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Five Key Takeaways from the Green Transportation Panel at the US and UK Climate Change Business Forum

On September 22, 2021, partner Edward Zaelke moderated a panel on green transportation at the US Embassy in London during the US and UK Climate Change Business Forum, Winning the Race to Zero: Journey to COP26. Panel guests included Richard Currie, Senior Director of Public Affairs for UPS; Jamie Heywood, Regional General Manager, Northern & Eastern Europe for Uber, a representative from a large e-commerce company and Lilli Matson, Chief Safety Health & Environment Officer for Transport for London. The discussion provided remarkable insights into how these three major companies and a forward-looking transportation agency of one of the world’s largest cities are approaching the climate challenge before them. A challenge that Philip T. Reeker, former ambassador of the Bureau of European and Eurasian Affairs, noted in his closing remarks, quoting a proverb, “If you don’t change course, you will likely get to where you are heading.” Steps to change course was the focus of this invitation-only conference and, in the area of green transportation, this panel left the audience with a number of key takeaways.

  1. What’s abundantly clear is that UPS, Uber and many e-commerce companies are fully committed and have set aggressive goals to have their operations reach net zero carbon or carbon neutrality. For example, Uber seeks to electrify its fleet of vehicles in London by 2025 and in the United States by 2030. The e-commerce company on the panel is a significant purchaser of green power and seeks to achieve net zero carbon by 2040. UPS, which operates delivery vehicles and also runs a fleet of long haul trucks and its own airplanes, has set near-term goals of carbon reduction and a target of being carbon neutral by 2050.
  2. London is demonstrating a local commitment to climate change that can serve as an example for other cities around the world. Transport for London, which operates the “Tube” subway system (among its other duties), is the largest user of power in London and currently in negotiation for power purchase agreements for renewable power for its operations. In addition to encouraging use of its rapid transit system, the city bought electric buses, required that all new licensed cabs be electric, created clean air zones and congestion zones to encourage electric vehicles and greatly expanded the bike lanes on roadways throughout London.
  3. Uber, UPS and many e-commerce companies view vehicle electrification for local routes as a key to meeting their climate goals. Uber, with more than 45,000 private commercial drivers in the London area alone, is aggressively meeting the challenge. It has developed an “electric vehicle bank” for each of its drivers, where a portion of each fare goes into a savings account to help the driver replace its present vehicle with an electric vehicle. Uber customers can also request Uber Green at no additional charge. Additionally, since many of its drivers live in the suburbs where less than a third of them have off-street parking, Uber is working with the local government to create [...]

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Carbon Capture, Utilization and Sequestration – An Industry Primed for Explosive Growth? A Summary of the White House Council on Environmental Quality’s Report

On June 30, 2021, the White House Council on Environmental Quality (CEQ) delivered a Carbon Capture, Utilization and Sequestration (CCUS) report to Congress in accordance with the Utilizing Significant Emissions with Innovative Technologies (USE IT) Act passed in December 2020. The CEQ report highlights an inventory of existing permitting requirements for CCUS deployment and identifies best practices for advancing the efficient, orderly and responsible development of CCUS projects at an increased rate.

The Biden Administration is “committed to accelerating the responsible development and deployment of CCUS to make it a widely available, increasing cost-effective, and rapidly scalable climate solution across all industry sectors.” CEQ Chair Brenda Mallory recognized that in order “[t]o avoid the worst impacts of climate change and reach President Biden’s goal of net-zero emissions by 2050, we need to safely develop and deploy technologies that keep carbon pollution from entering the air and remove pollution from the air…The report … outlines a framework for how the U.S. can accelerate carbon capture technologies and projects in a way that benefits all communities.” Development of CCUS projects and related infrastructure will be encouraged and favorably looked upon by the Biden Administration as a demonstrable example of how it’s seeking to combat climate change.

CCUS – OPPORTUNITY OF THE FUTURE FOR MIDSTREAM COMPANIES?

CCUS refers to a set of technologies that remove carbon dioxide (CO2) from the emissions of point sources or the atmosphere and permanently sequesters them. In addition to removing CO2, carbon capture technology has the potential to remove other types of pollution, such as sulfur oxides. According to leading scientists and experts, removal of CO2 from the air is essential to addressing the climate crisis and alleviating the most severe impacts of climate change. Beyond the impact carbon capture technology will have on the climate crisis, CCUS will continue to have a valuable role in the US economy as the technology continues to evolve.

The CEQ report makes it extremely clear that any effective nationwide rollout of CCUS is heavily dependent on a massive buildout of pipelines for CO2 transportation infrastructure. Currently, there are approximately 45 CCUS facilities in operation or in development and 5,200 miles of dedicated CO2 pipelines. The number of CCUS facilities and the breadth of dedicated CO2 pipelines will need to expand at a rapid rate if CCUS is to become an effective tool for meeting net-zero emission by 2050.

Establishing CCUS at scale is going to be heavily dependent on—and presents a great opportunity for—midstream pipeline developers. Despite the 5,200 miles of CO2 pipelines and the potential to employ “orphaned” pipeline networks previously used by the oil and gas industry once remediated, there is no current network of CO2 pipelines at a scale large enough for permanent carbon sequestration across all industrial sectors. Thus, to achieve climate goals set by the Biden Administration, a significant amount of CO2 pipelines will need to be developed. According to the CEQ report, expansion of CO2 pipeline infrastructure in “the near term is [...]

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Why 2030 is the New 2050 after the Leaders Climate Summit and What President Biden’s Accelerated Transition to a Sustainable Economy Means for Renewables Developers, Investors and Corporates

2030 is the new 2050 as US President Joe Biden has officially set a new goal for fighting climate change over the next decade in the United States. At the Leaders Climate Summit (the Summit) on Earth Day, he announced that America would aim to cut its greenhouse gas emissions at least 50% below its 2005 levels by 2030. If successful, this transition would lead to a very different America and would affect virtually every corner of the nation’s economy, including the way Americans get to work, the sources from which we heat and cool our homes, the manner in which we operate our factories, the business models driving our corporations and the economic factors driving our banking and investment industries. The effectiveness of this transition lies in the administration’s ability to pull on two historically powerful levers: Tax policy and infrastructure funding. However, tax policy will call upon multiple sublevers, such as increased tax rates, expanded tax credits, refundability, carbon capture, offshore wind, storage, transmission and infrastructure investment. All of this will be bolstered by the American corporate sector’s insatiable appetite for environmental, sustainability and governance (ESG) goal investment.

QUICK TAKEAWAYS

There were six key announcements at the Summit for renewables developers, investors and corporates to take note:

  1. The United States’ commitment to reduce its greenhouse gas emissions by 50% – 52% below its 2005 emissions levels by 2030
  2. The United States’ economy to reach net-zero emissions by no later than 2050
  3. The United States to double the annual climate-related financing it provides to developing countries by 2024
  4. The United States to spend $15 billion to install 500,000 electric vehicle charging stations along roads, parking lots and apartment buildings
  5. A national goal to cut the price of solar and battery cell prices in half
  6. A national goal to reduce the cost of hydrogen energy by 80%

President Biden’s goals are ambitious. It is clear from the history of renewable incentives in the United States as well as current developments that moving forward, the green agenda will predominately rely on two primary levers being pulled at the federal level: Tax policy and infrastructure funding. The federal tax levers mentioned above will not be pulled in a vacuum. Instead, they will be pulled in the midst of a tectonic shift among individual investors that now demand that institutional investors and corporations begin to create and meet ESG goals as individual customers are beginning to take a corporation’s climate goals and footprint into account when making purchasing decisions.

As a result, we discuss the following areas in greater detail below:

  1. Tax policy
    1. increased tax rates
    2. expanded tax credits
    3. refundability
    4. carbon capture
    5. offshore wind
    6. storage
    7. transmission
  2. Infrastructure bill
  3. ESG environment

DEEPER DIVE: BREAKING DOWN EACH LEVER AS WELL AS ITS OPPORTUNITIES AND CHALLENGES

  1. Tax Policy: The consistent message from the Biden Administration, at the Summit and elsewhere, makes clear that tax policy will likely play a significant role in the administration’s ambitious climate agenda. At [...]

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New Resource Center: Navigating Change in the US Administration

Pandemic relief, taxes, income inequality, climate change, infrastructure, healthcare and civil rights: the new US administration is moving forward rapidly on President Joe Biden’s stated priorities. So how are these new policies affecting your business? We’re here to keep you informed!

McDermott Will & Emery’s multidisciplinary team of industry-leading lawyers are monitoring key legal areas to help you navigate and gain perspective on the most critical impacts of changing US policies. Access the latest updates in our new resource center.




Biden Administration Continues to Shift National Infrastructure and Transportation Networks to Pave the Way for Electric Vehicles

On Tuesday, US National Climate Advisor Gina McCarthy publicly underscored President Joe Biden’s commitment to supporting the electric vehicle (EV) industry and other industries aimed at tackling the climate crisis. She noted the administration’s goal is to build more than 500,000 EV chargers. The electric vehicle charging station market size is projected to surpass around USD $39.2 billion by 2027 and witness a compound annual growth rate of 40.7% from 2020 to 2027.

McCarthy made her comments during a meeting with key stakeholders and influential policymakers in the EV and EV charging industries, including senior staff of the Department of Transportation, chief executive officers of companies producing electric vehicle charging infrastructures, the National Economic Council and the Council of Environmental Quality.

This is a further demonstration by the administration that it will rely upon the insight of renewable energy leaders to produce, navigate and accelerate the production of national renewable energy infrastructure. The administration also sees the modification of our national renewable energy infrastructure as a means to strengthen American manufacturing, create new employment opportunities and speed economic recovery through the pandemic crisis.

McCarthy’s remarks are part of a growing trend to find executive and legislative avenues to addressing the climate crisis. Democrats in the US House of Representatives have introduced legislation that aims to reduce economy-wide greenhouse gas emissions to net-zero by 2050. This emphasis has similarly carried over into the realm of domestic infrastructure. The CLEAN Future Act aims to require all retail electric providers to generate 100% of their power from zero-emissions resources by 2035, and 80% by 2030.

The federal government is not the only actor racing to find ways to meet the anticipated demand for electric vehicles and the subsequent infrastructural changes that will be required. A conglomerate of utilities has committed to cooperating to create a “seamless network” of charging stations along major highways.

These efforts across industries and branches of government indicate the inevitability of growth in the renewable energy industry and that the desire for opportunities for electric vehicles across the country will continue to be fueled.




Granholm Confirmed as Energy Secretary

Today, Jennifer Granholm was confirmed as secretary of energy, winning US Senate approval by a 64–35 vote. Granholm’s confirmation serves as another boost to President Joe Biden’s plan to tackle climate change and develop clean energy across the United States. Granholm, who is an advocate for electric vehicles and other low-carbon technologies, will join Pete Buttigieg, the secretary of transportation, as a member of President Biden’s cabinet selected to further a green economy and green infrastructure.

Granholm, who served two terms as the governor of Michigan, worked with the automotive industry during her term to obtain more than $1 billion in federal funding for Michigan companies to manufacture electric vehicles and batteries. Under Granholm’s leadership, Michigan also adopted standards requiring utilities to utilize renewable energy sources. Granholm promoted the use of wind and solar technology during her confirmation hearing by telling senators, “We can buy electric car batteries from Asia or we can make them in America. We can install wind turbines from Denmark or we can make them in America.” She believes investing in renewable energy technologies will create more American jobs and boost the US economy.

Granholm’s confirmation will likely serve as encouragement for developers, lenders and investors in the renewable energy industry, as this will create more opportunities for renewable energy projects across the country and amplify the need for clean energy.




The Carbon Tax Checklist

Many stakeholders have called for the United States to adopt a carbon tax. Such a tax could raise billions of dollars in annual revenue while simultaneously reducing greenhouse gas emissions. Several carbon tax proposals were introduced in the last Congress (2019-2020 term), and it is likely that several more will be introduced in the new Congress. Several conservative economists have endorsed the idea, as has Janet Yellen, President Biden’s Secretary of the Treasury. But the details of a carbon tax matter—for revenue generation, emissions reductions and fairness. Because Congress is likely to consider several competing carbon tax proposals this year, this article provides a way to compare proposals with a checklist of 10 questions to ask about any specific legislative carbon tax proposal, to help understand that proposal’s design and implications.

1. What form does the tax take: Is it an emissions tax, a fuel tax or a production tax?

The point of a carbon tax is to reduce greenhouse gas emissions by imposing a price on those emissions. But there is more than one way to impose that price. Critically, the range of options depends, to a very large degree, on the type of greenhouse gas the tax is trying to address.

The most ubiquitous greenhouse gas is carbon dioxide (CO2) and the largest source of CO2 emissions is the combustion of fossil fuels. Those emissions can be addressed by imposing a fee on each individual emission source or by taxing the carbon content of the fuel—because carbon content is a reliable predictor of CO2 emissions across different combustion circumstances. Most carbon tax proposals are fuel tax proposals; they impose a tax on fuel sales, corresponding to the amount of CO2 that will be emitted when the fuel is burned.

For CO2 emissions, the fuel tax approach has one significant advantage over the emissions fee approach. The fuel tax can be imposed “upstream,” rather than “downstream,” thereby reducing the total number of taxpayers and the overall administrative burdens associated with collecting the tax. A tax imposed on petroleum products as they leave the refinery, for example, is a way to address CO2 emissions from motor vehicles without the need to tax every individual owner of a gasoline-powered car. Most CO2-related carbon tax proposals work that way—they are upstream fuel taxes rather than downstream emissions taxes.

But not all greenhouse gas emissions can be addressed through a fuel tax, because not all greenhouse gas emissions come from fossil fuel combustion. Methane, for example, is released in significant quantities from cows, coal mines and natural gas production systems. A carbon tax directed at those emissions is likely to take the form of an emissions fee imposed on the owner or operator of the emission source. Many carbon tax proposals, however, simply ignore methane emissions or expressly exempt agricultural sources.

Fluorinated gases are yet another type of greenhouse. If they are subjected to a carbon tax, that tax is likely to take the form of a production tax, which would be imposed [...]

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Buttigieg Confirmation Signals Increased Investment in Renewable Energy Infrastructure and Electric Vehicles

Today, Pete Buttigieg was sworn in as secretary of transportation after his nomination passed the US Senate 86-13. His confirmation means a likely boon for investment in US infrastructure, particularly for those investing in renewable energy infrastructure, electric vehicle infrastructure and electric vehicles. In an email distributed to his staff today, he advised them that “…we will break new ground: in ensuring that our economy recovers and rebuilds, in rising to the climate challenge and in making sure transportation is an engine for equity in this country.”

US President Joe Biden has made similar pledges about infrastructure. Last week he signed an Executive Order that took bold steps to combat the climate crisis both at home and throughout the world, creating a number of opportunities for developers, lenders and investors in the renewable energy space.

Buttigieg’s confirmation is noteworthy since it is another concrete step by the Biden-Harris administration to implement its climate change agenda. For instance, the Biden-Harris administration has committed to replacing all government cars and trucks, including the fleet of United States Postal Service vehicles, with clean zero-emission electric vehicles. This would require replacing more than 645,000 vehicles, which reflects the most recent amount of government vehicles reported by the General Services Administration in 2019.

Buttigieg will now be responsible for overseeing the nation’s transportation system and creating safer roadways. The 86-13 vote signals that rebuilding the nation’s infrastructure will receive cross-party support. Buttigieg’s former experience as mayor of South Bend, Indiana, will likely aid him in impacting the local levels.




$40 Billion Available through Biden’s Department of Energy’s Loan Program Office for Innovative Technologies

With Democrats taking over the White House and the Senate, many eyes are on climate change and the role that the federal government can take to combat it. A variety of proposals have been floated about the best way for Congress to enact legislation to help in the fight against climate change, but certain actions can be taken immediately. One such action is to deploy $40 billion in loan capacity that was previously allocated to the Department of Energy as part of the 2009 stimulus package. This money is already available to the Department of Energy’s Loan Program Office (the LPO”) to spend at any time as a loan or a loan guarantee for qualified projects.

Any new loans would follow $30 billion of loans and loan guarantees previously provided by the LPO under these same programs (most notably under the Obama administration and one large loan associated with a nuclear reactor project under the Trump administration). Under the Biden administration, there is strong optimism that the unallocated funds may be more readily available for qualifying projects. The LPO, recognizing some of the challenges with government credit support programs, has taken steps to better engage interested parties, including providing no-commitment preconsultations to walk potential applicants through the process to ensure that the LPO and the project will each be prepared when the LPO application process begins in earnest. Additionally, in light of the innovative projects that exist in 2021, the LPO is examining the opportunities for offshore wind and the offshore wind value chain as well as looking at vehicle solutions that might qualify under the LPO’s programs.

The $40 billion in loan capacity, including $4.5 billion for renewables alone, is available for applicants seeking financing for innovative fossil energy projects, nuclear energy projects or renewable energy and energy efficiency projects; for fuel-efficient, advanced technology vehicle manufacturers; or for Tribal energy development projects.

To qualify for the renewable energy or energy efficiency loans or loan guarantees, under Title XVII of the Energy Policy Act of 2005, a project must meet all of the following requirements:

  • Employ new or significantly improved technologies as compared to commercial technologies in service in the United States at the time the guarantee is issued.
  • Avoid, reduce or sequester anthropogenic emissions of greenhouse gases.
  • Be located in the United States (foreign ownership or sponsorship of the projects is permissible as long as the projects are located in one of the 50 states, the District of Columbia or a US territory).
  • Provide a reasonable prospect of repayment.

Interested applicants should be aware that the timeline for LPO loan origination is typically longer than in the commercial financing market—roughly 90 days should be added to a typical project financing timeline for the LPO to diligence program eligibility and obtain internal approvals. However, for innovative projects that meet the other LPO eligibility requirements, the loans or loan guarantees available through the LPO may be a viable option. For instance, for offshore wind projects, long-duration energy storage, green [...]

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New Climate Change Guidance for NEPA Reviews

In the United States, federal agencies that license, permit or finance energy and infrastructure projects must, with some limited exceptions, analyze the environmental impacts of those projects before they approve them, pursuant to the National Environmental Policy Act of 1969 (NEPA).  But to what extent must those agencies consider climate change impacts as part of their NEPA reviews? The President’s Council on Environmental Quality (CEQ) has just issued a guidance document that addresses that question.

CEQ’s guidance document—an August 1 memorandum addressed to the heads of all federal departments and agencies—urges federal agencies to consider two climate change-related topics when conducting NEPA reviews.

The first topic is the impact of a proposed project on climate change, and the memorandum urges federal agencies to approach that topic by focusing on the project’s direct, and indirect, greenhouse gas (GHG) emissions. Agencies are encouraged to calculate a project’s anticipated emissions using existing government resources and calculators, and to draw upon existing government literature on the impacts of such emissions. The memorandum acknowledges that “the totality of climate change impacts is not attributable to any single action,” but concludes that climate-related impacts are exacerbated by some government actions and encourages agencies to compare the level of emissions expected from a proposed project to the level expected under alternative project scenarios. The memorandum provides scant details on how to calculate “indirect” GHG emissions but does suggest that for projects involving fossil fuel extraction, the indirect impacts turn, at least in part, on the anticipated ultimate use of the extracted fuel.

The second topic is the impact of climate change on the project, and on the project’s impacts.Here, CEQ’s memorandum encourages federal agencies to consider a proposed project’s impacts not simply on environmental conditions as they currently exist but as they will exist in the future and reflecting any changes that are expected as a result of climate change. Thus, if a project will draw water from a river that is already being, or that will be, diminished because of changing snowfall or rainfall patterns, that is an impact that should be acknowledged. The memorandum also encourages agencies to incorporate climate change resiliency and adaptation planning into their NEPA reviews, especially when analyzing project alternatives and potential mitigation measures. The memorandum suggests, for example, that agencies consider whether a proposed project’s design makes it more vulnerable to changing climate conditions (such as, in some areas of the country, increased risk of wildfires) than alternative projects.

CEQ’s memorandum applies to all new NEPA reviews and states that agencies “should exercise judgment” when considering whether to apply the guidance to currently ongoing reviews. CEQ states in the memorandum that it “does not expect agencies to apply” the guidance to projects for which a final environmental impact statement or environmental assessment has already been issued.




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