On July 14, 2021, the European Commission adopted a package of proposals including a proposal for a Carbon Border Adjustment Mechanism (CBAM). The CBAM proposal is a key element of the European Green Deal (Green Deal), which sets an ambitious goal for the European Union (EU) to reduce greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels, and to make Europe a climate-neutral continent by 2050.
On May 21, 2021, Mexico’s Energy Regulatory Commission (CRE) published in the Federal Official Gazette (DOF) Agreement number A/015/2021 by which the CRE complies with the Third Transitory of the “Decree amending the Thirteenth Transitory Article of the Hydrocarbons Law published in the Federal Official Gazette on August 11, 2014,” published in the DOF May 19, 2021. This GT Alert summarizes the Decree and shows the agreements no longer in effect as a consequence of the Decree.
On Dec. 26, 2020, Mexico’s Ministry of Energy (SENER) published in the Federal Official Gazette (DOF), a resolution that establishes the goods for which import and export activities are subject to regulation by SENER (the Resolution), whereby SENER amends the existing regulation related to such import and export activities and its corresponding permits.
Continue reading the full GT Alert, “Amendments to Regulations for Import/Export of Hydrocarbons and Hydrocarbon Products in Mexico.”
On Feb. 19, 2020, the IRS released Notice 2020-12 and Revenue Procedure 2020-12 (together, the “Carbon Guidance”) which provide highly anticipated clarity on the Internal Revenue Code Section 45Q credit for carbon oxide sequestration. The Carbon Guidance provides details on determining when construction has begun on an eligible project, and valid partnership allocations (including a permissible partnership flip structure), which in each case are very similar rules to those applicable or relied upon in solar and wind tax credit tax equity transactions.
This article provides a useful summary of the background and requirements for Section 45Q credit qualification; and the Carbon Guidance, including the “Physical Work Test” and the “5% Safe Harbor” as relates to establishing commencement of construction on a qualified facility or carbon capture equipment.
Read the full GT Alert, “Summary of Guidance on Section 45Q Carbon Tax Credits Under 2020 Notice and Revenue Procedure.”
On Feb. 19, 2020, the Internal Revenue Service released partial guidance on the implementation of section 45Q tax credits related to the capture and sequestration of carbon dioxide. The section 45Q tax credit was updated on Feb. 9, 2018, as part of the Bipartisan Budget Act (Pub. L. 115-123) to increase the amount of the tax credit per ton and to broaden the applicability to include “qualified carbon oxide.” The new IRS guidance is designed to assist in implementing the modified law.
The 2018 law removed the volume cap applicable to the tax credit, expanded the definition to include not just carbon dioxide but other carbon oxides such as methane, and raised the amount of the tax credit per ton. Carbon oxides captured and used for enhanced oil recovery can now receive a tax credit of up to $35 per ton, while carbon oxides deposited in secure geological storage can receive a tax credit of up to $50 per ton. Continue Reading IRS Takes First Steps to Implement Carbon Capture Tax Credit
With the recent passage of New York’s Climate Leadership and Community Protection Act, which calls for a carbon free electricity market by 2040, New York became the sixth state to pass legislation calling for a carbon free electricity market. Just one year earlier, California passed similar legislation, SB100, adopting a state policy to achieve a zero-carbon electricity market by 2045. These goals will have to be pursued notwithstanding the fact demand for electricity is projected to increase as other sectors pursue beneficial electrification to comply with ambitious emission reduction goals they face. Whether these goals can be achieved, and at what cost, will depend on technology advancements and how these laws are interpreted and implemented by regulators.
Click here to read the full article by Thomas R. Brill and Steven C. Russo, “An uncertain path to a cleaner future: Zero carbon electricity legislation in New York and California,” published by Utility Dive on Aug. 23.
For more on regulations and legislation aimed at reducing our carbon footprint, click here.
On July 23, 2018, Mexico published new administrative provisions (the “Guidelines”) implementing minimum insurance requirements for entities engaged in activities related to transportation, storage, distribution, compression, decompression, liquefaction, regasification, or retail sale of hydrocarbons or petroleum products in Mexico (“Regulated Entities”).
The Guidelines will help Regulated Entities that carry out activities in the hydrocarbon sector understand minimum insurance requirements for civil liability and environmental damage liability or losses that may occur as a result of their activities.
The Provisions are effective as of July 24, 2018.
As Michael Cooke noted in his post the following day, on June 3 EPA proposed its “Clean Power Plan” that EPA estimates would, if adopted and implemented, cut greenhouse gas emissions from existing electricity generating units by 30% from 2005 levels. 79 Fed. Reg. 34,829 (June 18, 2014). A few weeks later, as Mike again noted, the Supreme Court decided that EPA could impose technology-based GHG emission controls on new or modified emission sources, provided that the trigger for new source review came from new emissions of some other pollutant. Utility Air Regulatory Group v. United States Environmental Protection Agency, 82 U.S.L.W. 4535 (U.S. June 23, 2014).
The uncertainty and upheaval in greenhouse gas regulation has caused some to focus on the opportunities to advocate for more favorable rulemaking or to litigate the regulators’ authority to impose obligations at all. However, if you think about it, any pervasive GHG regulation has to create winners and losers. Some businesses are going to be able to capitalize on these changes. Lawyers should not forget the unglamorous and apolitical role of advising clients on how to do as well as possible under the new rules. That is the subject of my column this month in Pennsylvania Law Weekly. Read Carbon Emissions, the Supreme Court, and Business Opportunity, 37 Pa. L. Weekly 650 (July 15, 2014), by clicking here.
On June 2, 2014, the U.S. Environmental Protection Agency (“EPA”) published a draft rule that is intended to cut carbon emissions from existing power plants. EPA hopes to accomplish this through a state-focused strategy that is essentially an energy control rule than a traditional environmental pollution control effort. EPA expects to finalize the rule by June 2015 and the States will then have until June 2016 to implement state-specific plans to meet the requirements of the final rule. According to EPA, existing power plants are the largest source of carbon emissions in the U.S., accounting for roughly one-third of all domestic greenhouse gas emissions. This rule proposes to cut carbon emissions from the power sector by 30 percent from 2005 levels, aiming at changing how energy is generated and used. The rule also proposes specific reduction goals for each state. Under section 111(d) of the federal Clean Air Act, the states are given flexibility in designing plans to meet the standards once they are set. Therefore, much of the decisionmaking on how to implement these requirements will occur at the state level. Comments on the proposed rule will be due within 120 days from the date of publication of the rule in the Federal Register.
For a copy of the draft rule and related documents, click here.
The New York State Department of Environmental Conservation (DEC), in conjunction with the New York State Energy Research and Development Authority (NYSERDA), is currently accepting public comments on several proposed changes to the DEC’s regulations governing New York’s participation in the Regional Greenhouse Gas Initiative (RGGI). DEC’s proposed changes, which are based on updates to the RGGI model rule, are designed to reduce the RGGI emissions “cap” to increase the costs of CO2 emissions credits to encourage further reduction in CO2 emissions.
The linked GT Alert Carbon Claustrophobia — Significant Changes Coming to the Regional Greenhouse Gas Initiatives Cap and Trade Program explains the significance of the changes to the RGGI regulations. Steven Russo of GT’s New York office and Adam Silverman of GT’s Philadelphia office prepared the alert.