More than half world’s economy now regulated on net zero

There will be at least 77 net zero rules by 2024, covering green claims, procurement, disclosures and transition planning, says Oxford research

A study by the University of Oxford has found that at least 55% of the global economy is now governed by net zero regulation.

By next year, G20 governments will have introduced at least 77 rules to push the private sector towards net zero, according to the research.   

“When we aggregate the GDP of the countries covered in the stocktake that have already implemented net zero or decarbonization regulations, the result is that at least 55% of the global economy is somehow governed by these regulations,” said the report’s authors.      

The 77 instruments are divided into four: green claims and standards; reporting and disclosure; climate transition plans; and public procurement policies.   

Procurement policies 

“Procurement isn’t technically a regulation, it’s an opportunity to sell to a government if you can meet certain standards,” said Kaya Axelsson, a net-zero policy engagement fellow at Oxford’s Smith School of Enterprise and the Environment, and co-author of the report. 

“But it’s promising to see governments with contracts worth millions of dollars asking companies to set, for example, science-based targets using an accredited framework like SBTi,” she continued.  “It shows that external, voluntary frameworks can be used by governments to incentivise change.”

In Canada, procurement contracts above C$25m are allowed to include a requirement for bidders to adopt science-based targets in line with the Paris Agreement and join relevant voluntary initiatives. 

At last year’s Conference of the Parties, COP27, 19 governments formed the Net Zero Governments Initiative (NZGI), committing to integrate their climate objectives into their own operations, including purchasing and public procurement. 

Four more countries have joined since, and the group now includes the US, UK, Australia, Canada, France, Germany, Japan, Nigeria, Chile and Singapore. 

“A lot of what we’ve identified around procurement may be linked to that initiative,” said Axelsson, adding that NZGI is expected to announce more about its plans at COP28, which begins this week in Dubai. 

TCFD, ISSB and other external standards 

The study also highlighted a growing tendency for governments to recognise external frameworks like the Taskforce on Climate-related Financial Disclosures (TCFD), International Sustainability Standards Board and ISO standards in their policy interventions.

It identified 93 instruments that referenced the TCFD recommendations.  

Axelsson said that this was an encouraging trend, because those standards already had significant buy-in from the private sector.  

“People are scared off when they hear words like regulation,” she told REP. “But a lot of what we’re seeing isn’t about governments introducing additional responsibilities for the private sector, it’s about clarifying what companies are already doing on a voluntary basis and providing some certainty around things like which frameworks they should use.”

Mandatory over voluntary 

Axelsson added that the move toward mandatory rules was crucial because “we found that all of the voluntary commitments that have been made by companies over the past few years haven’t translated into meaningful, credible action”.

On Friday, media outlet Jakobin published an article about Amazon’s voluntary net zero pledge, in which the authors claimed the online retailer “celebrated its first decrease in total emissions since reporting began in 2018” over the summer – just weeks after ditching its commitment to net zero shipping.  

“The decline was a mere 0.4 percent to 71.3 million metric tons. At that rate, it would take Amazon until 2378 to reach its stated 2040 target of net-zero emissions,” the article suggested. 

Enthusiasm for voluntary decarbonisation has waned at a number of other large companies over the past year, mainly because of the short-term costs associated with reaching net zero.