United States
Federal Energy Regulatory Commission (FERC) Adopts Major Generator Interconnection Reforms
Last month, FERC Commissioners unanimously approved Order No. 2023 (the Order), which represents a significant reform to its energy generator interconnection rules. The Order aims to reduce interconnection backlogs nationwide by imposing new, more stringent requirements on transmission providers and interconnection customers alike. Notable reforms from the Order include: 1) the requirement for transmission providers that have not yet adopted cluster studies (and are not in the process of adopting cluster studies) to transition to a first-ready, first-served cluster study process, where studies are clustered together as opposed to performed on a sequential, first-come, first-served basis; 2) the imposition of new readiness requirements for interconnection customers, including stronger site control requirements and mandatory commercial readiness deposits; 3) the elimination of the “reasonable efforts standard” applicable to transmission providers and the replacement of it with firm deadlines and penalties to timely incentivize the completion of interconnection studies, which are necessary for identifying where to interconnect for improved network access; and 4) the adoption of numerous reforms aimed at better incorporating new technologies into the interconnection process, including storage and grid enhancement.
Biden Administration Proposes Heightened Fuel-Efficiency Vehicle Standards
On July 28, 2023, the National Highway Traffic Safety Administration proposed new Corporate Average Fuel Economy Standards for certain passenger cars, light trucks, heavy-duty pickup trucks, and vans. If finalized, the proposal would require an industry fleet-wide average—meaning the sales-weighted fuel economy of the entire fleet of vehicles sold in the United States—of approximately 58 miles per gallon for passenger cars in model year 2032 by increasing fuel economy two percent year-over-year for passenger cars.
Federal Acquisitions Regulation (FAR) Council Proposes Sustainable Federal Procurement Rule
On August 3, 2023, the FAR Council, which is responsible for establishing and coordinating federal procurement regulations, released a rule that would require the Department of Defense, General Services Administration, and National Aeronautics and Space Administration to prioritize the procurement of sustainable products and services to the maximum extent practicable. The FAR Council requested that comments to the proposed rule be submitted on or before October 2, 2023.
White House Council on Environmental Quality (CEQ) Proposes Permitting Reform Rule
Last month, the CEQ released its proposed Bipartisan Permitting Reform Implementation Rule, which codifies the changes to the National Environmental Policy Act (NEPA) enacted in June through the Fiscal Responsibility Act (the Debt Limit Bill). The rule’s requirements include stricter deadlines for NEPA permitting and page limits for environmental assessments. Please see our June update for more details about the Debt Limit Bill.
Bureau of Ocean Energy Management (BOEM) Announces New Mid-Atlantic Wind Energy Areas (WEAs)
On July 31, 2023, BOEM announced its intention to move forward plans to lease approximately 356,550 acres of offshore WEAs located off the coast of Delaware, Maryland, and Virginia. The WEAs have the potential to provide 4 to 8 gigawatts (GW) of offshore wind energy, in furtherance of the Biden Administration’s goal of deploying 30 GW offshore wind power by 2030. BOEM has opened a Notice of Intent (NOI) to request feedback on its preparation of an environmental assessment for each WEA. NOI comments must be submitted on or prior to August 31, 2023.
U.S. Department of Commerce (Commerce) Issues Final Scope Ruling Regarding Solar Tariffs Applicable to Imported Solar Cells and Modules from Cambodia, Malaysia, Thailand, and Vietnam Using Parts and Components Manufactured in China
On August 18, 2023, Commerce announced a final scope ruling (Ruling), which was subsequently published in the Federal Register on August 23, 2023, pursuant to Commerce’s circumvention inquiry into crystalline silicon solar cells and modules from China. Commerce found that certain Chinese producers are shipping certain solar products through four southeast Asian countries: Cambodia, Malaysia, Thailand, and Vietnam (each and collectively an “inquiry country”), for “minor processing in an attempt to avoid paying antidumping and countervailing duties (AD/CVD).” The investigation was requested by California-based solar panel manufacturer, Auxin Solar, in 2022, claiming that Chinese solar manufacturers were circumventing existing U.S. import duties by doing only “minor processing” or “insignificant” work on solar modules and cells in the four aforementioned countries before shipping the solar products to the United States.
The Ruling will not take immediate effect. President Biden issued a Presidential Proclamation 10414 on June 6, 2022, which delayed the collection of duties collected on any solar module and cell imports from the four countries listed above until June 2024, provided that the imports are “consumed” in the U.S. market within six months of termination of the proclamation.
Commerce investigated eight companies in total, and found that five of them are attempting to bypass U.S. duties by doing “minor processing” in one of the four abovementioned countries are:
- BYD Hong Kong (Cambodia)
- New East Solar (Cambodia)
- Canadian Solar (Thailand)
- Trina Solar (Thailand)
- Vina Solar (Vietnam)
This means that the other three companies, Hanwha Qcells, Jinko, and Boviet Solar will not be subject to additional duties. Commerce clarified, however, that solar cells made in one of the four abovementioned countries, even if such cells incorporate wafers from China, but are then exported to a non-inquiry country and further assembled into modules or other products in such non-inquiry country, are not covered by the Ruling. That is, if solar cells or modules are “merely transshipped from a Southeast Asian country through another third country, then it may still be covered by the circumvention findings and resulting suspension, cash deposit, and certification requirements.” (See Commerce Memorandum, December 19, 2022, linked here).
These four countries are responsible for approximately three-quarters of solar modules imported into the United States. Due to the extra duties to be assessed pursuant to the Ruling, costs for procuring solar panels may rise.
Europe
European Commission (EC) Adopts European Sustainability Reporting Standards (ESRS)
On July 31, 2023, the EC adopted the ESRS to harmonize sustainability-related disclosures and replace voluntary standards. Companies (including EU subsidiaries of non-EU companies) that fall within the scope of the Corporate Sustainability Reporting Directive (CSRD) will need to use the ESRS to guide their sustainability-related disclosures. The ESRS establishes mandatory standards, including: 1) general sector-agnostic standards that apply to all undertakings regardless of the sectors in which the undertaking operates and set out overarching disclosure requirements; and 2) 10 topical standards focused on specific environmental, social, and governance (ESG) matters (such asclimate, pollution, workforce, and business conduct). The ESRS follows the “double materiality” concept, which expands a company’s reporting boundary across its value chain and focuses not just on how sustainability factors affect the company financially, but also on the company’s impact on society and the environment. While the disclosures for topical standards are subject to a materiality assessment, an exception applies to climate change-related disclosures, meaning that if a company concludes that climate change is not a material topic, it must provide a detailed explanation of the reasons why.
For more information EU ESG disclosure requirements generally, please see this Client Alert.
European Securities and Markets Authority (ESMA) Releases Public Statement on Sustainability Disclosures Expected to be Included in Securities Prospectuses
On July 11, 2023, ESMA released a public statement regarding sustainability disclosures in prospectuses that are drafted under the EU Prospectus Regulation, which lays out the requirements for the drafting, approval, and distribution of prospectuses in securities markets. The statement sets out ESMA’s view of how current European Union (EU) legislation should be interpreted regarding the disclosure of sustainable bonds. ESMA noted the “importance of [ESG] matters to investors,” asking issuers and their advisors to consider sustainability-related matters when preparing prospectuses. ESMA’s statement focuses on, among other things: 1) the basis for any sustainability-related statements, requiring issuers to provide an objective explanation regarding their sustainability profile (for example,by stating that the issuer adheres to a specific market standard or label, including material information about that standard or label); and 2) specific sustainability-related disclosures, warning companies that they should not use sustainability disclaimers as a way to avoid responsibility for things they have control over. ESMA’s statement also mentions that any material sustainability-related disclosure published in an issuer’s non-financial reporting in accordance with the Non-Financial Reporting Directive and future sustainability reporting under the CSRD should be included in equity prospectuses.
For more information on EU ESG disclosure requirements generally, please see our previous Client Alert.
EU and Chile Agree to Critical Materials Deal
On July 18, 2023, the EU and Chile signed a Memorandum of Understanding (MOU) establishing a partnership intended to secure sustainable raw materials value chains to accelerate the clean energy and digital transition. The MOU highlighted the following areas of focus: 1) joint investment in raw materials extraction and processing; 2) investing in research and innovation; 3) cooperation on ESG criteria and alignment with international standards; 4) building infrastructure for project development; and 5) investing in job training and skills development. Following the signing of the MOU, the EU and Chile plan to develop an operational roadmap for the partnership that will include specific cooperation actions to be carried out by relevant stakeholders.
Asia
Tokyo Stock Exchange Releases Revised General Equality Rules
On July 28, 2023, the Tokyo Stock Exchange, Inc. released Revisions to Listing Rules in Relation to the Intensive Policy for Gender Equality and the Empowerment of Women 2023 and the Desired Investment Unit Level (the Revisions). The Revisions provide that domestic listed companies listed on the Prime Market shall strive to appoint at least one female executive by 2025, aim to have at least 30 percent female executives by 2023, and formulate an action plan to achieve such goals. The Revisions implement the plan published in June 2023, by Japan’s Council for Gender Equality, as discussed in our June update.
Australia Explores a Carbon Border Adjustment Mechanism
In a speech on August 15, 2023, Australia’s Minister for Climate Change and Energy announced that his department will undertake a review of carbon leakage policy responses, including a carbon border adjustment mechanism—similar to what the EU has adopted—for the steel and cement industries. The review will culminate in a report that the Minister expects to be published in late 2024.
New Zealand Establishes Climate Fund to Support Goal to Reach 100 Percent Renewable Electricity
On August 8, 2023, Prime Minister Chris Hipkins and Minister of Energy and Resources Megan Woods unveiled New Zealand’s first net zero fund, which will deploy up to $2 billion to accelerate the growth of renewable energy generation such as solar, wind, and green hydrogen, with the goal to make New Zealand one of the first countries in the world that generates 100 percent renewable electricity.
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