Interim Update on Biden Administration Climate Change Initiatives
The last edition of the Climate Report discussed President Biden's signing, on his first day in office, of an instrument for the United States to re-join the Paris Agreement on controlling climate change and his issuance one week later of Executive Order 14008 on "Tackling the Climate Crisis." The Administration is moving to implement the measures promised by these actions, including:
Greenhouse Gas Reduction Target
President Biden formally committed the U.S. to achieving a 50% reduction in net greenhouse gas emissions by 2030. It will take substantial reductions in emissions by nearly every sector, especially power generation and transportation, to achieve this goal. In addition, the focus on "net" emissions is important because it suggests a significant role carbon capture and other offset efforts.
EPA is moving to re-instate the Clean Air Act waiver that previously allowed California to set its own standards for greenhouse gas emissions from vehicles. California had used this authority to increase mileage standards and require some zero emission vehicles before the Trump administration tried to revoke the waiver. Following the lead of some European cities, it would not be terribly surprising to see efforts at the state or federal level to ban internal combustion engines in new passenger vehicles beginning with model years in the latter half of the decade.
Greenhouse Gas Emissions from Power Plants
EPA is considering how to regulate power plant emissions in light of the thorny legal issues created by challenges to the Clean Power Plan and the Affordable Clean Energy rule that left no rule in place for existing plants. Those issues were magnified on April 29 when 19 states led by West Virginia petitioned the Supreme Court to review EPA's authority. Additional petitions are expected to be filed by industry and other states. These actions have led EPA to consider if other existing Clean Air Act authorities can be used to require greenhouse gas emission reductions at power plants. There is not a clear path to an effective rule that will survive judicial scrutiny at this point.
Oil and Gas Operations
A May 6, 2021, report by the United Nations Environment Programme suggests that reductions in methane emissions from oil and gas operations could be significant in addressing climate change. The Trump administration's repeal of methane emission standards for oil and gas operations is on life support as a result. On April 28, the Senate passed a Congressional Review Act resolution to rescind the repeal, and EPA is headed in that direction even if Congress does not act. Meanwhile, a variety of efforts to restrict emissions on federal lands are being pursued, from efforts to reduce or eliminate future leases and drilling permits to strict standards for emissions at wells that are authorized. For example, the Department of Interior revoked 12 orders issued during the Trump administration. This action has the effect of restoring the Obama administration's restrictions on fracking on federal lands along with a 2016 moratorium on coal mining.
Environmental Impacts and Social Cost of Carbon
Several agencies have repealed Trump administration policies on the scope of environmental review for new project authorizations, with the result that greenhouse gas emission impacts of using oil and gas made available by new pipeline projects, for example, now have to be considered. When they are considered in a cost benefit analysis, the interagency working group established by the Executive Order determined that agencies should use the $51 per ton social cost of carbon that was in use at the end of the Obama administration and promised further revisions to the figure. There is ongoing debate whether a price on carbon emissions (i.e., a carbon tax) is necessary to provide the market with the signals it needs to help generate the desired reductions. The social cost of carbon is viewed by some as a starting point for the discussion on where that price should be set.
SEC Enforcement Policy
The Securities and Exchange Commission announced that it is increasing the examination of funds that claim to use environmental, social and governance ("ESG") metrics in selecting investments to assure that those metrics are applied as advertised. In addition, the SEC appears to be considering more prescriptive approaches to achieving consistency and uniformity in ESG reporting metrics.