Climate Change Committee Report

I. International Activities

A. United Nations

1. Framework Convention on Climate Change (UNFCCC)

The Twenty-Ninth Meeting of the Conference of the Parties (COP29) to the UNFCCC took place in Baku, Azerbaijan, from November 11 to 22, 2024. At COP29, parties to the UNFCCC were unable to agree on several key aspects of the review of the Warsaw International Mechanism for Loss and Damage (WIM) and deferred consideration until further climate talks in 2025. Additional pledges were also made towards the Fund for Responding to Loss and Damage (operationalized at COP28 to assist countries to deal with climate losses to which adaptation is not possible) with Australia pledging USD $32.64 million, New Zealand pledging USD $5.87 million, and Sweden pledging approximately USD $19 million bringing the current total value of pledges to the fund to USD $741.42 million.

COP29 also served as the Sixth Meeting of the Parties to the Paris Agreement (Parties). Additionally, an agreement was reached on a New Collective Quantified Goal on Climate Finance (NCQG Decision), which was upgraded to USD $300 million annually by 2035 from the previous goal of USD $100 billion annually through 2025. This funding will support the implementation of the nationally determined contributions (NDCs), national adaptation plans and adaptation communications of developing country Parties.

Discussions also continued at COP29 regarding mitigation and the implementation of the first Global Stocktake (GST) of collective progress under the Paris Agreement. The GST is intended to inform parties ahead of NDC submissions, the next round of which are due in early 2025. As of the February 10, 2025 deadline, only 13 of the 195 Parties had submitted an updated NDC.

Key steps were also taken at COP29 towards the operationalisation of Article 6 of the Paris Agreement with respect to carbon markets. Key decisions on adaption were delayed until talks in Bonn in 2025, but Parties agreed to launch the Baku Adaption Roadmap with the aim of advancing progress in line with Article 7.1 of the Paris Agreement and established the Baku High-Level Dialogue on Adaptation to be convened at each future session of the COP.

B.Regional and National Activities

1. United Nations Environment Programme (UNEP) Net Zero Alliances

In April 2024, the UNEP announced the Forum for Insurance Transition to Net Zero (FIT), a multistakeholder forum that works with insurance market participants and engages other stakeholders, including regulators, the scientific community, and civil society. The FIT aims to support the acceleration of voluntary climate action by the insurance industry and its key stakeholders, specifically by encouraging availability of insurance and financing for net-zero activities and transition technologies.

This development follows the dissolution of UNEP’s Net-Zero Insurance Alliance (NZIA) in April 2024. The NZIA lost a majority of its members over the previous year as companies faced political backlash and lawsuits in the United States, arguing that these types of groups raise antitrust issues. Other climate alliances have faced similar issues, such as the Net Zero Banking Alliance, which has had a number of major banks exit. The Glasgow Financial Alliance for Net Zero (GFANZ) has removed restrictions on participation in the group in response to withdrawals from other alliances, dropping its requirement that members’ activities comply with the Paris Agreement. Major US investment firms also left Climate Action 100+, a coalition of financial institutions aiming to engage the companies they invest in to take action on climate change.

Initial excitement around these alliances from businesses has fallen as climate-related initiatives and ESG have faced a heightened political focus in the United States. In June 2024, the majority of the U.S. House Judiciary Committee released a report that claims that the alliances are a “‘climate cartel’ of left-wing environmental activists and major financial institutions” that have “colluded to force American companies to ‘decarbonize’ and reach ‘net zero’” in violation of U.S. antitrust laws. This report was followed by hearings, document demands sent to participants in Climate Action 100+, and a supplemental report containing further allegations of a pressure campaign allegedly launched against a major oil producer. In November 2024, a group of U.S. state attorneys general filed a lawsuit claiming that three major asset managers “artificially constrained the supply of coal, significantly diminished competition in the markets for coal, increased energy prices for American consumers, and produced cartel-level profits for Defendants.” The case alleges that the asset managers violated the antitrust laws by implicitly agreeing to cut coal supply through public endorsement of ESG initiatives and that their collective ownership of American public coal company stock reduced competition.

2. European Union (EU) Sustainability and Environmental-Related Regulatory Developments

2024 witnessed a significant further buildout of the EU’s sustainability regulatory framework pursuant to the European Green Deal. However, its final months were marked by European Commission announcements on an “Omnibus” simplification initiative that cast a shadow over the future of some of the pillars of the EU’s sustainability regulatory framework, including the Corporate Sustainability Reporting Directive (CSRD), the EU Taxonomy for Sustainable Activities (Taxonomy Regulation), and the only recently adopted Corporate Sustainability Due Diligence Directive (CSDDD). As further discussed below, in the first quarter of 2025, the EU has moved forward on the first round of the “Omnibus” initiative. There have been many other developments at EU level and across individual member states (including in connection with deforestation, batteries, emissions trading, and similar), this Section will discuss the 2024 developments regarding: (i) the CSDDD, the CSRD, the Taxonomy Regulation, and anti-greenwashing consumer protections; and (ii) the developments through April 14, 2025, regarding the EU’s potential “Omnibus” initiative.

a. CSDDD

Following a protracted legislative process, the European Parliament and the Council adopted the CSDDD on June 13, 2024. The CSDDD is part of the European Green Deal Framework and introduces supply chain due diligence obligations on certain large EU and non-EU companies. In-scope companies will have to identify, prevent, and mitigate adverse human rights and environmental impacts in their own operations, those of their subsidiaries, and those of (indirect) business partners in their “chains of activities.” In relation to environment in particular, Annex I to the CSDDD sets out list of prohibitions and obligations included in international and EU instruments whose violations could consist of an “adverse environmental impact.”

As part of their CSDDD obligations, companies will also have to establish complaint mechanisms accessible to stakeholders affected by human rights and environmental impacts. The CSDDD will further enhance corporate accountability for such impacts by: (i) introducing a civil liability scheme pursuant to which individuals may seek injunctive relief and can allow representative organizations (e.g., trade unions or NGOs) to enforce their rights; and (ii) requiring EU Member States to set fines for violation of these obligations tied to company’s net worldwide revenue.

In addition to due diligence obligations, the CSDDD also requires in-scope companies to develop transition plans for mitigating their climate change impacts. In-scope companies will have an obligation to adopt and put into effect a transition plan which aims to ensure, through best efforts, compatibility of the business model and of the strategy of the company “with the transition to a sustainable economy and with the limiting of global warming to 1.5°C in line with the Paris Agreement.” Details on these transition plans will have to be disclosed on the in-scope company’s website and/or in their CSRD report.

The CSDDD will apply to both EU and to non-EU companies that generate revenue in the EU and exceed the scoping thresholds. Once transposed into the national laws of EU Member states (by 2026), the CSDDD’s application will be phased-in based on size, with compliance obligations beginning from July 26, 2028 under the “Omnibus” measures adopted in April 2025 (originally slated for July 26, 2027) for the largest companies.

b. CSRD and Taxonomy

The CSRD was adopted pursuant to the European Green Deal in 2022 and similarly follows a phased-in approach to application. 2024 marked the first financial year in respect of which EU and certain non-EU companies will have to disclose “sustainability information” in accordance with the CSRD as part of their 2025 management reporting. Under the CSRD, in-scope companies are required to produce detailed sustainability reports with disclosures on sustainability-related material impacts, risks, and opportunities (IROs) that are subject to third-party assurance.

The requirements in relation to sustainability reporting are set out in the European Sustainability Reporting Standards (ESRS), the first set of which were adopted by the European Commission on July 31, 2023. The ESRS consist of cross-cutting and topical standards, with detailed disclosure requirements in relation to various sustainability/ESG topics. Based on a “double materiality” assessment, in-scope companies may be required to make disclosures in relation to material IROs for the following environmental topics: climate change (including scope 1, 2, and 3 greenhouse gas (GHG) emissions; pollution; water and marine resources; biodiversity and ecosystems; and resource use and circular economy.

In the context of preparation for ESRS implementation as from 2024, the European Financial Reporting Advisory Group (EFRAG), the association appointed as the technical advisor to the Commission on the ESRS, published three implementation guidance documents on May 31, 2024. These address (i) the CSRD materiality assessment, (ii) the “value chain” CSRD concept, and (iii) a detailed list of ESRS datapoints that are potentially to be disclosed in CSRD reports. On August 7, 2024, the European Commission also published FAQs on the interpretation of certain provisions under the CSRD, addressing questions regarding scope and application dates, exemption rules, and third-party assurance of sustainability reporting.

CSRD sustainability reports must include disclosures required under the Taxonomy Regulation. The Taxonomy Regulation sets out the conditions that an economic activity has to meet in order to qualify as environmentally sustainable and to be considered “taxonomy aligned.” Pursuant to the Taxonomy Regulation, companies in-scope of the CSRD must disclose certain KPIs regarding the taxonomy-alignment of their activities.

c. Omnibus

In verbal remarks following a meeting on “The New European Competitiveness Deal” in November 2024, the European Commission President, Ursula von der Leyen, mentioned that the Commission would propose to simplify certain reporting frameworks under an “Omnibus” initiative aimed at alleviating compliance burdens. Von der Leyen specifically referenced overlapping requirements in the CSRD, the Taxonomy Regulation, and the CSDDD.

The newly appointed European Commission took office on December 1, 2024, and von der Leyen began her second mandate as President. On February 26, 2025, the Commission released its first “Omnibus” package consisting of a number of legislative drafts, which present separate proposals seeking to reduce the regulatory burden under various EU sustainability regulations and to strengthen the EU’s competitive position. These drafts include proposals to delay and simplify certain requirements under the CSRD, CSDDD and Taxonomy Regulation.

The first set of the Commission’s “Omnibus” proposals, known as the “Stop-the-Clock” Directive, was adopted by the EU on April 14, 2025 following endorsement by the European Parliament and the European Council. The “Stop-the-Clock” Directive postpones reporting and due diligence obligations for certain companies under the CSRD, CSDDD and the Taxonomy Regulation.

As of April 16, 2025, the Commission’s substantive proposals to simplify reporting and due diligence requirements under the CSRD, CSDDD and the Taxonomy Regulation remain under consideration by the European Parliament and Council. Notably, the Commission’s February 2025 substantive proposals do not contemplate amendments to the "double materiality" standard under the CSRD reporting requirements and would not specifically limit the extraterritorial application of the CSRD and CSDDD.

d. Anti-Greenwashing Consumer Protection Regulation

In 2024, the EU also further developed sustainability frameworks that will likely be unaffected by the omnibus initiative. Notably, two forthcoming Green Deal measures have sharpened the EU’s regulatory focus on greenwashing in the consumer protection area, which was primarily governed by general rules under the Unfair Commercial Practices Directive (UCPD).

First, the European Parliament and the Council adopted the Empowering Consumers for the Green Transition Directive (ECGTD) on February 28, 2024. The ECGTD amends the UCPD and will introduce new, stricter prohibitions on misleading sustainability labels and unsubstantiated generic environmental claims (including regarding climate neutrality and net zero). Member States must implement the ECGTD by 2026, with full application by September of that year.

Second, on June 17, 2024, the European Council adopted its position regarding the proposal of the Green Claims Directive. While the Green Claims Directive is subject to legislative negotiations, the Green Claims Directive would require companies to use clear criteria and the latest scientific evidence to substantiate their environmental and climate-related claims and labels. The proposed Green Claims Directive forms part of the broader package of consumer-oriented environmental regulation, including the Ecodesign for Sustainable Products Regulation and the ECGTD.

The Council’s position on the proposal for Green Claims Directive serves as the basis for legislative negotiations with the European Parliament, which are expected to resume later in 2025.

e. Conclusion

Overall, 2024 has seen the EU forge ahead with major sustainability regulatory developments, including the adoption of CSDDD and strengthened consumer protections regarding greenwashing. The “Omnibus” initiative, however, creates uncertainty, specifically in light of the implementation of the CSRD and the 2025 sustainability reports. 2025 is shaping up to be an interesting year for EU sustainability regulation.

3. Disclosure

a. CSRD – Transposition and Status Update

As of the date of this publication, the CSRD still remains the global high-water mark for sustainability reporting. As an EU directive, the CSRD requires transposition into the national laws of each of the EU member states to take effect. This was supposed to happen by July 6, 2024. Seventeen of the twenty-seven EU member states missed the transposition deadline. Following a letter of formal notice issued by the European Commission on September 26, 2024, opening infringement procedures against these member states, most have now completed or are nearing the completion of the transposition process, with only Austria, Malta and Portugal yet to make substantive progress as of January 2025. Meanwhile, a reasoned opinion, published by the European Commission on December 16, 2024 against Sweden for incorrectly transposing the CSRD by not giving retroactive effect to its national law, gave Sweden two months to address these alleged shortcomings. While the CSRD has not yet been formally incorporated into the European Economic Area Agreement which applies to Iceland, Liechtenstein, and Norway, steps have already been taken to incorporate the sustainability reporting requirements into both Norway and Liechtenstein’s laws.

The CSRD establishes the legal framework. As discussed above, the specific disclosure requirements that companies need to comply with are developed separately by EFRAG and the ESRS applicable to large EU companies are the only ones that have been formally adopted to date. The equivalent standards for non-EU companies are currently still being drafted. In line with the CSRD, the non-EU reporting standards will only require non-EU companies to focus on their sustainability impacts, and not their sustainability-related risks or opportunities. The European Commission announced as part of its February 26, 2025 “Omnibus” proposal its intention to adopt a new delegated regulation to revise ESRS and substantially reduce the number of data points on which companies are required to report, and to eliminate the adoption of sector-specific ESRS. On March 27, 2025, the Commission asked EFRAG to provide technical advice, by October 31, 2025, in the simplification of ESRS, and EFRAG launched a public consultation for input on ESRS revisions on April 8, 2025.

Although the first CSRD-compliant reports are being published in 2025, there has already been a notable shift in sustainability reporting as companies took steps to reformulate their sustainability disclosures to more closely resemble the methodology, content and format requirements of the CSRD. A key feature of this transition is the growth of “double materiality” assessments being used to determine relevant information. A double materiality assessment is an assessment that looks at both sustainability-related financial effects (internal) as well as sustainability impacts on people and the planet (external).

Although the reporting of sustainability-related financial effects under frameworks such as the Sustainability Accounting Standards Board (SASB) standards or the reporting of sustainability impacts under the Global Reporting Initiative’s (GRI) standards are not new, the CSRD requires both materiality perspectives to be applied and that connections are made to financial accounts where possible.

A second feature is the move away from purely subjective, stakeholder feedback-based materiality assessments to more objective, evidence-based approaches. Of those surveyed by EFRAG in 2024, approximately 70% were pursuing an objective, evidence-based approach relying mainly on internal and third-party data that is complemented, where data is not available, by the judgment of internal experts and stakeholders. While climate reporting in these early reports was more mature compared to the other environmental and social topics covered (with all fifty companies analyzed finding climate material), this was likely indicative of these companies’ ability to leverage pre-existing disclosures against frameworks such as the Recommendations of the Task Force for Climate-related Financial Disclosures (TCFD) and the CDP (formerly the Carbon Disclosure Project) with which the ESRS are closely aligned. More thorough assessments of a broader range of sustainability topics are expected this year as companies start to publish their assured CSRD-aligned reports.

Although many of the reports analyzed indicated that companies expect to rely on the transitional reliefs built into the ESRS, there has been increasing concern with the over-implementation of these disclosure rules by companies. The European Commission staff reportedly has been urging companies to approach reporting in a proportionately and pragmatic way. For example, companies are only required to obtain information from small- and medium-sized businesses in their upstream and/or downstream value chains starting from their fourth year of reporting (FY2028 at the earliest), and even then, the information that can be requested will be limited to lighter touch standards. Yet, increasing calls have cited “immense trickle-down effects for European SMEs,” perhaps symptomatic of over-implementation, as a reason to reduce sustainability reporting via the EU’s much reported “omnibus.”

b. The United Kingdom, Canada, and Other Jurisdictions Move Forward with International Sustainability Standards Board (ISSB) Climate Disclosures

The proliferation of mandatory sustainability disclosures is not limited to the EU. 2024 saw broad convergence around national-level adoption of reporting standards developed by the ISSB: IFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and IFRS S2 (Climate-related Disclosures). These ISSB standards consolidate and build on the voluntary frameworks developed by the TCFD, the Value Reporting Foundation’s Integrated Reporting Framework and SASB.

Although the ISSB standards are themselves not mandatory, they are increasingly being integrated into national reporting regimes, meaning that they are becoming mandatory for those companies in-scope of said regimes. A publication by the IFRS reported that thirty jurisdictions representing more than 40% of global market capitalisation have already decided to use or are taking steps to introduce ISSB standards into their regulatory frameworks. National approaches to ISSB standard adoption vary, with differing scopes and transitional reliefs (e.g., for disclosure of scope 3 GHG emissions). Early ISSB adopters include Singapore, where all Singapore listed companies will be required to disclose in line with the ISSB standards in the upcoming financial year (if not already), with private company sustainability reporting mandatory from 2027, and Australia, where the first ISSB-aligned sustainability reports are due to be filed in 2026. Mexican entities will also find themselves having to file new sustainability information in 2026, a requirement understood to be indicative of a broader planned convergence of Mexican standards with those of the ISSB.

c. Different Approaches and Interoperability Efforts under Sustainability Reporting Frameworks

The ISSB standards focus on financial materiality and represent a divergence in approach from the “double materiality” approach to sustainability reporting adopted in the EU and other jurisdictions, such as the People’s Republic of China. Under sustainability reporting guidelines issued for companies listed on one of China’s main exchanges (in April 2024) and standards for private companies (in December 2024), in-scope companies are required to conduct double materiality assessments, and listed Chinese companies will be required to disclose a corporate sustainability report in 2026.

As sustainability reporting regimes continue to emerge globally, there has been growing international efforts to promote interoperability and alignment between existing regimes, both voluntary and mandatory. Collaboration between sustainability standards bodies has led to the alignment of CDP with the ISSB standards and the publication of interoperability guidance, e.g., between the ISSB-ESRS and (in draft only) ESRS-GRI to help companies navigate the overlaps.

C. Litigation

In 2024, there were decisions regarding countries’ or private entities’ compliance with climate commitments or obligations stemming from national constitutions and laws or international agreements.

In Do-Hyun Kim et al. v. South Korea, South Korea’s Constitutional Court found that a national law related to a national GHG emissions reduction target violated the constitutional right to a healthy environment. The court established principles for assessing climate measures and addressing climate mitigation and adaptation under the constitution. In Mk Ranjitsinh & Ors. v. Union of India & Ors., India’s Supreme Court recognized the right to be free from the adverse effects of climate change under the constitutional right to life and personal liberty and equality before law and equal protection of law, balancing biodiversity conservation goals with a just energy transition.

In the United Kingdom, the High Court ruled in R (Friends of the Earth Ltd) v Secretary of State for Energy Security & Net Zero that the UK government’s 2023 Carbon Budget Delivery Plan (CBDP) did not comply with the Climate Change Act 2008 (CCA). The court found that the Secretary of State for Energy Security and Net Zero (Secretary) acted irrationally by concluding that the UK’s carbon budgets would be met based on an assumption that all of the CBDP proposals and policies would be “delivered in full,” an assumption not supported by the materials presented to the Secretary. The court also found that the Secretary’s assessment of whether the CBDP would contribute to “sustainable development” did not meet the threshold of certainty required by the CCA. In other countries, courts dismissed claims that governments were failing to adhere to climate commitments, including in the Czech Republic, Turkey, Romania, and Italy.

In Milieudefensie et al. v. Royal Dutch Shell plc, the Court of Appeal of The Hague addressed a private company’s climate obligations, reversing a district court decision establishing specific requirements for Shell to reduce GHG emissions from its operations and fossil fuel products. The Court affirmed Shell’s legal duty of care to mitigate climate change under Dutch tort law and international human rights obligations, but declined to impose a specific emissions reduction target, citing insufficient scientific consensus on pathways for individual companies and practical challenges related to Scope 3 emissions.

2024 also saw significant rulings or advisory opinions on climate change from regional and international courts and tribunals. In April 2024, the European Court of Human Rights (ECtHR) issued three decisions. In Verein KlimaSeniorinnen Schweiz and Others v. Switzerland, the ECtHR ruled that Switzerland violated Article 8 of the European Convention on Human Rights by failing to adopt sufficient climate mitigation measures. The claimants, an association of senior women, argued that inadequate Swiss climate policies left them vulnerable to heatwaves and health risks. The Court granted the association locus standi to bring the case, found a violation of the right to life and health (Articles 2 and 8), and established that states have a positive obligation to take substantial and progressive measures to reduce GHG emissions, aiming to achieve net zero emissions within the next three decades. The ECtHR introduced a five-step test to assess whether a state has met its obligations. In Carême v. France, the ECtHR found that the claimant could not claim victim status because he no longer resided in the affected area. In the third case, Duarte Agostinho and Others v. Portugal and 32 Others, the ECtHR found inadmissible a case brought by six Portuguese children and youth against Portugal and thirty-two other states, alleging insufficient action on climate change and violations of their rights to life, privacy, and non-discrimination due to climate impacts such as forest fires and heatwaves. The ECtHR cited the applicants’ failure to exhaust domestic remedies.

In May 2024, the International Tribunal for the Law of the Sea (ITLOS) issued an Advisory Opinion on climate change and international law that concluded that State Parties to the United Nations Convention on the Law of the Sea bear clear obligations under Article 194 to prevent, reduce, and control marine pollution caused by anthropogenic GHG emissions.

II. National Activities

A. Regulatory Activities

1. Regional and Multi-State Activities

B. Mitigation

1. Developments in Regulations for Clean Vehicle Tax Credits

a. Final Section 30D Rule

The Internal Revenue Service (IRS) published a final rule on May 6, 2024, defining eligibility requirements for the clean vehicle credit under Section 30D of the Internal Revenue Code, enacted by the Inflation Reduction Act of 2022 (IRA). Consistent with the IRA, the intent of the Section 30D rule is to incentivize, through consumer tax credits, the domestic supply chain for the critical minerals and battery components necessary to cost-effectively manufacture EVs that can compete with foreign manufacturers. The new rule establishes a more stringent and precise test to determine whether a vehicle qualifies for one-half of the $7,500 tax credit based on how certain critical minerals contained in a clean vehicle battery are sourced. Additionally, the new rule finalizes restrictions on excluded foreign entities from whom materials may not be sourced to maintain tax credit eligibility and provides final guidance on due diligence requirements and the accounting procedure related to these excluded entities.

i. Traced Qualifying Value Test

The final rule adopts a new test for determining the qualifying critical mineral content of a clean vehicle battery, changing the process from the prior “50% Value Added Test” to a new Traced Qualifying Value Test. This test determines whether, under Section 30D of the Code, the percentage of critical minerals in the battery extracted, mined, or processed in the United States is an applicable percentage for a year in which the vehicle is placed in service. For example, for a new EV placed in service in 2025, the applicable percentage is 60%, meaning that at least 60% of the critical minerals in the battery must have been extracted, processed, or recycled in the U.S. or a free trade agreement country.

At a high level, the 50% Value Added Test allowed manufacturers to claim a “qualifying critical mineral” if 50% or more of the value added to the critical mineral by extraction, processing, or recycling was derived by that process in the U.S. or a country with whom the U.S. has a free trade agreement. Put another way, the applicable percentage for 2025 is 60%, and if the taxpayer can show that at least 50% of that 60% represents value added to the extraction, processing, or recycling in the U.S., then the taxpayer can assume the applicable percentage is met.

The IRS states that the new Traced Qualifying Value Test is more precise than the 50% Value Added Test, requiring a manufacturer to fully trace any value added in a procurement chain. But the test is also decidedly more stringent than the 50% Value Added Test; a manufacturer may only treat the actual percentage of the value of a critical mineral as qualifying, rather than the full value, as it could under the 50% Value Added Test. In short, the net effect of the new test would be to make it more difficult for manufacturers to produce EVs that would qualify for the tax credit.

The IRS claims in the final rule that this more stringent test will incentivize value-add activities in the United States and allied countries by counting incremental value that would otherwise be lost under the 50% Value Added Test. To address concerns about the stringency of the test, the final rule gives a manufacturer the option to use the 50% Value Added Test prior to January 2027 if the manufacturer provides periodic written reports regarding the critical mineral content of the battery used in its electric vehicles.

ii. Definition of “Foreign Entity of Concern”

In addition to the critical mineral and battery components requirements, a vehicle cannot obtain a Section 30D tax credit under the IRA if any critical minerals or battery components originate from a “foreign entity of concern” (FEOC), as defined in section 40207(a)(5) of the Infrastructure Investment and Jobs Act. Concurrent with this final rule, the U.S. Department of Energy (DOE) finalized its interpretive guidance related to what does and does not qualify as a FEOC, which the IRS adopted in the final rule.

A FEOC includes foreign entities “owned by, controlled by, or subject to the jurisdiction or direction of a government of a foreign country that is a covered nation.” As of the final rule, “covered nations” include China, Russia, Iran, and North Korea. Importantly, “government of a foreign country” can include “subnational governments” and “certain current or former foreign political figures.”

DOE guidance clarifies that an entity would be “owned by, controlled by, or subject to the direction” of another entity if such other entity cumulatively holds 25% or more of the entity's board seats, voting rights, or equity interest. Importantly, the IRS notes that “licensing agreements or other contractual agreements may also create control.”

iii. Demonstrating FEOC Compliance

The rule establishes a three-step process for a clean vehicle manufacturer to demonstrate that its EV is eligible for the clean vehicle credit based on FEOC compliance. In step one, the manufacturer determines whether and to what extent the applicable critical minerals and battery components are FEOC-compliant (i.e., not manufactured in, extracted from, or processed in a FEOC). In step two, the FEOC-compliant battery components and critical minerals are physically tracked (or allocated to) to specific battery cells. In step three, the battery components are tracked to specific clean vehicles.

Importantly, in step 2 of the analysis above, the IRS now allows “allocation-based accounting,” in which manufacturers allocate the mass of FEOC-compliant critical minerals acquired from a supplier to battery cells - without physically tracking the critical minerals to specific battery cells. For example, if a manufacturer procures 20,000,000 kilograms (kg) of an “applicable critical mineral” for a battery cell production facility, of which 4,000,000 kg are FEOC-compliant and 16,000,000 kg are not, then 20% of the battery cells in the product line may be treated as FEOC-compliant. The IRS notes that this rule encourages manufacturers and their suppliers “to ensure secure supply chains; under an allocation-based accounting rule, the number of new clean vehicles that OEMs are able to produce is limited by the supply of the lowest-quantity FEOC-compliant critical mineral.”

b. Final Section 30C Rule

As a complement to the IRA’s support for EV manufacturing in the U.S., the IRA also provides support for EV charging stations and other fuels for clean vehicles. Specifically, the IRA provides an up-to 30% tax credit (30C Credit), up to $100,000 per single item of charging property, for alternative fuel vehicle refueling property (which includes EV charging stations) that the taxpayer places in service during the taxable year. Qualifying alternative fuel vehicle refueling property includes bi-directional charging equipment, and it must be placed in service in an eligible census tract, which includes census tracts described in what is defined as the New Markets Tax Credit in Section 45D(e) of the Code and excludes urban areas.

On September 19, 2024, the IRS and the Department of the Treasury (Treasury) issued a notice of proposed rulemaking implementing Section 30C (Section 30C NOPR). Among other things, the Section 30C NOPR clarified that EV charging stations are eligible for Section 30C credits as “applicable property” if they are “comprised of components that are functionally interdependent . . . [f]or the recharging of motor vehicles propelled by electricity, but only if the property is located at the point where the motor vehicles are recharged.” The Section 30C NOPR calls this “recharging property[,]” and it clarifies that Section 30C Credit eligibility extends to recharging property’s integral parts (e.g., the charging station), but not to real property, buildings, or structural components.

Section 30C allows a credit for each “single item” of recharging property, which the Section 30C NOPR defines as “[e]ach charging port for recharging property.” The Section 30C NOPR defines “charging port,” in turn, as “the system within a charger that charges one motor vehicle” and specifies that “[a] charging port may have multiple connectors, but it can provide power at the port’s rated electrical output to charge only one motor vehicle through one connector at a time.” The Section 30C NOPR also provides for the allocation of cost of “associated property” to each charging port. So, as an example in the Section 30C NOPR explains, the cost of a charger with two charging ports would be allocated across the 30C Credit for each charging port, as defined.

c. The NEVI Formula Program and the Charging and Fueling Infrastructure Discretionary Grant Program

The National Electric Vehicle Infrastructure Formula Program (NEVI Program) provided $5 billion in “funding to States to strategically deploy electric vehicle charging infrastructure and . . . establish an interconnected network to facilitate data collection, access, and reliability.” In addition, Congress appropriated $2.5 billion from 2022–2025 for the Charging and Fueling Infrastructure Discretionary Grant Program (CFI Program) meant to allow eligible government entities “to contract with a private entity for acquisition and installation of publicly accessible electric vehicle charging infrastructure[.]”

On February 28, 2023, the Department of Transportation and the Federal Highway Administration issued a final rule establishing minimum standards and requirements for projects funded under the NEVI and CFI Programs. This rule, in addition to typical conditions for use of federal funds, sets publication requirements, technical specifications, reliability and uptime standards, security measures, and pricing requirements associated with charging infrastructure funded by the NEVI and CFI Programs.

The Joint Office of Energy and Transportation (JOET) reports that, in Fiscal Year 2024, Texas led all other states in NEVI funding with $86,854,582, followed by California and Florida with $81,721,161 and $42,185,543 respectively. New Hampshire, Washington D.C., and Puerto Rico received the least funding, with $3,678,786, $3,552,666, and $2,909,472 in Fiscal Year 2024 respectively. JOET reported that, as of November 26, 2024, “there are 126 public charging ports in operation across 31 NEVI stations in nine states[.]” Ohio leads the way in NEVI implementation, having opened 15 NEVI stations. Forty-one states have opened first-round solicitations for NEVI charging stations, and “35 have issued conditional awards or put agreements in place for over 3,560 fast charging ports across more than 890 charging station locations.”

d. Impact of the Trump Administration – Uncertain Future Availability of EV and EV-related Incentives.

On January 20, 2025, President Trump issued an executive order which established as the policy of the United States to “eliminate” a so-called “electric vehicle (EV) mandate” by, among other things, “considering the elimination of unfair subsidies and other ill-conceived government-imposed market distortions that favor EVs over other technologies and effectively mandate their purchase by individuals, private businesses, and government entities alike by rendering other types of vehicles unaffordable[.]” The executive order requires agency heads to “review all existing regulations, orders, [and] guidance documents . . . to identify those agency actions that impose an undue burden on the identification, development, or use of domestic energy resources . . . , including restrictions on consumer vehicles and appliances.”

The executive order also sought to require all agencies to “immediately pause the disbursement of funds appropriated through the [IRA] or Infrastructure Investment and Jobs Act . . . , including but not limited to funds for electric vehicle charging stations made available through the [NEVI] Formula Program and the [CFI] Program” until the agencies evaluate these programs, the agencies file a report with the Directors of the National Economic Council (NEC) and the Office of Management and Budget (OMB) with recommendations for complying with the executive order, and the Directors of the NEC and OMB “have determined that such disbursements are consistent with any review recommendations they have chosen to adopt.” The executive order does not require the Directors of NEC and OMB to issue decisions under a certain timeframe.

The fate of federal funding and support for electric vehicles and related infrastructure remains uncertain in light of the Trump administration’s recent executive order. At the time of writing, the U.S. District Court for the District of Columbia stayed an OMB memorandum putting the funding pause into effect, and the OMB issued a second memorandum clarifying that agencies should pause only “grant, loan or federal financial assistance programs that are implicated by the President’s Executive Orders[,]” including the executive order described above. While federal funding and support for electric vehicles and related infrastructure is ostensibly paused, it remains to be seen how and whether President Trump’s executive order will sustain legal challenges.

To the extent the Executive Order purports to rescind funding under the NEVI and CFI programs, some may argue that the President lacks the power to permanently do so without Congressional approval. Further, although the Executive Order seems to clearly target federal support for EVs, including the Section 30D Rule, it is unclear what effect, if any, the Executive Order will have on the availability of the actual tax credits, which are enshrined in federal statute, to eligible U.S. taxpayers.

C. Litigation

In 2024, U.S. courts saw a continued rise in climate-related litigation, with varied success. Key cases involved enforcement of environmental regulations, climate-related suits on constitutional grounds, claims against corporations for “greenwashing,” and related enforcement actions by the U.S. Securities and Exchange Commission (SEC). Many of these cases are ongoing in 2025.

1. Ohio v. Environmental Protection Agency

In Ohio v. Environmental Protection Agency, the Supreme Court temporarily stayed enforcement of the Clean Air Act’s “good neighbor” provision, which required states to mitigate emissions that would impact air quality in neighboring states. Interpreting the “good neighbor provision,” the EPA rejected the plans submitted by twenty-one states in which the states indicated how they would reduce emissions affecting the air quality in “downwind” states, and instead EPA adopted its own plan for those twenty-one states and two others that never submitted plans. Three of those states, along with several companies and industry associations, challenged the EPA’s plan in the U.S. Court of Appeals for the District of Columbia and sought emergency intervention from the Supreme Court when the D.C. Circuit declined to stay the EPA’s plan while the challenge was pending. The Supreme Court held that the EPA failed to adequately explain and justify the appropriateness of its plan’s emissions reduction requirements and granted the temporary stay. The Supreme Court’s stay remains in place pending resolution of the merits of the challenge to the EPA’s plan before the D.C. Circuit.

2. Exxon Mobil Corp. v. Arjuna Capital LLC

In June 2024, a Texas federal district court dismissed a lawsuit by Exxon against activist investors Arjuna Capital, LLC and Follow This seeking a declaratory judgment that Exxon could exclude from its 2024 annual meeting proxy statement a shareholder proposal that called for cuts to the company’s GHG emissions, arguing that the proposal did not seek to improve performance or create shareholder value. The court found the claim moot, as the investors withdrew their proposal and “unconditionally and irrevocably” stipulated not to make similar proposals in the future. Arjuna’s stipulation was prompted by the court’s May 2024 decision denying Arjuna’s motion to dismiss, having held that merely withdrawing the proposal (without the “unconditional and irrevocable” stipulation Arjuna later added) did not make it sufficiently clear that the challenged conduct could not be reasonably expected to reoccur.

3. Climate-Related Constitutional Lawsuits

Several cases involving youth plaintiffs challenging state and federal governments for failing to prevent or mitigate climate change have been resolved this year, with mixed results.

In Held v. State, the Montana Supreme Court ruled in favor of youth plaintiffs challenging a state law restricting consideration of greenhouse gas emissions and related climate change impacts in environmental reviews. The Court held that the right to a clean and healthful environment under the Montana Constitution was forward-looking and included climate change, and that the plaintiffs had standing based on their personal stake in the rights at issue.

The Ninth Circuit, however, granted the U.S. government’s petition for a writ of mandamus and directed the district court to dismiss plaintiffs’ claims in Juliana v. United States. Plaintiffs sought a declaratory judgment that the U.S. government’s support for fossil fuels and failure to mitigate climate change violated plaintiffs’ constitutional rights under the Fifth and Ninth Amendments. On appeal of the district court’s denial of the United States’ motion to dismiss, the Ninth Circuit held that plaintiffs lacked standing, as the declaratory relief requested was not likely to mitigate the concrete injuries alleged, and ordered the district court to dismiss. Instead, the district court permitted plaintiffs to amend. In granting mandamus, the Ninth Circuit reiterated its prior holdings and held that its prior mandate to the district court did not permit leave to amend and there was no intervening change of law that would have permitted the district court to deviate from the Ninth Circuit’s mandate. Plaintiffs’ petition for certiorari to the Supreme Court is pending as of January 2025.

In Genesis B. v. EPA, a California federal district court dismissed a case against the EPA for allegedly harming and discriminating against plaintiffs by allowing dangerous levels of pollution. Plaintiffs requested a declaratory judgment that the EPA violated their constitutional rights to equal protection and life, as well as for the court to recognize the equal protection of children as a protected class. Citing Juliana, the court found the plaintiffs did not have standing due to a lack of redressability, as the declaratory relief sought was unlikely to mitigate the harms claimed but allowed plaintiffs to file an amended complaint. The plaintiffs filed an amended complaint in May 2024 adding requests for injunctive relief to prevent the EPA from discriminating against children through its analyses and regulatory programs. Defendants filed a motion to dismiss in July 2024, arguing plaintiffs lacked standing, ripeness, or a claim to which the Court can grant relief.

In Navahine F. v. Hawai‘i Department of Transportation, Hawai’i settled a case brought by youth plaintiffs alleging the state transportation system violated the Hawai’i constitution’s public trust doctrine and right to a clean and healthful environment. The settlement requires the Hawai’i Department of Transportation take actions to achieve a zero emissions target by 2045, along with other commitments to consider carbon emissions and increase transparency.

4. Greenwashing Litigation

The rise in “greenwashing” litigation continued in 2024. These cases involve allegations that companies made misleading, misrepresentative and/or deceptive statements about, for example, the environmental benefits of their products or the climate change impact of their activities. These cases have had mixed results in U.S. courts.

In June 2024, for example, a Missouri federal district court dismissed a suit brought under the Missouri merchandising practices law relating to Nike’s claims that its clothing was made sustainably while at the same time allegedly using methods that harm the environment. The court found insufficient facts to allow a reasonable inference that Nike had misled customers with its representations and that the plaintiff’s allegations did not meet the law’s “reasonable consumer” test. But in August 2024, the D.C. Court of Appeals revived a case against Coca-Cola alleging violations of the D.C. Consumer Protection Act based on the company’s allegedly misleading statements about its environmental sustainability, including stated goals of using 100% recyclable packaging by 2025. The D.C. Court of Appeals held that even aspirational statements could deceive consumers about a company’s sustainability efforts, as Coca-Cola’s statements could be deceptive if its recycling efforts could not actually offset the company’s greater environmental harms and if it did not actually attempt to progress towards achieving its stated environmental goals. Cases have also been filed against Tyson Foods in D.C. Superior Court for allegedly misrepresenting its net-zero commitment and “climate-smart” products and against Lululemon in Florida federal court for allegedly misleading consumers that its practices were environmentally sound.

Similar class-action suits have addressed product labeling. The Southern District of New York dismissed a suit alleging misleading “carbon-neutral” labels on Evian water bottles, as the product label included a link to a fuller description of what “carbon-neutral” meant with the certification process and relevant standards for carbon offsets. Yet a California federal magistrate judge denied summary judgment and certified a class action suit against Rust-Oleum for labeling products “non-toxic” and “Earth friendly” in violation of California’s consumer protection laws. Ongoing cases continue in Minnesota federal district court against Target, alleging that certain beauty products labeled “Target Clean” actually contain harmful chemicals, and in California district court against Honey Pot Co. regarding labels that its products labeled “plant-derived” contain synthetic ingredients.

Cases alleging misrepresentations to investors have also found mixed success. A $9.25 million settlement was reached in a securities class action against Oatly in the Southern District of New York for promoting the company as more environmentally sound than it was and artificially pumping shares. The Second Circuit upheld the dismissal of a lawsuit alleging Danimer Scientific exaggerated the environmentally friendly nature of a plastics alternative it produced, finding no proof the company purposefully misled investors.

Several cases are also ongoing against energy suppliers for allegedly misleading consumers about the purported impact of their fossil fuel products on climate change, including in Hawaii and Connecticut, but several others have now been dismissed (in Delaware, Maryland, and New York) because plaintiffs’ state law claims were precluded and preempted by federal law. Plaintiffs have also filed a putative class action in Oregon state court alleging a natural gas company misled customers by advertising a “Smart Energy” program that would offset natural gas emissions, while directing the fees paid to methane-producing industrial dairy farms.

5. SEC “greenwashing” enforcement cases

The SEC announced three greenwashing-related charges in 2024. In September, the SEC charged Keurig with making inaccurate statements regarding the recyclability of its single-use beverage pods. Keurig agreed to a cease-and-desist order and to pay a civil penalty of $1.5 million. The SEC announced in October charges against an investment adviser for misstatements and compliance failures related to an investment strategy marketed as incorporating ESG factors, resulting in a cease-and-desist order and a $4 million civil penalty. In November, the SEC charged another investment adviser for making misleading statements regarding the percentage of company assets under ESG-related management, resulting in a $17.5 million penalty.

However, in September 2024, the SEC disbanded the Climate and ESG Taskforce of its Enforcement Division, and it remains unclear where enforcement priorities will fall for the incoming administration.

After establishing an Environmental Fraud Task Force in 2023, the U.S. Commodity Futures Trading Commission (CFTC) adopted final guidance regarding the listing of designated contract markets of voluntary carbon credit derivative contracts in September 2024 and shortly thereafter in October, in conjunction with the Department of Justice and SEC, charged two individuals for fraud and false, misleading, or inaccurate reports relating to voluntary carbon credits. Also, in October 2024, the Northern District of Illinois granted summary judgment for the CFTC, finding that the defendant, who operated “crypto hedge funds,” had made misrepresentations about the funds’ performance and misappropriated investors’ funds through the carbon offset program. However, as with the SEC, it is unclear whether the CFTC will continue to prioritize further enforcement actions on these issues.

III. State and Local Activities

A. Mitigation

1. State and Regional Activities

On January 13, 2025, California Air Resources Board (CARB) notified the U.S. EPA that it was withdrawing its waiver of preemption request for its Advanced Clean Fleets rule (ACF). California originally applied for waiver of federal preemption for the ACF rule in November 2023. In withdrawing California’s request to the U.S. EPA, CARB’s chair, stated, “[f]rankly, given that the Trump administration has not been publicly supportive of some of the strategies that we have deployed in these regulations, we thought it would be prudent to pull back and consider our options.” The ACF became effective in October 2023 and outlaws the sales of medium-and heavy-duty internal combustion fleets by 2036 and phased in Zero Emission Vehicles (ZEVs) in California. The U.S. Clean Air Act (CAA) allows California to set standards for many mobile sources that are more restrictive than federal truck regulations. In 2023, CARB, several truck manufacturers and a truck manufacturer’s association have also agreed to form the Clean Truck Partnership (CTP), a public/private partnership to reduce truck emissions. Members of the CTP committed to meet California’s vehicle standards, which will require the sale and adoption of zero-emissions technology in the state, regardless of challenges to the standards under the federal CAA. CARB also agreed to work collaboratively with manufacturers to provide reasonable lead time to meet its requirements and to support the development of necessary ZEV infrastructure before imposing new requirements. For example, in 2024, the CTP agreed on harmonizing with the 2027 federal Clean Trucks Plan NOx rule and provided a Manufacturers Advisory Correspondence on demonstrating legacy engine cap compliance.

On April 6, 2023, U.S. EPA granted a waiver for the California Advanced Clean Trucks Rule (ACT) and it is effective and enforceable. Massachusetts, New Jersey, New York, Oregon, and Washington adopted the ACT and were set to begin implementation in 2025. However, on January 20, 2025, the Trump Administration issued an Executive Order to “immediately pause the disbursement of funds appropriated through the Inflation Reduction Act of 2022 or the Infrastructure Investment and Jobs Act,” which has created some delay in implementation of the ACT while the impacts of the ACT are assessed. Federal agencies must submit a report to the Office of Management and Budget detailing how disbursements align with the Administration’s new policies. ACT and ACF compliance concerns created by inadequate charging station infrastructure have been a hurdle for trucking companies and manufacturers. The legal issues about the pending Supreme Court litigation and the Executive Order about the viability of a waiver withdrawal or reinstatement or whether the President can overrule a Congressionally mandated disbursements will likely create future legal debates and delays.

On December 18, 2024 the U.S. Environmental Protection Agency (EPA) granted California’s request for a waiver from the Clean Air Act (CAA) federal preemption requirements to implement and enforce two clean vehicle regulations: (1) the Advanced Clean Cars II (ACC II) regulations, which apply to light- and medium-duty engines and vehicles and (2) the “Omnibus” low-NOx regulations, which apply to on-road heavy-duty vehicles and engines as well as off-road diesel engines. California’s ACC II regulations focus on passenger cars and include requirements for vehicles that are model year 2026 through 2035 and later for on-road light- and medium-duty engines and vehicles. The ACC II regulations also require manufacturers to increase the production and sale of zero-emission vehicles (ZEVs) in California from 35% by model year 2026 to 100% by model year 2035 and beyond. However, manufacturers may count up to 20% of plug-in hybrid electric vehicles toward compliance with the ZEV sales standards. The “Omnibus” low-NOx regulations impose stringent exhaust emission standards for nitrogen oxides (NOx) and particulate matter (PM) and other emission-related requirements for the new model year 2024 and later on-road medium- and heavy-duty engines. The regulations also establish new PM emission standards for off-road diesel-fueled auxiliary power units. Both the ACC II regulations and the “Omnibus” low-NOx regulations are currently in effect. However, EPA’s decisions to grant a waiver of preemption for the ACC II regulations and the Omnibus low-NOx regulations have been challenged in two separate cases before the Ninth Circuit Court of Appeals. This litigation remains ongoing. Additionally, California’s promulgation of the ACC II regulations has been challenged in both federal district and state courts, and this litigation remains ongoing as well.

Prior to EPA’s recent finalization of these two waivers, fuel groups and some states also challenged EPA’s 2022 decision to reinstate California’s waiver of federal preemption under section 209(b)(1) of the CAA to allow California to regulate emissions from motor vehicles under its Advanced Clean Cars (ACC I) program. Those petitioners argued that the ACC I regulations impose undue economic burdens, exceed California’s authority under the CAA, and violate the states’ constitutional right to “equal sovereignty” by granting a CAA waiver to California but not any other state. In April 2024, the D.C. Circuit Court of Appeals upheld the EPA’s CAA waiver for the ACC I program and ruled the fuel petitioners lacked standing to raise their statutory claim and the state petitioners lacked standing to raise their preemption claim. The D.C. Circuit also rejected the state petitioners’ constitutional claim and held EPA’s decision did not violate the requirement of equal sovereignty among the states. The Supreme Court has agreed to review the D.C. Circuit’s decision solely to determine whether the fuel petitioners have standing to challenge EPA’s grant of a CAA waiver of federal preemption for the ACC I program.