Global Context
Going back to the industrial revolution (e.g. fuelled by burning coal in the UK) scientists began to realise that increased levels of CO2 in the atmosphere led to increases in global surface temperatures (1850 – 1890ish). Since then there has been a lot of work to prove the link, culminating in the work overseen by the Intergovernmental Panel on Climate Change (IPCC) who alongside others, produce yearly updates on the strength of evidence gathered and impacts. The IPCC has recently produced a publicly available global temperature map with adjustable parameters, that shows the regional effects of different temperature rises. This is a useful, visual indicator when considering scenario analysis.
As climate change evidence grew and the effects were starting to be seen, countries grouped together to discuss and agree how to mitigate emissions and adapt to the changing world within the annual Coalition of Parties (COP). Each COP generally focusses on a priority issue, the last one was COP29 in Baku (November 2024) and eventually agreed a finance package for developing countries but the milestone was COP21. This was held in Paris in December 2015 where the then 192 countries (Parties) agreed to limit the increase in the global average temperature to “well below 2°C above pre-industrial (1850) levels” and pursue efforts “to limit the temperature increase to 1.5°C above pre-industrial levels.” – known as the Paris Agreement. There is some evidence that we have now breached 1.5°C increase, however this remains the ambition and is often used as a scenario comparator.
Carbon Dioxide Emission Reduction Context
So, we know how Climate Change is caused and what has been agreed to, in order to limit the worst effects. It is then incumbent on each individual country to enact the reductions in emissions needed and agreed to, via Nationally Determined Contributions (NDCs). NDCs are promises made by countries to the United Nations regarding the volume of CO2 emission reduction and when these will be made by. The combination of these NDCs is the route to keeping global temperatures below the 1.5 – 2°C increase. However………….
- the best science available currently, estimates that the NDCs stated thus far will lead to a temperature increase of around 2.7°C and;
- full implementation of all current policies needed to achieve the NDCs is thought to be unlikely, therefore a significant increase in NDCs is needed to be Paris aligned.
UK Position
The UK’s legal framework for tackling climate change mixes economy-wide targets with sectoral, organisation-level duties. Below are the key mandatory actions and who must comply today.
1) Net-zero & carbon budgets (the legal backbone)
The Climate Change Act 2008 (as amended) makes the UK’s emissions targets and the carbon-budget system legally binding — including the UK’s commitment to reach net-zero greenhouse gas emissions by 2050. This creates the statutory expectation that government policy and public bodies align with those budgets.
2) Mandatory emissions-related reporting: SECR
The Streamlined Energy and Carbon Reporting (SECR) rules require quoted companies, large unquoted companies and large LLPs to disclose annual energy use and greenhouse-gas emissions in their directors’/annual reports (with thresholds based on company size and reporting duties under the Companies Act). In practice that means groups meeting large-company criteria (turnover, balance sheet, employees) must publish energy and GHG info.
3) Mandatory audits: ESOS (energy audits every 4 years)
The Energy Savings Opportunity Scheme (ESOS) is a statutory programme that applies to large UK undertakings and corporate groups (see detailed qualification rules). Qualifying organisations must carry out energy audits of buildings, industrial processes and transport every four years and notify the regulator. Non-compliance can lead to enforcement action.
4) Market-level emissions control: UK Emissions Trading Scheme (UK ETS)
The UK ETS imposes permitting, monitoring and surrender obligations on regulated installations and (in many cases) aviation operators whose activities and emissions fall within the schedule of regulated activities — operators must hold GHGE permits, report and surrender allowances or face penalties. Regulators (EA, SEPA, NRW, etc.) enforce compliance.
5) Financial-market and large-firm disclosure: TCFD / SDR trajectory
The FCA has implemented TCFD-aligned disclosure rules (phased in from 2021) for listed companies and has extended reporting expectations to many financial firms (asset managers, insurers and other regulated firms). The UK is rolling these into a stronger Sustainability Disclosure Requirements (SDR) and UK Sustainability Reporting Standards (UK SRS) — meaning listed issuers and many large financial firms face mandatory climate-related disclosure requirements.
6) Buildings & landlords: minimum energy performance standards (MEES)
There are legally enforceable minimum EPC standards for rented domestic and non-domestic properties (landlords must meet the required EPC band or face restrictions/fines), with government proposals and timelines to tighten standards further. These rules apply to landlords of private rented property and commercial property owners under the relevant regulations.
Final note (practical next steps)
These rules are evolving (IFRS and UK SDR are active policy areas). If you’re responsible for compliance, start by: (1) checking whether your organisation meets the size/sector thresholds on GOV.UK, (2) mapping current reporting/energy-audit gaps (SECR/ESOS), and (3) integrating disclosure and transition-plan work into governance. For further guidance, consult the GOV.UK and FCA pages linked above.
