Law 98/2021 laying down the foundations of climate policy was published on December 31, 2021 and comes into force on February 1.

The Climate Framework Law establishes objectives and requirements for the design of public policies in all economic sectors and levels of government, in addition to being universally applicable: this law will have a direct or indirect impact on natural persons and public and private legal persons.

the Climate Framework Law:

• Recognize climate emergency
• Adhere to the goal of carbon neutral by 2050establishes 14 objectives and 11 principles for climate policy
• Dedicate the right to climate balance
• Establishes climate-related rights and duties, including:

1. the right to intervene and participate in administrative procedures concerning climate policy;
2. the duty to protect, preserve, respect and ensure the maintenance of the climatic balance.

The climate framework law is the concretization of the Paris Agreementthe European Green Deal and the European climate law, approved in July 2021, and is linked to the European ESG regulationsin particular the European taxonomy and the obligations provided for in the legislation already in force on sustainable finance.

Both the public and private sectors, including investors, financial entities and the general public, will be affected by the new law, which poses complex challenges and imposes strict new obligations, in addition to having its own sanctions regime in case of violation.

The climate framework law is yet another aspect that companies need to consider while continuing their activities. We expect the interpretation and interaction of all European and national legal instruments (including at regional and local levels) in force in Portugal to be incredibly demanding.

Below is an overview of the most salient aspects of the new law:

CLIMATE POLICY AND OBJECTIVES

• Schedule of greenhouse gas (GHG) reduction targets compared to 2005 values, excluding land use and forests: reduction of at least 55% by 2030, 65% to 75% by 2040, 90% by 2050;
• Target for the net CO2 sink equivalent of the land use and forestry sector at least 13 megatons on average between 2040 and 2050, and target for marine and coastal ecosystems;
• Sectoral objectives for reducing GHG emissions compared to 2005 values ​​and obligatory homologation sectoral climate change mitigation and adaptation plans.

The law takes care of study, by 2025, the possibility of advancing carbon neutrality to 2045, much more ambitious than the objective of the European climate law. If this should be the case, the objectives will have to be adjusted.

ECONOMIC AND FINANCIAL INSTRUMENTS

• Budgetary and fiscal policies to be respected which are the reference in terms of climate.
• Creation of a new category of tax deduction – IRS Verde [Green Personal Income Tax] –, who will benefit taxpayers who acquire, consume or use environmentally sustainable goods and services.
• Definition of a financial instrument intended to support climate policies.
• Links to European legislationincluding:

1. in the region of financial policies, financial management, financial support and borrowingfrom State and public and private institutionsin accordance with the sustainable finance principlesand taking into account climate risk and climate impact in their funding decisions;
2. the requirement that by 2030 all state public goods meet the principles of the European taxonomy and the State ensures the transfer of holdings in companies or enterprises that do not respect the principles of the European taxonomy;
3. taking climate risk into account in corporate governance and assess the carbon impact of their activity.

CLIMATE POLICY GOVERNANCE

• Mitigation and adaptation to climate change coordinated with other sectoral policies and with the development of economic, social and political activities.
• Climate Action Advisory Council [Conselho Consultivo para a Ação Climática].
• Regional and local climate policies, respectively planned and implemented by the Autonomous regions and local government.
• Promotion of climate security by government, including by:

1. identify risks and act to prevent and mitigate the consequences of climate change on public order, security and peace;
2. identify and declare all areas where human health or safety may be compromised like critical areaswhich will then be the subject of special civil defense measures.