2024’s carbon policy so far: four key takeaways

Our Carbon Policy in Brief report highlights the latest need-to-know events from the carbon industry. Read on for our pick of this year’s big carbon policy developments so far and sign up to receive more carbon related content. 

US Supreme Court likely to repeal the Chevron Deference 

New cases heard by the US Supreme Court in recent weeks are likely to directly impact the country’s climate policy.  

Two cases from 17 January have asked the US Supreme Court to reassess the 'Chevron deference'. This doctrine was originally designed to allow judges to defer to government agencies in situations where federal law was ambiguous. It meant that agencies handling the Clean Air Act, for example, could directly select the best emissions reduction technologies without it being explicitly defined by Congress when it wrote the law. 

The Chevron deference was established in the 80s, and aimed to ensure that detailed decisions were made by experts, and that the system was kept politically accountable. Agencies are linked to a president, giving them a level of accountability, and granting voters some say in policies. Federal judges, on the other hand, are neither experts in these policy matters nor elected by voters.   

We believe repealing the Chevron deference could make policymakers less likely to pass laws that would benefit the energy transition.  

The door would be opened to litigation, with even effective policies becoming vulnerable to lawsuits from companies who may disagree with an interpretation of the law. In addition, judges would make decisions on cases where they are not necessarily experts, removing industry-specific intelligence from policy making.  

These issues could slow the flow of cases through the legal system and ultimately reduce the scope of policy making, as agencies chose to play it safe to avoid legal challenges. 

Chile to allow local companies to offset 100% of taxable emissions  

Chile has come up with a new mechanism to boost the domestic carbon offset market and compensate for emissions regulated under the carbon tax.  

The new system will allow companies to offset 100% of their taxable emissions – but there are restrictions. Credits are only accepted from projects located in the country, and the emission reduction must have happened within the last three years. Verified Carbon Standard (VCS), Gold Standard, and Clean Development Mechanism (CDM) credits will be recognised, but they still need to undergo a fast-track local certification. 

The low carbon tax of US$ 5/tCO2 is unlikely to inspire new carbon offset projects in the short term. However, a new price is under discussion, with a target of US$ 35/tCO2 in 2030. A higher value may attract the interest of project developers.  

It’s a good sign for the voluntary carbon market that Chile is recognising international registries. In return, registries need to assure these projects with robust accounting, additionality, measurement, and verification frameworks. If initiatives like this continue to emerge, registers will need to interact effectively with one another to ensure information about cancelled or retired credits is accessible to all registries and local regimes.   

Switzerland and Thailand forge historic carbon credit deal  

Switzerland and Thailand recently concluded the first ever transaction of Internationally Transferred Mitigation Outcomes (ITMOs), under Article 6.2 of the Paris Agreement on 9 January. This historic deal involves Switzerland purchasing 1,916 ITMOs from the Bangkok E-Bus Programme in Thailand. Article 6.2 offers two ways for countries to compensate for emissions. Countries can use reduction credits to meet their own domestic targets, or sell them to other countries, who can then put them towards their nationally determined contribution (NDCs). The transaction was facilitated by the Klik Foundation and mandated by the Swiss government and will benefit Switzerland by contributing towards its nationally determined contribution (NDC). To prevent double counting, Thailand has committed to adjusting its greenhouse gas inventory by the amount of mitigation outcomes transferred to Switzerland.   

This is a groundbreaking exchange. It’s the first example of a sovereign country buying units for compliance with its national emissions pledge. The deal was signed on 24 June 2022, and credited to the Klik Foundation account in the Swiss Emissions Trading Registry on 15 December 2023. Switzerland has also engaged in similar agreements with Dominica, Ghana, Chile, Georgia, Morocco, Malawi, Peru, Senegal, Tunisia, Uruguay, Ukraine, and Vanuatu.  

We consider this transaction to be hugely significant for the global carbon market and climate change mitigation efforts. The joint commitment by Switzerland and Thailand to adjust greenhouse gas inventories ensures transparency and mitigates the risk of double counting. The success of this deal should build confidence in these kinds of agreements and establish a precedent for responsible carbon trading in the future.  

EU Parliament adopts ‘anti-greenwashing’ law to empower consumers  

On 17 January, the European Parliament voted overwhelmingly for a directive that would “empower consumers for the green transition”. The directive has been reported as an “anti-greenwashing” law as it partially challenges climate claims. 

The directive lists a number of restrictions on claims and terms, including:  

• Claims, such as “climate neutral” and “climate net zero”, if they are solely “based on the offsetting of greenhouse gas emissions”. 
• Companies must also avoid making generic environmental claims, such as “green” and “eco-friendly”, without “recognised excellent environmental performance which is relevant to the claim”. 
• The media has reported this news with headlines like: “The EU has banned carbon neutral claims”, but we think this is an oversimplification. Terms like “carbon neutral” are only prohibited when they are exclusively based on offsetting. In fact, the directive explicitly allows advertising of green investments, including in carbon offset projects. The new directive only prescribes that information is not misleading. It is designed to ensure that companies making climate-related claims are contributing fairly to the net zero transition. 

'Carbon neutral' claims have been popular with businesses who have purchased offsets equal to their carbon footprint. The simplicity of the concept has helped the idea to spread, and driven corporate demand for offsets. 

It’s worth noting though that there is existing pressure to avoid claims solely based on offsetting. Both the media and industry stakeholders have been raising the issue, and in some cases legal action has been taken to contest “carbon neutral” claims. 

So, while this legislation does not ban the term entirely, it is nonetheless likely to contribute to the move away from carbon neutrality claims – and as a result, could negatively impact the demand for carbon offsets. 

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