United States

U.S. Department of the Treasury (Treasury) and Internal Revenue Service (IRS) Release Procedural Guidance for Carbon Sequestration Credits

On July 24, 2024, the Treasury and the IRS, in coordination with the U.S. Department of Energy (DOE), released Notice 2024-60 (the Notice), providing procedural guidance for taxpayers submitting a written lifecycle analysis report (an LCA Report) to determine the amount of qualified carbon dioxide capture eligible for credits under Section 45Q of the Internal Revenue Code of 1986, as amended (the Code), pursuant to changes authorized by the Inflation Reduction Act of 2022. The Notice describes the information that taxpayers must include in an LCA Report for each qualified facility for which Section 45Q is applicable, including relevant business information and supporting data for review by the IRS and the DOE. The Notice also provides that the IRS and the DOE generally will complete approval requests for LCA Reports within four months from the date of receipt.

Europe

Corporate Sustainability Due Diligence Directive (CSDDD) Enters into Force

On July 5, 2024, the CSDDD was published in the European Union’s (EU) Official Journal, and entered into force 20 days later, on July 25, 2024. EU Member States must transpose the CSDDD into national law by July 26, 2026. The CSDDD introduces mandatory obligations for large companies with significant EU operations to perform due diligence on human rights and sustainability impacts both on their own operations and within their supply chain.

The CSDDD applies to companies with more than 1,000 employees and global annual turnover of €450 million (approximately US$490 million) for EU companies or EU annual turnover of at least €450 million for non-EU companies. Companies in the financial sector are generally exempt. The CSDDD will apply in stages, starting three years after entry into force for EU companies with more than 5,000 employees and net global annual turnover of more than €1.5 billion (approximately US$1.6 billion), and non-EU companies with group-wide consolidated turnover in the EU exceeding €1.5 billion.

On July 25, 2024, the European Commission (EC) published a first set of Frequently Asked Questions on the CSDDD, including information on the CSDDD’s objectives, scope, and enforcement issues.

EC Publishes Clarifications for Companies Applying European Sustainable Reporting Standards (ESRS)

On August 7, 2024, the EC published a set of Frequently Asked Questions on issues surrounding the ESRS. The EC adopted the ESRS on July 31, 2023, for use by all companies subject to the Corporate Sustainability Reporting Directive (CSRD). The standards cover a wide range of ESG issues, including climate change, biodiversity, and human rights. A covered company will be required to report both on its impacts on people and the environment, and on how social and environmental issues create financial risks and opportunities for the company. The ESRS will be phased in over time for different companies.

For more information on the CSRD, refer to the firm’s Client Advisory.

The Integrity Council for the Voluntary Carbon Market (ICVCM) Limits Applicability of Its “Core Carbon Principles” (CCP) Label

On August 6, 2024, the ICVCM published a press release announcing that carbon credits issued under eight existing renewable energy methodologies will not be able to use the ICVCM’s CCP label because those methodologies are insufficiently rigorous in assessing whether the projects would have gone ahead without the incentive of carbon credit revenues. The ICVCM’s decision impacts almost one-third of all carbon credits issued in voluntary carbon markets.

United States

Federal Trade Commission (FTC) Non-Compete Ban Blocked Nationwide

On August 20, 2024, a federal district court in Texas blocked the final rule issued by the FTC that would have prohibited all for-profit employers nationwide from using non-compete agreements with most workers. The final rule was set to take effect on September 4, 2024, and would have required employers to send notices to all current and former workers who had entered into covered non-compete agreements informing them that their covenants not to compete would not be enforced. The court’s decision set aside the final rule and ordered that it not be enforced or otherwise take effect on a nationwide basis. As a result of the Texas district court’s ruling, employers are relieved of the obligation to notify workers that their covenants not to compete are unenforceable. Employers also may continue to enter into and enforce noncompetition agreements with workers as permitted by applicable state law.

For more information, please see the firm’s Client Alert.

U.S. Court of Appeals for the District of Columbia (D.C. Circuit) Vacates Environmental Protection Agency's (EPA) Denial of Biofuel Exemptions

In an appeal by small petroleum refiners challenging the EPA’s denial of their exemptions to federal renewable fuel blending requirements, the D.C. Circuit sided largely with the appellants, vacating the EPA’s denial. The decision vacated the EPA's denial of more than 100 petroleum refiners' hardship exemptions from renewable fuel standard requirements. The challenged actions were rendered after the U.S. Court of Appeals for the Tenth Circuit determined that the EPA's basis for granting several renewable fuel exemptions from 2016 to 2018 was flawed and remanded the decision back to the EPA. The refineries argued that unlike big oil companies, they do not have the capacity to blend the amount of ethanol and biofuels needed to keep up with renewable fuel standard requirements. As such, they were required to purchase Renewable Identification Numbers from companies that blend more fuel than necessary. The D.C. Circuit granted all but two companies' petitions for review challenging the EPA's rejection of their hardship exemptions, vacated the actions, and remanded them to the EPA for further proceedings.

Judge Strikes Down Missouri’s ESG Investing Barriers

On August 14, 2024, Judge Stephen Bough of the U.S. District Court for the Western District of Missouri issued an opinion overruling the state’s 2023 rules (the Rules) which limited the extent to which financial experts could consider ESG factors while advising on client investments. Judge Bough agreed with the plaintiffs’ assertion that the Rules created demands on certain financial institutions and securities dealers not seen in federal law and found that the Rules are expressly preempted by the National Securities Markets Improvement Act of 1996. Further, he highlighted the Rules’ vagueness as a barrier to their practical enforcement under the U.S. Constitution.

Electric Vehicle Group Seeks to Defend Fuel Economy Rule in the U.S. Court of Appeals for the Sixth Circuit (Sixth Circuit)

The Zero Emission Transportation Association (ZETA) filed a motion in the Sixth Circuit to help defend the National Highway Traffic Safety Administration's final rule on corporate average fuel economy (CAFE) standards (Final Rule). The CAFE standards cover vehicle model years of 2027 to 2032 and push manufacturers to include more fuel-efficient vehicles in their fleets such that by 2031, the overall fleet-wide average fuel economy is at least 50.4 miles per gallon.

Eight separate legal challenges have been brought against the Final Rule, which have been consolidated in the Sixth Circuit. The challenges are being brought by states, fuel and agricultural groups, and environmental advocates and present a range of positions. ZETA, a coalition of companies across the electric vehicle supply chain, is seeking to intervene in the suit, stating that "the stringency of the standards adopted by NHTSA in the final rule will have a significant effect on the demand for electric vehicles, the value of credits generated by manufacturers of zero-emission vehicles, and the scale of investment in electric vehicles and supporting infrastructure—all of which directly impact ZETA's members."

The consolidated challenge is MCP No. 189 Corp. Avg. Fuel Econ (NHTSA-2023-022), case number 24-7001 in the U.S. Court of Appeals for the Sixth Circuit.

United Kingdom

United Kingdom (UK) Advertising Watchdog Finds Virgin Atlantic Airways’ Sustainability Claim to Be Misleading

On August 8, 2024, the UK’s Advertising Standards Authority (ASA) found a radio advertisement by Virgin Atlantic Airways claiming to have conducted a transatlantic flight on “100 [percent] sustainable aviation fuel” to be misleading. The aviation fuel for the transatlantic flight was entirely composed of synthetic fuels derived from animal fats and plant refuse and had significantly lower greenhouse gas emissions over its lifecycle than conventional aviation fuels. However, complainants to the ASA highlighted that listeners of the advertisement could be misled into believing that burning the fuel created no environmental impacts at all.

The ASA reviewed a consumer opinion survey that Virgin Atlantic Airways had commissioned on how the advertisement was understood and highlighted that a significant portion of listeners either believed that the aviation fuel, as described, had no environmental impacts at all, or even worse environmental impacts than conventional aviation fuel. The ASA considered the likelihood that listeners would be misled absent information on the calculated emissions lifecycle reduction of 64 percent and details on how even “100 [percent] sustainable aviation fuel” could create materially adverse environmental impacts. The ASA told Virgin Atlantic Airways to include qualifying information on the environmental impacts in future versions of the advertisement.

Wilson Sonsini Advised Clearway on 25-Year Power Purchase Agreement with Puget Sound Energy

On July 23, 2024, Clearway Energy Group announced that it has signed a 25-year power purchase agreement with Puget Sound Energy for the Haymaker wind farm, a 315 MW facility under development in Montana. Once operational, Haymaker will generate enough electricity to power approximately 116,000 homes each year. Construction of the wind farm is scheduled to begin in 2026, with commercial operations expected by 2028. Please see our Client Highlight or Clearway Energy Group’s news release for more information.

Join Wilson Sonsini at ClimateHaven’s Quarterly Green Drinks Event

Wilson Sonsini is a proud sponsor of ClimateHaven’s upcoming Green Drinks event, which will be held from 5:00 p.m. to 7:30 p.m. on Thursday, August 29, 2024, at ClimateHaven’s office in New Haven, Connecticut. Click here for more information.

Wilson Sonsini to Moderate a Panel at the Renewable Energy Markets Conference

Wilson Sonsini sponsors and will moderate a panel at the Renewable Energy Markets 2024 Conference, which will be held September 16-18, 2024, at the Westin Denver Downtown. Renewable Energy Markets is the clean energy industry’s most important annual conference focused on the status, businesses, organizations, and households that choose clean, renewable electricity every day.

Wilson Sonsini to Host New York Climate Week Event

Wilson Sonsini is sponsoring an intimate in-person event with Overture Climate LLC on September 24, 2024, as part of New York Climate Week.

The DOE released a Funding Notice announcing $10 million investment to develop supplies of critical minerals and materials.

The DOE released a Second Funding Opportunity announcing a $2.2 billion investment to develop resilience and reliability of power grid.

Frontier published its carbon removal offtake agreement template as part of its ongoing effort to support early-stage carbon removal suppliers and technologies. Frontier is an advance market commitment to buy permanent carbon removal that was founded by Stripe, Alphabet, Shopify, Meta, McKinsey and tens of thousands of businesses using Stripe Climate.