Energy security and climate finance converged as the week’s dominant themes. Governments tightened links between finance and environmental compliance. Several nations adjusted decarbonisation timelines under pressure from rising energy costs. Insurers and regulators warned that physical risk now threatens core infrastructure and investment flows.
European Climate Law sets binding 2040 target
The amended European Climate Law entered into force on 7 April 2026, establishing a legally binding target to reduce net greenhouse gas emissions by 90 per cent by 2040 compared with 1990 levels. The Council gave final approval in March after Parliament adopted the text in February with 413 votes in favour.
The law sets a domestic reduction floor of 85 per cent, with up to 5 percentage points permitted from high-quality international carbon credits from 2036. The EU Emissions Trading System for road transport and buildings, known as ETS2, has been delayed by one year to 2028 as part of the compromise.
The European Commission will now revise the Effort Sharing Regulation and related sectoral instruments to align with the 2040 framework. Policymakers hope the binding target provides the long-term certainty needed for industrial transition investment. The law also requires member states to expand carbon removal and reforestation programmes as part of their national contributions.
New UK carbon price floor enters into force
The UK raised the minimum price for carbon allowances on 8 April 2026. Under The Greenhouse Gas Emissions Trading Scheme Auctioning (Amendment) Regulations 2026, the auction reserve price rose from £22 to £28 per tonne of CO₂ equivalent. The regulations were laid in March and apply to all UK ETS auctions from this week.
The change reflects an inflation-based adjustment since the original price floor was set in 2021. Annual inflation-linked increases will follow from 1 January 2027, pegged to the GDP deflator published by the Office for National Statistics. The mechanism is designed to prevent the floor from eroding in real terms over time.
The UK ETS Authority confirmed the adjustment aligns with national net zero strategy and maintains a steady investment signal for clean energy projects. The UK and EU have also committed to work towards linking their respective trading schemes.
Italy delays coal exit amid gas price surge
Italy’s parliament passed legislation this week extending the country’s coal power phaseout from 2025 to 2038, according to Climate Change News on 9 April 2026. The government tied the bill to a confidence vote, meaning a defeat would have collapsed the Meloni coalition.
The move is a direct response to gas price spikes triggered by the US and Israeli strikes on Iran in late February. Italy is heavily reliant on imported gas and faces acute pressure from industry and consumers. The four coal plants affected currently generate less than 1 per cent of the country’s electricity, but the government wants them available as emergency standby capacity.
Environmental groups condemned the decision as a structural regression rather than a temporary measure. The bill still requires Senate approval, where the ruling coalition holds a majority. Analysts note that experts quoted in reporting agreed the plants’ reactivation would not lower electricity prices.
India withdraws bid to host COP33
India quietly withdrew its candidacy to host the COP33 climate summit in 2028, Climate Home News reported on 8 April 2026. The decision was communicated to the Asia-Pacific Group on 2 April in a letter from the environment ministry, citing a review of the country’s commitments for that year. No further explanation was given publicly.
Prime Minister Narendra Modi had announced the bid in his address at COP28 in Dubai in December 2023. In July 2025, BRICS nations formally endorsed India’s candidacy. Ministry officials had established an 11-member preparation cell as recently as last year.
Sources told ThePrint that contributing factors included the US withdrawal from the Paris Agreement and poor attendance at the Belém COP in late 2025, which reduced the diplomatic appeal of hosting. South Korea is now the only country known to have expressed interest in the presidency. COP33 is the third in line after COP31 in Turkey and Australia, and COP32 in Ethiopia.
Climate risk threatens insurability of infrastructure
Physical climate risks pose a growing threat to the insurability of critical infrastructure, according to a report by the MSCI Institute published on 8 April 2026. Insured losses from natural catastrophes reached approximately $107 billion in 2025, continuing a multi-year trend of elevated claims.
The report warns that rising climate exposure could affect infrastructure financing and long-term asset values if adaptation measures lag. Insurers are increasingly acknowledging that historical loss data alone may no longer provide a reliable basis for pricing risk.
This creates a systemic constraint on investment. Projects in high-risk regions may struggle to secure coverage at viable cost. Governments risk being drawn in as insurers of last resort.
Brazil embeds deforestation checks into credit markets
Brazil’s banking system has been formally enlisted in the fight against Amazon deforestation. From 1 April 2026, lenders must verify satellite-based government registry data before approving subsidised rural credit, according to Reuters. The rule covers approximately $53 billion in loans, roughly one-third of all rural credit in the country.
Banks must check whether properties appear in a government database tracking illegal clearing since 2019, using imagery from Brazil’s National Institute for Space Research, INPE. Farmers whose land is flagged must demonstrate that any deforestation was lawfully permitted before credit proceeds.
The shift moves environmental enforcement from regulators to financial intermediaries. Analysis by the Climate Policy Initiative found that roughly 17 per cent of subsidised rural lending from 2020 to 2024 went to farms deforested after 2020. Brazil’s main farm lobby is now backing congressional legislation to block the measure.
Investors press technology firms on climate resource use
More than a dozen investors are pressing Amazon, Microsoft, and Alphabet over the environmental footprint of their US data centre expansion. Pressure is focused on water consumption and energy use, ahead of annual shareholder meetings this spring.
The issue centres on AI infrastructure. Data centres require large volumes of electricity and cooling water. Investors argue that aggregated corporate disclosures are insufficient to assess local and systemic impacts.
Trillium Asset Management has filed a shareholder resolution targeting Alphabet’s climate strategy, arguing that the company’s emissions have surged alongside its data centre buildout. Calvert Research and Management has raised concerns about inadequate water disclosure. Several multibillion-dollar projects have been cancelled in recent months following community opposition, signalling that tension between digital growth and climate commitments is now reaching boardrooms.
Britain records modest emissions decline
Britain’s greenhouse gas emissions fell by 2 per cent in 2025, provisional government data showed, as reported by Reuters on 2 April 2026. Total emissions were estimated at 367 million metric tons of CO₂ equivalent, down seven million tons from 2024.
The largest reduction came from industry, where emissions fell 12 per cent. Blast furnace closures in the iron and steel sector drove the bulk of those gains, according to the Department for Energy Security and Net Zero. Transport emissions, by contrast, rose 2 per cent owing to higher petrol and diesel use.
Progress remains structurally uneven. Industrial gains mask rising emissions in transport. The UK has a legally binding target to cut emissions by 81 per cent by 2035, a trajectory that current rates of change will not meet.
European renewable investment faces policy friction
Spain’s wind industry association, AEE, warned on 6 April that a proposed EU-wide windfall tax on energy profits could deter investment in renewables, according to Reuters. The warning followed a joint letter from the finance ministers of Germany, Italy, Spain, Portugal, and Austria to the European Commission calling for a temporary solidarity levy.
Energy prices have surged since US and Israeli strikes on Iran in late February, with Brent crude hitting $116 per barrel. The five ministers argue the measure would fund consumer relief and demonstrate European unity. The AEE counters that taxing renewable energy profits alongside fossil fuel gains creates legal uncertainty at the point when wind deployment most needs stability.
The tension reflects a challenge familiar to European policymakers. Measures designed to redistribute war-driven windfall profits risk chilling the investment they depend on. Poor calibration at this stage of the energy transition carries real cost.
