On April 20, 2022, the cybersecurity authorities of the United States, Australia, Canada, New Zealand, and the United Kingdom—the so-called “Five Eye” governments—announced the publication of Alert AA22-110A, a Joint Cybersecurity Advisory (the “Advisory”) warning critical infrastructure organizations throughout the world that the Russian invasion of Ukraine could expose them “to increased malicious cyber activity from Russian state-sponsored cyber actors or Russian-aligned cybercrime groups.”  The Advisory is intended to update a January 2022 Joint Cybersecurity Advisory, which provided an overview of Russian state-sponsored cyber operations and tactics, techniques, and procedures (“TTPs”).

In its announcement, the authorities urged critical infrastructure network defenders in particular “to prepare for and mitigate potential cyber threats by hardening their cyber defenses” as recommended in the Advisory.

Continue Reading International Cybersecurity Authorities Issue Joint Advisory on Russian Cyber Threats to Critical Infrastructure

The Fifth Circuit recently allowed the federal government to resume use of the “social cost of carbon” (SCC), after a district court enjoined reliance on the metric earlier this year.  The SCC aids cost-benefit analysis of regulatory actions and can provide insights into the impacts of climate change and greenhouse gas emissions reductions.  The continued legal back and forth over the SCC demonstrates that it is a highly contested and important concept, supporting much of President Biden’s climate agenda and with potential spillover effects for corporate carbon pricing.

Background

The legal battles directly stem from an Executive Order President Biden issued on his first day in office, but continue a dispute that began in the last two presidential administrations.  Executive Order 13990 re-established an Interagency Working Group (IWG); directed it to issue an interim estimate of the SCC (the “interim SCC”); directed agencies to use the SCC “when monetizing the value of changes in greenhouse gas emissions resulting from regulations and other relevant agency actions”; and directed the IWG to continue work towards a “final” SCC figure, originally set to be published in January of this year.  The portions of the order addressing the SCC were themselves a response to Trump Administration actions which disbanded the IWG and directed use of an SCC estimate far lower than what prevailed under the Obama Administration.  In February 2021, the Biden IWG issued the interim SCC, which returned to the Obama-era estimates as follows:

Source: Interagency Working Group on Social Cost of Greenhouse Gases

Litigation over the Biden SCC estimates and effects on the Federal Government

A host of state attorneys general immediately challenged the interim SCC in two separate lawsuits in Louisiana and Missouri.  Among other claims, these suits alleged the interim SCC failed to comply with the Administrative Procedure Act’s notice-and-comment requirements, was arbitrary and capricious, and otherwise was enacted without statutory authorization.[1]  In February, a District Court Judge in the Western District of Louisiana hearing one of these challenges issued a preliminary injunction, prohibiting agencies from “adopting, employing, treating as binding, or relying upon” any SCC estimates that depart from those used in the Trump Administration.

This opinion immediately reverberated across the federal government.  In a motion to stay the injunction pending further appeal, the Justice Department wrote:

The consequences of the injunction are dramatic.  Pending rule-makings in separate agencies throughout the government—none of which were actually challenged here—will now be delayed.  Other agency actions may now be abandoned due to an inability to redo related environmental analyses in time to meet mandatory deadlines.[2]

In light of this injunction, a host of federal rulemakings, grants, and agency processes were delayed, including federal oil and gas leasing and grants made under a $2.3 billion program for capital-intensive transportation projects.  In court filings, the Justice Department further catalogued how the injunction was derailing federal operations dealing with climate change.  A declaration filed by a high ranking Office of Management and Budget (OMB) official documented disruptions to at least 21 rulemakings by the Department of Energy, 5 by Environmental Protection Agency, 9 by the Department of Transportation, and 3 by the Department of the Interior.[3]  The injunction would have forced the Transportation and Interior Departments to redo 60 and 27 environmental impact analyses, respectively.

Apart from its impact on agency rulemaking, the injunction threatened to implicate the White House’s international climate efforts.  For instance, the United States engages in regular conversations with the Canadian government to align SCC measurements across borders.[4]  Multilateral discussions with the Asian Development Bank may also be affected, as its energy policy reviews often incorporate references to SCC measures.[5]  The Justice Department argued the injunction would impede this international cooperation.

On March 16th, the Fifth Circuit stayed the injunction pending appeal.  The Court primarily rested its decision on Plaintiff’s lack of standing, noting the states’ injuries are “merely hypothetical.”[6]  Even if an agency did consider the SCC, it would only be one factor agencies consider “in determining when, what, and how to regulate or take agency action”[7]  The Fifth Circuit also considered the breadth of the impacts on government activities caused by the lower court’s sweeping injunction.[8]

The SCC moving forward

The IWG will now continue its work as litigation challenging the SCC continues.  This includes the Louisiana proceeding and the Fifth Circuit’s stay, as well as a pending 8th Circuit appeal of a Missouri district court decision, [9] which dismissed another challenge to the interim SCC for lack of both standing and ripeness.[10]

The IWG must still promulgate updated “final” SCC figures, which are expected to be higher than the interim ones based on President Obama’s IWG.  It is unclear when this might occur: neither the White House nor OMB has issued an official update.  Prior to the injunction, however, OMB had already solicited and received detailed public comment on how to incorporate the latest peer reviewed science and economics literature into the new SCC measure.[11]  Since, technical experts across federal agencies had been synthesizing and summarizing this input, with the “goal of providing updated estimates in the next couple of months.”[12]  Given delays caused by the litigation, it’s uncertain if the Government intends to honor this timeline.  Additionally, the IWG had intended to subject their updated estimates to a peer review process and, to this end, EPA had published a request to nominate experts on January 25th.[13]

The IWG’s work and the final SCC will be closely watched, both by the federal government and the private sector.  Under the SEC’s recently proposed climate-disclosure rule, publicly registered companies that use an internal carbon price—i.e., an “estimated cost of carbon emissions used internally within an organization”—would be required to disclose the price per metric ton of carbon dioxide equivalent used, and the company’s rationale for selecting that price.[14]  While not bound to do so, in setting internal carbon prices some companies may reference or even adopt the IWG’s estimate of the SCC.  However, with the fate of the interim SCC unclear, and an array of carbon markets around the globe setting other prices on carbon, many companies may be less inclined to adopt the IWG’s SCC in their internal carbon pricing.

[1] See, e.g., Complaint, Louisiana et al., v Biden et al., 21-CV-01074 (W.D. La., filed on April 22, 2021), ECF No. 1.

[2] Mem. in Sup. of Defs’ Motion for a Stay (“Gov. Mem.”), 21-CV-01074, (W. D. LA., February 19, 2022), ECF No. 103-1.

[3] Declaration of Dominic J. Mancini (“Mancini Decl.”), 21-CV-01074 (W. D. LA., February 19, 2022), ECF No. 104 at 10.

[4] Id. at 19–20.

[5] Id.

[6] Louisiana v. Biden, 22-30087, (5th Circuit, March 16, 2022), Document #00516242341 at 5.

[7] Id.

[8] Id. In particular, it noted how the injunction halted “the President’s directive to agencies in how to make agency decisions, before they even make those decisions.”  Id.  It also forced the government to comply with the Trump Administration’s SCC estimates, “even though that document was not mandated by any regulation or statute in the first place.”  Id.

[9] Missouri, et al., v. Biden, 21-03013 (8th Circuit).

[10] Missouri, et al., v. Biden, 21-CV-287, (Aug. 31, 2021), ECF No. 48.

[11] Id. at 22-23.

[12] Id. at 23.

[13] Id.

[14] Securities and Exchange Commission, “The Enhancement and Standardization of Climate-Related Disclosures for Investors,” Proposed Rule at 83–86 (March 21, 2022).

On March 3 and 14, 2022, the European Financial Reporting Advisory Group (“EFRAG”) published its most recent set of Working Papers on the future of the EU’s European Sustainability Reporting Standards (“ESRS”). The ESRS will establish dozens of sustainability-related disclosure requirements that will be mandatory for thousands of EU companies under the Corporate Sustainability Reporting Directive (“CSRD”) (see our blog on the CSRD as background). Companies subject to the CSRD will be required to include these disclosures in their annual reports, and these disclosures will need to be audited. Importantly, this is the first time EFRAG has provided significant detail regarding reporting standards for topics that fall under the “S” pillar of the ESG (environmental, social, and governance) framework. The European Commission is currently aiming to have the CSRD and ESRS apply from January 2023, with initial reports due in 2024, and EFRAG will hold public consultations on its draft reporting standards in the coming months.

Continue Reading European Reporting Standards for the “S” in ESG: EFRAG’s New CSRD Disclosure Requirements for Workers and Human Rights Take Shape

As the world struggles to adjust to the harsh new reality of Russia’s invasion of Ukraine, the most recent instalment of the Sixth IPCC Report slipped out almost unnoticed.  And that is worrying, since the assessment in this section of the Report is even starker than previous assessments – noting in particular that in order to avoid global temperatures increasing by greater than 1.5 degrees C above preindustrial levels, the world needs to halve its emissions this decade: a reduction that the world does not currently appear to be remotely on course to do.

However, whilst the IPCC Report and the Russian invasion of Ukraine are not linked, Russian aggression in Ukraine may serve as a catalyst to speed up the European energy transition and accelerate its retreat from dependency on Russian gas and exposure to volatile international oil markets, which could in turn deliver a more rapid reduction in European emissions.  In the process, perhaps setting the world on a path to achieving an outcome that currently seems unattainable.

Continue Reading The IPCC and The Ukraine Crisis

On February 2, 2022, the European Commission adopted a Complementary Climate Delegated Act (the “CCDA”) listing specific gas and nuclear activities as “environmentally sustainable” for purposes of the EU Taxonomy Regulation, subject to strict criteria. Only certain activities that comply with strict emissions limits and other criteria detailed below may be so designated. Even so, the Commission’s decision to list nuclear and gas activities as “environmentally sustainable” is controversial and may still be blocked by EU Member States and the European Parliament through an upcoming scrutiny period, and may also be legally challenged before the EU Courts. Nevertheless there is a significant chance that the Commission’s criteria to consider the listed gas and nuclear activities as “environmentally sustainable” will enter into force by the beginning of 2023. This would allow such listed gas and nuclear activities to have access to green investors and ear-marked public funds under the EU’s Next Generation EU investment program.

Continue Reading Gas and Nuclear Activities in the EU Taxonomy Regulation: Under What Conditions Does the Commission Deem Them Environmentally Sustainable?

Two federal agencies recently released a joint Request for Information (“RFI”) in the latest in a series of concrete steps to meet the Biden Administration’s goal to achieve 100 percent carbon pollution-free electricity (CFE)[1] in federal operations by 2030.  The RFI, issued by DLA-Energy and GSA, offers industry a chance to shape future federal CFE procurements by providing information on carbon-free electricity supplied in competitive retail markets.  Although not itself a procurement opportunity, the information submitted under the RFI will inform the parameters and conditions of CFE competitions that the federal government expects to begin as soon as this year, with contract deliveries starting in 2023.

Continue Reading RFI Begins to Chart Course for Federal Clean Energy Procurements

The European Commission (the “Commission”) formally adopted on 27 January 2022 its new Guidelines on State aid for climate, environmental protection and energy (CEEAG). The CEEAG replace the guidelines that were in force since 2014 (EEAG) and integrate the new objectives of the EU Green Deal of a reduction of 55% net greenhouse gas emissions compared to the 1990 levels by 2030 and of carbon neutrality by 2050. The Commission has estimated that achieving the new 2030 target would require EUR 390 billion of additional annual investment compared to the levels in 2011-2020, an investment that cannot be borne by the private sector alone, and would therefore require public investments.

Continue Reading The Commission adopts its new Climate, Energy and Environmental Aid Guidelines (CEEAG)

Last year, Covington predicted an increased focus on environmental enforcement under the Biden Administration.  Recent statements by key environmental leadership have confirmed this, further sharpened Administration priorities, and track renewed focus by DOJ more broadly on combating corporate malfeasance.  In the coming year, regulated entities should prepare for increased criminal enforcement, including consideration of conduct within their supply chains.  They should also expect increased scrutiny of their environmental compliance programs, including the potential for corporate monitorship if DOJ deems a company’s compliance program to be inadequate.

Continue Reading Environmental Enforcement in 2022: Renewed Focus on Criminal Conduct, Compliance

The Italian Legislative Decree 196/2021 (“Italian Decree”) implementing the Single-Use Plastic Directive (“SUPD”) will enter into force on January 14, 2022.  The Italian Decree diverges from the SUPD on significant aspects: it provides a more flexible definition of plastic; delays the entry into force of the ban on prohibited SUPs; and exempts from such ban specific biodegradable and compostable materials.  The Decree also imposes specific return obligations on waste plastic bottles.

While the Italian Decree provides companies with additional flexibilities to market their SUPs in Italy, companies should carefully assess the risks that may arise if EU Courts finally hold that the Decree is not compatible with EU law.

Continue Reading Italy Transposes into National Law the EU Single-Use Plastic Products Directive

Last December, the European Commission published its legislative Package on Hydrogen and Decarbonized Markets (“Package”), which proposes new rules aiming to develop a hydrogen market in the EU. The new rules bring much awaited legal clarity to the concepts and role of blue and green hydrogen within the EU’s energy regulatory framework for the climate transition.

In effect, the Commission’s legislative Package is intended to promote the use of blue hydrogen until at least 2030 provided that it achieves the same decarbonization as green hydrogen (i.e., 70% GHG reduction).  However, the European Parliament and Council may amend both the proposed definition and conditions of blue hydrogen and the proposed regulative incentives during their consideration of the Package and its adoption through the legislative procedure that will now follow.  Moreover, the European Commission will be empowered to develop much of the methodologies implementing the definitions of blue and green hydrogen.  Companies intending to engage in blue and green hydrogen operations in the EU/EEA would be well advised to closely follow these developments.

Continue Reading New Definitions for Blue and Green Hydrogen: The European Commission’s Package on Hydrogen and Decarbonized Gas Markets