On May 29, 2024, the U.S. Treasury Department and the Internal Revenue Service issued a notice of proposed rulemaking (“NPRM”) that includes guidance on two of the Inflation Reduction Act of 2022’s renewable electricity tax credits – but which notably failed to provide guidance with respect to the eligibility of clean electricity generated by biogas or renewable natural gas (“RNG”) for those credits, leaving RNG developers with lingering questions.
On March 6, 2024, the Securities and Exchange Commission (“SEC”) adopted rules requiring registrants to disclose certain climate data in annual reports.
The rules were originally proposed in 2022, and the final language adopted scales back some of the earlier proposal’s more onerous reporting requirements (including Scope 3 emissions reporting).
In a vote that stretched into the evening, New Mexico’s legislature passed House Bill 41 by a 26-15 vote on February 13. The bill, which establishes a statewide program known as the “Clean Transportation Fuel Standards,” makes New Mexico the fourth U.S. state to enact a clean fuel standard (i.e., a marked-based set of policies designed to curb carbon emissions while incentivizing investment into renewable fuel projects and green vehicles). Oregon, Washington, and California have similar standards on their books.
On December 19, 2023, the California Air Resources Board (“CARB”), which administers the California Low Carbon Fuel Standard (“LCFS”), released a rulemaking package (“Draft Rule”) describing proposed LCFS changes, including changes designed to make carbon intensity (“CI”) reduction obligations more stringent.
Specifically, the Draft Rule would mandate a 30% reduction in transportation fuel CI scores by 2030 and a 90% reduction by 2045 (in each case, versus a 2010 baseline). Current CARB rules, which the Draft Rule would modify, require only a 20% reduction by 2030.
The prevailing wisdom is that increased carbon reduction obligations will spur renewable fuel demand, leading to an increase in the value of LCFS credits (which are created when renewable energy is used in producing transportation fuel, and can be transferred to industry participants subject to emission reduction obligations for use in meeting their obligations).
Among the benefits afforded the renewable energy sector by the Inflation Reduction Act of 2022, the ability to monetize 11 new or expanded clean energy tax credits via direct transfer was especially interesting to developers because of its potential to eliminate costly, drawn-out tax equity transactions.
Investors were also eager to participate in the newly
The U.S. Environmental Protection Agency (“EPA”), which administers the federal renewable fuels program known as the Renewable Fuel Standards (“RFS”), has long considered the potential impact of electric vehicles on the RFS. Specifically: how can the RFS (under which transactable credits known as Renewable Identification Numbers (“RINs”) are generated by the creation and use of renewable fuels) be adapted to address renewable fuel converted not into traditional compressed or liquified fuel, but instead into electricity used to power electric vehicles?
2022 saw a flurry of renewable natural gas (RNG)-related deals, including in anticipation of (and then in response to) the historic Inflation Reduction Act (IRA). Sustainability mandates and the growing maturity of RNG-related credit markets, as well as the IRA’s expansion of investment and production tax credits, drove increased transactions and historic valuations.
On September 21, 2022, the Senate passed the Kigali Amendment to the 1987 Montreal Protocol (which had been signed by former President Obama in 2016) by a vote of 69 to 27, reaffirming U.S. commitment to the reduction of hydrofluorocarbons (“HFCs”) through multiple processes (some of which are already causing shifts in import and export markets, as well as in the consumer market).
In the wake of increasing inflation and as a means of codifying several of the Biden administration’s legislative priorities, the Senate passed the $750 billion Inflation Reduction Act on August 7, 2022 (the “Act”), by a 51-50 party-line vote. The Act, which is comprised of sweeping healthcare, energy, and tax measures, was approved by the House of Representatives on August 12, 2022, and signed into law by President Biden on August 16, 2022, creating a significant number of renewable energy sector benefits.
On December 7, 2021, the U.S. Environmental Protection Agency (“EPA”) released its proposed 2020, 2021, and 2022 Renewable Volume Obligations (“RVOs”). RVOs determine the amount of renewable fuel (typically, ethanol) certain fuel refiners and others involved in the transportation fuel supply chain (“Obligated Parties”) are required to blend into their own fuel production during a given year. Obligated Parties failing to meet their RVOs for any year must buy Renewable Identification Numbers (“RINs”) or other credits, or risk default under the Renewable Fuel Standard (“RFS”).