Legal Implications of the UAE’s New Climate Change Law for Companies: Climate Protection as a Compliance Obligation
The enactment of Federal Decree-Law No. (11) of 2024 by the United Arab Emirates (UAE) marks a significant legal development in environmental regulation. Effective from May 30, 2025, the law establishes binding obligations for businesses and government entities to address climate change. Its primary goal is to align national climate policies with international standards, including the Paris Agreement commitments, through a mix of regulatory and market-driven mechanisms.
I. Scope and Legal Framework
The law’s primary objective, as outlined in Art 2, is to implement a legally binding framework aimed at reducing greenhouse gas (GHG) emissions. The UAE Cabinet is mandated to set annual emission reduction targets consistent with the country’s Nationally Determined Contributions (NDCs). This provision creates a dynamic regulatory system responsive to evolving climate goals. The legislative structure combines domestic environmental law with international climate obligations, making compliance critical for businesses involved in global supply chains.
II. Legal Obligations for Companies
1. Emission Reduction Mandates / Monitoring and Reporting Requirements
According to Art. 5, businesses operating in high-emission sectors such as energy, industry, and transport must align their operations with national emission targets. This involves adopting environmentally sustainable technologies and minimizing carbon-intensive processes. Failure to implement such measures could lead to regulatory penalties.
Art. 6 imposes strict obligations on companies to monitor, document, and report their GHG emissions. This includes establishing certified environmental management systems to ensure accurate data collection. Businesses must retain these records for at least five years and submit regular reports in the format specified by the relevant authorities. Any false or incomplete submissions may trigger administrative penalties.
2. Market Mechanisms and Carbon Trading
Art. 10 introduces a national emissions trading system (ETS), enabling businesses to trade carbon credits. By purchasing carbon offsets, companies can meet emission targets while benefiting from cost-effective solutions. The government will regulate the carbon market, gradually reducing the availability of credits to encourage long-term emission reductions.
3. Sanctions and Legal Penalties
Non-compliance with the law is addressed in Art. 14, which prescribes financial penalties ranging from AED 50,000 to AED 2 million, depending on the severity of the violation. Repeat offenses within two years will result in doubled fines. This enforcement mechanism underscores the law’s coercive regulatory nature and highlights the importance of corporate environmental compliance.
III. International Compliance and Legal Comparison
The UAE’s climate law is closely modeled on international frameworks like the EU Emissions Trading System (EU ETS) and the Task Force on Climate-related Financial Disclosures (TCFD). Its alignment with such standards simplifies compliance for multinational corporations and facilitates integration with global sustainability practices. Businesses engaged in international supply chains must ensure that their environmental disclosures meet both UAE and global reporting requirements to avoid cross-border legal liabilities.
IV. Recommendations for Corporate Compliance
To comply with the law, companies should take the following steps:
- Compliance Management: Establish company-wide environmental management systems certified under ISO 14001 to ensure legal conformity.
- Internal Controls: Develop internal monitoring systems for emission tracking, as mandated by Art. 6.
- Legal and Technical Advisory: Seek expert advice on regulatory compliance and financial optimization through carbon trading under Art. 10.
- Reporting Procedures: Implement robust reporting mechanisms to submit accurate and timely emissions data to relevant authorities.
V. Conclusion
UAE Federal Decree-Law No. (11) of 2024 provides a comprehensive legal framework aimed at combating climate change through mandatory environmental and reporting standards. Businesses are legally required to adapt their operations, invest in sustainable technologies, and establish internal compliance systems. Early adoption of these measures will help companies reduce legal and financial risks while benefiting from market-driven incentives.
