While America could still re-elect climate skeptic Donald Trump as its leader, Europe has chosen to confirm Ursula von der Leyen as its leader, the architect of the Green Deal. Thus, while the EU remains at the forefront of environmental regulations, the US maintains a lead in decarbonisation technologies, particularly in cars, batteries and solar energy, by favoring subsidies and private investment. Without sinking into blissful techno-solutionism, it is nevertheless on this front that the real battle against global warming is being played out.
Doesn’t every COP bring huge disappointments, which reinforces the climate anxiety of the new generations? Multilateralism works by consensus, and it requires extreme efforts to produce a mouse, as shown by COP 28, which with just the tips of its fingers could get what everyone knows already admitted for thirty years: we must plan for a just “transition from fossil fuels”. How fast? Only the market can say this yet because there is no mechanism to force states to abandon coal and gas according to a fixed schedule to green their energy mix at a rapid pace.
There are therefore still the national rules which are imposed extraterritorially from the major economic centres. Carbon accounting regulations are increasing in Europe and the US, but are they sufficient? No one can really dispute the interest in creating a shock of transparency by measuring the true impact of companies via carbon accounts, if only to make markets more efficient.
But the measure alone is insufficient if not accompanied by economically viable decarbonisation solutions. Here again lies the problem: it is not enough to report, but to correct a market inefficiency that still causes us to favor fossil fuels without considering their impact on our children’s lives.
In Europe, climate legislation has experienced a sudden acceleration with a drastic expansion of the companies concerned. The European Green Deal and the Emissions Trading System (EU ETS) show this desire to reduce emissions by 55% by 2030 and achieve CO2 neutrality by 2050. The Corporate Sustainability Reporting Directive (CSRD), which entered into force in 2024, strengthens companies’ transparency requirements in terms of sustainability by integrating the standards GRI (Global Reporting Initiative) and IFRS (International Financial Reporting Standards). It introduces the concept of double materiality and asks companies to assess not only the financial impact of climate risks on their activities, but also the impact of their activities on the environment and society. Above all, CO2 reporting will be imposed on SMEs with more than 250 employees for all direct and indirect emissions. But reporting alone doesn’t cut it, and greener energy remains a largely national concern.
In the United States, the legislative process is more convoluted. Under the Biden administration, the Inflation Reduction Act (IRA) of 2022 marked a turning point with $370 billion earmarked for green energy and recycling industries related to electric vehicles and solar panels. Furthermore, the Securities and Exchange Commission (SEC) has finally established rules aimed at strengthening climate risk disclosure for publicly traded companies, an initiative that could change carbon accounting at the federal level. But CO2 reporting only covers a fraction of the so-called scope 1 and 2 emissions – what a company emits with its own machines or buildings and via its electricity consumption.
In California, a local law called SB253, also known as the Climate Corporate Data Accountability Act, will require companies with more than a billion in revenue to disclose all of their greenhouse gas emissions starting in 2026, only adding a layer of transparency at the state level. We are still far from extending the obligation to SMEs as in Europe…
These premises could well be swept away by the re-election of Donald Trump in 2024. Known for his climate skepticism, Trump declared with assumed cynicism that the rising water was not so serious because it would allow more people to have homes by the sea.. .He intends to dismantle current climate policies and slow any progress on reducing emissions under Biden. It must be remembered that in the US so-called ESG policies are fiercely rejected by the Republicans, who equate them with “wokism”, that is, the protection of the rights of minorities: compensation for discrimination and the fight against warming, same fight… Despite of these challenges, recent federal actions show a desire to catch up on decarbonization, less for ideological reasons than to avoid losing economic ground to China in future sectors.
Technological rivalry between the US, Europe and China may paradoxically speed up the energy transition. China continues with its five-year plan, aiming for carbon neutrality by 2060 and maximum emissions by 2030, investing heavily in renewable energy, batteries and electric vehicles, while unfortunately remaining the world’s biggest polluter with a heavy reliance on coal. But here we are, if global decarbonisation is essentially based on widespread electrification and greener grids, to summarize the IPCC’s prescriptions, this will only take us 80% of the way. This is a source of hope because the battle for future markets is already giving rise to technologies that offer carbon-free alternatives at lower costs. If they are well funded, nothing can really stop their spread… The hardest part is yet to come, because there are still the 20% of emission sources for which we don’t really have economic alternatives: on steel, cement, fertilizers and everything. ultra-energy-intensive sectors. This is where we need to invest in disruptive technologies that are still in their infancy.
It will be easier for public policies to impose emission reductions if this enriches society by spreading new, less polluting and more efficient technologies. We are still far from that. Reporting alone is not a substitute for action, as many companies seem to believe
The automotive sector offers a model for regulation for other sectors. It only finally began to begin its low-emissions transformation when it saw emissions obligations imposed on it, under penalty of paying huge surcharges, in Europe as in the United States. In addition to taxes, the electric alternative became a growth driver for the industry as consumers began to find a financial advantage over thermal engines.
We cannot change capitalism without integrating the destruction of nature into prices. The extension of the transparency obligations is ultimately only a first step. Without monetization of avoided emissions or CO2 reductions, carbon accounting will only have limited effects. There is no more time to waste.