrastructure Law, essentially creating an unparalleled economic transfer from taxpayers and government revenue to private companies, many of which are oil, gas, and mining firms that contributed to the climate crisis.
At present, the IRA has led to massive construction of renewable energy facilities, as well as false solutions such as carbon capture and storage (CCS) projects, all spurred by tax incentives. The risk in all sectors and types of companies supporting the IRA is essentially political: changes to the White House and Congressional leadership could roll back, accelerate, or otherwise create unfair outcomes vis-a-vis the economic transfer of wealth that is occurring, ostensibly with even less transparency or oversight.
Tropical Deforestation-Free Procurement Act (New York)
In April 2023, a bill in the New York State Senate sought to enact “the New York tropical deforestation-free procurement act requiring that companies contracting with the state do not contribute to tropical primary forest degradation or deforestation directly or through their supply chains; [and] establishes the supply chain transparency assistance program to assist small and medium-sized businesses and minority- and women-owned businesses in achieving compliant supply chains.” This unique subnational legislation could become a model for other nations and jurisdictions. The collected data would furnish insights into the beneficiaries of deforestation, enabling us to resist the influence of business lobbies and corporate capture.
According to Friends of the Earth, “[The Act requires] state contractors who deal in tropical forest-risk commodities to certify that their products don’t drive tropical deforestation or degradation, by providing data to the state and the public demonstrating supply chain due diligence to their products’ points of origin; Closes loopholes in existing 30-year-old state law banning the use of tropical hardwoods for government projects; Provides a bidding preference for small and medium-sized businesses, minority-and-women-owned businesses, and businesses fulfilling state contracts using New York products; Creates a supply chain transparency assistance program to support New York-based small and medium-sized businesses and women and minority-owned enterprises to achieve ethical and sustainable supply chains for forest-risk products. This program will be administered by Empire State Development; Requires a minimum of two representatives from indigenous tropical communities within the geographic areas to be part of a Stakeholder Advisory Group; Defines ‘tropical forest-risk commodities’ to include soy, beef, palm oil, coffee, cocoa, wood pulp, paper and wood products. Other commodities may be added by the Commissioner of the Office of General Services.”
Regrettably, in December 2023, the New York governor vetoed the legislation, which had passed with overwhelming bipartisan majorities in both houses of the Legislature. The bill enjoyed widespread support among businesses, indigenous peoples, and citizens globally. As said, the legislation aimed to establish New York State as a leader in protecting the world’s critical tropical forests and largest carbon sinks. Nonetheless, there remains an opportunity to build a stronger coalition to pass the bill in the future.
Rolling back deforestation in Brazil
With President Luiz Inácio Lula da Silva (2023-26) back in power, Brazil has committed to rolling back deforestation in the Amazon, which became exacerbated during the Bolsonaro Administration (2019-22). However,there is concern that Congress will not pass the no deforestation law due to corporate capture by agribusiness interests.
“In his first decisions as president, [Lula] restored the authority of the government’s environmental protection agency Ibama to combat illegal deforestation, which had been diluted by Bolsonaro. He also revoked a measure that encouraged illegal mining on protected Indigenous lands. In addition, he unfroze the billion-dollar Amazon fund financed by Norway and Germany to back sustainability projects, reinforcing his commitment to ending deforestation in the Amazon, which surged to a 15-year high under Bolsonaro. After his election victory, Lula pledged to reduce deforestation in the Amazon to zero.”
Following a year in office, by the end of 2023 the Lula administration had overseen a 55% decrease in Amazon deforestation. This significant reduction was primarily attributed to beefing up regulatory enforcement and implementing stringent measures to crack down on illegal development activities.
Economic Transformation Plan (Brazil)
The Brazilian Government seeks to stimulate its economy and initiate the energy transition by establishing a carbon market with cap-and-trade for large emitters and safeguards for indigenous communities participating in carbon offset projects. Led by the Finance Ministry, the Plan will include around 100 measures across six policy domains, such ascarbon trading, bioeconomy, and infrastructure adaptation, the issuance of government bonds tied to social and environmental initiatives, and gradually phasing out fossil fuel subsidies.
According toConectas,“The opportunities emerging in the financial sector concern the initiatives that the current federal government is leading, such as the agenda of the Ministry of Finance’s Ecological Transformation Plan. Although subject to criticism, this plan could be an opportunity for the economic and financial sectors to change their behavior and consider climate variables and the need for restructuring in the face of the energy transition.”