Fiji’s Climate Change Act 2021 is more than hot air
By Sam Cook and Damian Kelly
Summary
Fiji has become the seventh country in the world – and first Big Ocean State – to pass domestic legislation inclusive of a net-zero target by 2050.
The Act gives full effect to Fiji’s obligations under the Paris Agreement and implements its Nationally Determined Contributions.
The Act affects those operating in both the private and public sectors in Fiji – with guidelines expected within twelve months of the Act’s commencement.
The Act is expected to come into force on a date to be advertised by the Minister published in the Gazette.
Introduction
After what some have labelled as a ‘disappointing’ COP 26 Climate Summit where the commitments of other nations could be regarded as little more than ‘hot air’, Fiji sent a strong message and set an example to other nations by passing the Climate Change Act 2021 (the Act), becoming the seventh country in the world – and the first Big Ocean State – to pass domestic legislation inclusive of a net-zero emissions target by 2050.
The Act addresses carbon budgets, the framework for establishing a carbon market, climate-induced mobility, nature-based solutions, the legal recognition of maritime boundaries relative to sea level rise, climate finance and intergovernmental resilience building (amongst other things).
In this article, we highlight key provisions of the Act and what is means for those operating in the public and private sector in Fiji.
Commitment to Paris Agreement and NDCs
The Act recognises that Fiji and the Earth are facing a climate emergency, emphasising the need to limit global temperature increase to 1.5 degrees Celsius above pre-industrial levels (as provided under Article 2 of the Paris Agreement).[1] The Act emphasises that Fiji (like all Pacific nations) is vulnerable to the impacts of climate change and that a global rapid and ambitious shift is required to address this.
The Act gives full effect to Fiji’s obligations under the Paris Agreement (including its Nationally Determined Contributions (NDC)). Notably, earlier this year, Fiji updated its NDC (although we have not provided a full explanation of Fiji’s updated NDCs in this article, a copy may be accessed here).
The Act recognises the critical importance of the ocean to the identity and livelihoods of the people of Fiji and the Pacific island peoples.[2] The Act sets both a long term ocean sustainability target (being for Fiji’s internal waters, archipelagic waters, territorial seas, contiguous zone and exclusive economic zone to be 100% sustainability and effectively managed) and a marine protected area target (being for 30% of Fiji’s internal waters, archipelagic waters, territorial seas, contiguous zone and exclusive economic zone to be designated as a marine protected area by 2030).[3] This follows on from the lead of other Pacific nations such as Palau which has made similar commitments to protecting the marine environment, and also aligns with the High Ambition Coalition’s targets of protecting land and marine environments.
The Act also recognises the permanence of Fiji’s maritime boundaries and zones notwithstanding the effects of climate change and sea level rise – maintaining the rights and entitlements set out by the United Nations Convention on the Law of the Seas (UNCLOS).[4]
Impact of the Act on Fiji’s public sector
Under the Act, the Minister (within 12 months of the its commencement) must prepare and issue guidelines on how state entities (government ministry, department, constitutional body, statutory authority, Government company or associated entity) must ensure consistency with achieving the objectives and principles of the Act when making a decision or developing or implementing a policy, programme or process.[5] Once those guidelines are issued, all state entities will be required to make decisions in accordance with such.[6]
Impact of the Act on Fiji’s private sector
Under the Act, the Minister (within 12 months of its commencement) must develop and publish guidance materials for the purpose of assisting company directors and other offices (for the purpose of this article, the Director(s)), managed investment schemes and licensed financial institutions to fulfil their obligations under the Act.[7]
Impact on Directors’ Duties
The Act extends a director’s duty to exercise reasonable care, skill and diligence (under the Companies Act 2015) by requiring that directors consider and evaluate “climate risks and opportunities” to the extent that such risks and opportunities are foreseeable and intersect with the interests of the company (when exercising reasonable care and diligence).[8]
Under the Act:
(a) Climate change risks include –
the physical risks associated with climate change;
the transition risks associated with changes that may occur in the process of adjusting towards a low-carbon economy;
the liability risks stemming from the failure to consider and address the physical risks and transition risks; and
the economic and financial risk arising from any of the above.[9]
(b) Climate change opportunities include –
reducing operating costs by improving efficiency across premises, operations and processes;
saving on annual energy costs through shifting energy usage towards low emissions energy sources;
capitalising on shifting consumer and producer preferences by innovating and developing new low-emission products and services;
opportunities in new markets or types of assets; and
enhancing climate resilience to climate risks thus avoiding future economic costs.[10]
Although this duty remains untested, we expect that the obligations imposed on directors will be dependent upon the industry in which they operate (dependent on the extent to which the company relies upon fossil fuels).
Impact on financial reporting
The Act also requires that all companies (that are required to prepare financial statements and a directors’ report under section 338 of the Companies Act 2015) and all licensed financial institutions (that are required to submit statements and returns under section 26(1) of the Banking Act 1995) must disclose in such documentation:
(a) any material financial risks to the company/licensed financial institution arising from climate change risks and climate change opportunities;
(b) measure adopted by the company/licensed financial institution to reduce its exposure to these material financial risks;
(c) how considerations of climate change risks are integrated into investment policies, risk management policies and investment decision-making processes; and
(d) the climate change impacts of the activities of the company/licensed financial institution and of the use of the use of goods and services it produces and the extent to which the company/licensed financial institution complies with the long-term temperature goal in Article 2 of the Paris Agreement.[11]
Penalties for a breach the Act
Generally, a person who commits an offence under the Act could be liable on conviction to a fine not exceeding FJD$750,000 or imprisonment for a term not exceeding 10 years (or both).[12]
As an additional point, a director may also be found liable for the actions or omissions of a company they manage, where the director directed, authorised, assented to, acquiesced in or participated in the commission of the offence by the company.
Conclusion
Prime Minister Frank Bainimarama has likened the climate emergency to “war waged against the planet” highlighting that a global response is required to address this wicked problem.[13]
The comprehensive nature of the Act highlights the coordinated response and overarching obligations on both public and private sectors that is required to combat climate change. We look forward to the Minister providing the guidelines for both the private and public sectors.
Fiji has solidified its position as a world leader in climate change response through passing the Act, and setting an example to other nations that implementing domestically legally mandated targets – in being a custodian to the oceans and planet, Fiji has charted a course for other nations to follow.
For more information, please do not hesitate to contact us.
[1]Climate Change Act 2021, section 6(1) and (2). [2] Ibid, section 79(a). [3] Ibid, section 81. [4] Ibid, section 80. [5] Ibid, section 18(4). [6] Ibid. [7] Ibid, section 93(1). [8] Ibid, section 94. [9] Ibid, section94(2). [10] Ibid, section 94(3). [11] Ibid, section 96 – 98. [12] Ibid, section 103. [13] See the Government of Fiji’s statement and Prime Minister Frank Bainimarma’s comments at Fijian Government - FIJI LEGISLATES 2050 NET-ZERO COMMITMENT, CHALLENGES INDUSTRIALISED NATIONS TO FOLLOW SUIT
