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United States
A Note Regarding President Donald J. Trump's Day-One Executive Orders
On January 20, 2025, President Donald Trump signed a flurry of executive orders that signal a distinct shift in U.S. policy on a range of topics. Among other things, these orders initiated the United States' withdrawal from the Paris Agreement, disbanded the Interagency Working Group on the Social Cost of Greenhouse Gases, paused disbursement of funds appropriated through the Inflation Reduction Act of 2022 and the Infrastructure Investment and Jobs Act, signaled an intent to repeal subsidies for electric vehicles and state vehicle emissions standards waivers, and temporarily prevented new or renewed wind energy leasing on the Outer Continental Shelf. President Trump also announced a national emergency relating to domestic energy production, and directed federal agencies to take steps to expedite infrastructure and energy production development. Finally, these executive orders also instructed agencies to expedite certain environmental reviews and permitting, such as under the National Environmental Policy Act. To be clear, the executive orders as of the date of this update do not apply directly to federal clean energy tax incentives, but agency reviews conducted per the instruction of these orders may lead to future proposals to rescind or revise implementing guidance. The executive orders set forth a clear shift in energy policy priorities, expressly favoring fossil fuel development. In many instances, the executive orders require federal agencies to begin the process of repealing and replacing current regulations to implement those policy goals. We anticipate further changes in the regulatory landscape. We continue to monitor those changes and will provide updates as they develop and, as always, are available to help our clients and the industry navigate these changes. For more information about President Trump's executive orders regarding clean energy and climate technologies, please see our client alert.
President Trump Issues Executive Orders Addressing Diversity, Equity, Inclusion, and Accessibility (DEIA)
On January 20 and 21, 2025, President Donald Trump signed executive orders titled "Ending Radical and Wasteful Government DEI Programs and Preferencing" and "Ending Illegal Discrimination and Restoring Merit-Based Opportunity." These orders aim to dismantle DEI policies across the federal government by, among other things, requiring the Director of the Office of Management and Budget to coordinate the termination of illegal DEIA programs, review and revise all existing federal employment practices, union contracts, and training programs to comply with the new DEIA policy, terminate DEIA offices and positions, and generate lists of federal contractors involved with DEIA programs. Furthermore, the executive orders revoke a number of previous executive orders signed by past presidents, including Executive Order 11246, which President Lyndon B. Johnson signed in 1965 to establish equal opportunity employment at federal contractors.
Companies should expect scrutiny of their DEIA programs. The Ending Illegal Discrimination and Restoring Merit-Based Opportunity executive order directs each federal agency working with the Attorney General to identify, "up to nine potential civil compliance investigations of publicly traded corporations, large non-profit corporations or associations, foundations with assets 500 million dollars or more, State and local bar and medical associations, and institutions of higher education with endowments of over 1 billion dollars."
Companies should remember that existing federal civil rights and anti-discrimination laws continue to govern compliance requirements for federal contracts and grants. A number of lawsuits have been filed challenging several executive orders issued by President Trump and we expect more litigation to ensue, including with respect to aspects of these two DEIA executive orders. We anticipate further changes and guidance in the DEIA realm in the form of executive orders, agency regulations, court opinions, and legislation. We will continue to monitor these changes and provide updates as more information becomes available.
Treasury and IRS Release Final Regulations for Section 45Y Clean Electricity Production Tax Credit and 48E Clean Electricity Investment Tax Credit
On January 7, 2025, the Treasury and the IRS issued final regulations regarding the clean electricity production tax credit under Section 45Y and the clean electricity investment tax credit under Section 48E of the Internal Revenue Code of 1986, as amended (the Code). The Final Regulations provide updates to proposed regulations published on June 3, 2024, including clarifications for determining greenhouse gas emissions rates resulting from the production of electricity, petitioning for provisional emissions rates, and determining eligibility for the clean electricity production tax credit and investment tax credit in various circumstances.
For more information regarding such clean electricity tax credits, see our prior white paper and our client alert.
IRS Releases Final Regulations on Clean Hydrogen Production Credit Under Section 45V of the Code
On January 3, 2025, the Treasury and the IRS released final regulations on the clean hydrogen production credit under Section 45V of the Code. Such regulations provide rules for determining lifecycle greenhouse gas emissions rates resulting from hydrogen production processes, petitioning for provisional emissions rates, verifying production and sale or use of clean hydrogen, modifying or retrofitting existing qualified clean hydrogen production facilities, using electricity from certain renewable or zero-emissions sources to produce qualified clean hydrogen, and electing to treat part of a specified clean hydrogen production facility instead as property eligible for the energy credit under Section 48 of the Code. The regulations affect all taxpayers who produce qualified clean hydrogen and claim the clean hydrogen production credit, elect to treat part of a specified clean hydrogen production facility as property eligible for the Section 48 energy credit, or produce electricity from certain renewable or zero-emissions sources used by taxpayers or related persons to produce qualified clean hydrogen.
For more information on the final regulations, please see our client alert.
IRS Releases Final Regulations Regarding Low-Income Communities Bonus Credit Amounts Under Inflation Reduction Act
On January 8, 2025, the Treasury and the IRS released final regulations regarding the program for allocating low-income communities bonus credit amounts under the Inflation Reduction Act of 2022 for calendar years 2025 and succeeding years. Such regulations affect taxpayers seeking allocations of capacity limitation to claim an increased clean electricity investment tax credit for the taxable year in which a qualified facility is placed in service and provide definitions and requirements that are applicable for the program.
New York Signs Climate Change Superfund Act
On December 26, 2024, the governor of New York signed the Climate Change Superfund Act, requiring oil and gas companies to pay $75 billion over the next 25 years into the state's newly established climate change adaptation cost recovery program. The legislation creates a "Climate Superfund" aimed at financing projects in New York that strengthen the state's ability to withstand severe climate change-related events, such as extreme heat and flooding. Notably, it marks an effort to shift the financial burden of climate-change resiliency from the public to fossil fuel companies.
The California Air Resources Board (CARB) Extends Comment Period for California Senate Bills 253 and 261
CARB solicited public comment as part of its efforts to implement Senate Bills 253 and 261. Due to the California wildfires, CARB has subsequently extended the comment period deadline to March 21, 2025.
For more information about Senate Bills 253 and 261, please see our client alert.
Nasdaq Submits SEC Proposal to Remove Board Diversity Rules
On January 17, 2025, Nasdaq submitted a proposal to the U.S. Securities and Exchange Commission (SEC) to remove Nasdaq diversity rules 5605(f) and 5606 and related ancillary rules. The proposal follows the recent decision of the U.S. Court of Appeals for the Fifth Circuit which prohibited Nasdaq from implementing its board diversity rules as previously approved by the SEC. Nasdaq requested that the proposed amendments take effect on February 4, 2025, to align with the Fifth Circuit's mandate implementing the vacatur of the SEC's approval of the diversity rules.
For more information about the Fifth Circuit's opinion, please see our client alert.
Europe
European Union (EU) Market Regulator Issues New Q&As on Guidelines for ESG or Sustainability-Related Fund Names
On December 13, 2024, the European Securities and Markets Authority (ESMA), the EU's financial markets regulator, published additional Q&As on how to apply the guidelines on funds' names using ESG or sustainability-related terms (the Guidelines). The Guidelines provide minimum requirements on how funds based in Europe or marketed in Europe may use ESG or sustainability-related terms in their names. The newly published Q&As address how investments in European Green Bonds affect fund-naming restrictions, to what level of investments in sustainable investments funds should commit to use a sustainability-related name, and what the exclusion related to controversial weapons encompasses.
ESMA published the Guidelines in May 2024. The Guidelines began to apply to new funds starting from November 21, 2024, and will apply to existing funds starting from May 21, 2025.
European Commission (EC) Promises Circular Economy Act in 2026
On December 16, 2024, new EC Commissioner Jessika Roswall promised that the EC would introduce an EU Circular Economy Act in 2026 (the Proposed Act). The Proposed Act is expected to introduce measures that incentivize the use of secondary materials in manufacturing, which will have implications on product design and throughout the supply chain. Sectors such as chemicals, construction, electronics, packaging, transportation, and textiles can be expected to be affected by the Proposed Act. EC President Ursula von der Leyen assigned Commissioner Roswall the task of leading this effort in her mission letter, jointly with Executive Vice-President Séjourné. Once presented by the EC, both the European Parliament and the Council of the EU will have to formally approve the Proposed Act for it to become law.
Underlining the EU's interest in circular economics, on December 17, 2024, the Council of the EU discussed a proposed regulation on circularity requirements for vehicle design and on the management of end-of-life vehicles. The EC's proposed draft would set a minimum recycled content for plastics of 25 percent, and would cover cars, motorcycles, and certain heavy vehicles. Both the European Parliament and the Council of the EU will have to formally approve the proposed regulation for it to become law.
European Banking Authority (EBA) Publishes Guidelines on the Management of ESG Risks
On January 9, 2025, the EBA published its final report on guidelines on the management of ESG risks (the ESG Risk Guidelines), following a public consultation in 2024. The EBA was assigned the task of creating guidelines on minimum standards for identifying, measuring, managing and monitoring ESG risks for financial institutions under Article 87a(5) of the Capital Requirements Directive VI.
The ESG Risk Guidelines require financial institutions to perform institution-specific materiality assessments of ESG risks at least once per year. The scope of the assessment should represent the institutions' activities and product portfolios. Institutions should develop a robust and sound approach to managing and mitigating ESG risks over the short, medium, and long term, including a time horizon of at least 10 years.
An annex to the ESG Risk Guidelines contains key quantitative and qualitative criteria for the assessment of ESG risks. The ESG Risk Guidelines will apply to most financial institutions starting on January 11, 2026. Small and non-complex institutions have until January 11, 2027, to comply with the ESG Risk Guidelines.
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