UAE’s New Climate Law: and it’s impact on regional businesses
The UAE’s Federal Decree-Law No. (11) of 2024, aimed at addressing climate change, was issued on August 28, 2024, and will take effect on May 30, 2025. This law is a key part of the UAE’s Net Zero 2050 strategy and requires businesses to reduce carbon emissions and adopt sustainable practices.
Key Impacts for Businesses:
- Mandatory Reporting: Companies must report their emissions and follow decarbonisation plans.
- Clean Energy and Innovation: Businesses are encouraged to adopt clean energy, carbon capture, and offsetting mechanisms.
- Penalties for Non-Compliance: Fines range from AED 50,000 to AED 2 million for failing to comply.
The law applies to both public and private sectors, including free zones, and promotes R&D and innovation to fight climate change. The establishment of a National Carbon Credit Registry will allow for carbon trading, helping companies meet emissions targets.
Overall, this legislation not only supports climate action but also creates new business opportunities, making sustainability a competitive edge for companies in the UAE.
Federal Decree-Law on Reducing Climate Change Effects
Sources identified by the Ministry and relevant authorities, in coordination with concerned entities, must regularly measure emissions from their activities, maintain an emissions inventory, and submit periodic reports.
Article (6) Measurement, Reporting, and Verification
1. Sources determined by the Ministry and the competent authority, in coordination with the entity concerned, shall:
a. Measure emissions emitted from their activities on a regular basis, prepare an emissions inventory, and submit periodic reports according to the standards specified by the Ministry or the competent authority, as the case may be, and take measures to reduce such emissions in accordance with the resolutions issued by the Ministry after coordination with the competent authorities and entities concerned.
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The New Climate Law supports enforces UAE’s commitment to Sustainability and ESG
2024 marks the second consecutive Year of Sustainability following the COP28 conference, reinforcing its dedication to sustainable initiatives. The country is driving forward ambitious projects like the UAE Net-Zero 2050 Strategy and making significant investments in renewable energy and green technology, such as the Mohammed bin Rashid Al Maktoum Solar Park in Dubai and the Barakah Nuclear Energy Plant in Abu Dhabi.
Sustainable Finance and ESG Regulations
The UAE established the Sustainable Finance Working Group (SFWG), a collaboration between government ministries, financial regulators, and securities exchanges, to promote sustainable finance regulations. The SFWG introduced guidelines for managing climate-related financial risks and ESG disclosure requirements, ensuring consistent reporting on sustainability across the UAE. The group is also developing the UAE’s taxonomy design principles to further standardize sustainability practices.
In Summary
The UAE’s new Federal Decree-Law No. (11) of 2024 aims to address climate change and support the Net Zero 2050 strategy, requiring businesses to reduce carbon emissions and adopt sustainable practices. Set to take effect on May 30, 2025, the law mandates regular emissions reporting and decarbonisation efforts, with penalties for non-compliance ranging from AED 50,000 to AED 2 million. The law impacts both public and private sectors, including free zones, and promotes clean energy adoption, innovation, and the creation of a National Carbon Credit Registry to enable carbon trading. Additionally, it reinforces the UAE’s broader commitment to sustainability through initiatives like the Sustainable Finance Working Group (SFWG) and investments in renewable energy projects.