Report: At least 55% of global economy already governed by net zero regulation

17 / 12 / 2023

By Marwa Nassar - -

* COP28’s outcome is meaningful

* Governments should develop policy, regulatory systems to back climate pledges

* Expecting private sector to deliver voluntarily on climate promises is bumpy road

A recent report issued by the Oxford University said at least 55% of the global economy is already governed by some form of net zero regulation. As of 2024, a minimum of 77 net zero regulations will be in effect worldwide.

The mapped regulatory activity in G20 members has evolved quickly, nearly quadrupling in size over just four years, according to the Net Zero Regulation Stocktake Report 2023.

The report underlined said it is essential, for COP’s promises to mean anything, that governments develop policy and regulatory systems to back climate pledges.

The report highlighted that COP28’s outcome is meaningful. For the first time in three decades (since the UN Framework Convention on Climate Change was founded), oil and gas has been included in an agreed text. The final text includes a pile of compromises that may cause issues down the road, but this moment still represents an historic signal about ‘the beginning of the end of the fossil fuel era’.

But an empirical look at government action across the G20 suggests that a steady move towards corporate climate accountability is, in fact, coming: Oxford Net Zero’s recently published stocktake finds governments around the world are beginning to put up regulatory ‘guardrails’ to protect us from pushing the planet to its limits.

This is happening in the context of decreasing geopolitical stability, an ongoing fossil-fuelled energy crisis, and the simultaneous acceleration of climate impacts and decarbonization.

Under such conditions, expecting the private sector to deliver voluntarily on climate promises is a bumpy road. The last two years have seen demoralizing steps backwards, with companies pulling back on commitments, even as research has become more and more compelling about the economic fundamentals underpinning the green transition.

In response, governments are beginning to take action: in the report, Lucilla Dias, Adriana Elera and I observe a marked increase in net zero policy and regulation, which will be critical for realizing the new international agreement on a ‘ transition away from fossil fuels…to achieve net zero by 2050’.

Since the 2015 Paris Climate Agreement was signed, a flurry of commitments to net zero have been made across the public and private sectors.

The latest global net zero stocktake showed the number of large, publicly listed companies with climate targets doubled in two years, with commitments now from more than 50% of companies.

Net zero target-setting has been mired with greenwashing charges, and with good reason. Of commitments studied in the report, less than a third were sufficiently backed by a plan that meets minimum internationally agreed criteria. Last year’s “Integrity Matters” report published by a UN-convened group of experts, pulled no punches in calling out deficiencies underneath the hood of many promises.

While mitigating greenwashing is important, it is even more important to build enabling environments for companies to fulfill their climate commitments by strengthening regulation and policy. Tightening these screws has a dual effect: Laggards will be required to pull their weight, while leaders who have walked the talk will see their investments and efforts rewarded.

There are also many reasons for businesses to call for government action to cut a path through a maze of voluntary Environmental Social and Corporate Governance (ESG) frameworks. Duplicate requirements cost companies time and money, resources that could be going towards developing climate solutions.

Following the historic pronouncements at COP28, it is a critical moment to turn the groundswell of voluntary climate action into clear, fair, and aligned ground rules for the net zero economy.