INTRODUCTION
The UAE government in October 2024 passed a climate change law focused on reducing the effects of Climate Change. The objective of the law centres around managing emissions, increasing the adaptability of the economy to the impacts of climate change, supporting innovation in the area and improving regional and international cooperation by aligning local and global plans and strategies to tackle climate change. The law shall come into effect in May 2025.
THE ROLE OF ESG IN ADDRESSING CLIMATE CHANGE
The enactment of this law underscores the growing importance of Environmental, Social, and Governance (ESG) frameworks in driving sustainable development across the UAE.
ESG principles play a pivotal role in enabling businesses to align with global sustainability goals, enhance stakeholder trust, and attract investment. By addressing environmental concerns such as emissions reduction and promoting accountability and governance, the law reflects the UAE’s commitment to integrating ESG into its economic and regulatory frameworks. The emphasis on incentivizing technological innovation and carbon offsetting further highlights how ESG-focused strategies can support businesses in adapting to new regulatory landscapes while fostering long-term resilience.
PROVISIONS
Article 4 of the law dealing with climate change mitigation directs sources of greenhouse gases to reduce the same by improving energy efficiency, using clean energy, enhancing and protecting natural carbon sinks, and using other technologically advanced methods determined by the Ministry of Climate Change and Environment.
Article 5 of the law obligates the Cabinet to determine annual targets for emission reduction for all sectors at the national level by coordinating with the Ministry to achieve the national pathway to carbon neutrality.
Source of Greenhouse gases i.e. public and private legal persons or individual entities are obligated:-
1. To measure emissions emitted, prepare an emissions inventory, and submit periodic reports according to the standards specified by the Ministry. They are also obligated to take measures to reduce such emissions.
2. Submit data related to emissions and reduction measures and the expected reduction results.
3. Maintain a record of measured emissions quantities for five years from the date of each analysis to be assessed by the relevant competent authority.
The law also imposes penalties ranging from AED 50,000 to 2,000,000 for violating the above-stated obligation on the sources, with a provision of doubling the fines in case of a repeat offence.
The law also obligates the Ministry and the Competent authority to incentivize sources to adopt newer technologies and methods to reduce emissions such as facilitating carbon offsetting activities, emissions trading, and adopting shadow prices of carbon, among other measures.
The law obligates the Ministry to establish a National Carbon Credit Registry, Competent Authority, Nationally Determined Contributions (NDCs), or other such Climate Action Boards or Committees. Further, the law obligates the competent authority to establish Climate Change Adaptions Plans assessing the main risks, determining measures to respond to the risks and implementing plans and adaption measures related to Climate Change.
CONCLUSION
The framework of the Decree-law is centered around the creation of competent entities that can help mitigate the risks associated with climate change. By promoting the adoption of ESG principles, the law ensures a balanced approach that not only penalizes sources of greenhouse gases but also incentivizes positive action through innovation and collaboration. The law rightly does not impose any specific obligations on any industry and allows the Competent authorities and the Ministry to determine the specifics for effective implementation of the law. The law is progressive and does not merely penalize the wrongs committed by sources but also incentivizes them to take positive action.
To know more about this blog, you may contact:
Thomas Paoletti
Francesca Romana Valeri
Fauzia Khan
