ESG and sustainability disclosure and reporting requirements for listed and non-listed companies are rapidly taking shape. As announced at COP26, there is now an International Sustainability Standards Board (“ISSB”) tasked with encouraging global uptake of ESG reporting standards. In the EU, the European Financial Reporting Advisory Group (“EFRAG”) is the body tasked with developing mandatory sustainability and ESG reporting standards under the EU’s Corporate Sustainability Reporting Directive (“CSRD”). Both the ISSB and EFRAG have each recently published ESG and sustainability disclosure and reporting “prototypes”. These prototypes are important pieces to an emergent reporting regime that is very likely to become critical commercially—if not mandatory—for many companies. There are also encouraging signs that what has until recently been a relatively disjointed set of standards, is beginning to come together under a more harmonized agenda and institutions.

This blog presents an overview of some of the detailed climate-related disclosure and reporting metrics covered by the ISSB and EFRAG climate prototypes, and highlights critical considerations for companies as more detailed and mandatory ESG and sustainability reporting frameworks begin to take shape.

Continue Reading ESG & Sustainability Reporting Developments: Climate Disclosure Prototypes

As the United Nations Climate Change Conference of the Parties (“COP”) in Glasgow has drawn to a close, with seemingly mixed messages and a somewhat ambiguous conclusion, it is worth reflecting on the overall trajectory of the climate issue, societal expectations, and the accomplishments that — with time — Glasgow is likely to represent.  COP26 highlighted the fragility of the planet, as well as the fragility of the global consensus-based United Nations approach to protecting it.  It highlighted the sweep of global climate-induced challenges and the scale of transformation needed to address them.  With rising temperatures has come a rising global focus on climate and a far greater set of emerging societal expectations for meaningful responses by government and the private sector.  Despite the risk that the global agreement forged in Glasgow is seen by climate activists as all talk and no action — what they referred to as “blah, blah, blah” — I believe that a number of features will endure as important accomplishments.

Continue Reading Report from Glasgow COP26: Assessing the United Nations Climate Conference

On the 10th of November 2021, the Scottish Government published its Draft Hydrogen Action Plan (the “Plan”), as a companion document to its December 2020 Hydrogen Policy Statement.

The Plan sets out the Scottish Government’s detailed proposals for the Hydrogen industry in Scotland across the next five years. The aim is for Scotland to have capacity to produce 5 GW of Hydrogen by 2030 and 25 GW of Hydrogen by 2045. This blog sets out the key takeaways from the Plan.

Continue Reading The Scottish Government’s Draft Hydrogen Action Plan

The European Commission seeks stakeholders’ feedback until 18 November on its proposal to define cross-border projects in the field of renewable energy generation that would be eligible to receive EU funding under Connecting European Facility instrument.

Continue Reading European Commission Opens Public Consultation to Define Selection Criteria for Renewable Energy Projects Eligible of EU Funding

On 19 October, alongside a number of other important strategy documents (over 2,000 pages in total), the UK Government published its ‘Net-Zero Strategy’ (NZS) which will help achieve the UK’s interim five yearly carbon targets leading up to net-zero by 2050.

Continue Reading The UK’s Net Zero Strategy

In December 2020, the UK PM set out an ambitious 10 Point Plan for a green industrial revolution, one of the key points of which was the production of 5 GW of low carbon hydrogen in the UK by 2030.  The Plan envisaged hydrogen playing a key role in decarbonising energy-intensive industries and heavy transport and replacing natural gas in domestic heating.

On 17 August the UK Government published its Hydrogen Strategy (together with a number of associated Consultations), which lays the foundations for the UK’s future hydrogen economy and sets out how the UK Government will support innovation and stimulate investment in low carbon hydrogen to meet its 5GW target.

Continue Reading Hydrogen in The UK

The D.C. Circuit issued a decision in Vecinos para el Bienestar de la Comunidad Costera v. FERC, which faulted FERC for failing to consider whether the social cost of carbon (SCC) is a “generally accepted” analytical tool for assessing the significance of greenhouse gas impacts under NEPA.  The decision is likely to result in additional agency engagement of the necessity of the SCC in project reviews, although the decision does not mandate the tool’s use going forward.

As we have described in prior posts, the social cost of carbon is a tool that expresses in dollar amounts the estimated cost to society of a one metric ton increase in CO2 emissions.  Developed by a federal interagency working group (IWG) originally to aid cost benefit analysis in rulemaking context, the tool also has potential use in the project approval, by informing agency assessments of environmental impacts under the NEPA.  By and large, however, courts have accepted agency decisions not to utilize the SCC in their analysis, often relying on the well-established rule that NEPA generally does not mandate cost-benefit analysis.  See 40 C.F.R. 1502.22.

Enter Vecinos, the most recent decision in an evolving area of law.  The case concerned FERC approval of liquefied natural gas export terminals and pipelines in Texas.  As it has in past projects, FERC quantified the greenhouse gas emissions associated with construction and operation of the facilities, but declined to consider the significance of those effects on the project’s contribution to climate change.  The Commission justified this position on the grounds that there is no “universally accepted methodology to attribute discrete, quantifiable, physical effects on the environment to” an individual source’s greenhouse gas emissions.  Local residents, environmental groups, and  a nearby city challenged, arguing, inter alia, that the Commission was obligated to use the social cost of carbon in light of 40 C.F.R. § 1502.21, a CEQ regulation implementing NEPA which requires agencies to evaluate impacts based on theoretical approaches or research methods “generally accepted in the scientific community” when “information relevant to reasonably foreseeable significant adverse impacts cannot be obtained.”

The D.C. Circuit held that the Commission’s NEPA analysis was inadequate.  Its decision regarding the social cost of carbon[1] rests solely on FERC’s failure to consider the potential effect of § 1502.21, which was not discussed or cited in any FERC order or briefing in the case.  In so doing, it distinguished an earlier D.C. Circuit decision which had upheld FERC’s decision not to use the social cost of carbon in other projects, which also did not discuss the regulation.[2]

Accordingly, on remand and in the future, FERC and other agencies will have to more directly evaluate the tool and the rigor of the science behind it.  Proponents will argue that the social cost of carbon is the kind of “generally accepted” theoretical approach § 1502.21 requires be incorporated into NEPA:  The IWG’s SCC framework is at this point over a decade old, and was designed from the start to reflect scientific consensus, incorporating the three most widely cited climate economic impact models, each of which have been extensively peer reviewed.  The National Academy of Sciences has recognized the tool and provided recommendations on how to strengthen it, which the Biden Administration is actively working to incorporate through an inclusive public process with stakeholders and experts to ensure that projections are based on the “best available science.”

The decision is the latest in a series of cases assessing the adequacy of FERC’s NEPA analysis.  The D.C. Circuit has required that FERC more fully consider the climate consequences of approved projects, particularly the reasonably foreseeable downstream impacts of additional fossil fuel transportation infrastructure, and Vecinos is another push in the same direction.  But, as it has in the past, the D.C. Circuit made clear that it was stopping short of forcing the social cost of carbon on FERC.  Indeed, the Vecinos court remanded the approval without vacating it, concluding it was “reasonably likely” that the Commission would be able to reach the same result even after discussing § 1502.21, and that vacatur could “needlessly disrupt completion of the projects.”  Construction of the facilities continues after the ruling.

Even if Vecinos does not result in broader adoption of the social cost of carbon in project approval, changes from the executive and legislative branches may, for FERC as well as other agencies.  By the end of this month, the interagency working group will submit recommendations on “areas of decision-making, budgeting, and procurement” across the federal government where the SCC should be applied, which could include project approval and NEPA analysis.  Regarding FERC specifically, President Biden will soon be expected to announce his replacement for Commissioner Neil Chatterjee, potentially shifting the Commission to a Democratic majority and providing additional support to Chairman Glick, who has vocally supported having the Commission consider the significance of greenhouse gas emissions and the social cost of carbon in NEPA analyses.

[1] Vecinos separately held that the Commission’s environmental justice analysis was arbitrarily limited, as it did not discuss potential disproportionate effects more than two miles away from the project site.

[2] See EarthReports, Inc. v. FERC, 828 F.3d 949, 956 (D.C. Cir. 2016); see also Appalachian Voices v. FERC, No. 17-1271, 2019 WL 847199 (D.C. Cir. Feb. 19, 2019); Sierra Club. v. FERC, 672 Fed. Appx. 38, 39 (D.C. Cir. 2016).

In wrapping up our three-month long series on the ABCs of the AJP that commenced on Earth Day, we offer some final reflections on the progress and outlook for this monumental public policy initiative. Continue Reading Not Broken, Simply Unfinished – What’s Next for the AJP?

This is the twenty-sixth post in our series on “The ABCs of the AJP.”

As we wrap up our blog series on the climate and energy implications of the Biden Administration’s American Jobs Plan (AJP), it is an opportune moment to revisit our journey from A through Z, and reflect on whether the Biden Administration’s proposed investment in infrastructure can set the nation on a path to achieve its 2050 net-zero target. Continue Reading Zeroing-In on Net-Zero Emissions

On July 14, the European Commission presented its legislative proposal for a Carbon Border Adjustment Mechanism (“CBAM”).  This long-anticipated tool is intended to make importers pay for the greenhouse gas (“GHG”) emissions embedded in the covered goods that they market in the EU.  A Covington webinar on the main elements of the proposal and related policy considerations is available here. Continue Reading Will the EU CBAM Cover More Than What You Think? Complex Goods, System Boundaries, and Circumvention Under the Commission’s CBAM Proposal