The Clima Act: Companies accountable for climate damage

FIVE days before 2024 ended, The New York Times published a banner story highlighting a new law that penalizes companies for their greenhouse gas (GHG) emissions. It reported that Gov. Kathy Hochul of New York signed the Climate Change Superfund Act into law.

This legislation mandates that companies responsible for carbon dioxide emissions from 2000–2024 should make an annual contribution of $3 billion for the next 25 years. The revenue generated will support climate resilience initiatives and fund projects aimed at mitigating climate change impacts in the state.

In the Philippines, the House of Representatives’ Committee on Climate Change held its fourth technical working group (TWG) meeting on the proposed the Climate Accountability (Clima) Act. The goal is to hold companies accountable for their contributions to climate change, especially their GHG emissions.

The bill defines climate accountability as “the responsibility of and corresponding need for reparation from businesses and carbon majors significantly responsible for climate change. A climate accountability regime establishes a governance mechanism for ensuring that climate targets are met through robust regulation and progress reporting. The accountability of carbon majors shall range from negligence to causation.”

While differing in scope and scale, funding mechanisms and legal context, the Clima Act and the Climate Change Superfund Act share notable similarities.

Both embody the fundamental “polluter pays principle” where businesses causing environmental damage are held financially responsible for the aftermath. This approach would incentivize them to reduce their carbon footprint and invest in sustainable practices, contributing to the overall goal of reducing GHG emissions nationally, thereby achieving their Nationally Determined Contribution targets.

Vulnerable communities

Both bills seek to generate financial resources from businesses to support climate-related projects and assist affected communities, illustrating a commitment to corporate accountability in addressing climate change. It emphasizes the need to bolster climate resilience, recognizing that significant investments are essential for adapting to and mitigating climate change effects.

In a chat interview, Greenpeace Philippines senior campaigner Virginia Benosa-Llorin shared, “Each nation must take steps in ensuring the biggest polluters pay their fair share. Either they act to stop fossil fuel companies from destroying the climate now, or have the world resign to a near future where life-and-death climate impacts become the new normal. Thus, the swift passage of the Clima bill must be prioritized. It would create a legal framework to hold corporations accountable for climate loss and damage.”

The Copernicus Climate Change Service, European Union’s Earth Observation Program says it is “virtually certain that 2024 will be the warmest year on record and the first year of more than 1.5 degrees Celsius above preindustrial levels.” Given the global climate crisis and the Philippines’ vulnerability to climate impacts, passing the Clima Act would enhance our country’s commitment to climate action, aligning with international agreements like the Paris Agreement. It could serve as a foundation for further climate legislation and policy initiatives. It would also meet the growing global expectations for businesses to operate sustainably and ethically while holding our local companies accountable for their GHG emissions and fostering corporate responsibility for climate impacts.

The legislation would reflect a broader commitment to climate justice, ensuring that those least responsible for climate change, but most affected by its impact receive the resources needed for adaptation and recovery. According to former Department of Finance assistant secretary Paola Sherina Alvarez’s presentation, Climate Finance in the Context of the Philippines, ” … on a long-term average basis, the country is expected to incur an annual loss of P171 billion due to typhoons.”

The Climate Change Reparation Fund will be established to assist communities affected by extreme weather events. It will provide support for recovery and resilience-building, which are vital for mitigating climate change impacts on vulnerable communities.

“The Clima Bill is a commendable piece of human rights-based legislation aimed at protecting vulnerable communities affected by climate change. Since July 2024, I have participated in the deliberations and witnessed the dedication of the 30-member TWG to balance the interests of all sectors: government, business, NGOs (nongovernmental organizations) and civil society sectors, and communities. They have also worked to ensure that the bill can be easily administered and implemented if it becomes law,” stated Agnes de Jesus, chief sustainability officer of First Philippine Holdings Corp.

The Clima Act’s timely passage is not merely a legislative formality but a necessary measure to equip the nation with the tools required to address climate change effectively, support affected communities and uphold the principles of sustainability and justice amid growing environmental challenges.

The author is the founder and chief strategic advisor of the Young Environmental Forum and a director of Climate Tracker Asia Inc. He completed a climate change and development course at the University of East Anglia (UK) and an executive program on sustainability leadership at Yale University (USA). You can email at ludwig.[email protected].