EY Center for Climate Policy

EY Center for Climate Policy | Global solutions for innovative climate policy making

EY Center for Climate Policy (EY CCP) is an international expert hub that works with sovereigns helping them design climate policies, with corporates in need of understanding how these shifting policies will impact their business, and with developers looking to build high-quality offsetting projects.

With cross-cutting expertise from legal to economic and technical backgrounds, we are well versed in various carbon pricing models and can help facilitate and inform the design of domestic climate regime, starting from the conceptual phase through the implementation.

We offer a wide range of services tailored to the needs of public and private sector clients. In particular, we help advance thinking about climate policies through comparative analysis, by sharing best practices, lessons learned, cautionary tales and ideas worth transplanting from jurisdictions with existing carbon measures. We monitor and scrutinize new policy developments and assist in interpreting them and assessing the impact, both on business and on sovereigns. We also assist in understanding how various layers of climate legislation might overlap and intersect, for instance with regard to compliance and voluntary markets, or between domestic policies and the Paris Agreement framework.

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EY Center for Climate Policy helps Governments, Corporates and Project Developers.

We help design climate policies 

  • I. Understanding current state of climate policies

    Presently carbon legislation operates across different jurisdictional dimensions: city, sub-national, national, regional and global. It can address different aspects of carbon measures, from voluntary to compliance.

  • II. Determining the reasons to legislate

    Countries might want to address a number of legislative objectives at once, or focus on priority areas. Those can include: defining the legal nature of carbon credits to provide certainty for transactions and taxation, regulating rights to carbon credits, introducing carbon tax to disincentivize environmental externalities, implement Article 6 of the Paris Agreement to attract investments in carbon sinks.

  • III. Designing policy

    Policy design sits at the heart of the process aimed at implementing carbon measures. It should reflect the legislative framework, practices, governance and customs of a given jurisdiction, but should also draw from the best practices and case studies collected in countries that have adopted similar measures.

  • IV. Implementation

    Implementation usually takes place in phases, where different sectors are brought into the scope of the policy. Sometimes the first phase is expressly referred to as “learning by doing” since there are no financial / fiscal implications and businesses are simply expected to learn how to navigate new requirements.

  • V. Monitoring and course revisiting

    Effectiveness of climate regulations once they are implemented should be monitored and assessed, especially as the market evolves and new policies are enacted internationally. Also, countries might want to introduce related solutions, for instance with regard to promotion of energy from renewable sources. The overlap of such policies should be closely examined to avoid unintended consequences. It is to be expected that climate policies will be changing course with time.

 

How to build an optimal carbon architecture?

When designing a legislative carbon framework the following questions arise:

  • What are the advantages of regulating the voluntary carbon market?
  • Which model for carbon pricing model to use (cap-and-trade, carbon tax, or both)?
  • Which industries should be covered?
  • How to set emissions baseline?
  • What will be the envisioned evolution of the system?
  • Whether and how to implement carbon border adjustment mechanism?
  • How to align with schemes that have a potential to be interlinked?
  • How to address governance issues?
  • How to engage stakeholders?
  • How to structure carbon price, and mechanisms for limiting price volatility for emissions trading regimes?
  • How do you establish a legal definition of carbon credits, including their potential treatment as financial instruments ?
  • How to create a domestic trading platform?
  • How to ensure interplay between compliance and voluntary markets and market based mechanism under Article 6 of the Paris Agreement?
  • How to embed climate regulations in the existing political / regulatory system?

The overarching goal is to design and implement a fully operational carbon policy ensuring real and measurable emission reductions accompanied by social, economic and environmental co-benefits.

 

We help to understand the impact of climate policies on business.

  • I. Consult

    Corporates are often engaging in the consultation process for carbon markets policy making, as some countries implement Article 6 of the Paris Agreement, and others see an increasing imperative to regulate the voluntary carbon market. We support companies in expressing their perspective on how regulations could incentivize their participation in offsetting schemes.

  • II. Comply

    Once carbon market regulation is in place, we help corporates understand their obligations under the compliance schemes and identify opportunities coming from voluntary carbon market regulations. 

  • III. Offset

    When offsetting their emissions, companies put a lot of effort to buy carbon credits with high environmental integrity. It is important for corporates to properly use the carbon credits they buy for non-financial reporting purposes, which is not always easy to navigate. We guide our Clients through those intricacies to ensure secure and impactful emission offsetting strategies. 

  • IV. Invest

    Investing in offset projects might be a viable alternative for corporates to build their carbon credits portfolio. In this model, a company provides equity financing to a project developer and becomes a co-owner of credits generated from this project. We connect Clients with project developers and national governments engaged in carbon credits generation under Article 6.2 of the Paris Agreement. 

  • V. Market

    Rapid development of the carbon markets creates many opportunities for development of new products and commodities, especially by the financial market and in the insurance sector participants. We help clients design innovative instruments thar carbon markets need to scale in a secure way.

We help to build high quality offsetting projects.

EY supports Clients in selecting research & development projects with high carbon credits issuance potential. We also conduct the certification process on Client's behalf. After credits are issued, EY would support you in selecting an appropriate trading strategy.

We support clients in the build-out of net zero economy 

We help to capture the potential offered by voluntary carbon markets

We help organization to fulfill obligations under Article 6 of the Paris Agreement

We support our clients in becoming an attractive location for sustainable investments

We help the companies to achieve competitive advantage in the world that is increasingly seeking carbon neutral products and services

We support the organizations in gaining credibility in discussions on an international climate diplomacy arena

Why climate policies?

Recent years have seen a growing trend among nations of the world towards setting up domestic climate policies. The reasons behind those actions vary between supporting the build out of net zero economy, collecting revenues to support decarbonization efforts, avoiding or mitigating payments under carbon border adjustment mechanism that the EU is implementing and other countries start contemplating, capturing the potential offered by voluntary carbon markets, benefitting from market based mechanisms under Article 6 of the Paris Agreement, becoming an attractive location for sustainable investments, achieving competitive advantage in the world that is increasingly seeking carbon neutral products and services, gaining credibility in discussions on an international climate diplomacy arena, ensuring that the social cost of carbon is internalized by the emitters for climate externalities.

Ultimately, we might witness the emergence of one global carbon pricing and legal framework, which is advocated by the WTO Director General Ngozi Okonjo-Iweala: “A shared global carbon-pricing framework would best provide certainty for businesses and predictability for developing countries,” Decarbonizing Supply Chains: Leaving No One Behind > World Economic Forum Annual Meeting | World Economic Forum (weforum.org). Until that happen, this fragmented policy landscape will continue to be challenging to navigate.

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