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SEC Adopts Climate-Related Disclosure Rules

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The U.S. Securities and Exchange Commission (SEC) today adopted final rules for the “Enhancement and Standardization of Climate-Related Disclosures for Investors” (the Rules). The Rules require registrants to disclose climate-related risks that have had, or are reasonably likely to have, a material impact on business strategy, results of operations, or financial condition, together with their associated actual or potential material impacts. The Rules do not require reporting on Scope 3 emissions or greenhouse gas (GHG) emissions originating in a registrant’s value chains or outside of its direct operations (as was proposed in earlier versions – see our earlier bulletin here). The Rules notably require more disclosure from registrants on capitalized costs, expenditures expensed, and losses related to material use of carbon credits. Disclosure requirements will be phased-in between 2025-2033, with compliance dates dependent on the type of registrant. The SEC also published a fact sheet alongside today’s release. This bulletin briefly summarizes key details of the Rules. Content of the disclosures. The Rules will require a registrant to disclose, among other things: Strategy. The Rules require disclosure of the following strategy-related climate risks and impacts: actual and potential material impacts of any identified climate-related risks on the registrant’s strategy, business model, and outlook; if, as part of its strategy, a registrant has undertaken activities to mitigate or adapt to a material climate-related risk or has adopted a transition plan to manage material risks, a quantitative and qualitative description of material expenditures incurred and material impacts on financial estimates and assumptions that directly result from such mitigation or adaptation activities; and specified disclosures regarding a registrant’s activities, if any, to mitigate or adapt to a material climate-related risk including the use, if any, of transition plans, scenario analysis, or internal carbon prices. Risk management. The Rules require disclosure of a registrant’s climate-related risk management, including: any oversight…

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U.S. and China Release Sunnylands Statement Ahead of COP 28

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The United States and China announced renewed commitment to enhance cooperation to address the climate crisis in the Sunnylands Statement released on November 14, 2023 (the Statement). Both countries indicated their commitment to the effective implementation of the UNFCCC and the Paris Agreement, including the Glasgow Climate Pact and the Sharm el-Sheikh Implementation Plan, and to further the effective and sustained implementation of the U.S.-China Joint Statement Addressing the Climate Crisis and the U.S.-China Joint Glasgow Declaration on Enhancing Climate Action in the 2020s. This bulletin provides key details of the new and renewed commitments in the Statement. COP 28. The countries indicated that the consensus Global Stocktake decision expected to come out of COP 28 should, among other things: reflect that substantially more ambition and implementation on action and support will be needed to achieve the Paris Agreement’s goals; send signals with respect to the energy transition (renewable energy, coal/oil/gas), carbon sinks including forests, non-CO2 greenhouse gases (GHGs) including methane, and low-carbon technologies; encourage economy-wide 2035 Nationally Determined Contributions (NDCs) covering all GHGs; note the expectation of developed countries that the $100B climate finance goal will be met in 2023; welcome the recommendations of the Transitional Committee with respect to establishing funding arrangements to address loss and damage, including the establishment of a fund; and emphasize the important role of international cooperation. 2035 NDCs. The U.S. and China both affirmed that their 2035 NDCs under the Paris Agreement will be economy-wide, include all GHGs, and reflect emission reductions aligned with the Paris Agreement temperature goals. Energy Transition. The Statement provides important commitments related to the energy transition, including: support for the G20 Leaders Declaration to pursue efforts to triple renewable energy capacity globally by 2030 and sufficiently accelerate renewable energy deployment through 2030 from 2020 levels to accelerate the…

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US EPA Releases Ambitious Proposed Rules for Federal Vehicle Emissions Standards

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The U.S. Environmental Protection Agency (EPA) yesterday announced new proposed federal vehicle emissions standards that are intended to accelerate the ongoing transition to cleaner vehicles and reduce emissions. The proposals would avoid nearly 10 billion tons of CO2 emissions through 2055, equivalent to more than twice the total U.S. CO2 emissions in 2022. The proposed regulations are designed to ensure that electric vehicles (EVs) make up as much as 67 per cent of new passenger vehicles sold in the U.S. by 2032. If implemented, we anticipate that the proposed regulations will have a significant impact on Canada’s economy given the high level of integration of automotive sectors and Canada’s rich supply of critical minerals essential to the production of EVs and EV batteries. This bulletin briefly summarizes the proposed rules: Light- and Medium-Duty Vehicles. The first set of proposed standards, the “Multi-Pollutant Emissions Standards for Model Years 2027 and Later Light-Duty and Medium Duty Vehicles”, builds on the EPA’s existing emissions standards for passenger cars and light trucks for model years (MYs) 2023 through 2026. The EPA projects that, with the new standards, EVs could account for 67% of new light-duty vehicle sales and 46% of new medium-duty vehicle sales in MY 2032. The proposed MY 2032 light-duty standards are projected to result in a 56% reduction in projected fleet average greenhouse gas emissions target levels compared to the existing MY 2026 standards. The proposed MY 2032 medium-duty vehicle standards would result in a 44% reduction compared to MY 2026 standards. Heavy-Duty Vehicles. The second set of proposed standards, the “Greenhouse Gas Standards for Heavy-Duty Vehicles – Phase 3”, would apply to heavy-duty vocational vehicles (such as delivery trucks, refuse haulers or dump trucks, public utility trucks, transit, shuttle, school buses) and trucks typically used to haul freight. These standards would complement the criteria pollutant standards…

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President Biden Signs Inflation Reduction Act

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The United States has just passed arguably its most significant and meaningful legislative instrument on climate change and clean energy. It is intended to have positive implications for climate and clean energy markets around the globe. On Sunday, August 8, 2022, the US Senate passed the Inflation Reduction Act of 2022 (the Act). The Act was then passed by the House of Representatives on Friday, August 12, 2022, and President Biden signed it into law today (Tuesday, August 16, 2022). The Act represents a central pillar of President Biden’s policy agenda and is extremely ambitious in scope, with significant implications for healthcare, taxes, and climate change. It authorizes approximately US$430 billion in spending, with approximately US$369 billion of that sum directed to clean energy and addressing climate change. This bulletin highlights the central climate and energy provisions of the Act. It is noteworthy that Senate Democrats estimate that the Act will raise US$739 billion in new revenue through measures such as increasing the IRS’s enforcement of tax evasion, and a new 15% minimum tax rate applicable to corporations with profits of $1 billion or more. These new revenues are intended to more than offset the expenses resulting from new programs, resulting in a projected reduction in the federal government’s deficit. The Senate was the critical hurdle for the Act, with approval remaining in doubt until its final passing by a vote of 51-50 (along strict party lines with Vice President Harris casting the 51st and tie-breaking vote).   Senate Democrats indicate that the climate change provisions of the Act will result in a 40 percent reduction in carbon emissions by 2030 compared to 2005 levels when fully implemented. While this falls short of America’s updated Paris Target of a 50-52% reduction from 2005 GHG emissions by 2030, it constitutes meaningful progress toward that goal.    The climate and energy portions…

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CFTC Seeks Comment on Climate-Related Financial Risk

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The U.S. Commodity Futures Trading Commission (CFTC) has released a Request for Information seeking public comment on climate-related financial risk (the RFI). The CFTC notes that the RFI will inform its understanding and oversight of climate-related financial risk relevant to the derivatives markets, underlying commodities markets, registered entities, registrants, and other related market participants. This bulletin briefly summarizes the RFI. The RFI is seeking comments on questions posed by the CFTC around the following topic areas: data; scenario analysis and stress testing; risk management; disclosure; product innovation; voluntary carbon markets; digital assets; financially vulnerable communities; public-private partnership/engagement; and capacity and coordination. The CFTC indicated that it may use the responses and comments received through the RFI to inform potential future actions including the issuance of new or amended guidance, interpretations, policy statements, or regulations, or other potential action by the CFTC. All of the CFTC’s commissioners voted in favour of the RFI. However, Commissioner Mersinger, in a concurring statement included in the RFI, indicated that several of the questions in the RFI were beyond the jurisdiction of the CFTC. Commissioner Mersinger asserted that the CFTC does not regulate commodity markets and does not have statutory authority to create a registration framework for participants within voluntary carbon markets nor the authority to regulate digital assets or distributed ledger technology outside of activities related to derivatives. In addition, Commissioner Pham stated that the CFTC should seek to harmonize any climate risk management framework with existing prudential and other regulatory regimes for registrants already subject to such regimes. The RFI follows the CFTC’s first Voluntary Carbon Convening (the Convening) which discussed issues related to the supply and demand for high quality carbon offsets, including product standardization and the data necessary to support the integrity of carbon offsets’ greenhouse gas emission avoidance and claims.…

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