Lincoln International has identified paths businesses are taking to decrease their carbon footprint in an overall effort to transform their activities.

CO2 Regulatory Frameworks Evolve Globally

On the heels of the Paris Climate Agreement and the Green Deal, governments around the world are implementing standards to take steps toward lower CO2 emissions.

In Europe, the European Green Deal is setting the blueprint for this transformational change as European business leaders work toward zero net emissions of greenhouse gases by 2050. While emission allowances differ region to region, the European Union Emissions Trading System (EU ETS) has reduced CO2 emissions by more than 1 billion tons between 2008 and 2016.

The EU ETS “cap and trade” principle sets a maximum total green gas emission limit for participating installations. Allowances for emissions are allocated and traded, forcing installations that exceed their cap to purchase allowances from others. The system has created a cost-effective manner of reducing emissions without significant government oversight. Similarly, Canadian leaders have implemented a similar system, following the EU’s path.

In the U.S., regulations on CO2 emissions are present but have yet to evolve to the extent of European standards. Increasingly stringent regulations are expected to be on the horizon for the U.S. markets, with the Biden administration’s infrastructure plan that passed in November 2021 proposing tax incentives for emission reduction.

Though CO2 emissions can be tied to companies across sectors, industrials businesses face specific challenges in compliance with evolving emissions standards—iron, steel, refineries and cement businesses in particular are under pressure in the EU. Moreover, as supply chain challenges impact global CO2 supplies, companies are facing gauging prices that are not sustainable for all purchasers in the longer-term.