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The definitions on this website (and published in our Climate Contract Playbook) have been prepared in good faith on a pro bono basis and are free to download and use. The definitions have been drafted and edited by a variety of lawyers and, as such, the approaches to drafting may not conform to any particular drafting norms. We acknowledge this as a consequence of the collaborative drafting process.
The definitions on this website (and published in our Climate Contract Playbook) are provided on an ‘as is’ basis and without any representation or warranty as to accuracy or that the definitions will achieve the relevant climate goal or any other outcome.
This website (and the Climate Contract Playbook) does not comprise, constitute or provide personal, specific or individual recommendations or advice of any kind, and does not contain legal or financial advice. The definitions are precedents for legal professionals to use, amend and negotiate using their professional skill and judgement and at their own risk.
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At present, all the definitions are based on the laws of England and Wales. We encourage the conversion of these precedent definitions for use in other jurisdictions.
Carbon Budget means the aggregate of [value] tonnes of Carbon Dioxide Equivalent of Greenhouse Gas emissions permitted within the period of [YEAR to YEAR].
Model laws definition for the UK
Carbon Budget means the cumulative volume of carbon dioxide emissions permitted within a defined five-year period, as determined by the Secretary of State in accordance with the duties under Articles 4(1)(a) and 8(1) of the Climate Change Act 2008 in order to keep global warming below the Net Zero Target, and set at:
(i) 2,544,000,000 tonnes of Carbon Dioxide Equivalent for the period of 2018 to 2022 under section 2(c) of the Carbon Budgets Order 2009 (SI 2009/1259);
(ii) 1,950,000,000 tonnes of Carbon Dioxide Equivalent for the period of 2023 to 2027 under section 2(c) of the Carbon Budget Order 2011 (SI 2011/1603); and
(iii) 1,725,000,000 tonnes of Carbon Dioxide Equivalent for the period of 2028 to 2032 under section 2(c) of the Carbon Budget Order 2016 (SI 2016/785).
Model laws definition for other jurisdictions
Carbon Budget means the cumulative volume of Greenhouse Gas emissions permitted at the national level for the period of [YEAR to YEAR], expressed as a net quantity of Carbon Dioxide Equivalent and determined by decree of [NATIONAL LEGISLATION].
A system of carbon budgets can be a useful tool for organisations to manage and reduce their carbon footprints. It also seems inevitable that a carbon tax will be introduced at some point to meet the UK’s 2050 Net Zero Target.
Model laws for the UK
The Climate Change Act 2008 creates a system of “carbon budgets”, which will set limits on the net UK carbon account, to be divided into five-year periods beginning with the period 2008-2012. To date, five budgets have been set for the periods 2008-12, 2013-2017, 2018-22, 2023-2027 and 2028-2032. The carbon budget for the prescribed period of time must not be exceeded by the net UK carbon account, as defined in Article 27 of the Climate Change Act 2008 and set at 55,000,000 carbon units for the 2018-2022 budgetary period under Article 3 of the Climate Change Act 2008 (Credit Limit) Order 2016 (SI 2016/786).
Model laws for other jurisdictions:
· Carbon budget periods appear typically to be five-year periods.
Consider whether certain emissions should be excluded from the carbon budget. E.g. emissions from international air/sea travel or from land use and forestry.
Any contract where the parties wish to set carbon limits or create incentives and obligations linked to carbon including: manufacturing agreements, supply agreements, joint venture/ shareholder agreements. It may also be useful for directors’ annual reports, section 172 strategic reports and national climate laws.
A party could even enshrine positive climate behaviour in their Articles of Association (or equivalent documents), by including a Carbon Budget definition.
Used in Zack’s Clause [SPA/Investment Agreement Warranties], Gordon’s Clause [Capital Markets Due Diligence Questionnaire] and Tristan’s Clause [Construction Materials: Procurement].
Code de l’environnement (France)
Climate Change Response (Zero Carbon) Amendment Bill (New Zealand)