On May 29, 2024, the Department of the Treasury (Treasury) and the IRS released proposed rules for the section 45Y clean electricity production tax credit (“Section 45Y Credit”) and the section 48E clean electricity investment tax credit (“Section 48E Credit”).  These credits are informally referred to as tech-neutral credits because they do not specify particular technologies eligible for credits, unlike the existing production and investment tax credits.  Below we summarize certain important provisions in these proposed rules and some of their implications for project finance for constructing facilities with net-zero greenhouse gas (“GHG”) emissions, such as a need for emissions accounting and monitoring. Comments are due on August 2, 2024, and a public hearing is scheduled to be held on August 12 and 13.

Continue Reading When Is the Greenhouse Gas Emissions Rate Not Greater Than Zero?  Proposed Regulations on the Tech-Neutral Credits Provides Clarification

The Supreme Court will soon decide whether to hear two cases that could dictate the future of climate change tort suits.  Such suits have proliferated in recent years: several dozen active cases assert state tort law claims—like nuisance, trespass, and strict liability—against oil and gas companies for fueling and misleading the public about climate change.  The two pending cases go to the very foundations of these claims.

Continue Reading Supreme Court Receives Filings with Key Implications for Climate Change Tort Suits

On May 28, the Biden-Harris Administration issued the Voluntary Carbon Markets Joint Policy Statement and Principles (Policy Statement).  You can find Covington’s analysis of the Policy Statement here.  Jointly announced by the U.S. Secretaries of Treasury, Agriculture, and Energy, and senior White House climate officials, the Policy Statement describes a three-pronged approach to responsible carbon market development and participation: (1) credit or supply integrity, including protections regarding climate and environmental justice; (2) demand integrity, to ensure the credible use of credits; and (3) market-level integrity, including facilitating efficient market participation and lowering transaction costs.  The Policy Statement builds on other recent federal actions, including the Commodities Futures Trading Commission’s 2023 proposed guidance for voluntary carbon credit derivatives and the Securities and Exchange Commission’s final climate risk disclosure rule, which requires certain disclosures related to carbon offset purchases, in the Administration’s attention to and elevation of the voluntary carbon market as an important element in the nation’s climate policy. 

In this post, we dive deeper into the voluntary carbon market landscape, implications for business, and additional recent developments. 

Continue Reading Engaging in Voluntary Carbon Markets: Overview of Key Developments, Risks, and Opportunities

The European Union has just adopted the  Right to Repair Directive (“R2RD”).  Once it enters into force, the R2RD will require manufacturers of many types of consumer goods to provide repairs beyond the liability period, among other requirements.  This blog post follows up on our previous blog post that discussed the different positions of the European Parliament and Council on the legislative proposal for the R2RD. 

Continue Reading The EU Adopts Right to Repair Directive

On May 13, the Federal Energy Regulatory Commission (FERC or Commission) issued Order No. 1920, the Commission’s long-awaited final rule regarding regional electric transmission planning and cost allocation for future transmission projects on the nation’s interstate electric grid.  Order No. 1920 revises key aspects of the Commission’s current regional transmission planning and cost allocation policies, largely adopted in 2011 in Order No. 1000, in an effort to help accelerate the buildout of transmission infrastructure needed to serve the country’s changing resource mix and growing energy demand projections. 

The major reforms adopted by FERC in Order No. 1920 center around four key areas: (A) planning horizon; (B) developing planning scenarios; (C) selection of transmission solutions and (D) cost allocation, each discussed in more detail below. At a high level, the rule requires transmission providers to engage in long-term regional transmission planning at least 20 years in advance, use at least seven enumerated benefits for the evaluation and selection of long-term regional transmission facilities, and hold a six-month engagement period for relevant state entities before filing a cost allocation method for a chosen project with FERC. Yet, while the Commission’s overarching goal of Order No. 1920 appears to be the selection of efficient long-term regional transmission solutions by transmission providers, the rule makes no mention of National Interest Electric Transmission Corridors (National Interest Corridors), geographic areas designated by the Department of Energy (DOE) where transmission congestion or constraints have an adverse effect on consumers, and where, in certain circumstances, FERC has siting authority for transmission facilities under the Federal Power Act (FPA).     

Continue Reading FERC Issues Order No. 1920 To Accelerate Regional Transmission Planning

On May 28, the U.S. Secretaries of Treasury, Agriculture, and Energy, along with senior White House climate officials, issued the Voluntary Carbon Markets Joint Policy Statement and Principles (Policy Statement).  The Policy Statement provides observations regarding the current state of voluntary carbon markets, followed by a set of guiding principles for responsible market participation.  A White House Fact Sheet describes the Policy Statement as representing the U.S. government’s commitment to advancing the responsible development of voluntary carbon markets, “with clear incentives and guardrails.”  Notably, the Fact Sheet  states that, with such incentives and guardrails, voluntary carbon markets can drive significant progress toward the Administration’s goals of reaching global net-zero greenhouse gas (GHG) emissions by 2050 and limiting warming to 1.5 °C.

Continue Reading Biden Administration Publishes Voluntary Carbon Markets Joint Policy Statement and Principles

An additional piece of the section 30D puzzle arrived last Friday when the Department of the Treasury (Treasury) and Department of Energy (DOE) released final rules (Treasury Rule and DOE Rule).  Largely tracking the proposed regulations, which we described in our prior blog posts (here and here), but with notable changes, these rules provide further clarity to the electric vehicle sector, essential to foster the widespread EV adoption in the United States.

Continue Reading Further Clarity to the Electric Vehicle Industry and Consumers Is Here, But It Is Not Done

On May 1, 2024, the White House Council on Environmental Quality (“CEQ”) published its final “Phase 2” National Environmental Policy Act (“NEPA”) regulations, formally called the Bipartisan Permitting Reform Implementation Rule (“Final Rule”). Publication of the Final Rule completes a multi-year effort by the Biden Administration that included publication of final, narrower “Phase 1” rule in April 2022. The Final Rule is predominantly consistent with the 2023 proposed rule, which is analyzed in an earlier blog post.

CEQ’s Final Rule is notable in many respects. It advances sound environmental analysis to inform the public and decisionmakers while implementing new efficiencies to help accelerate the environmental permitting process for infrastructure projects, from solar, wind, and transmission lines to federally-funded domestic manufacturing projects. In this regard, the Final Rule is a key component of the Biden Administration’s commitment to advancing domestic infrastructure, including projects aligned with the Biden Administration’s climate and clean goals that are being further propelled by federal grants and tax incentives pursuant to the Infrastructure Investment and Jobs Act (IIJA) and Inflation Reduction Act (IRA). 

Continue Reading CEQ Final NEPA Regulations and Department of Energy Actions Aim to Responsibly Accelerate Clean Energy, Transmission, and Other Infrastructure Development

First observed on April 22, 1970, Earth Day has long been recognized as a watershed moment for the modern environmental movement.  On that day, over 20 million demonstrators nationwide marched to raise awareness of the need to protect and preserve the environment.  The energy generated from that day galvanized the country to action, leading to the creation of the U.S. Environmental Protection Agency (EPA) in December 1970 and the passage of several statutes later that decade—including the Clean Air Act (CAA) the Clean Water Act (CWA), the Endangered Species Act (ESA), and the Resource Conservation and Recovery Act (RCRA)—that serve as the foundation of U.S. environmental legislation.  Today, Earth Day is recognized by countries around the world, and has expanded from its initial focus on pollution control to include elevating environmental justice in low-income, disadvantaged, and indigenous communities and promoting domestic and international climate action.

Beginning with a proclamation on April 19 declaring climate change to be “the existential crisis of our time,” the Biden-Harris Administration marked Earth Day and the week after by announcing a suite of final rules and grant programs aimed at fossil fuel abatement and pollution control, accelerating electric transmission grid modernization and solar energy development, and reducing greenhouse gas (GHG) emissions from the transportation sector.  These actions underscore not only the continued “whole-of-government” approach that the Administration has taken to combat climate change but also the urgency with which federal agencies have moved to promulgate final rules and protect them from potential congressional revocation ahead of the Congressional Review Act deadline later this spring. 

To assist industries and markets as they evaluate the impact of these final rules and programs, we’ve spotlighted several of these Earth Week regulatory and grant-funding actions.

Continue Reading A Week of Climate Action: Spotlight on the Biden-Harris Administration’s Earth Week Regulatory and Grant-Funding Actions

On April 17, 2024, the EPA released a final rule designating two perfluorinated chemicals—Perfluorooctanoic Acid (PFOA) and Perfluorooctanesulfonic Acid (PFOS)—as hazardous substances under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).  EPA also released enforcement guidance explaining how it intends to apply the new listing with respect to certain types of potentially responsible parties.

Continue Reading EPA Finalizes Rule Listing PFOA and PFOS as CERCLA Hazardous Substances