P2N0 - Edition 34 - News And Views On The Drive Towards Net-Zero GHG Emissions

HEADLINES FROM JULY 1 TO JULY 31, 2025

Current State of Play

As part of our new series of Current State of Play, this month we had intended to build on the Current State of Play in Edition 33 – Article 6 of the Paris Agreement, by considering Carbon Capture and Storage¹ and Carbon Dioxide Removal² in the context of Article 6 and carbon credits and carbon offsets generally. Both CCS and CDR are required to address climate change, together with the other means of decarbonization and achieving the energy transition. Edition 35 of P₂N₀ will consider these matters.

Our plans changed on July 23, 2025, when the International Court of Justice (ICJ) gave an Advisory Opinion on Climate Change in response to questions posed in resolution of the UN General Assembly on March 29, 2023.

The Advisory Opinion relates to the Obligations of States in respect of Climate Change. The Advisory Opinion is, and its possible implications are, assessed in the Current State of Play.

Opening observations:

One of the reasons for changing the cadence of the publication of P₂N₀ was to anticipate a quieter news cycle during the Northern Hemisphere summer, while fully expecting a heavier news month during July ahead of the August holiday season.

Over H1 of 2025, it has become apparent that a number of corporations and other organizations have chosen to withdraw from initiatives in which they once participated, and a new pragmatism has emerged. The two themes are connected:

For example:

• A number of:
  • corporations have withdrawn from participation in the Science Based Targets Initiative (SBTI), marking a lack of alignment between those corporations and the climate disclosure reporting assessment and reporting frameworks that are continuing to be developed; and
  • a number of banks have withdrawn from the Net-Zero Banking Alliance. (NZBA), which was established at COP-26 in Glasgow in 2021 as part of the Glasgow Financial Alliance for Net Zero (GFANZ). The key objective for the Alliance was aligning bank activities with achieving net-zero GHG emissions by 2050 (Net-Zero 2050).
    
    Earlier in 2025, the NZBA moved away from Net-Zero 2050 being mandatory for membership of the NZBA.

• A number of member states of the EU have expressed concern about the EU Corporate Sustainability Reporting Directive (CSRD). One of the pieces of work that was not completed (and has been left for Michaelmas Term), ahead of the Northern Hemisphere summer break was to simplify the CSRD. The deadline for completion of work by the European Reporting Advisory Group (EFRAG) extended to November 30, 2025³.
  
  On August 1, 2025, EFRAG published revised exposure drafts of the European Sustainability Reporting Standards (ESRS). At first glance, the revised exposure drafts provide simplification, meaningful simplification. Edition 35 of P2N0 will provide a commentary.
  
  Whatever one's perspective, some initiatives and mandated approaches appear to be "running out of road". This is no one's fault, disenfranchisement of key participants is however a concern. It is important that key participants are not disenfranchised further, because the participation of each of them is needed.
  
  During July 2025 the following matters caught the eye:

• Electricity Mid-Year Update 2025: On July 30, 2025, the International Energy Agency (IEA) publishedElectricity Mid-Year Update 2025. The publication is excellent.

The key findings from the IEA publication are: "Global electricity demand is expected to expand at one of the fastest sustained paces in over a decade despite ongoing economic pressures ... with renewables, natural gas and nuclear all contributing to meet the additional demand";

• Demand for electrical energy is projected to increase by 3.3% in 2025 and 3.7% in 2026;
• Renewables are expected to become the world's largest source of electrical energy as early as 2025 and by 2026 at the latest.

The IEA concludes that carbon dioxide emissions from the generation of electrical energy are forecast to plateau in 2025 and record a slight decline in 2026.

Also, the role of natural gas and LNG as an energy transition fuel, and more likely (with CCS) a longterm fuel would now seem to be re-established.

By way of a reminder: Edition 33 of P₂N₀ reported under (GHG emissions arising along the LNG value chain) that:

"On June 20, 2025, the IEA published Assessing emissions from LNG supply and abatement options. The publication is excellent.

The key facts and statistics are:

• The IEA estimates that extraction and production, processing, refining and treatment and transport of oil and natural gas (and LNG) give rise to around 5.2 Gt CO2-e a year, 3.5 Gt CO2-e from oil, and 1.6 Gt CO₂-e from natural gas (and LNG), operations (i.e., from activities within the Scope 1 and Scope 2 emissions across the sectors).
• It is estimated that 350 million metric tonnes of CO₂-e GHG emissions arise in the LNG supply chain (from extraction and production to the point of use). The IEA estimates that it would take USD 100 billion to reduce these GHG emission by 60%. The means of achieving this reduction are detailed in the IEA report.

It is estimated that 41.6 Gt CO₂ emissions ⁴ arose in 2024 from fossil fuel use (35.8 Gt), cement production (1.6 Gt) and land use (4.2 Gt). A further 5.2 Gt CO2-e emissions arising as Scope 1 and 2 emissions⁵ of the oil and natural gas (and LNG) industries.

The IEA⁶ estimates that 37.8 Gt of CO2 emissions arose from the combustion of fuel (including CO2 emissions from fuel combustion, industrial processes and fugitive and flaring emissions)."

On July 24, 2025, the IEA published its Coal Mid-Year update 2025. The publication is well-worth a read. The key findings of the publication are:

• Demand globally for coal is likely to remain unchanged during 2025 and 2026, with demand having reached an all-time high in 2024 of around 8.8 billion metric tonnes;
• During 2025 the IEA forecasts a slight increase in demand, followed by a marginal decline in 2026, bringing demand to just below 2024 levels.
• International Renewable Energy Agency (IRENA) publishes two key publications during July 2025:
  • Renewable Power Generation Costs in 2024: On July 22, 2025,IRENA published Renewable Power Generation Costs in 2024. The publication is well-worth a read.
    
    The key findings from the IRENA publication are:
  • Photovoltaic solar electrical energy capacity is on average 41% less expensive that the lowest cost fossil-fuel alternative (at USD 0.043 / KWh) and onshore wind capacity is on average 53% less expensive (at USD 0.034 / kWh);
  • The installation of an additional 582 GWs of renewable capacity in 2024 contributed to the lower cost of electrical energy, and contributed to a reduction in the GHG emissions arising by unit of electrical energy generated; and
  • 91% of renewable electrical energy installed during 2024 had a lower unit cost that fossil-fuel alternatives.
• Renewable Energy Statistics 2025: On July 10, 2025, IRENA published Renewable Energy Statistics 2025. As with Renewable Power Generation Costs in 2024, the publication is well-worth a read.
  
  The key findings from the IRENA publication are:
  
  
• While there was 15% growth in the installation of renewable energy capacity, there remains a "growth gap" with Asia (in effect China) accounting for 71% of new renewable energy generation capacity, with the 12.3% of growth in Europe and 7.8% in the US, whereas Africa, Eurasia, Central America and the Caribbean together accounting for 2.8% of growth;
  
  "If the same annual growth rate continues, the world will only reach 10.3 TW of renewables capacity [of the 11 GW], missing the target by 0.9 TW. Achieving the target by 2030 would require renewable capacity to expand even faster at 16.6% annually in less than the remaining five years".
• The rate of growth is not sufficient compared to the tripling of renewable electrical energy capacity by 2030 made at COP-28.

As noted previously noted, what needs to be done is known, and the publication indicates that progress is being made at close to the required rate.

• EU targets 90% reduction in GHG emissions by 2040: On July 2, 2025, the European Commission (EC) published the proposed amendment to the EU Climate Law:Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) 2021/1119 establishing the framework for achieving climate neutrality. To accompany the proposed amendment, the EC published Delivering on the Clean Industrial – Communication⁷ . The proposed amendment provides for a 90% reduction in net-GHG emissions by 2040 compared to 1990 (EURT). The proposed amendment will be considered by the European Parliament and the Council of the European Union.
  
  Is the target overburdening? While the EU has agreed on this ambitious target, a number of countries have expressed concern about the cost of the achievement of the target, including Czechia, Italy and Poland, and French President, Emmanuel Macron, questioning whether the EU is overburdening itself.
  
  Carbon credits at arms'-length: While there was support for the use of carbon credits to reduce the cost of decarbonisation, in the final analysis, the EU is allowing for a possible limited use of high-quality carbon credits to discharge liability arising under the EU ETS (commencing in 2026). This approach is consistent with thinking around the world: the EU ETS is intended to place a price on carbon that provides an incentive for corporations and other organisations to adopt lower, low and no carbon technologies so as decarbonize their activities (to achieve actual avoidance, reduction and removal) of GHG emissions, with carbon credits to be used to offset activities that cannot be decarbonised.
  
  A number of folks have argued that the possible limited use of high-quality carbon credits is a "missed opportunity". If a market for high-quality carbon credits arises under Article 6 of the Paris Agreement, one can see the use of those carbon credits, but only after decarbonisation has been exhausted.
  
  Devil is in the detail: Communication from the EU about how it intends the EURT has drawn a fair amount of comment. One of the communications states:
  
  
  "All zero and low carbon energy solutions (including renewables, nuclear, energy efficiency, storage, CCS and CCU, carbon removals, geothermal and hydro-energy, and all other current and future net-zero energy technologies) are necessary to decarbonise the energy system by 2040".
  A number of folks have commented that this statement is notable because it does not refer to the use of renewable hydrogen expressly, and it is limited to the decarbonisation of the energy system. The fact that the statement does not reference expressly renewable hydrogen should not be of concern given the policy settings in place to allow the development of the use of renewable hydrogen (subject always to the economics).
  
  The fact that the statement relates to decarbonization of the energy system alone while not of a concern of itself, tends to bring into focus the need for policy settings to respond to the GHG emissions arising from the agriculture, forestry and land use (AFOLU) sector. Rather than an increase in the avoidance, reduction and removal of GHG emissions across AFOLU sector through increase sequestration capacity across the EU, the sequestration capacity of the EU is less than it was in 2014⁸ .
  
  On July 2, 2025, Finland supported the EURT. At the same time, Finland noted that it was important that the EC take into account the need to implement policy settings to avoid, reduce and remove GHG emissions arising across the AFOLU sector, and to restore and to increase the sequestration capacity across the EU. In addition, Finland indicates that it will continue to explore the use of carbon credits. Please take time to read the statement from Finland found at https://ym.fi, under Finland supports Commission's proposal concerned 90 per emission reduction target by 2040. What is needed is known.
  
  On July 3, 2025, it was reported widely that during calendar year 2024, 47% of electrical energy usage across the EU was generated form a renewable source.
• Norway in lockstep: While Norway is not a member-state of the EU, it is aligned with the EU and is part of the European Economic Area. Norway has announced its new nationally determined contribution (NDC) for the purposes of Article 4 of the Paris Agreement: to reduce its GHG emissions by 2035 at least 70 – 75% compared to 1990. Achievement of the revised NDC is part of the law of Norway, under the Climate Change Act.
  
  
  The NDC for Norway for 2035 states:
  
  "Norway plans to fulfil the NDC by 2035 through domestic measures and in cooperation with the European Union in accordance with Article 6 of the Paris Agreement. If deemed necessary, achievement of the target can be supported by Internationally Transferred Mitigation Outcomes (ITMOs) acquired outside the European Economic Area (EEA). The European Union's NDC and legislation for the period after 2030 will have implications for the implementation of Norway's NDC for 2035".
• Australia, India, Japan and US align around CM₃: On July 2, 2025, it was reported widely that the US, Japan, India and Australia (the Quad) had agreed to work together to secure supply of critical materials, metals and minerals (CM₃). In a joint communique following meetings in Washington, DC, the Quad has established the Quad Critical Minerals Initiative.
  
  On July 24, 2025, China and the EU held a Summit in Beijing, China. Climate change was on the agenda. In relation to Climate Change, a joint press statement was made. Ahead of the Summit, trade talks
  
  were held, including on critical metals and minerals. It is understood that a good deal more discussion is likely. On July 28, 2025, the EU and the US announced that they would establish a critical metals and minerals alliance.
  
  On July 4, 2025, Reuters, Andy Home (at https://www.reuters, under Metals smelting is the West's next critical minerals crisis. The article is well-worth a read, not least because it continues to complete the jigsaw puzzle around CM_3. Also, it illustrates the need for shared mining and smelting to achieve affordable and secure availability of CM₃.
• IRENA holiday reading: During July 2025, the good folk at IRENA published the followingThe Potential for Green Hydrogen and Related Commodities Trade. The publication is well-worth a read.
• Nigeria plans for 4 million metric tonnes of green ammonia production: On July 19, 2025 Punch (at https://punchng.com, under FG unveils plan to produce four million tonnes of ammonia) reported that the Federal Government of Nigeria plans to produce 4 million metric tonnes of green ammonia by 2060 as part of its plans to transition to a lower GHG emission economy.
• Universal Access to Clean Energy Cooking in Africa: On July 18, 2025, the IEA published Universal Access to Clean Energy Cooking in Africa. The publication continues the championing by the IEA of clean cooking. The publication notes that one billion people in Africa (or four in five families) lack clean cooking solutions. The purpose of the publication is to provide a roadmap to address this, and to overcome the consequences of it.
  
  
  The publication states:
  
  "African countries can close one of the continent's most harmful energy and development gaps in just 15 years if they replicate the progress seen in other developing economies, showing how universal access to clean cooking could be achieved across sub-Saharan Africa by 2040."
  The publication tracks the outcomes of the Summit on Clean Cooking in Africa (held in May 2024 in Paris) which mobilised over USD 2.2 billion in public and private sector commitments. The publication states that more than USD 470 million of these commitments have been disbursed.
• Traceability of critical raw materials, with a focus on Africa: During the first half of July 2025, the European Parliament publishedTraceability of critical raw materials, with a focus on Africa. The publication is a study of the technical and logistical issues that arise from tracing the source of critical raw materials. The publication is well worth a read.

To view the full pdf, click here.

Footnotes

1. Carbon Capture and Storage involves the capture of CO2 that would otherwise be emitted to the climate system and the storage of that CO2 (sequestration) permanently and securely in a geological formation. This avoids the emission of CO2 into the climate system. Carbon Capture and Use involves the capture of CO2 that would otherwise be emitted to the climate system, and the use of it for an industrial use, including to produce products that do not store CO2 permanently.

2. Carbon Dioxide Removal involves the removal of CO2 that is already in the climate system (from the climate system) and the storage of the CO2 in a more stable form of carbon, which is not permanent. This removes CO2 emissions already in the climate system.

3. EFRAG has publishedState of Play 2025, detailing the results of its analysis of the first CSRD reports. The publication is well-worth a read, revealing themes that it is hoped are assessed further, and addressed.

4. 2024 Global Carbon Budget report by Global Carbon Project.

5. Greenhouse Gas Protocol published by the World Resources Institute defines Scope 1 and Scope 2 emissions as follows: Scope 1 Direct Emissions, being emissions that arise from sources owned or controlled by the corporation or other organization whose GHG emissions are being measured and Scope 2 Electrical Energy indirect GHG emissions being emissions that arise generation of electrical energy used by the corporation or other organization. Scope 3 Other Indirect Emissions being emissions that arise as a consequence of the activities of the corporation or other organization.

6. From the IEA Global Energy Review 2025, CO₂ Emissions.

7. In addition, among other things, the EC published: Commission Recommendation on tax incentives to support the Clean Industrial Deal in light of the Clean Industrial Deal State aid Framework; and Commission Recommendation on Innovative Renewables, Grid Infrastructure, and Future-Proof Network Charges.

8. While the reasons for this reduction in sequestration capacity is well-known (forests continue to mature, and as a result absorb less CO2, the rate of harvesting has increased, and the impact of climate change with loss of forested areas, including as a result of increased frequency and severity of droughts and floods, and forest fires). It is to be hoped that the AFOLU sector receives reinvigorated policy settings.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.