UK climate policy and regulation tracker

If environmentalists were hoping to see King Charles’ first ever Parliamentary speech – setting out the Government’s programme of legislation in the coming months – brimming with new climate-focused laws, they will have been severely disappointed. Alongside promises to attract “record levels of investment in renewable energy sources” was the announcement of a Bill to support the future licensing of new oil and gas fields. While there will be “stringent new emissions and import tests,” the new law will require new North Sea oil and gas drilling licenses to be handed out on an annual basis, somewhat undermining the UK’s climate ambitions.

The King’s Speech follows a recent trend for a rolling back of policy to tackle the UK’s climate impacts. Citing the cost-of-living crisis, Prime Minister Rishi Sunak has already announced a five-year delay on the ban on new petrol and diesel car sales, now aligning with the EU’s 2035 date. The ban on oil boilers in off-grid buildings has also been moved back, from 2026 to 2035. And the decision to phase out 100% of gas boilers by 2035 has been weakened to an 80% target. Rather than force companies and households to be energy efficient, Sunak favours incentivisation, he says. Plans to fine landlords for failing to improve the Energy Performance Certificate ratings of their properties have also been scrapped.

While the Government’s flip-flopping on green policy continues to make investment in low-carbon measures challenging, companies will need to be aware of the requirements imposed by more stringent carbon-risk and ESG reporting. As of April 2022, around 1,300 of the largest UK-registered companies and financial institutions were required to disclose climate-related financial information using guidelines from the Task Force on Climate-related Financial Disclosures (TCFD). Now, as we head into 2024, and TCFD monitoring transfers to the International Sustainability Standards Board (ISSB). Companies can, voluntarily, use the ISSB’s ‘S1’ and ‘S2’ standards to help guide their disclosures of sustainability‑related and climate-related risks and opportunities. In time, these standards are expected to form the basis of new disclosure regulation for all large companies, not just listed ones as is currently the case.

It is less than 100 days until the requirements of the new EU Corporate Sustainability Reporting Directive (CSRD) are implemented in the UK. Most companies have not started preparing for the new reporting framework, but it will impact many big businesses that have more than 250 staff or revenues over £34.8m. CSRD requirements apply from 1 January 2024 for businesses already subject to the EU’s Non-Financial Reporting Directive (NFRD). It will then expand to cover other large companies from 1 January 2025.