EAAS — a legal framework introduction.
Foreword
EAAS ( Energy As A Service) is a unique App, created by a team of enthusiasts concerned with the state of the world, a revolutionary answer to the ever — growing environmental challenges Planet Earth Faces and a powerful tool helping both Business and Individuals contribute toward the improvement in the environmental, social and working conditions.
Historical context
The initial idea behind the creation of EAAS, 4 years ago was born from the concern about the state of the World and is an attempt to create a tool helping people achieve positive and meaningful environmental changes.
The app had to be both: flexible enough to deal with always uncertain, ever-changing Climate related regulations and appealing for the corporate and private use.
The task ahead seemed daunting, with many doubting the founder’s vision. Some were afraid of the volatility of the Sustainability-related laws, others were too short sighted to realize the importance of reducing the negative climate impact of our civilization and improving social and working conditions of the population.
Finally, after 3 years of trials and tribulations the team behind EAAS is proud to announce the App in its test run!
A qualified, merit — based team, created with diversity and representation in mind.
The creation of the EAAS would not have been possible without a team that believes in values behind the project — namely : protection of the Environment, importance of the Labour Law and improvement of work conditions for the employees as well as equality, diversity and inclusion.
In EAAS, we put our money where our mouths are! Our team consists of 20 persons from 12 different countries, a diverse cast of characters representing multiple cultures, religions, genders and worldviews. People of different ages, coming from different social strata work together in a horizontal, rather than vertical and hierarchical structure, where every voice is heard and every opinion matters.
While diversity and inclusion are essential values, team members are highly educated specialists in their fields of work. The project involves artists, graphic designers, lawyers, marketing specialists, programmers, algorithm specialists to name but a few.
State of the App
At the time of writing this piece, the app is running in its testing phase, with the for general release planned for week 51 of 2023. We have also done a lot of work and localized the app for the Korean and Chinese markets, so the EAAS app is available in three language versions: global (English) and Korean and Chinese. We are also planning to launch the Turkish version in January 2024. EAAS will have its first test run in select few companies in South Korea, Austria and Poland at the beginning of 2024.
Inner workings of the App
EAAS is a sophisticated tool meant for both B2C and B2B users. It gives anyone an opportunity to participate in a community of like minded individuals interested in a betterment of the World, learn helpful information about Sustainability and earn money while doing so.
The frontpage of the app is a general monitor screen with basic information, shortcuts to the other parts of the application, basic Sustainability metrics and a display of already earned tokens.
Additionally, our software includes: a wallet with detailed information on the Carbon Rewards earned by the user, that allows for buying and selling Carbon Rewards for real money and transferring the funds to your bank account.
How does one earn Carbon Rewards? It is simple! By reading through informative lessons that teach about Sustainability matters such as ESG, Carbon Offsetting Practices and Green Energy, followed by a short quiz — a proof of knowledge earned. Afterwards, the user is given a task relevant to the topic of the lesson. Upon completing the task, one is eligible for a reward.
The tasks are divided between the categories of: ESG, Carbon, Green Energy Validation and Community. The rewards one can earn vary, with the Community contribution being the most valuable.
Carbon Rewards are a form of token that works two fold. Firstly it is a currency that has a real life value that can be exchanged for real money. Secondly, the token serves as a proof of an completed action that has a positive impact on the Environment, Society or Working Practices, validating the Data collected by the app. This data will be essential to measure the impact the user or a business has. This is important for the B2B users of the app as the software we have developed will serve as the cheapest, fastest and most accurate method of scoring and assessing Sustainability metrics. EAAS will be of a great help to the companies in complying with the Climate Law.
ESG, Carbon and Green Energy
They constitute 3 out 4 ways one can earn rewards or — in case of the corporations -provide data for the Sustainability metrics.
ESG ( Environmental, Social and Governance ) are one of the most important sets of Sustainability reporting metrics that are essential European Sustainability Reporting Standards (ESRS), mandated by the co-legislators of the CSRD [1].
Environmental data answers concerns over Climate related issues such as greenhouse gasses (GHG) emissions, global warming, energy production and environmental Sustainability.
Social reporting is meant to decrease Human Rights Violations; improve Occupational Health and Safety or Community Relations.
Governance metrics inform about: Corporate Ethics, Governance and Practices and the treatment of employees.
ESRS divides the Environmental (E) reporting into 5 categories: Climate Change (E1) [2], Pollution (E2)[3], Water and Marine Resources (E3) [4], Biodiversity and Ecosystems (E4) [5] and Resource Use and Circular Economy (E5) [6]; while Social (S) is divided into Own Workforce (S1)[7], Workers in the Value Chain (S2)[8], Affected Communities (S3)[9], Consumers and end-users (S4)[10] with Governance having only one category, namely Business Conduct[11].
Carbon Taxes, Carbon Credits, Carbon Offsets, CBAM
Carbon Dioxide is the greenhouse gas that is being produced in the greatest quantities, therefore, achieving a reduction in the CO2 emissions is an integral part of both the European Climate Law and the Paris Agreement. Three most widely used methods include: Carbon Taxes, Carbon Offsetting and Carbon Credits.
Carbon Taxes; CBAM
source: State and Trends of Carbon Pricing 2023; The World Bank [12]
Taxation of the greenhouse gasses comes in two different forms: an emission tax corresponding with the amount of the gas produced by an entity and a tax that is placed on goods and services that result in large quantities of GHG produced [13], such as a carbon tax on coal, gasoline, and cement, to name but a few[14]. According to many economists, Carbon Taxes are the most efficient way of decreasing the emissions of aforementioned harmful to the atmosphere gasses [15][16] [17] [18], with an added benefit of generating substantial tax revenue[19].
Carbon Border Adjustment Mechanism (CBAM) is an answer to attempts at Carbon Tax evasion on the European Markets via the means of moving the production to the countries outside of the EU jurisdiction[20]. It is a measure of putting “… a fair price on the carbon emitted during the production of carbon intensive goods that are entering the EU, and to encourage cleaner industrial production in non-EU countries.”[21]
The CBAM entered into application in its transitional phase on 1 October 2023, with the first reporting period for importers ending 31 January 2024 [22].
Carbon Credits
Integral part in achieving zero net emissions, Carbon Credits are bought by companies who exceeded their GHG emissions above the threshold allowed to them[23]. Carbon Credits is a certificate that represents one ton of CO2e ( 1 ton of Carbon Dioxide equivalent) taken from the atmosphere [24], that is tradeable and a Cap & Trade tool.
Carbon Credits are divided into two main categories, depending on the place they are being traded at — Global Compliance Market (GCM) and Voluntary Carbon Market (VCM).
Carbon Credit Markets are one of the fastest growing exchange markets in the World.
EAAS rewards its users with Carbon Credits upon completion of in-built tasks, encouraging pro-environmental practices and allowing for participation in highly profitable Carbon Markets.
source: State and Trends of Carbon Pricing 2023; The World Bank [25]
Carbon Offsets
A source of Carbon Credits, Carbon Offsets are operations resulting in the removal of GHGs from the atmosphere and an aid to the businesses that exceeded allowed emissions. Examples of the projects include: renewable energy development, the capture and destruction of GHGs and reforestation initiatives.
Green Energy Validation
With renewable energy systems becoming more popular each day, EAAS App, helps its users understand, participate, Validate and benefit from Green Energy production with educational lessons and tasks. As a proof of our belief in the future of the renewable energy projects we additional Carbon Credits for compilation of Green Energy tasks.
Community
The team behind EAAS believes that grassroots movements are the most important part of Sustainability improvements. Without an understanding of the importance behind biodiversity preservation or stopping climate change, every top down attempt will be faced with an opposition as another tax or an inconvenient regulation. Our App offers a plethora of participatory activities and rewards users contributing towards the growth of our environmentally conscious community.
European Climate Law
As a result of the growing awareness of environmental issues, the threat of global warming and preventing irreparable damage to the Earth’s biodiversity, accompanied by the higher than ever public scrutiny over businesses’ practices, European Union created European Climate Law[26] — a means of achieving goal of becoming climate net neutral by 2050[27], with an intermediate step of reducing net Greenhouse Emissions by 55% in 2030 [28], set out in the European Green Deal[29].
This commitment is in line with goals set out in the Paris Agreement [30] [31] [32] of: “Holding the increase in the global average temperature to well below 2 °C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5 °C above pre-industrial levels…” [33]
Furthermore, the European Climate Law aims to develop a measures of tracking the progress of the implementation of Sustainability Practices and creating Standards of Sustainability Reporting standards for the business World, that were established in Nonfinancial Disclosure Reporting Directive (NFRD) [34] and were further elaborated on in Corporate Sustainability Reporting Directive (CSRD) [35]. CSRD will apply to almost 50 thousand corporations from the Member States and any company from outside EU that is large enough and wants to operate in the European market[36].
Lastly, at the time of writing this article, Council and the European Parliament reached a provisional deal on the Corporate Sustainability Due Diligence Directive (CSDDD) [37], which strengthens the Climate Law even further, by: “… establishing obligations for large companies regarding actual and potential adverse impacts on human rights and the environment, with respect to their own operations, those of their subsidiaries, and those carried out by their business partners. “ [38] and setting a framework for imposing sanctions of up to 5% of a company’s global turnover [39].
From legal language to the business World
In essence, an ever growing number of corporations will be legally obliged to comply with the EU Climate Law by achieving a meaningful improvement in their Sustainability metrics.
Their efforts will have to be reported and a failure to either report their results or comply with the established Sustainability goals will result in exorbitant fines.
With general practice consisting of a cost — ineffective and time — consuming creation of the ESG departments in an attempt at writing lengthy Sustainability Reports EAAS offers a quick and effective solution — a holistic approach of compiling ESG, Carbon and Green Energy Hard Data Points, via the means of prediction general Sustainability requiring only the fraction of the Data, thanks to the sophisticated algorithm and predictive capabilities.
The Hard Data Points are “hidden” in tasks — a creation of a painstaking process of translating Climate Law — in both its letter and in spirit — into the real life activities that will serve as Sustainability metrics
Arbitrage
CSRD and CSDDD, as aforementioned, will apply to the entities outside the EU as well, “…if they have over €150 million net turnover generated in the EU, three years from the entry into force of the directive.”[40] EAAS offers an arbitrage, helping corporations from outside European cultural and legal values achieve compliance with EU Sustainability regulations without worrying about understanding the nuance of a foreign laws and cultures.
All the tasks used to gather data are written in an easy to understand language and contain references to the official documents and guidelines. Lessons are of great help as well, highly educational but easily understood.
Furthermore, our team is always ready to answer questions regarding the Sustainability issues and — if a need were to arise — prepare more elaborate answers. We maintain constant communication with a client and members of our team are trained to explain any potential issues in multiple tiers of sophistication of the language: from very basic Tier 3 (T3) explanations tailored towards those unacquainted with Sustainability, programming or algorithm to the Tier 1 (T1) — metalanguages of specialists in their respective fields of work.
Additionally, in order to tackle the ever-changing landscape of the Climate Law, EAAS is being constantly updated, in order to best conform with any changes in regulations.
Last but not least, our lawyers will prepare additional educational material, elaborating on legal issues in more depth, and validated by some of Poland’s best Universities of Law.
Algorithm
EAAS employs an advanced algorithm that compiles the aforementioned Hard Data points and using Zero Knowledge Principle predicts the overall Sustainability outcomes by scaling a fraction of the data that would have to be collected in a written report. The system achieves results that comply with double materiality standards.
Data Protection
Our App employs strict data protection, in compliance with Data Protection Laws such as The EU General Data Protection Regulation (GDPR)[41]. For every individual user, EAAS offers 3 different levels in regards to the data required, starting from just basic login info such as nickname, email and password.
For company employees, apart from strong data protection, we ascertain full anonymity of the users in order to encourage honest answer or reporting of any unlawful company practices without a fear of reprisal to any potential whistleblower, in compliance with the European Directive on the protection of persons who report breaches of Union law[42], directly transposed into the Member States’ national legal systems[43].
[1] The ESRS per delegated act (adopted on 31 July 2023)
On 31 July 2023, the European Commission adopted the Delegated Act on the first set of European Sustainability Reporting Standards (ESRS). Adoption of ESRS by Delegated Act is mandated by the co-legislators in the Corporate Sustainability Reporting Directive (CSRD — Directive (EU) 2022/2464) adopted in December 2022.
[2] EFRAG; November 2022; Draft Sustainability Reporting Standards, ESRS E1, Climate Change
[3] EFRAG; November 2022; Draft Sustainability Reporting Standards; ESRS E2, Pollution
[4] EFRAG; November 2022; Draft Sustainability Reporting Standards, ESRS E3, Water and Marine Resources
[5] EFRAG; November 2022; Draft Sustainability Reporting Standards, ESRS E4, Biodiversity and Ecosystems
[6] EFRAG; November 2022; Draft Sustainability Reporting Standards, ESRS E5, Resources Use and Circular Economy
[7] EFRAG; November 2022; Draft Sustainability Reporting Standards, ESRS S1, Own Workforce
[8] EFRAG; November 2022; Draft Sustainability Reporting Standards, ESRS S2, Workers in the Value Chain
[9] EFRAG; November 2022; Draft Sustainability Reporting Standards, ESRS S3, Affected Communities
[10] EFRAG; November 2022; Draft Sustainability Reporting Standards, ESRS S4, Consumers and end-users
[11] EFRAG; November 2022; Draft Sustainability Reporting Standards, ESRS G1, Business Conduct
[12] Map of Carbon Taxes and ETS; source: State and Trends of Carbon Pricing 2023; The World Bank; https://openknowledge.worldbank.org/entities/publication/58f2a409-9bb7-4ee6-899d-be47835c838f
[13] Center for Climate and Energy Solutions; Carbon Tax Basics; https://www.c2es.org/content/carbon-tax-basics/
[14] Muresianu Alex; May 2, 2023 Tax Foundation; Carbon Taxes in Theory and Practice;
https://taxfoundation.org/research/all/eu/carbon-taxes-in-practice/#_ftn27
[15] Gupta, S.; et al. (2007). “13.2.1.2 Taxes and charges”. Policies, instruments, and co-operative arrangements. Climate Change 2007: Mitigation. Contribution list of Working Group III to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change (B. Metz et al. Eds.). Print version: Cambridge University Press, Cambridge, U.K., and New York, N.Y., U.S.A.. This version: IPCC website. Archived from the original on 29 October 2010. Retrieved 18 March 2010.
[16] Julius J. Andersson, “Carbon Taxes and CO2 Emissions: Sweden as a Case Study,” Economic Policy 11:4 (2019), https://pubs.aeaweb.org/doi/pdfplus/10.1257/pol.20170144.
[17] Hannah Ritchie, Max Roser, and Pablo Rosado “CO2 and Greenhouse Gas Emissions,” Our World in Data, accessed Feb. 28, 2023, https://ourworldindata.org/co2/country/sweden.
[18] Jan Abrell, Miriam Kosch, and Sebastian Rausch, “How Effective Was the U.K. Carbon Tax? A Machine Learning Approach to Policy Evaluation,” USAEE Working Paper №19–396, Apr. 17, 2019 https://www.econstor.eu/bitstream/10419/207139/1/1663457328.pdf.
[19] Tax Foundation, “Option 50: Institute a Carbon Tax” in Options for Reforming America’s Tax Code 2.0, Apr. 19, 2021, https://taxfoundation.org/tax-reform-options/?option=50.
[20] European Commission; Carbon Border Adjustment Mechanism; https://taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism_en
[21] ibidem
[22] Regulation (EU) 2023/956 of the European Parliament and of the Council of 10 May 2023 establishing a carbon border adjustment mechanism (Text with EEA relevance)
[23]The Different Types of Carbon Credits ; FEB 10TH 2023; https://ecocart.io/types-of-carbon-credits/
[24] Peterdy Kyle, Carbon Credits, How They Work & Credits vs Offsets; https://corporatefinanceinstitute.com/resources/esg/carbon-credit/
[25] PRice Evolution in Selected ETS from 2018 to 2023; source: State and Trends of Carbon Pricing 2023; The World Bank; https://openknowledge.worldbank.org/entities/publication/58f2a409-9bb7-4ee6-899d-be47835c838f
[26] Regulation (EU) 2021/1119 of the European Parliament and of the Council of 30 June 2021 establishing the framework for achieving climate neutrality and amending Regulations (EC) No 401/2009 and (EU) 2018/1999 (‘European Climate Law’) https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32021R1119
[27] https://climate.ec.europa.eu/eu-action/european-climate-law_en
[28] ibidem
[29] https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal_en
[30] Council Decision (EU) 2016/1841 of 5 October 2016 on the conclusion, on behalf of the European Union, of the Paris Agreement adopted under the United Nations Framework Convention on Climate Change
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32016D1841
[31] Paris Agreement — UN Framework Convention on Climate Change
https://unfccc.int/sites/default/files/resource/parisagreement_publication.pdf
[32] Council Decision (EU) 2016/590 of 11 April 2016 on the signing, on behalf of the European Union, of the Paris Agreement adopted under the United Nations Framework Convention on Climate Change
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32016D0590
[33] ibidem
[34] Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending Directive 2013/34/EU as regards disclosure of non-financial and diversity information by certain large undertakings and groups Text with EEA relevance
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32014L0095
[35] Directive (EU) 2022/2464 of the European Parliament and of the Council of 14 December 2022 amending Regulation (EU) No 537/2014, Directive 2004/109/EC, Directive 2006/43/EC and Directive 2013/34/EU, as regards corporate sustainability reporting (Text with EEA relevance)
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32022L2464
[36] ibidem
[37] European Council of the European Union; Press release;14 December 2023; “Corporate sustainability due diligence: Council and Parliament strike deal to protect environment and human rights”
[38] ibidem
[39] ibidem
[40] European Council of the European Union; Press release;14 December 2023; “Corporate sustainability due diligence: Council and Parliament strike deal to protect environment and human rights”
[41] Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation) (Text with EEA relevance)
https://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1552662547490&uri=CELEX%3A32016R0679
[42] Directive (EU) 2019/1937 of the European Parliament and of the Council of 23 October 2019 on the protection of persons who report breaches of Union law
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32019L1937
[43] European Commission; “Protection for whistleblowers European Commission initiatives on the protection of persons reporting on breaches of Union law.”
