The UAE Climate Law: How to prepare and achieve compliance

The UAE Climate Law is raising the bar on climate disclosure – upping the standards and at the same time sparking a shift from ESG compliance to strategic value from ESG. Experts from Nexio Projects outline the key requirements of the UAE Climate Law and explain how organisations can effectively prepare for and achieve compliance.

The UAE Climate Law establishes the country’s first comprehensive legal framework for managing greenhouse gas emissions and embedding climate action across the economy. It applies to both public and private sector entities, including companies operating in free zones, and shifts the UAE from largely voluntary sustainability efforts to mandatory compliance.

Under the UAE Climate Law, organisations are required to measure, monitor and report their emissions, aligning with a national system designed to improve transparency, accountability and data quality. The law also reinforces the UAE’s broader climate ambitions, particularly its commitment to achieving net zero emissions by 2050.

Issued in August 2024, the law came into force on 30 May 2025, with a transition period allowing organisations time to comply fully by May 2026.

What is the UAE Climate Law exactly

The UAE Climate Law – formally Federal Decree-Law No. 11 of 2024 on the Reduction of Climate Change Effects – is presented as a major step in the UAE’s sustainability agenda, aligned with the country’s commitment to net zero emissions by 2050. It marks a shift from climate targets being primarily strategy‑led to being increasingly execution‑led through compliance expectations.

The law applies to essentially all types of entities operating in the UAE across all seven Emirates, both in mainland and free-zones. The decree covers government bodies, public entities and private sector organisations. While the law is intentionally broad, first focus will be on high-emitting activities such as energy-intensive industries like oil & gas, steel and heavy manufacturing, utilities and also large real-estate portfolios to name a few examples.

Importantly, the UAE Climate Law offers no exemptions by company size or industry, so SMEs, manufacturers, service businesses, and tech startups alike must adhere to its requirements. This broad scope matters commercially because it expands the likely compliance perimeter beyond a narrow subset of regulated entities. 

What companies are expected to do

The core expectations revolve around measurement, reporting, and action: 

• Measure and report emissions in line with Ministry of Climate Change and Environment (MOCCAE) methodologies, supported by records and documentation for regulatory review;

• Annual Scope 1 and Scope 2 reporting via a centralised MOCCAE platform, and additional structured obligations for higher emitters, including ISO 14064‑aligned inventories and third‑party verification by MOCCAE‑approved verifiers; 

• Adopt mitigation and adaptation measures, including climate action planning and emissions reduction strategies aligned with national plans and sector‑specific requirements.

To achieve compliance, companies should begin by establishing a clear understanding of their greenhouse gas emissions through a structured baseline assessment. This involves identifying emission sources across operations, collecting reliable data, and calculating emissions in line with methodologies set by the Ministry of Climate Change and Environment.

Organisations should then implement robust monitoring, reporting and verification (MRV) systems to ensure emissions data is accurate, auditable and regularly updated. Governance is equally important – assigning internal responsibility, embedding climate considerations into risk management processes, and ensuring leadership oversight will be critical to meeting regulatory expectations.

Beyond measurement and reporting, companies should develop and execute emissions reduction strategies aligned with national targets. This may include improving energy efficiency, transitioning to renewable energy sources, optimising supply chains and engaging suppliers on sustainability practices.

To embed a continuous process, businesses should also stay informed of evolving regulatory guidance and timelines, ensuring they meet disclosure requirements and are prepared for potential audits or inspections.

Timelines and penalties 

The law came into force on 30 May 2025 and will be implemented in phases, with more detail expected to follow through MOCCAE guidance. Penalties can be severe, with administrative fines cited from AED 50,000 up to AED 2 million, and potentially higher for repeated or serious breaches depending on enforcement pathways.

From compliance to strategic value

While much of the focus of the UAE Climate Law is on achieving compliance, at Nexio Projects we have consistently seen leading companies use this moment as a catalyst – turning what could be a ‘tick-the-box’ exercise into a broader transformation that adds operational value and supports strategic objectives.

The process of becoming compliant can unlock valuable insights into how ESG management can be professionalised, particularly across reporting, governance and sustainability practices.

Reducing emissions can also drive cost efficiencies, especially in energy-intensive sectors. By improving efficiency or transitioning to renewable energy, organisations can lower operating costs while meeting regulatory requirements. At the same time, compliance strengthens brand positioning. As environmentally conscious consumers continue to grow in number, credible climate action helps build trust and deepen customer loyalty.

Financing is another key dimension: early movers can enhance their credibility with lenders, investors and clients, and may gain access to green financing instruments such as sustainability-linked loans and ESG-aligned bonds. With financial institutions increasingly factoring climate risk into credit decisions, strong compliance can translate into more favourable borrowing conditions.

Additionally, companies developing climate technologies or sustainability-focused services may benefit from government support and access to emerging markets. In parallel, as global supply chains raise ESG expectations, compliant organisations are better positioned to compete for international contracts and partnerships.

Taken together, these factors create a clear business case for early action – strengthening readiness, supporting more effective financing discussions, mitigating risk and enabling competitive expansion, while reducing friction in due diligence processes.