Weekly News | 14th December to 23rd December 2022

Codo Advisory keeps an eye for you on the latest events and trends in climate finance and corporate sustainability, in the world and in Japan. Here’s what caught our attention last week.

World | G7 Nations to open Climate Club as green trade tensions rise 

• By reaching this understanding, the Group of Seven nations aim to create coordinated joint rules and standards in a stretch to avoid trade disputes over green tariffs.  
• While both the EU and the US are creating financial incentives to contain climate change while operating high-stakes technological shifts, it has become clear that climate policies are now central in the fight for global power.  
• German Economy Minister Robert Habeck and his French counterpart Bruno Le Maire declared that “it is in our mutual interest to swiftly find common ground here” as world trade must start to play by green rules.  
• Read more about this story: Bloomberg 1 & 2

Comment from Codo: As Japan will be presiding G7 in 2023, it will be tasked with figuring out the operation of this new initiative. This could offer the country an opportunity to reconnect with European and American initiatives on corporate sustainability and climate regulations, such as the EU Corporate Sustainability Reporting Directive or the US new corporate disclosure rules.

World | COP15 reach a deal to protect 30% of land and water by 2030 

• The United Nations’ nature talks concluded over the commitment from the wealthier nations to vow $30 billion a year to poorer ones by 2030 in part of a new biodiversity fund to be created and administrated by the Global Environment Facility – an experienced organization that supports environmental works.  
• The agreement winds up four years of work as such a framework was already discussed over the previous iterations of the U.N. Biodiversity Conferences. It is bound to mark history of global environmental action in similar ways to the Paris Agreement for climate. 
• Negotiators also agreed that countries should “ensure” biodiversity-related disclosure from their companies, without making anything “mandatory” as nations were divided about such a close.  
• Read more about this story: Bloomberg, Nikkei 

Comment from Codo: While some countries and companies, mainly in Europe, have already started to push biodiversity as actively as climate in their sustainability agenda, it is far from being the case in Japan. According to a global ranking of SDGs progress by country, Japan has major challenges on both biodiversity-related SDGs, “Life on land” and “Life below water”. Already lagging on climate action, Japan will have to double its efforts to catch up on biodiversity, including via the accelerated adoption of new international frameworks such as TNFD, and enhanced biodiversity literacy within companies. 

Europe | The EU sets rules to wind off packaging waste 

• As the volume of plastic waste is expected to increase by 46% by 2030 at the current pace, the European Commission seeks to decrease packaging waste by 15% from 2018 levels before 2040 by increasing the share of recyclable and compostable products.  
• The EU expects this initiative to knock on global effects as it represents the largest single market amid the e-commerce boom. Targeting broad industries from food production to consumers’ electronics and chemical manufacturing, the focus will be packaging – with plastic accounting for 40% of it and paper 20%.  
• The European Organization for Packaging and the Environment said it expected incentives to draw investment in required systemic changes, from using alternative materials to implementing refillable bottles.   
• Read more about this story: Bloomberg 1 & 2     

Europe | The EU to implement carbon border tax and phase out pollution permits 

• The European Parliament agreed to push for higher ambition in the EU Carbon Border Adjustment Mechanism (CBAM) by applying taxes on importations from organic chemicals to refineries and hydrogen amongst others. The mechanism will come into full effect by 2026 or 2027.  
• The goal is to avoid “carbon leakage” – which would see manufacturers relocate their production outside of Europe – while encouraging the rest of the world to increase its climate ambition.  
• The EU also decided to progressively phase out its “pollution permits” allocated to the emitters on the European Union Emission Trading Scheme (ETS) – which applies to 40% of the continent’s emissions – by reducing the number of proposed allowances by 62% by 2030 compared to 2005 standards, de facto forcing concerned industries to reduce their emissions by 62%.  
• Read more about this story: Le Monde 1 & 2, Financial Times  

Comment from Codo: The EU Carbon Border Adjustment Mechanism will have direct consequences for companies exporting their products to Europe. Japanese companies whose products have a high carbon footprint due to Japan’s energy system’s heavy reliance on fossil fuels will become less competitive on the European market, compared to similar products made in countries with a higher share of decarbonized energy sources. 

America | Connecticut makes climate change studies mandatory 

• This decision follows the footsteps of New Jersey which became the first American state to mandate climate change education in 2020. By doing this, those states protect it from budget cuts and climate-denying political views as education in the US is increasingly becoming part of a cultural battleground.  
• To fix solid roots to its climate education program, the state adopted the Next Generation Science Standards, a set of pre-college curriculum contents developed by scientists to deliver concrete knowledge to the students. 
• With curriculums getting updated, teachers seek to address eco-anxiety while emphasizing contextual and interdisciplinary learning.  
• Read more about this story: The Guardian  

Japan | Japan hosts 1st meeting for Asia zero-emissions initiative in March 

• Yakutoshi Nishimura, Japan’s Minister of Economy, will attend the Tokyo meeting including officials from Australia and Southeast Asian nations next march, aiming to build on the Asia Zero Emission Community concept.  
• Japan seeks to play a central role in this new framework by serving as a model through its $500 million deal with Indonesia to support renewable energy and power grid improvements by combining public and private sectors. It will thus provide technology and financial assistance with the help of its companies and banks, such as the state-owned Japan Bank for International Cooperation. 

• Read more about this story: Nikkei 1 & 2