|
United States
House Passes the “One Big Beautiful Bill Act” Which Includes Substantial Changes to Federal Energy Tax Credits in First Step of Budget Reconciliation Process
The Congressional budget reconciliation process is underway and on May 22, 2025, the U.S. House of Representatives passed legislation, commonly referred to as "The One Big Beautiful Bill" (the House Bill), by a mostly party-line vote of 215-214-1. If enacted, the House Bill would make significant changes to energy tax law, including substantial cutbacks to various tax credits that were created or expanded under the Inflation Reduction Act of 2022 (IRA). For example, many technologies that currently qualify under the "tech-neutral" Clean Electricity Production Tax Credit (Section 45Y PTC) and the Clean Electricity Investment Tax Credit (Section 48E ITC) would be eliminated under the House Bill if construction of the applicable facility does not begin before 60 days after enactment or if the applicable facility is placed-in-service after 2028. Additionally, the House Bill would end a number of tax credits earlier than under current law. Each of the transportation-related tax credits, the Section 25C energy efficient home improvement credit, Section 25D residential clean energy credit, Section 45L new energy efficient home credit, and Section 45V clean hydrogen production credit would expire on December 31, 2025, and the Section 45U zero-emission nuclear production tax credit, the Section 45X advanced manufacturing production tax credit, and the Section 48(a) legacy energy credit for geothermal heat pumps earlier than is provided for under IRA. Moreover, the House Bill would expand foreign entity of concern (FEOC) restrictions.
We continue to monitor these critical legislative developments during the budget reconciliation process. For a more detailed breakdown of the legislation, please see our Client Alert.
Colorado Redefines “Clean Energy Resource” to Include Nuclear Energy
In April 2025, Colorado Governor Jared Polis signed HB25-10, which adds nuclear energy to the definition of a clean energy resource. With the signing of HB25-10, nuclear energy may now contribute to the state’s 2050 net-zero emissions goal. Although Colorado does not currently have any nuclear power plants, proponents of HB25-10 hope nuclear energy could complement wind and solar energy production. Opponents of HB25-10 expressed concerns that nuclear reactors are expensive, and the clean energy designation alone may not adequately contribute to clean energy generation in the state.
Securities and Exchange Commission (SEC) Approves Registration for First “Green” Stock Exchange
On April 11, 2025, the SEC approved Green Impact Exchange’s (GIX) application to register as a national securities exchange, thereby greenlighting the first “green” stock exchange in the U.S. GIX will initially be a dual-listing platform for companies listed on other national exchanges and will operate a fully automated electronic order book, allowing users to electronically submit orders to buy and sell certain approved securities. Publicly traded companies will be able to list on GIX’s exchange so long as they agree to adopt the exchange’s sustainability standards. For instance, among other standards, GIX requires listed companies to have public commitments to long-term sustainability and accountability mechanisms, established goals that “will lead to operating its business sustainably,” along with a strategy to achieve such sustainability goals within a commonly accepted reporting framework. GIX expects trading on the platform to begin in early 2026.
Europe
German Regulator Publishes Guidance on the German Supply Chain Due Diligence Act (SCDDA) and Antitrust Issues
On April 9, 2025, a German regulator published a German-language guidance paper on how companies may engage in industry initiatives to comply with the SCDDA without falling foul of antitrust law. The guidance by the Federal Office for Economic Affairs and Export Control, which enforces the SCDDA, emphasizes that, according to European Union (EU) antitrust regulations, companies that cooperate with competitors in supply chain due diligence may not share competitively sensitive information. The guidance reminds companies that group boycotts under German antitrust law, although it may be legal to stop buying from suppliers who do not comply with human rights standards. The guidance also contains details on potential measures that industry initiatives may wish to engage in to further companies’ compliance efforts with the SCDDA.
German Coalition Agreement Seeks to Abolish SCDDA
On April 9, 2025, the political parties who have formed Germany’s new federal government presented their coalition agreement, which promises to abolish the SCDDA. The SCDDA requires large companies with more than 1,000 employees in Germany to conduct human rights and environmental due diligence in their own operations and in their supply chains and to publish reports. These requirements were seen by some as very onerous and going beyond what will be required by incoming EU legislation (although the EU is currently seeking to reduce the scope of this legislation).
The new coalition aims to replace the SCDDA with a new law implementing the EU’s Corporate Sustainability Due Diligence Directive (CSDDD). The coalition agreement states that the reporting requirement under the SCDDA will be immediately abolished, and that breaches of due diligence requirements set out in the SCDDA, apart from “massive human rights violations,” will not be sanctioned until the law implementing the CSDDD goes into effect.
European Corporate Sustainability Reporting Rules Postponed
On April 17, 2025, the European Commission’s (EC’s) “Stop the Clock” proposal became law after its publication in the Official Journal of the EU on the previous day. The European Parliament’s April 3, 2025, vote had approved the proposal, as had the Council of the European Union’s vote on April 14, 2025. The law postpones the application of the CSDDD until July 2028, and similarly postpones the phase-in of reporting requirements under the Corporate Sustainability Reporting Directive (CSRD) for companies of the second and third wave until 2028.
European institutions are continuing to negotiate the substantive changes to the CSRD and CSDDD which the EC proposed in its Omnibus legislative package on February 26, 2025. Some of the proposals to simplify the laws have proven to be controversial in the European Parliament, and a political agreement might not be reached until late 2025.
For more details on the EC's Omnibus legislative package, please see our March 2025 Sustainability and ESG Advisory Practice Update.
EC Publishes Updated Guidance, FAQs, and Draft Delegated Act for EU Deforestation Regulation (EUDR)
On April 15, 2025, the EC published updated guidance and FAQs on the EUDR, aiming to help companies demonstrate that their products do not contribute to deforestation. The EC stated that it aimed to simplify the rules and reduce the administrative burden of the EUDR on companies operating in the EU. The EC additionally published a draft of the Delegated Act which is open for public consultation until May 13, 2025. If adopted, the draft Delegated Act would address stakeholders’ request for guidance on specific categories of products. Finally, the EC intends to adopt a country benchmarking system through an Implementing Act no later than June 30, 2025. The benchmarking system will classify countries, or parts thereof, into three categories (high, standard, and low risk).
The EUDR 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 (post December 31, 2020) deforestation, forest degradation, or breaches of local environmental and social laws. Large companies have until December 30, 2025, to comply with their obligations under the EUDR, and SMEs have until June 30, 2026.
EC Adopts Working Plan for Ecodesign for Sustainable Products Regulation (ESPR) and Energy Labeling Regulation (ELR)
On April 16, 2025, the EC published its 2025-2030 working plan for the ESPR and the ELR. The plan includes a list of products that should be prioritized for introducing ecodesign and energy labeling requirements over the next five years. The priority products for ecodesign and energy labeling requirements are steel and aluminum, textiles (especially apparels), furniture, tires, and mattresses. In addition, the EC intends to introduce requirements on repairability for products such as consumer electronics and small household appliances.
The ecodesign and energy labeling requirements will cover, on the one hand, product performance characteristics (e.g., minimum durability, spare parts availability, or minimum recycled content), and on the other hand, product information, including key product features such as the products’ carbon and environmental footprint. The EC will set requirements via delegated acts on a product-by-product basis or for groups of similar products.
EC Plans Revision of the Sustainable Finance Disclosure Regulation (SFDR)
On May 2, 2025, the EC initiated a call for evidence to review the SFDR. Stakeholders are asked to submit general feedback by May 30, 2025. The SFDR sets disclosure requirements for financial market participants regarding their organization, services, and products, and is meant to prevent so-called greenwashing and to allow investors to assess sustainability risks.
The call for evidence notes that the EC is looking to reduce ESG reporting burdens for financial market participants and to ensure overall coherence of the rules on sustainable finance. Notably, the EC wants a revised SFDR to conform with potential changes to corporate sustainability reporting obligations as envisaged in the EU Omnibus on the CSDR and the Taxonomy Regulation. The EC is planning for the revision of the SFDR to take place in the fourth quarter of 2025.
European Securities and Markets Authority (ESMA) Consults on Proposed Regulatory Technical Standards (RTS) Under ESG Rating Regulation
On May 2, 2025, ESMA, the EU’s financial markets regulator and supervisor, opened a consultation on its proposed RTS under the ESG Rating Regulation. The ESG Rating Regulation was adopted by the EU in 2024 and aims to improve the transparency and integrity of the business activities of ESG ratings providers. Under the ESG Rating Regulation, ESMA authorizes and supervises providers of ESG ratings and sets requirements for methodologies to be used for ratings.
ESMA’s proposed RTS cover for instance i) which information ESG rating providers should provide to be authorized, ii) which safeguards should be present to mitigate conflicts of interest with other business activities, and iii) what information rating providers should have to disclose to interested parties as well as the public. The draft RTS will be open for consultation until June 20, 2025. ESMA faces a statutory deadline of October 2, 2025, to submit the draft RTS to the EC, which may then formally adopt them.
|
