Assessment Of The Climate Change Act (CCA) 2021: Compliance Obligation Of Oil And Gas Operators

Introduction

Nations across the world have increasingly adopted climate change laws over the last two decades. This is not only attributable to the dynamism in international climate treaties and negotiations but also a growing appreciation of the crucial role that national laws and policy measures play. Nigeria, a signatory to various global climate agreements like the Paris Agreement, actively participated in the United Nations Conference of Parties (COP) 26, where it submitted an updated Nationally Determined Contribution (NDC)¹ to the United Nations Framework Convention on Climate Change (UNFCCC) outlining its strategies for reducing greenhouse gas emissions. During this conference, Nigeria made a significant commitment to² achieve net-zero emissions by 2060. Subsequently, the Climate Change Act, 2021, was enacted, marking a pivotal legislative step toward combating climate change and reducing excessive greenhouse gas emissions.

Despite the passing of the Climate Change Act (CCA) in 2021, its level of implementation remains unclear, particularly in relation to the involvement and obligations of oil and gas entities. Thus, this article seeks to assess the provisions for the implementation of the CCA and examines all specific compliance obligations on oil and gas operators with respect to addressing climate change issues prevalent in and around the nation.

Brief Outline of International Climate Change Regulations

1. Montreal Protocol 1987 and Kigali Amendment

Originally adopted in 1987, the Montreal Protocol was not structured to directly tackle climate change. This regulatory accord became the model for future regulatory accords/treaties on climate change. The Montreal Protocol was eventually ratified by all nation states, requiring them to phase out the production and usage of green-house substances (such as chlorofluorocarbons (CFCs)) that deplete the ozone layer³. Also, by the Kigali Amendment in 2016, the Protocol's mandate was extended to additionally phase out hydrofluorocarbons (HFCs), which are also potent greenhouse gases used in air conditioning and refrigeration, which are not ozone-depleting but contribute significantly to global warming.

2. United Nations Framework Convention on Climate Change (UNFCCC) 1992

Ratified by 197 countries, including the United States, the UNFCCC⁴ landmark accord was the first global treaty to explicitly address climate change. Specifically, the UNFCCC serves as the foundation for global climate negotiations and agreements, with its primary objective being to stabilize greenhouse gas concentrations in the atmosphere to prevent dangerous interference with the climate system.

Notably, it established an annual forum, known as the Conference of the Parties (COP), for international discussions aimed at stabilizing the concentration of greenhouse gases in the atmosphere. These meetings laid the groundwork for the Kyoto Protocol and the Paris Agreement respectively.

3. Kyoto Protocol

2005 Adopted in 1997 and entering into force in 2005, the Kyoto Protocol⁵ is an extension of the UNFCCC. It legally binds developed countries to emission reduction targets. The Protocol introduced mechanisms like the Clean Development Mechanism (CDM), Joint Implementations (JI), and Emissions Trading to help countries meet their targets. The first commitment period was from 2008 to 2012, and the second commitment period, known as the Doha Amendment, runs from 2013 to 2020.

4. Paris Agreement 2015

The Paris Agreement⁶, adopted in 2015 and effective from 2016, has been cited to be one of the most significant global climate treaties to date, requiring all countries to make/set emissions-reduction pledges. The agreement aims to limit global warming to well below two (2) degrees Celsius above pre-industrial levels, with efforts to limit the increase to 1.5 degrees Celsius. Unlike the Kyoto Protocol, it requires all countries, not just developed countries, to submit Nationally Determined Contributions (NDCs) outlining their climate goals/ actions towards becoming carbon neutral (net-zero). The Agreement places significant emphasis on transparency, adaptation, and financial support for developing nations.

5. Conference of Parties (COP) 26 2021

COP26, the 26th Conference of the Parties to the United Nations Framework Convention on Climate Change (UNFCCC), took place in Glasgow, Scotland in 2021, and has been described as one of the most effective treaties on climate change and the adoption of renewable energy across the world. The conference brought together representatives from about 200 countries to address and negotiate global actions to combat climate change. Key objectives of COP26 included:

1. Strengthening Climate Ambitions: Countries were urged to submit more ambitious Nationally Determined Contributions (NDCs) to reduce greenhouse gas emissions and limit global warming to well below 2 degrees Celsius
2. Financial Commitments: Developed countries were encouraged to fulfill their pledge of providing $100 billion annually in climate finance to support developing nations in their mitigation and adaptation efforts
3. Coal and Fossil Fuels: There was a strong emphasis on phasing out coal usage and reducing fossil fuel subsidies to accelerate the transition to cleaner energy sources
4. Carbon Markets: Progress was made on Article 6 of the Paris Agreement, which provides for the rules for international carbon markets and emissions trading
5. Establishment of the Green Grids Initiative (One Sun, One World, One Grid (GGI-OSOWOG): the green grids initiative was launched by the governments of Italy and the U.K, aiming to connect renewable energy grids across borders to facilitate a faster transition to the use of renewable energy.

Overview of the Climate Change Act (CCA) 2021

Establishment of The National Council on Climate Change:

The CCA 2021⁷ established the National Council on Climate Change (the "Council") which is a body corporate vested with the powers to develop policies and make decisions on all matters pertaining to climate change in Nigeria. The Council is also required to manage the implementation of the provisions of the CCA 2021.

The membership of the Council includes members of the various ministries and departments of the Federal Government of Nigeria. Additionally, the CCA 2021⁸ provides that the Council is further required to make room for representatives from the private sector on climate change, environment-related matters, gender based representatives (women), age-based (youth), as well as persons with disabilities, who will be nominated by their most representative registered national umbrella association.

Establishment of the Secretariat of the National Council on Climate Change.

As a measure to check and balance the excesses of the Council, the CCA 2021⁹ establishes a Secretariat to handle the administrative, scientific, and technical functions of the Council and a Director-General of the Secretariat who will oversee the administration of the Council. The secretariat is mandated to keep proper accounts and records of the National Council's income and expenditure¹⁰, submit a comprehensive report of all the activities of the Secretariat, and prepare a statement of account in respect of each financial year. The accounts of the Council are to be audited within six (6) months after the end of the financial year to which the accounts relate, and the accounts are to be audited in accordance with the guidelines issued by the Auditor General for the Federation. Notably, the CCA also permits the Council to accept gifts of land, money, or other property on such terms and conditions, as may be specified by the person or organisation making the gift, which shall be taken into account by the secretariat. However, these conditions must not be inconsistent with the provisions of the law and any other relevant policies.

Introduction of Climate Change Fund and Carbon Tax

The CCA 2021¹¹ introduced a climate change fund into which shall be used for the operation and administration of the National Council and other offices established under it. The CCA 2021 further mandates the Council to develop a mechanism for imposing a carbon tax in collaboration with the Federal Inland Revenue Service ("FIRS"), and to coordinate the implementation of sectoral targets and guidelines for the regulation of Green House Gas ("GHG") emissions and other anthropogenic causes of climate change.

The Climate Change Fund:

The CCA makes provisions for the Climate Change Fund (the Fund)¹² to be administered by the Council, as a depository of funds earmarked by the National Assembly for the running of the Council. Sources for the Climate Change Fund include grants from international organisations; fines, and charges from private and public entities in default of the climate change mitigation/ adaptation obligations; carbon tax, and emissions trading remittances, etc. Notably, the CCA¹³ also permits the Council to accept gifts of land, money, or other property on such terms and conditions, as may be specified by the entity making the gift, such gifts shall be deposited into the Fund.

Before the enactment of the CCA 2021, most climate related projects sought funding from foreign sources which became a hindrance to the implementation of sector policies/initiatives. The establishment of the Fund creates a framework to support the influx of climate change mitigation finance by way of donations, grants, and investment from international and indigenous organisations towards tackling the climate crisis. The Fund is to be applied towards¹⁴: the cost of administration of the Council, payments of emoluments, allowances, and benefits of members and staff of the Council; climate change advocacy and information dissemination; funding innovative climate change mitigation and adaptation projects; conducting assessments of climate change impact on vulnerable communities and population; incentivizing entities for their efforts toward transiting to clean energy and sustaining a reduction in GHG emissions; etc. Hence, the establishment of the Fund creates a financial pool to fund public and private sector initiatives towards ensuring green energy transition and achieving the nation's net-zero emissions target.

Carbon Budget

The CCA 2021¹⁵, provides for a national carbon budget, thus, mandating the Federal Ministries of Environment and National Planning to set a carbon budget (which means the approved quantity of GHG emission that is acceptable over a specified time), the budgetary period for Nigeria and to periodically revise the carbon budget in line with Nigeria's nationally determined contributions (NDC's) in order to comply with international obligations. The goal of the carbon budget is to keep the average increase in global temperature within 2 degrees Celsius and make a concerted effort to limit the temperature increase to 1.5 degrees Celsius above pre-industrial levels. Under the CCA it is further provided that within 12 (twelve) months to the end of a carbon budgeted period, the Federal Ministry of Environment ("the Ministry") is required to submit to the Federal Executive Council ("FEC"), through the National Council, a new carbon budget for approval. Where, however, there is a need to review a carbon budget within a carbon budget cycle, the Ministry shall, within 3 (three) months of the revision of the carbon budget, submit it to the FEC through the Council for approval. The Ministry shall also be responsible for publishing guidelines for the measurement, reporting, and verification of national emissions that will serve as the basis for setting and annually reviewing the carbon budget.

National Climate Change Action Plan

Under the CCA 2021, the Secretariat, in consultation with the Ministry and the Federal Ministry of Budget and National Planning, was mandated to formulate a National Climate Change Action Plan ("Action Plan") every five years, the first of which is to be produced within 12 (twelve) months from the commencement of the CCA 2021 (which has been formulated/published, and for the purposes of this article is highlighted hereunder¹⁶). The CCA makes provisions for the process through which the Action Plan is to be formulated. The process includes consultation with the public for a period not less than 8 (eight) weeks ending 14 (fourteen) days before the presentation of the Action Plan to the Council for approval.

The Action Plan¹⁷ shall serve as a basis for establishing national goals, objectives, and priorities on climate adaptation and, for identifying activities to ensure that the national emissions profile is consistent with the carbon budget goals. The Action Plan shall also prescribe measures and mechanisms for, among other things;

• identifying actions for adaptation and mitigation against climate change;
• identifying strategic areas of national infrastructure requiring climate-proofing;
• enhancing energy conservation, efficiency, and use of renewable energy in industrial, commercial, transport, domestic and other uses; and
• achieving Nigeria's climate change goals.

The CCA also provides for the components of the Action Plan, some of which include an articulated carbon budget for the five-year cycle and for each of the years in the five-year cycle, details on the level of compliance with international climate commitments, past and current, the projected greenhouse gases (GHG) emission profile of GHG emitting sectors of the economy, and incentives for private and public entities that achieve GHG emission reduction.

Additionally, the Director-General of the Secretariat is also required to submit a detailed report on the state of the nation regarding climate change to the Council and the National Assembly Committee on Climate Change¹⁸. This report shall be submitted for each five year cycle and shall include, information on the progress of the implementation of the Action Plan, the extent to which the GHG emission profile is consistent with the annual carbon budget, identification of the vulnerable areas to the impacts of climate change, assessment and management of risks/vulnerability, and fines issued against private and public entities for non-compliance with the provisions of the CCA. The Director-General¹⁹ is also required to submit to the National Assembly, within 3 (three) months after the end of every financial year, an evaluation report on the performance of climate change duties by private and public entities.

Compliance Framework: CCA 2021.

The CCA 2021 sets out a compliance framework²⁰ for climate change obligations for different sectors in the Country including; the Ministries, Departments, and Agencies (MDAs), public entities, and private entities.

For MDAs, the CCA 2021, provides, among other things, for the establishment of a climate change desk to integrate climate change actions into their core mandate²¹. MDAs are also obligated to adhere to the annual carbon emission reduction targets²², in line with the national action plan and carbon budget provided under the CCA 2021. Where an MDA fails to meet its carbon emission reduction target, it shall be subjected to a review, and if found liable, its principal officers shall be sanctioned and may be fined as determined by the Council²³.

In relation to the compliance obligations of Public Entities²⁴, the CCA provides that the National Council may by regulations impose obligations relating to climate change on public entities²⁵ and may vary or revoke any such obligations, where necessary. The CCA 2021 further provides obligations for Private Entities, whereby private entities with a minimum of fifty (50) employees are obligated to; put in place substantial measures to achieve the annual carbon emission reduction targets in line with the Action Plan and to designate a Climate Change Officer or an Environmental Sustainability Officer with the responsibility of submitting the annual reports on an entity's efforts at meeting its carbon emission reduction and climate adaptation plan²⁶. By the CCA 2021, the Council may also require a private entity to prepare reports on the status of its performance of its climate change obligations and prescribe the period for reporting. Where a private entity fails to meet its target, it shall be liable to a fine determined by the Council, which shall rely on a system of Environmental-Economic Accounting with attention on the health impacts, impact on climate variation, and interruption or damage to ecosystem services.

Compliance Obligations of CCA 2021 on Oil and Gas Operators

From the foregoing, we observe that the CCA 2021 does not expressly/separately provide for obligations for oil and gas operators, hence oil and gas entities are categorized essentially as 'private entities' and the obligations mandated on such entities under the CCA 2021, by extension, applies to them as well. However, it is pertinent to highlight that in line with the provisions of the CCA 2021, the operations of players in the oil and gas sector are the most affected as private entities, given that they account for a substantial part of Nigeria's greenhouse gas (GHG) emissions.

Putting private sector emissions into perspective, about 75 million tonnes of Co2 equivalent a year is emitted by the oil and gas sector exceeding that generated by other sectors such as the power and transportation sector. The power sector is next in line with about 37.82 million tonnes of emissions in 2020 alone²⁷. Under the CCA as provided above, these oil and gas operators (essentially private companies) will be provided with carbon budgets which they must comply with, or face penalties, which is not inclusive of the penalties to be imposed on them (oil and gas companies) for gas flaring as provided under the Petroleum Industry Act, 2021. Further, the CCA 2021 envisages the introduction of a carbon tax to be charged on carbon emitters aimed at reducing emissions and encouraging the use of environmentally friendly alternatives.

Implementation and Challenges of the CCA 2021

In implementing the CCA 2021, the government through the provisions of the Act, clearly acknowledges the importance of public participation and mandates MDAs, and Civil Society Organisations (CSOs)²⁸ to adopt certain climate mitigation policies in its operations. The CCA further emphasizes the need to align with global climate commitments²⁹, specifically stating that the Act³⁰ shall be applied in all sectors of the economy and within the territorial boundaries of Nigeria for the development and implementation of mechanisms geared towards fostering low carbon emission, environmentally sustainable and climate-resilient society. From the foregoing, the CCA 2021 includes necessary provisions for its implementation. However, it is worthy to note that while there has been some implementation of the provisions of the CCA 2021, there is still room for improvement to fully realize the overall objectives of the CCA and ensure that a carbon net-zero environment is achievable in the near future. Some of the key implementation efforts are highlighted as follows:

1. Establishment of the National Council on Climate Change (N.C.C.C):

Following the provisions of the CCA 2021),)³¹ the N.C.C.C alongside its secretariate was established and formally inaugurated by the Buhari administration)³² (28th September 2022), to oversee, and coordinate national efforts, ensuring that climate policies are effectively integrated across sectors.

2. Establishment of a Department of Climate Change.

In furtherance of its net-zero commitments, the Federal Government through the Ministry of Environment formed a Climate Change Department (DCC))³³ mandated to provide sustainable policies, initiatives, and an enabling environment for climate change action in Nigeria and to regularly update and report information regarding national greenhouse gas emissions, vulnerability assessment, and adaptation measures to the National Climate Change Action Plan.

3. Development of the National Climate Change Action Plan (NCCAP):

In line with the provisions of the CCA)³⁴, the NCCAP has been implemented, providing the policy vision, mission, and a number of specific strategies and actions to reduce greenhouse gas emissions including but not limited to;

• waste management;
• nationally determined contribution (NDC) for greenhouse gas emissions for industries;
• reforestation
• promotion of alternative and renewable energy
• energy transition financing, etc.

4. Stakeholder Engagement:

The government has shown commitment towards the implementation of this climate change legislation (and other net-zero aimed policies) through engagement with various stakeholders, including the private sector, academia, local communities, and civil society organizations to foster inclusive decision-making processes and ensure that diverse perspectives are taken into consideration in line with the CCA)³⁵, for policy formation and implementation.

Challenges

Despite these strides in implementation, several challenges continue to hinder the full realization of the CCA 2021's objectives:

1. Institutional limitations and lack of Coordination:

Effective implementation requires robust coordination among Ministries, Departments, and Agencies (MDAs), and other stakeholders. Overlapping regulations and inconsistent policy collaboration continue to lead to fragmented implementation efforts and inefficiencies.

2. Funding Constraints:

Adequate financial resources are critical for the successful implementation of climate initiatives, especially in a third-world nation. However, securing sufficient funding remains a significant hurdle, with many projects reliant on external financing and international aid

3. Technical Capacity:

There is a gap in technical and operational know-how in the nation's energy transition and climate-based solutions space. The need for enhanced technical expertise and infrastructure to support the comprehensive execution of climate strategies cannot be overemphasized.

4. Public Awareness and Participation:

While public participation is mandated in the CCA 2021, achieving meaningful engagement and widespread awareness remains challenging. Cultural, educational, and socio-economic barriers often limit public/ community involvement and support. Thus, by effectively working with representative groups, civil society organisations/groups the Government can ensure that there is widespread acceptance of the Climate Change Policies and adequate sensitization of the populace to adopt same.

Conclusion

Taken together, we highlight that the implementation of Nigeria's Climate Change Act 2021 has set a solid foundation for addressing climate change locally and aligning national efforts with global commitments. However, it is notable that the brunt of the CCA 2021, when fully implemented, would be borne by oil and gas operators especially as the financial implication for continuous GHG emissions is expected to rise exponentially for emitters. Consequently, oil and gas operators and other industry stakeholders (such as power generating (GenCos) companies) will be gradually compelled to review their operations and businesses to align with the domestic and global energy transition drive.

As the momentum rises towards reducing the effect of climate change, the World Bank, development banks, and other international financing institutions may continuously be wary of investing in or supporting the development of fossil fuel projects. As such, players in the fossil-sourced energy space may encounter difficulties in assessing finance for new projects.

Footnotes

1 https://climatechange.gov.ng/wp-content/uploads/2021/08/NDC_File-Amended _11222.pdf

2 https://treaties.un.org/doc/publication/unts/volume%201522/volume-1522-i-26369 english.pdf

3 https://treaties.un.org/doc/publication/unts/volume%201522/volume-1522-i-26369 english.pdf

4 https://unfccc.int/files/essential_background/ ackground_publications_htmlpdf/ application/pdf/conveng.pdf

5 https://unfccc.int/resource/docs/convkp/ kpeng.pdf

6 https://sustainabledevelopment.un.org/frameworks/parisagreement

7 S.3 CCA 2021 (Part II - Establishment of The National Council On Climate Change).

8 S.5 (r)-(u) 2021 CCA 2021

9 S.7 CCA 2021 (Part III - Administration and Control of The National Council On Climate Change).

10 S. 16 CCA 2021

11 S. 15 CCA 2021

12 Section 15 (Part IV; Financial Provisions) CCA 2021

13 Section 18 ibid

14 Section 15 (2) ibid

15 Section 19 ibid

16 https://climatechange.gov.ng/wp-content/uploads/2021/08/NCCP_NIGERIA_REVISED_2 JUNE-2021.pdf

17 Section 20 (4) CCA 202

18 Section 21 ibid

19 Section 21 (3) CCA 2021

20 Part VI – OBLIGATIONS RELATING TO Climate Change. Sections 22 – 24 of the CCA 2021

21 Section 22 (1) Ibid

22 Section 22 (4) Ibid

23 Section 22 (5) Ibid

24 Section 23 Ibid

25 Section 23 (a) Ibid

26 Section 24 (1) (a)(b) Ibid

27 https://ourworldindata.org/co2/country/nigeria

28 Sections 22, 23, and 25 CCA 2021

29 Section 20 (4) Ibid

30 Section 1(i) Ibid

31 Section 3 Ibid

32 https://punchng.com/fg-to-inaugurate climate-change-council-targets-zero emission/

33 https://climatechange.gov.ng/

34 Section 4(b) CCA 2021

35 See Section 30 CCA 2021 and Section 25, and https://afripoli.org/projects/climate adaptation/briefing-2nd-stakeholder-policy engagement-meeting

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