ITALY: An Introduction to Public Law: Environmental

Navigating the Legal and Economic Landscape of Environmental Law

In the broader context of climate change and environmental degradation, the legal and economic elements of environmental law and regulation have become central. As a matter of fact, governments, businesses, and individuals around the world are struggling with the challenges posed by a changing climate and the need for sustainable practices.

The need for global harmony  

One of the most significant goals of environmental law should be an international effort to create a cohesive legal framework. A first move has certainly been the Paris Agreement, adopted in 2015, which remains a cornerstone in the global fight against climate change. The Agreement brings nations together to limit global warming and mitigate the adverse effects of climate change. In the legal realm, countries are aligning their policies with the agreement’s objectives, aiming to create a unified front against environmental threats. The Agreement has further strengthened the role of the Conference of the Parties (COP), which is an example of international co-operation where states discuss their international commitments, making them binding while waiting for the subsequent COP. Recently, COP 28 took place in Dubai and ended with a final call to transition away from fossil fuels and a commitment to triple renewable capacity and double energy efficiency by 2030.

The European Union is a good example of the efforts made to actively trying to unify different pieces of national legislations by adopting packages, regulations and directives specifically committed to emissions’ reduction, sustainable corporate governance for the European market and sustainable products (ie, the Corporate sustainability due diligence directive – CSDDD, the Eco-design Regulation, the Eco-label Regulation, the “Effort sharing” Regulation, the new Climate Regulation that establishes the framework for achieving climate neutrality, the RED II Directive and its related sustainability and greenhouse gas emission criteria on bioliquids, the Wate Framework Directive and the new concepts of “byproducts” and “end of waste”).

On a national level, governments are now enacting and strengthening environmental laws to address specific challenges within their borders. From stricter emissions standards to regulations governing waste management, countries are finally starting to recognise the need for a comprehensive legal framework that promotes environmental sustainability and sustainable development.

The rise of sustainable practices and their economic implications

Environmental law is strictly linked to economic forces. For this reason, businesses are experiencing a paradigm shift as sustainability becomes a key driver of economic decisions. The transition to a low-carbon economy is reshaping the external and internal organisation of industries, with companies facing both challenges and opportunities.

Carbon pricing mechanisms have gained popularity and greater success as a way to internalise the environmental costs of economic activities. Through carbon taxes and emissions trading systems (see, for instance, both the European ETS and the Carbon Boarder Adjustment Mechanism – CBAM) governments are incentivising businesses to reduce their carbon footprint, which not only aligns with environmental goals but has further economic implications such as pushing companies to adopt cleaner technologies and practices.

Renewable energy is one of the main sources of economic transformation. Countries and businesses investing in renewable energy, such a solar and wind power, are not only contributing to environmental goals but also profiting from the economic benefits. The renewable energy sector has become a major driver of job creation and economic growth, demonstrating the economic feasibility of sustainable practices.

However, the economic shift towards sustainability is not without challenges. Some industries, particularly those that rely heavily on fossil fuels, will face (and are already facing) economic disruption. Governments and businesses must navigate a delicate balance, ensuring a just and green transition for workers and communities affected by the shift away from traditional, environmentally harmful practices.

The need for more international co-operation  

While legal frameworks are evolving, the effectiveness of environmental laws depends on strong enforcement mechanisms. In many cases, enforcement faces challenges such as insufficient resources, bureaucratic hurdles, and the inherently international nature of many environmental issues.

International co-operation is crucial to overcoming these challenges. Shared resources, technology transfer, and collaborative efforts are necessary to address environmental problems that transcend borders. Some recent developments indicate a growing recognition of the interconnectedness of environmental issues and the need for collective action (ie, the aforementioned European legislative initiatives).

At the national level, increased public awareness and demand for environmental accountability are driving stronger enforcement. Civil society, environmental organisations and citizens all play a key role in holding governments and businesses accountable for their environmental responsibilities. The rise of environmental and climate change litigation is proof of the growing power of legal avenues to ensure compliance with environmental laws.

Challenges and difficulties for companies: navigating the transition

While transitioning towards sustainable practices presents a significant opportunity, companies are also facing challenges and difficulties in such a transformative landscape. One of the main obstacles is certainly the financial burden associated with transitioning to more environmentally friendly operations.

For industries that are used to traditional, carbon-intensive practices, the costs of adopting cleaner technologies and complying with stringent environmental regulations can be substantial. This financial strain poses a dilemma for companies, requiring strategic planning to balance short-term financial pressures with long-term sustainability goals. It is often necessary to turn to specialist legal advisers who can find and create tailor-made solutions that can help companies in preventing internal and external environmental risks, further aligning them with global, European and national climate goals along their supply chain. Areas of particular focus for a just transition include assisting companies in the conversion of industrial processes, promotion of the use of by-products and end-of-waste solutions, and biofuel regulations.

Another significant challenge is the complexity of global supply chains. Companies often face difficulties in tracking and managing the environmental and social impacts of their entire supply network. In this sense, the European Corporate Sustainability Due Diligence Directive, while surely a positive step toward increased company accountability, adds even more complexity for companies operating across borders. Co-ordinating sustainability efforts throughout the supply chain demands substantial investments in production, data collection, monitoring, and collaboration, particularly in industries with complicated and dispersed supply networks.

Moreover, the lack of universally standardised metrics for measuring sustainability poses a challenge for companies aiming to communicate their environmental efforts transparently. Divergent reporting standards across different pieces of legislation and frameworks tend to create confusion and hinder accurate comparisons. Establishing a coherent and universally accepted set of metrics for assessing companies’ environmental performance would not only help companies in benchmarking their sustainability efforts and safeguarding their businesses but it would also provide investors and consumers with clearer data to make more informed choices.

The regulatory framework itself can be a source of uncertainty. Companies operating in multiple jurisdictions, as frequently happens in Italy and the EU, must navigate a patchwork of environmental regulations, each with their own requirements.

In conclusion, while the legal and economic landscape of environmental law is positively evolving towards sustainability, companies are still facing a complex series of challenges. Overcoming them is not only essential for the survival and growth of businesses but is becoming a hallmark of corporate resilience and responsibility in the face of pressing environmental concerns, which is why experts in these niche legal sectors are now more than ever needed to support both companies and multinationals.