Welcome to the 30th edition of our Digest for Executives – a summary of key climate-related events, publications, and insights for cross-functional corporate leaders.?
Much of this update compiles the policy implications of Donald Trump’s re-election and the reactions of interested parties. Electric-vehicle credits may be scrapped, despite the desires of some of the nation’s largest automakers. On the other hand, Biden administration measures like energy-efficiency standards will likely outlive the Trump term. Reversing other Biden policies could be a drawn-out process rather than a sharp U-turn. Gary Gensler’s successor at the Securities and Exchange Commission won’t be able to immediately reverse long-delayed climate disclosure rules, but since the rules have been stayed by the courts and it is highly unlikely that a Trump administration will defend the rules, the rules will likely “die on the vine.”??
COP29 in Azerbaijan also ended this past week with a $300 billion deal on climate finance – far less than the needed $1 trillion per year to combat climate change. Also at COP29, negotiators agreed on a global carbon market mechanism after years of delays; proponents called the emission trading rules the “gold standard,” while skeptics remain concerned about the integrity risks and the transparency of the negotiating process.??
- COP29 Negotiators Agree on Global Carbon Market Mechanism (Bloomberg, November 11) - The Paris Agreement’s carbon mechanism (PACM) reached a significant milestone at COP29, where governments agreed to establish new carbon credit quality standards. This is a welcome sight; the rules have been log-jammed in recent years due to disagreements on their integrity and concerns over the verification of additionality for promised emissions reductions. The PACM, which is set up to succeed the Kyoto Protocol Clean Development Mechanism, is structured similarly to existing voluntary carbon market programs and provides a framework for international collaboration on emissions reduction. By creating standardized rules and a dedicated supervisory body, the mechanism aims to bring greater integrity and reliability to global carbon credit trading. The agreement signifies a step forward in creating a more standardized approach to international emissions reduction and credit trading.?
- Trump’s Proposed Clean Energy Retreat: US Costs and Global Rewards (Net Zero Industrial Policy Lab, November 6) – Biden policies like the Inflation Reduction Act (IRA) and Bipartisan Infrastructure Law have driven billions of dollars in clean energy investment, helping the US compete with China and reclaim a position in emerging clean energy supply chains. Reversing these policies will “harm the US’s bid for leadership in this new world,” according to one of the co-authors of this study. The Johns Hopkins scientists argued that a Trump repeal of the IRA would divert lucrative opportunities to other countries and cost the US manufacturing jobs, tax revenue and as much as $50 billion in lost exports. Americans will continue to install ever-cheaper renewables, but without the manufacturing subsidies, many of the necessary technologies will be imported. Countries that find a way to utilize rapidly declining solar prices to fuel development will benefit enormously, while the US may get left behind. The study emphasizes that it is highly uncertain whether the IRA will actually be repealed because it was designed to make repeal politically difficult, and more than 70% of investment projects announced are in Republican districts – it is more likely that specific provisions will be at risk, such as the EV tax credit. TCB will continue to pay attention to the implementation of the IRA under the new administration.??
- Lee Zeldin Knows How to Defend Trump. Will He Defend the Environment? (The New York Times, November 12) – Since his nomination to run the EPA, Mr. Zeldin has echoed Trump’s messaging on “energy dominance” in oil and gas. Zeldin has historically opposed Democratic legislation to reduce greenhouse gases and promote renewable energy. Environmental advocates in Zeldin’s native Long Island, however, credit him with supporting conservation issues that are less partisan, including his leading role in protecting an island in Long Island Sound and opposing Trump’s 2018 plan to open nearly all U.S. waters to oil and gas drilling.?
- Trump’s Transition Team Aims to Kill Biden EV Tax Credit (Reuters, November 15) – Trump’s energy-policy transition team, led by billionaire oilman Harold Hamm, is planning to get rid of the $7,500 consumer tax credit for electric-vehicle (EV) purchases, a key measure in the Biden administration’s Inflation Reduction Act. Elon Musk, Tesla’s CEO and one of Trump’s biggest backers, supports removing the tax credit, likely because it will hurt smaller EV competitors more than it impacts Tesla, which is by far the country’s biggest maker of EVs. Scrapping the tax credit will likely slow an already stalling EV transition, would make the US less competitive in the EV market, and will hurt American automakers trying to catch up to the highly subsidized Chinese EV industry. To combat the removal of the tax credit, Governor Newsom announced on Monday that California will provide rebates to eligible residents who buy EVs.??
- These Are the Environmental Rules That Will Likely Outlive Trump (The Washington Post, November 18) – Biden’s stiffer energy-efficiency standards for appliances will be hard to reverse because of the 1975 Energy Policy and Conservation Act, which created federal efficiency standards for appliances. However, Trump could still attempt to weaken the standards by allowing them to get watered down via lawsuits; and it is unlikely that he will raise any efficiency standards for the next four years.?
Corporate & Disclosure Updates??
- EU to Re-Open and Merge CSRD, CS3D and Taxonomy (Real Economy Progress, November 20) – In an effort to “reduce bureaucracy and reporting burdens,” European Commission President Ursula von der Leyen announced a planned proposal to consolidate three key directives: CSRD, CS3D, and the EU Taxonomy. In particular, she noted that there are currently redundancies across the reporting requirements, and that the number of data points asked for is “too much.” Although she stressed that they did not intend to change the content of the laws in this transition, the plan to merge the directives does open the possibility that the EU Parliament and Council could make edits to the existing regulation. As one lawyer noted, “If this actually happens, everything is fair game.”?
- Corporate Sustainability After the US Elections (Watershed, November 25) - The two panelists, former SEC commissioner Robert Jackson Jr. and Rich Powell, CEO of the Clean Energy Buyers Association, agreed that the SEC is likely to roll back disclosure requirements, but that corporate boards and executive leadership teams are still looking to continue these disclosure efforts – which are largely influenced by investor demands and reporting requirements set by other regulatory bodies, mainly California and Europe. Even so, the lack of a central, federal rule on climate disclosure will make reporting and messaging more difficult, and leadership teams will need to be more informed and intentional about what to disclose and how to message sustainability progress. Within the context of the IRA, the panelists also emphasized the importance of maintaining affordable electricity; if the grid continues to grow but supply does not keep up, prices are at risk of increasing. The Greenhouse Gas Reduction Fund, set up in the IRA, is still going to put significant cash to work and make progress before any rollback by the IRA’s opponents. Lastly, the panelists highlighted electrification - with the recent emphasis on turning away from fossil fuel combustion, clean energy production has grown, electricity costs have come down, and the national grid has grown. The panelists issued a warning to keep an eye on electrification moving forward. If the grid continues to grow and supply does not keep up, we risk increasing electricity prices.?
