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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.




Consultation Describes State Aid for Third EU Carbon Emissions Trading Period

by Prajakt Samant

The European Commission (EC) published in December 2011 a Consultation on the draft guidelines for targeting State Aid (Guidelines) in furtherance of the European Union (EU) Emission Trading Scheme (ETS) when the Third Trading Period begins in January 2013.  Interested parties have until January 31, 2012, to submit comments on the draft Guidelines before they are finalized.

Launched in 2005 to combat human-caused climate change by ratcheting down emissions of carbon dioxide, the ETS, as revised in 2008, allocates EU-wide emissions allowances for auction that can be used, banked or traded.  According to the Consultation, State Aid (as defined in the Treaty on the Functioning of the EU), can be directed to the following emission reduction activities:

  • Minimize Carbon Leakage — Carbon leakage occurs when emissions from a source within an EU Member State are reduced by migrating to a source outside of the EU where emission controls are less strict or non-existent.  State Aid can be directed to minimize the risk of leakage.
  • Efficient Power — State Aid can be used to make investments in highly efficient power plants, including facilities capable of capturing and sequestering greenhouse gas (GHG) emissions from power plants Efficiency is to be measured against a standard articulated in the Guidelines.
  • Allowance Grants in lieu of Auction — Member States will have the option to grant free (non-auctioned) allowances to electricity generators where the savings are invested in modernizing their operations through investments in clean technologies and in diversifying their energy mix and sources of supply.
  • Exempting Certain Emission Sources — According to the Consultation, State Aid can be used to exempt certain small emission sources, including hospitals, from the EU ETS, but not from other obligations to reduce GHG emissions.

The amount of State Aid awarded to each of these applications will be based either on a formula in the Guidelines or according to the application’s environmental contribution.  Awards are to be guided by the precept of European law that a sledgehammer should not be used to crack a nut, also known as the principle of proportionality.




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