October 2024 Update
We are pleased to share the October 2024 issue of Wilson Sonsini's Sustainability and ESG Advisory Practice Update. Each issue combines news, key legal developments, and resources related to sustainability and environmental, social, and governance (ESG) matters relevant to public and private companies internationally.
In this issue, we cover:
- proposed regulations for an alternative fuel vehicle refueling property tax credit;
- the enactment of amendments to California’s climate reporting laws
- the United Kingdom’s new anti-greenwashing guide; and
- Australia’s first climate-risk reporting regime.
We hope that you will find this information practical and useful. For any questions, please contact Amanda Urquiza, Manja Sachet, Scott Zimmermann, or any other attorney from Wilson Sonsini’s Sustainability and ESG teams.
| Regulatory and Reporting Developments |
United States
U.S. Department of the Treasury (Treasury) and Internal Revenue Service (IRS) Release Proposed Regulations for Alternative Fuel Vehicle Refueling Property Tax Credit Under Section 30C
On September 19, 2024, the Treasury and the IRS issued a notice of proposed rulemaking (the Proposed Regulations) regarding certain aspects of the alternative fuel vehicle refueling property tax credit under Section 30C (the 30C Credit) of the Internal Revenue Code of 1986, as amended (the Code), pursuant to changes authorized by the Inflation Reduction Act of 2022 (IRA). Section 30C of the Code, as revised by the IRA, provides a base credit amount of six percent for qualifying property and an increased credit amount of 30 percent for qualifying property which satisfy prevailing wage and apprenticeship requirements, up to a cap of $100,000 per single item of eligible 30C property. The Proposed Regulations provide several helpful clarifications to the requirements to claim the 30C Credit, including defining a “single unit” of 30C property as each charging port (for recharging property), fuel dispenser (for refueling property), or each qualified alternative fuel storage property or electrical energy storage property, along with any property that is “functionally interdependent” or an “integral part” of such qualifying property; clarifying 30C Credit eligibility for “dual-use” property; specifying the methodology to determine geographic location requirements with respect to projects located in low-income census or non-urban census tracts; and clarifying 30C Credit recapture guidelines. Concurrently with the Proposed Regulations, the IRS issued Notice 2024-64, modifying guidance previously provided in Notice 2024-20 to provide taxpayers with mapping tools to determine whether qualifying property meets eligible census tract requirements for the 30C Credit. Treasury and the IRS have requested comments on the Proposed Regulations, which must be received by November 18, 2024.
For more information regarding the Proposed Regulations, please see our client alert.
California Governor Gavin Newsom Signs Bill Enacting Changes to Climate-Related Disclosure Laws
On September 27, 2024, California Governor Gavin Newsom signed Senate Bill 219 (SB 219), to amend the Climate Corporate Data Accountability Act and the Climate-Related Financial Risk Act. SB 219 establishes several compliance deadlines for reporting companies under the Climate Corporate Data Accountability Act (SB 253) and the Climate Related Financial Risk Act. Notably, pursuant to SB 219, covered companies now have until July 1, 2025, to publicly disclose their greenhouse gas emissions under SB 253.
For more information regarding SB 219, please see our client alert.
California Enacts Legislation to Ban the Distribution of Plastic Bags
On September 22, 2024, California Governor Gavin Newsom signed SB 1053 into law, which will ban the distribution of plastic bags at most grocery stores, convenience stores, and retailer checkouts. SB 1053 is aimed to disallow thicker plastic carryout bags which were permitted under the states’ initial plastic bag ban passed in 2014 and approved by voters in 2016 (SB 270). Commencing on January 1, 2026, SB 1053 will prohibit most grocery stores, convenience stores, and other retailers in California from distributing plastic bags to customers at the point-of-sale. The law permits such stores to provide single-use paper bags at the point-of-sale by charging the customer at least $0.10 per bag. Beginning on January 1, 2028, SB 1053 requires that the paper bags provided at the point-of-sale be composed of at least 50 percent postconsumer recycled materials, rather than the 40 percent previously required.
Europe
United Kingdom (UK) Competition and Markets Authority (CMA) Issues Tailored Guide Against Greenwashing in the Fashion Industry
On September 18, 2024, the UK’s CMA issued a practical guide against misleading environmental claims in the fashion industry, building on its 2021 Green Claims Code. The example-based practical guide reminds fashion brands that they must i) give clear, accurate, and complete information about their products, ii) clearly set out criteria used to decide which items are included in green fashion collections and detail any minimum requirements, and iii) be clear if the claim is based on only specific parts of a product’s life cycle.
In addition, the CMA stated that it had sent letters to 17 unnamed fashion brands advising them to review their green claims on this basis. Previously, on March 27, 2024, the CMA announced that it had secured commitments from fashion brands ASOS, Boohoo, and George at Asda to change the way they display, describe, and promote their green credentials.
European Commission (EC) Starts Infringement Proceedings Against Member States for Not Fully Transposing the Corporate Sustainability Reporting Directive (CSRD)
On September 26, 2024, the EC announced that it had started infringement proceedings against 17 Member States for failing to notify their national measures transposing fully the CSRD. The CSRD introduced new rules on sustainability reporting, requiring large companies and listed companies (excluding micro-undertakings) to disclose information on the social and environmental risks they face, and on how their activities impact people and the environment. The new sustainability reporting rules apply from financial years beginning on or after January 1, 2024.
European Securities and Markets Authority (ESMA) Publishes 2025 Work Program with Focus on Sustainable Finance
On October 1, 2024, European Union financial markets regulator ESMA published its annual work program for 2025, which includes a strong focus on sustainable finance issues. The program contains several specific work outputs regarding sustainability.
The previewed work outputs include: 1) collaboration with national supervisory authorities to develop supervisory tools to detect and address greenwashing; 2) assessment of vulnerabilities of financial market participants (FMPs) and products within ESMA’s remit to adverse climate-related financial shocks; 3) publication of guidance on sustainability-related claims to FMPs; 4) development of regulatory technical standards to supplement the Green Bond Regulation and the ESG Rating Regulation; and 5) additional guidance for disclosures under the Sustainable Finance Disclosure Regulation.
EC Proposes Deferring Deforestation Regulation Compliance by One Year
On October 2, 2024, the EC proposed granting in-scope entities additional time to achieve compliance with regulations addressing the risks of deforestation and forest degradation brought about by the placement or exportation of certain products from the EU market (the Deforestation Regulation). Under the EC’s proposal, large companies would have until December 30, 2025, and small- and medium-sized enterprises would have until June 30, 2026, to comply with their obligations under the Deforestation Regulation, compared with the previous respective compliance dates of December 30, 2024, and June 30, 2025. Both the European Parliament and the European Council would have to agree to the EC’s proposal.
Simultaneously, the EC published additional guidance and updated FAQs to help in-scope entities comply with the Deforestation Regulation. The Deforestation Regulation covers commodities such as cattle, cocoa, coffee, oil palm, rubber, soy, and timber, and products derived from these commodities. It requires companies trading in these goods to conduct extensive supply chain due diligence efforts to ensure that these goods do not result from recent (i.e., post-December 31, 2020) deforestation, forest degradation, or breaches of local environmental and social laws.
Australia
Australia Set to Adopt First Mandatory Climate-Based Financial Reporting Framework
On September 20, 2024, the Australian Accounting Standards Board (AASB) finalized disclosure standards for the country’s first mandatory climate-related reporting regime. The AASB approved the Australian Sustainability Reporting Standards, which are now considered to align more closely with international standards than the AASB’s earlier draft from October 2023. Australia introduced the climate-reporting regime through the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill (the Act). The Act requires both listed and non-listed companies to comply with elements of the reporting regime. Annual reporting periods will commence based on the size of an entity or its level of emissions.
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International Auditing and Assurance Standards Board (IAASB) Approves International Standard on Sustainability Assurance 5000 (ISSA 5000)
On September 20, 2024, the IAASB approved the proposed ISSA 5000. Formal publication of the standard is expected in December 2024, followed by the publication of Range of Guidance and Application Material in January 2025. ISSA 5000 provides a profession-agnostic standard for sustainability assurance engagements, aiming to enhance the trust and confidence of investors, regulators, and other stakeholders in sustainability information. The standard is principles-based and can be applied to information about all sustainability topics and aspects of topics.
| Litigation and Enforcement Actions |
United States
Missouri Withdraws Appeal on ESG Investing Rules
In August 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 limiting the extent to which financial experts could consider ESG factors while advising on client investments (the Rules). 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. Missouri initially opted to appeal the judgment in the U.S. Court of Appeals for the Eighth Circuit, but Missouri has since withdrawn its appeal and agreed to pay the plaintiffs $500,000 for legal fees to settle the matter.
Commodity Futures Trading Commission (CFTC) Sues Former Carbon Credit Project Developer CEO over Misleading Emission-Reduction Reporting
On October 2, 2024, the CFTC initiated legal proceedings against Kenneth Newcombe, the former CEO and majority investor in a carbon credit project company, for his alleged involvement in reporting deceptive information to a carbon credit registry, third-party reviewers, and others. The complaint against Newcombe marks one of the CFTC’s first actions for fraud in the voluntary carbon credit market. The CFTC seeks a variety of civil penalties, including monetary fines, disgorgement of illegitimate profits, compensation for damages, and an injunction to prevent further breaches of the Commodity Exchange Act.
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| Wilson Sonsini's Sustainability Highlights |
Client Highlights
Wilson Sonsini Advises Pure Lithium on Asset Acquisition of Dimien
On October 1, 2024, Pure Lithium Corporation, a disruptive Boston-based vertically integrated lithium metal battery technology company, announced the acquisition of all the assets of Dimien Inc., a private U.S. vanadium cathode materials company. Pure Lithium acquired Dimien’s intellectual property, know-how, and manufacturing equipment. Dimien's experienced team will also join the company. Wilson Sonsini advised Pure Lithium on the transaction.
Wilson Sonsini Advises Kairos Power on Agreement with Google for 500MW of Clean Energy
On October 14, 2024, Kairos Power and Google announced they have signed a Master Plant Development Agreement, creating a path to deploy a U.S. fleet of advanced nuclear power projects totaling 500 MW by 2035. Wilson Sonsini represented Kairos Power in the transaction.
Firm Advises Clearway on Offtake Agreements for Pine Forest Solar and Storage Project
On October 2, 2024, Clearway Energy Group (Clearway) announced that it has closed financing and begun construction on the 300 MW solar and 200 MW standalone storage Pine Forest project in Hopkins County, Texas. Once complete, the Pine Forest project will generate enough electricity to power over 90,000 homes with reliable, low-cost energy. Dell Technologies contracted a significant portion of the solar project under a long-term virtual power purchase power agreement (vPPA) to support its climate goals. Separately, Universal Corporation is also contracted under a vPPA with the Pine Forest solar project. Wilson Sonsini advised Clearway on the negotiation of the two offtake agreements/vPPAs opposite Dell Technologies and Universal Corporation.
Wilson Sonsini Advises Type One Energy on Patent Matters Related to $82.4 Million Seed Round
Wilson Sonsini client, Type One Energy, Inc. recently closed its $82.4 million seed financing round as it pursues a direct path to commercializing fusion energy.
Events
Wilson Sonsini Participates in the American Council on Renewable Energy (ACORE) 2024 Grid Forums
On October 10, 2024, Wilson Sonsini attended the ACORE Grid Forum, an event which convened grid experts, regulators, and leaders of clean energy, storage, and transmission companies in Arlington, Virginia. Attendees heard insights on grid innovations to meet growing power demand, national security considerations, and what’s next for regional and interregional transmission planning. Wilson Sonsini attorney Nic Gladd served as a panelist on “Fixed or a First Step? Maximizing the Benefits of FERC’s Transmission Planning Rule.” Wilson Sonsini was a presenting sponsor of the event.
Wilson Sonsini Attends the Berkeley Energy & Resources Collaborative (BERC) Fall Symposiums
On October 11, 2024, Wilson Sonsini participated in the BERC Resource Symposium–a dynamic one-day, student-run conference at UC Berkeley. This year’s theme was Land Use Solutions for Decarbonization and Resilience. Wilson Sonsini served as a sponsor of the event.
Wilson Sonsini Participates in the News Project Media (NPM) DG Development & Finance Forums
Wilson Sonsini served as a sponsor for NPM’s DG Development & Finance Forum, which took place on October 23 and 24, 2024. The event brought together over 250 attendees, including over 30 senior-level industry leading speakers. Wilson Sonsini attorney Elina Coss was a featured speaker at the event and served as a moderator on the panel “Tax Equity & Debt Financing Accelerating DG Projects.”
Wilson Sonsini Attends Seattle Fusion Week
Seattle Fusion Week took place from October 21 through 23, 2024, in Seattle, Washington and Everett, Washington. The event brought together fusion energy companies, elected officials, research institutions, non-governmental organizations, and more for educational presentations and a networking reception. Wilson Sonsini was a sponsor of the event.
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The U.S. Department of Energy will provide up to $900 million in federal funding for the development of Gen III+ nuclear small modular reactors.
Technology companies made large investments in generating electricity from nuclear power.
The U.S. Environmental Protection Agency issued a final rule requiring rigorous water testing and the replacement of legacy lead pipes in drinking water systems nationwide.
A ruling by the South Korean Constitutional Court found that the government’s framework for addressing climate change violates the South Korean Constitution’s mandate of environmental conservation.
Singapore Exchange Regulation announced its adoption of international sustainability standards in climate-reporting regime.
The Irish government proposed raising the tax on petrol and diesel emissions to €63.50, while lowering the vehicle registration tax rate to eight percent for low-emission vehicles.
Colombia’s national government announced plans to advance the country’s energy transition.
Keurig Dr. Pepper, Inc. will pay a $1.5 million civil penalty after the SEC issued an order charging the company with making inaccurate statements concerning the recyclability of its single-use beverage pods in its annual reports.
Geological survey discovers lithium reserves in Southwestern Arkansas estimated at between five and 19 million tons.
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