Increasing Divergence Between US and EU Banks in Approach to Climate Change
Over the past several weeks, each of the major US banks have announced their withdrawal from the Net Zero Banking Alliance (presumably in response to the policy priorities of the second Trump Administration). Although participation in this group may have been more a matter of “virtue-signaling” rather than expressing and adopting a meaningful commitment, the departure of the US banks was nonetheless noteworthy as demonstrating the changing political climate in the United States. During this same time period, in contrast, many of the European Union’s largest banks have re-affirmed their commitment to the Net Zero Banking Alliance, declaring it a core component of their environmental and sustainability strategies.
This divergence between the US and EU with respect to the Net Zero Banking Alliance is illustrative of the increasing divide between the two major Western economies on an array of issues related to climate change. For example, while the SEC is preparing to dismantle the Biden Administration’s climate disclosure law, the EU is maintaining–although possibly adjusting–its own climate disclosure laws. Navigating this divide is becoming increasingly complex for the many companies that operate in both jurisdictions, or simply have commercial ties and are subject to regulatory burdens on both shores of the North Atlantic.
Several of Europe’s biggest banks have declared their commitment to the world’s largest climate alliance for the industry, distancing themselves from Wall Street’s sudden exit from the group. . . . The declarations of support for NZBA follow a period of crisis for the alliance, which saw its biggest US members walk away in quick succession after the Nov. 5 election. President Donald Trump has since taken a wrecking ball to the climate agenda of his predecessor, including ordering that the US leave the Paris climate agreement. Though Europe is struggling with its own backlash against environmental, social and governance regulations, its biggest banks say they remain committed to working together to fight climate change.
www.bloomberglaw.com/…
Community and Environmental Groups File TSCA Section 21 Petition Seeking the Phase Out of Hydrogen Fluoride in Domestic Oil Refining
The Natural Resources Defense Council (NRDC) announced on February 11, 2025, that community and environmental groups submitted a petition under Section 21 of the Toxic Substances Control Act (TSCA) to the U.S. Environmental Protection Agency (EPA) to prohibit the use of hydrogen fluoride in domestic oil refining “to eliminate the extreme and unreasonable risks this use presents to public health and the environment.” Brought by NRDC, Clean Air Council (CAC), and Communities for a Better Environment (CBE), the petition states that EPA must issue a TSCA Section 6(a) rule prohibiting the use of hydrogen fluoride in domestic oil refining to eliminate unreasonable risks to public health and the environment. According to the petition, “TSCA requires EPA to issue such a rule because this petition identifies (1) a ‘chemical substance’ ([hydrogen fluoride]) that presents, (2) under one or more ‘conditions of use’ (the use of HF for alkylation at U.S. refineries, and the rail and truck transportation needed to supply HF to those refineries), (3) an unreasonable risk to health or the environment.” The petition notes that hydrogen fluoride can take different forms and that anhydrous hydrogen fluoride tends to form hydrofluoric acid when it mixes with water. As reported in our November 13, 2019, blog item, in 2019, EPA denied a similar TSCA Section 21 petition to prohibit the use of hydrofluoric acid in manufacturing processes at oil refineries. EPA denied the 2019 petition because it lacked the analysis that would be expected in a TSCA risk evaluation preceding a Section 6(a) rulemaking, such as “discussion of the appropriate hazard threshold, exposure estimates, assessment of risks, or how the facts presented allow EPA to comply with its duties under section 26 or other statutory requirements in making an unreasonable risk determination.” Absent such information, EPA “cannot make the threshold determinations necessary to substantively assess and grant a petition for a TSCA section 6(a) rulemaking.”
TSCA requires EPA to grant or deny the petition within 90 days from the day the petition is filed. If EPA grants the petition, EPA must promptly commence an appropriate proceeding. If EPA denies the petition, EPA must publish the reasons for denial in the Federal Register.
What Can Happen When Federal Career Employees Are Told “You’re Fired!”
Among the less-noticed, less-reported implications of “firing” federal employees for whatever reason (or no reason) is the process under current law and regulations that applies to reducing or eliminating programs and positions within the U.S. government. Known as a reduction in force (RIF), these procedures are arcane, complicated, and could have many unintended impacts even if imposed to attain targeted reductions in specific parts or programs of the federal workforce. The Executive Order issued on February 11, 2025, designed to implement “workforce optimization” (Implementing The President’s “Department of Government Efficiency” Workforce Optimization Initiative), has stated that to reduce the workforce, RIF procedures will be followed.
The RIF procedures are found in the Workforce Reshaping Operations Handbook, 119 pages long, not including an Appendix of 107 pages. This manual from the U.S. Office of Personnel Management (OPM) outlines how and what happens to a federal employee who has their position eliminated due to budget cuts or management decisions to stop a program activity.
The key characteristics that drive what will happen are seniority of the employee and their job title (along with a veterans’ preference). As an example, for the U.S. Environmental Protection Agency (EPA), many staff are hired as an “environmental protection specialist (EPS)” — not a surprise at the agency devoted to environmental protection. There are many job titles at EPA, or any agency, such as chemist, grant administrator, ecologist, meteorologist, and so on. If an office or program element is “reduced in force,” then those staff with more seniority in their job title may have “bumping rights” over someone with the same job title elsewhere in the organization.
If the decision is to reduce the EPA workforce for all “climate-related” or “diversity program” work, some staff may have been hired as “EPS” positions and migrated to climate or diversity related work over time. If there is a RIF, some of those personnel may have started in the water or toxics program and may have bumping rights affecting staff in another part of EPA, outside of the climate or diversity activities — even if that other part of EPA is not the intended target of the cutback.
As an example of the complexity of predicting what might happen, one can examine the one small part of the Workforce Reshaping Operations Handbook, Chapter II (Human Resource’s Role and Responsibilities), Section D (Determining Rights to Other Positions):
Appendix D, Determining Rights to Other Positions, provides additional information on determining employees’ representative rates, normal line of progression for each position, identification of vacancies available for assignment and other placement offers, released employees’ qualifications for assignment, released employees’ assignment rights, and running a mock RIF and reviewing results for accuracy.
This is among the many considerations little-noticed from the first weeks of the new Administration’s “shock and awe” assault on the bureaucracy that could result if big budget or even small “targeted” cuts are forthcoming. Until now, proposed cuts and employees placed on administrative leave appear to have been made without the preparation or details required by the RIF procedures. The new Executive Order helps clarify some of the procedures agencies are to follow when reducing the workforce.
Without Schedule F in place, in addition to applicable regulations and labor contracts, the attempt to fire specific employees may have unpredictable and/or unintended effects and could impact agency activities far outside of the targeted program(s) or personnel. A further element of uncertainty about the future capabilities of federal agencies comes from another component of the Executive Order that states that “The Plan [to reduce the size of the workforce] shall require that each agency hire no more than one employee for every four employees that depart,” with certain exceptions. Future production and schedule of programs are surely to be affected by the difficulties of back-filling vacancies and the impact on staff morale during and after the results of these new initiatives.
Biden EPA Filed Notice of Appeal of Ruling that Typical Levels of Drinking Water Fluoridation Present an Unreasonable Risk to Health
As reported in our September 30, 2024, blog item, the U.S. District Court for the Northern District of California ruled in September 2024 that the plaintiffs established by a preponderance of the evidence that the levels of fluoride typical in drinking water in the United States pose an unreasonable risk of injury to the health of the public. Food & Water Watch v. EPA (No. 3:17-cv-02162-EMC). On January 17, 2025, the Biden U.S. Environmental Protection Agency (EPA) filed a notice of appeal in the U.S. Court of Appeals for the Ninth Circuit. Food & Water Watch v. EPA (No. 25-384). Now that President Trump’s nominee for EPA Administrator, Lee Zeldin, has been confirmed, it remains to be seen how the Trump EPA will proceed. A mediation conference is scheduled for February 26, 2025.
In its September 24, 2024, decision, the U.S. District Court for the Northern District of California found that “fluoridation of water at 0.7 milligrams per liter (‘mg/L’) — the level presently considered ‘optimal’ in the United States — poses an unreasonable risk of reduced IQ in children.” The court notes that its finding “does not conclude with certainty that fluoridated water is injurious to public health; rather, as required by the Amended TSCA, the Court finds there is an unreasonable risk of such injury, a risk sufficient to require the EPA to engage with a regulatory response.” The court order does not dictate how EPA must respond, but states that “[o]ne thing the EPA cannot do, however, in the face of this Court’s finding, is to ignore that risk.”
The BR International Trade Report: February 2025
Recent Developments
President Trump drives forward with “America First” trade policy. Shortly after taking office on January 20, President Trump issued a memorandum to various department heads outlining his “America First” trade policy. Notably, the memorandum paves the way for robust tariffs and calls for executive branch review of various elements of U.S. trade policy. Read our alert for additional analysis.
United States delays tariffs on imports from Canada and Mexico but imposes 10 percent tariffs on imports from China. On February 1, President Trump, acting under the authority of the International Emergency Economic Powers Act (“IEEPA”), imposed a 25 percent tariff on imports from Canada and Mexico (excluding energy resources from Canada, which were subject to a tariff of 10 percent) and a 10 percent tariff on imports from China. After first threatening to respond in kind—with retaliatory tariffs or other measures—both Canada and Mexico negotiated a 30-day pause in exchange for increased enforcement measures at America’s borders. There was no similar agreement between the United States and China, which became subject to additional tariffs on February 4. Notably, the president initially eliminated the de minimis exemption for certain Chinese-origin imports of items valued under $800, but then later reinstated the exemption.
President Trump announces 25 percent tariff on all steel and aluminum imports entering the United States. On February 10, President Trump signed a proclamation imposing 25 percent tariffs on imports of steel and aluminum from all countries and cancelling previous tariff exemptions. Peter Navarro, a trade advisor to the president, remarked that “[t]he steel and aluminum tariffs 2.0 will put an end to foreign dumping, boost domestic production, and secure our steel and aluminum industries as the backbone and pillar industries of America’s economic and national security.” The new tariffs will take effect on March 12.
President Trump announces reciprocal tariff regime. On February 13, the president paved the way for what he called “the big one,” reciprocal tariffs directed against countries that impose trade barriers on the United States. Under the new framework, the United States will impose tariffs on imports from countries that levy tariffs on imports of U.S. goods, maintain a value-added tax (“VAT”) system, issue certain subsidies, or implement “nonmonetary trade barriers” against the United States. The president stated that the U.S. Department of Commerce will conduct an assessment, expected to be completed by April 1, to determine the appropriate tariff level for each country.
President Trump sets tariff sights on European Union. President Trump has said he “absolutely” plans to impose tariffs on goods from the European Union to address what he considers “terrible” treatment on trade. In an effort to stave off such measures, the European Union reportedly has offered to lower tariffs on imports of U.S. automobiles. Experts suggest that, in the event of U.S. tariffs, the European Union may retaliate with countermeasures against U.S. technology services.
Trump and Putin discuss commencing negotiations to end the war in Ukraine. President Trump stated on February 12 that he had a “lengthy and productive” phone call with Russian President Vladimir Putin in which the two leaders discussed “start[ing] negotiations immediately” and “visiting each other’s nations.” The president followed up with a call to Ukrainian President Volodymyr Zelensky, who reported that the call was “meaningful” and focused on “opportunities to achieve peace.” The dialogue comes amidst Russia and Belarus releasing American detainees in recent days.
President Trump and Indian Prime Minister Narendra Modi meet to discuss deepening cooperation. On January 27, President Trump spoke with Indian Prime Minister Narendra Modi to discuss regional security issues, including in the Indo-Pacific, the Middle East, and Europe. Notably, following the phone call, India cut import duties on certain U.S.-origin motorcycles, potentially in an effort to distance itself from President Trump’s claims on the campaign trail that India was a “very big abuser” of the U.S.-India trade relationship. Prime Minister Modi followed up the discussion with a meeting with President Trump at the White House on February 13.
Secretary of State Marco Rubio meets with “Quad” ministers on President Trump’s first full day in office. On January 21, foreign ministers of the “Quad”—a diplomatic partnership between the United States, India, Japan and Australia—convened in Washington, D.C. In a joint statement, the group expressed its opposition to “unilateral actions that seek to change the status quo [in the Indo-Pacific] by force or coercion.”
U.S. Secretary of State Marco Rubio meets with Panamanian President José Raúl Mulino. In early February, Secretary of State Marco Rubio traveled to Panama to meet with Panama’s President José Raúl Mulino and Foreign Minister Javier Martínez-Acha. During the meeting, Secretary Rubio criticized Chinese “influence and control” over the Panama Canal area. Notably, following the meeting with Secretary Rubio, Panama announced that it would let its involvement in China’s Belt and Road initiative expire.
DeepSeek launches an artificial intelligence app, prompting U.S. national security concerns. In January, DeepSeek—a Chinese artificial intelligence (“AI”) startup—released DeepSeek R1, an AI app reportedly less expensive to develop than rival apps. Reports indicate that the United States is investigating whether DeepSeek, in developing its platform, accessed AI chips subject to U.S. export controls in contravention of U.S. law. Commerce Secretary nominee Howard Lutnick echoed these concerns in his recent confirmation hearing.
President Trump issues memorandum launching “maximum pressure” campaign against Iran. On February 4, the president issued a National Security Presidential Memorandum (“NSPM”) restoring his prior administration’s “maximum pressure” policy towards Iran, with a focus on denying Iran a nuclear weapon and intercontinental ballistic missiles. The NSPM directs the U.S. Department of the Treasury and the U.S. Department of State to take various measures exerting such pressure, including imposing sanctions or pursuing enforcement against parties that have violated sanctions against Iran; reviewing all aspects of U.S. sanctions regulations and guidance that provide economic relief to Iran; issuing updated guidance to the shipping and insurance sectors and to port operators; modifying or rescinding sanctions waivers, including those related to Iran’s Chabahar port project (which India has developed at considerable expense); and “driv[ing] Iran’s export of oil to zero.” See the White House fact sheet.
President Trump signs executive order calling for establishment of a U.S. sovereign wealth fund. On February 3, the president issued an executive order directing the Secretary of the Treasury, the Secretary of Commerce, and the Assistant to the President for Economic Policy to develop a plan for the creation of a sovereign wealth fund. A corresponding fact sheet describes the White House’s goals for the fund, including “to invest in great national endeavors for the benefit of all of the American people.” Treasury Secretary Scott Bessent stated that he expects the fund to be operational within the next year.
Dispute between the United States and Colombia over deportation flights prompts brief tariff threat. On January 26, Colombian President Gustavo Petro barred “U.S. planes carrying Colombian migrants from entering [Colombia’s] territory” due to concerns over migrants’ treatment. President Trump responded by ordering 25 percent tariffs on Colombian goods, to be raised to 50 percent in one week, visa restrictions on Colombian government officials and their families, and cancellation of visa applications. The standoff between the two countries was resolved later that same day, signaling President Trump’s intention to use tariffs as a key foreign policy tool.
Impeached South Korean President Yoon Suk Yeol officially charged with insurrection. On January 26, South Korean prosecutors formally charged impeached President Yoon Suk Yeol with insurrection. Yoon becomes the first president in South Korean history to be criminally charged while still in office. In addition to criminal charges, Yoon faces potential removal from office via impeachment. Should the Constitutional Court uphold the impeachment, as many experts anticipate, South Korea will have two months to hold a new election.
Powering Progress: Navigating the Intricacies of On-Site Nuclear Generation
Key Points:
Behind-the-meter nuclear projects require careful coordination with grid operators and utilities, involving detailed interconnection studies and agreements to manage power flows and ensure system reliability.
Regulatory challenges may arise from state laws granting exclusive service territories to utilities, particularly when third-party ownership structures are involved. These issues require state-specific analysis and navigation.
Project developers must engage early with regulators, secure necessary approvals, and navigate complex state and federal regulations, including potential state commission proceedings for larger projects.
Successful development hinges on understanding local economic, environmental, and tax policies, building strong relationships with regulators and supporters, and securing experienced legal representation familiar with large-scale energy projects.
Small modular reactors (SMRs) can be collocated with high demand customers such as data centers and large manufacturing and chemical facilities to provide electric energy and capacity to them directly. Behind-the-meter nuclear generation may be a practical response to issues related to the cost, reliability, and schedule availability of power from incumbent utilities particularly given the size, scalability, constructability, safety, efficiency, and reliability of SMRs. Clients considering such a colocation strategy should consider a range of practical and regulatory issues.
NRC Licensing
Under the 1954 Atomic Energy Act, the Nuclear Regulatory Commission (NRC) is mandated to license nuclear power generating facilities. For traditional large scale nuclear reactors, which typically produce more than 700 MW(e), the NRC process for approval of design and siting has been very expensive and time consuming. There are current proposals by developers, states, and Congress, to either re-interpret or amend the NRC’s “utilization facility rule” to allow the design and siting of SMRs and microreactors, which typically produce no more than 300 MW(e) – with some as low as 10 MW(e) – to be exempted from much of this traditional approval process. Despite potential changes, the NRC will likely still need to approve the design and location of SMRs before they can be deployed. Additionally, state regulators may play a larger role in this process.
Compatibility with Load
Nuclear power plants are designed to operate continuously at high capacity, making them ideal for supplying electricity to consumers with steady, round-the-clock demand. These consumers typically don’t experience significant fluctuations in their energy needs on a daily or seasonal basis. Industries or facilities with consistent energy requirements, regardless of time of day or season, are particularly well-suited to the output profile of nuclear plants.
However, it’s important to recognize that all electrical loads have some degree of short-term variability. Additionally, allowances must be made for both planned maintenance outages and unexpected events, which can affect both the nuclear power plants and the facilities they serve.
While some operations, such as remote mining or refining facilities, can function as isolated microgrids without a connection to the main utility grid, this is not feasible for all potential users with variable loads. Many users (data centers, for example) must rely on additional measures to ensure uninterrupted processes. These backup options may include battery storage systems, peaking facilities for handling demand spikes, or maintaining a connection to the main power grid.
This approach ensures a reliable power supply that can accommodate both the steady baseload provided by nuclear plants and the inevitable fluctuations in demand, planned outages, and unforeseen circumstances.
Utility Service Agreements
When using the electric grid to supplement on-site nuclear generation or absorb excess power, project developers must coordinate with the incumbent public utility. The terms of the electric service agreement will vary based on the utility’s tariffs and regulatory structure.
In regions with vertically integrated investor-owned utilities (common in the South and Mountain West), a single agreement may cover both power supply to the facility and excess power sent to the grid.
In competitive markets, the incumbent utility provides grid interconnection and possibly emergency supply, while competitive suppliers handle other services. This may result in separate agreements for grid connection and power market transactions.
Qualified Facility (QF) Status
On-site generation facilities that can utilize waste heat or steam from nuclear units may qualify for Qualified Facility (QF) status under federal law. This status can provide significant advantages for selling power back to the grid. QF status creates a must-take obligation for the incumbent electrical supplier, primarily in areas without wholesale competition. Consequently, these benefits are mainly available in regions where power supply markets are not deregulated.
The Terms of Utility Service Agreements
The terms of the electric service agreement will depend on which utility serves the location in question and the specific market structures tariffs, regulatory policies and statutes that govern that utility’s operations. Forty-two regional transmission operators (RTOs), independent system operators (ISOs) and major electric utilities serve 85% of U.S. load, but there are many more electric utilities and cooperatives that operate under RTO and ISO umbrellas. Among the hundreds of incumbent utilities, there is tremendous variation in the rules and practices that might determine what sort of utility service agreement might be negotiated to support on-site nuclear generation. There is no one-size-fits-all answer. A case-by-case review of the statutory and regulatory structure for each location is necessary.
Flexibility in the Terms of Utility Service Agreements
Currently, there’s little standardization in utility contracts for behind-the-meter nuclear projects. In supportive utility and regulatory environments, developers may have room to negotiate agreements tailored to their specific needs.
Many utilities have tariff provisions for traditional behind-the-meter generation and net metering, often limiting capacity to very low megawatts. These tariffs typically target much smaller projects and should not be considered definitive for behind-the-meter nuclear developments.
Project developers may negotiate with utilities and seek regulatory approval for customized terms on a case-by-case basis. In jurisdictions supportive of behind-the-meter nuclear generation or the facilities it will serve, even statutory limitations might be addressed through potential amendments.
Transmission Interconnection
Facilities using behind-the-meter nuclear generation will connect to the grid at transmission voltages. The incumbent transmission system operator, typically a Balancing Area Authority (such as an RTO, ISO, or utility), must study potential power flows to and from the facility. These studies determine the cost and schedule for grid interconnection.
The studies assess the grid’s ability to handle the facility’s maximum anticipated electricity demand and energy injection, particularly during peak demand periods. They identify necessary facility additions or upgrades to accommodate these power flows within system operating parameters. This includes specific transmission lines and transformers for the facility, as well as any required system-wide upgrades.
These interconnection studies rely on reliability criteria and power flow models maintained by utilities to comply with National Electric Reliability Council (NERC) standards, as enforced by the Federal Energy Regulatory Commission (FERC).
The process typically occurs in phases: feasibility studies or transmission impact assessments (TIAs), followed by interconnection studies and facilities studies. Each phase provides greater detail on costs and schedules.
Transmission providers usually require developers to demonstrate a binding commitment to proceed beyond feasibility studies. Developers must pay for these studies or agree to cover costs if the project does not reach completion or justify the expense through sufficient load.
The process concludes with an Interconnection Agreement, which establishes a fixed price for transmission upgrades and an interconnection schedule. Utilities may face FERC penalties for failing to meet agreed timelines.
Queuing Projects
Behind-the-meter nuclear projects often transfer excess power to the grid when generation exceeds on-site demand. Consequently, these projects join the transmission provider’s generation interconnection queue alongside solar, wind, and fossil fuel projects.
Recent Federal Energy Regulatory Commission orders require transmission utilities to analyze multiple interconnection requests in batches at least annually. The timing of these requests significantly impacts both cost and interconnection timeline.
As customer demand grows, more extensive upgrades become necessary to accommodate additional power, increasing interconnection costs and delays. Therefore, securing an early position in the queue is crucial for behind-the-meter generation projects to optimize both cost and schedule.
Siting Acts and Certificate of Public Necessity and Convenience Statutes
Many states require utility commission approval for major electric transmission and generation projects before construction begins. This is typically mandated by siting acts or certificate of public necessity and convenience statutes. These laws often define major generation projects as those with at least 75-80 MW capacity.
Behind-the-meter nuclear generation projects in this range may require pre-construction approval through a state commission proceeding. Similarly, the incumbent utility must seek approval for any associated major transmission facilities.
While behind-the-meter nuclear projects should easily meet the substantive requirements for a certificate due to their direct link to on-site load, these proceedings can attract political opposition. Therefore, project developers should approach this process with careful preparation and not take approval for granted.
Third Party Ownership
Financial structures where a third party owns the nuclear facility, rather than the on-site energy user, can create regulatory challenges. These issues arise from state statutes and regulatory frameworks that either grant exclusive service territories to incumbent utilities or classify any entity providing electric service to the public as a regulated electric utility.
These regulatory hurdles are typically avoided when a party operates generation resources solely for its own consumption or only sells excess generation into wholesale markets. However, in states with strict interpretations of territorial service rights, transactions may be prohibited if the nuclear facility owner differs from the on-site energy user. This arrangement could be viewed as violating the incumbent utility’s exclusive territorial service rights.
It is important to note that states vary widely in their interpretation of these statutes. Consequently, there’s no one-size-fits-all solution to this regulatory landscape. A thorough state-by-state analysis of relevant statutes, commission orders, and appellate court decisions is essential to navigate these complexities effectively.
Economic Development, Land Use, Zoning, Environmental, and Tax Issues
Developing a successful behind-the-meter nuclear generation project demands careful navigation of state-specific laws, policies, and practices. This includes economic development, land use, zoning, environmental, and tax issues.
Early engagement is crucial. Establishing strong relationships with staff and regulators at the project’s outset can be decisive in withstanding potential disruptions from other parties or interest groups. Identifying champions and supporters, and securing entitlements early, are key strategies.
Early engagement is crucial. Establishing strong relationships with staff and regulators at the project’s outset can be decisive in withstanding potential disruptions from other parties or interest groups. Identifying champions and supporters, and securing entitlements early, are key strategies.
Legal representation with local knowledge and experience in similar large-scale development projects is essential. Such expertise can help anticipate challenges and streamline the complex regulatory process.
By addressing these factors proactively, developers can create a solid foundation for their project, enhancing their chances of success in the face of potential obstacles.
Texas’ Power Transmission Infrastructure: Addressing Growing Demand from Data Centers and Crypto Mining
Texas is facing a rapidly evolving energy landscape, driven in part by the surging power demands of data centers and cryptocurrency mining operations. As the digital economy expands, the state’s existing power transmission infrastructure must adapt to ensure grid reliability, affordability and sustainability. However, the growing demand for electricity raises critical challenges, including the need for additional transmission capacity, grid resilience, and fair cost allocation for new infrastructure investments.
Rising Energy Demand from Data Centers and Crypto Mining
Texas has become a prime location for data centers and cryptocurrency mining operations due to its deregulated energy market, favorable business climate and relatively low electricity costs. Data centers, which support cloud computing, artificial intelligence (AI), and financial transactions, require vast amounts of power, often operating 24/7. Similarly, cryptocurrency mining facilities run continuously, consuming significant amounts of electricity to maintain blockchain networks.
The Electric Reliability Council of Texas (ERCOT) projects that power demand from these industries will grow substantially in the coming years. Consumption of electricity from large flexible loads such as data centers and crypto mining facilities is projected to account for 10% of ERCOT’s total forecasted electricity consumption in 2025. ERCOT currently expects power demand to nearly double by 2030. Without strategic infrastructure upgrades, this demand would likely strain the grid, increase congestion and lead to higher electricity prices for consumers.
Challenges with Existing Transmission Infrastructure
Texas operates its own independent power grid, which provides flexibility but also limits its ability to import electricity from neighboring states during periods of high demand. The state’s transmission infrastructure has already faced challenges in keeping up with rapid population growth and extreme weather events. In 2021, Winter Storm Uri exposed vulnerabilities in the grid, leading to widespread outages and highlighting the need for greater investment in both generation and transmission capacity.
One major challenge is that much of Texas’ renewable energy generation—especially wind and solar—is located in rural areas, far from major load centers like Dallas, Houston and Austin. Without sufficient transmission capacity, this clean energy cannot be efficiently delivered to where it is needed. The addition of high-energy-consuming industries like data centers and crypto mining exacerbates this challenge by increasing congestion on existing transmission lines.
The Need for Additional Transmission Infrastructure
To accommodate the growing energy needs, Texas must significantly expand its high-voltage transmission network. New transmission lines are necessary to:
Relieve Grid Congestion – increasing transmission capacity reduces bottlenecks that can drive up energy prices and cause reliability concerns.
Enhance Grid Resilience – strengthening transmission infrastructure can help prevent widespread outages during extreme weather events.
Support Renewable Integration – more transmission lines will allow Texas to take full advantage of its abundant wind and solar resources by connecting them to high-demand areas.
Ensure Reliability for Data Centers and Crypto Mining – dedicated infrastructure planning can ensure that new energy-intensive operations do not disrupt service for residential and commercial consumers.
The Costs of Transmission Expansion
One of the biggest questions surrounding transmission expansion is funding. Historically, Texas has used a mix of ratepayer contributions, state incentives, and private investments to build and maintain its power infrastructure. There are several potential funding mechanisms for new transmission lines:
• Ratepayer Contributions – transmission costs are often passed on to consumers through electricity bills. However, increasing rates to fund expansion may face resistance, especially if residential and small-business customers bear a disproportionate burden of the cost.
• ERCOT Transmission Cost Recovery – ERCOT has a cost allocation model that spreads transmission investments across various market participants. This approach ensures that those benefiting from the upgrades contribute to the costs.
• Direct Charges on Large Energy Consumers – one potential policy solution is to require data centers and crypto mining companies to pay a larger share of transmission infrastructure costs. Special tariffs or direct infrastructure investment agreements could be established to ensure that these industries contribute fairly.
• Public-Private Partnerships – collaboration between the state government, utilities, and private investors could help finance large-scale transmission projects. In some cases, tax incentives or low-interest financing options could encourage private sector investment in critical infrastructure.
• Federal Funding and Grants – the federal government has recently made funding available for grid modernization projects through the Infrastructure Investment and Jobs Act. The new administration has called some of this into question. Texas could leverage these funds to supplement state and private investments.
Balancing Growth and Grid Reliability
Expanding transmission infrastructure is essential, but it must be done in a way that balances economic growth with grid reliability. Policymakers must ensure that the costs are distributed equitably and that the grid remains stable during periods of high demand. Additionally, investments in energy storage, smart grid technology, and demand response programs can complement transmission expansion by improving overall efficiency.
Texas has long been a leader in energy innovation, and addressing these transmission challenges will be critical to the state maintaining that position. By implementing forward-thinking policies and funding strategies, the state can support its growing digital economy while ensuring a reliable and affordable power supply for all consumers.
Employers Should Plan for the Impact of Evolving Social Policy on Their Workforce
Even before the 2024 presidential election and the recent wave of executive orders, employers were evaluating their positions on various social issues.
Whether taking a formal stand, abstaining from a position, or landing somewhere in between, employers often consider external stakeholders and the court of public opinion. But they frequently forget about a critical and impactful audience—their employees.
Below are a few key areas where evolving social policies intersect with employee considerations.
Environmental, Social, and Governance (ESG) Policies: Regulations around diversity, equity, and inclusion; sustainability; the environment; and financial investments can differ across federal, state, and local jurisdictions, and certain rules apply only to government contractors. Aside from legal concerns, employers may face public and private questions about their actions or policies from employees. As such, employers should make sure that their ESG policies are current, thoughtful, and well communicated, especially in light of changing public sentiment, regulations, and legislation.
Social Media and Freedom of Speech: Employer policies on social media, recording/filming in the workplace (and online), volunteerism, non-solicitation, and whistleblowing should be updated to ensure that they reflect the latest laws, regulations, and guidance by applicable agencies and regulatory bodies. Management should also be trained on these policies, including how to respond to situations when the company’s employees choose to speak out on issues.
Benefit Programs: Employees might question their employer’s benefit policies relating to health care coverage provisions, benefit subsidies, time off/leave and holidays, and even voluntary benefit choices. Do these programs appear to favor certain employees over others? Employers should regularly evaluate these programs not only for compliance but also through the lens of their employees’ needs and expectations, which may differ based on location.
Labor Negotiations: An employer’s social advocacy and related positions impact its employees and the labor unions that currently—or may in the future—represent them. Therefore, employers should make sure that they have a strategy that supports this relationship and is in compliance with applicable labor laws, as well as labor contracts that are in place.
Outsourced, Offshore/Nearshore Workforce: When a company’s contingent and contract labor works side by side with the company’s employees, it’s essential that policies and programs account for this important and sometimes significant part of the workforce. Vendor contracts and communication strategies should also be aligned with these efforts.
Immigration Policies: Most industries and their employees are affected by immigration policy. A legal immigrant workforce will likely be concerned about their own status and that of their families during this uncertain time. Employers must review their policies and programs for these valuable workers and consider what supports, policies, and communications they should provide.
Mandatory Training programs: Employers should annually review mandatory training programs against changing regulations and expectations, as well as current strategies related to advocacy and ESG.
The bottom line: An employer’s stand on social issues and related policies, investments, programs, and trainings affects its workforce. A company’s employees are its face to customers and the public, so employees’ engagement and alignment matters. Because laws and regulations affecting ESG are continually changing, employees will be more engaged and better ambassadors for their employer if it has a well-considered strategy and communication plan addressing these topics.
Michelle Wright also contributed to this post
SEC Begins Process of Eliminating Climate Disclosure Rule
In a development that could hardly be termed unexpected, the Trump Administration SEC has begun the process of unraveling the climate disclosure rule promulgated by the SEC under the Biden Administration. Specifically, the Acting Chair of the SEC–Mark Uyeda, who had dissented from the adoption of the climate disclosure last year–issued a statement signaling that the SEC would soon reverse its position on the climate disclosure rule. Highlighting “the recent change in the composition of the Commission, and the recent Presidential Memorandum regarding a Regulatory Freeze,” Uyeda announced that he would ask the Eighth Circuit–where all of the legal challenges to the climate disclosure rule have been consolidated–to take no action until “the Commission [] deliberate[s] and determine[s] the appropriate next steps.” Such “next steps” could likely involve the SEC no longer defending the validity and legality of the climate disclosure rule.
Despite the significance of this development–effectively, the beginning of the end of one of the Biden Administration’s signature regulatory achievements–this move was widely expected and is unlikely to have much practical impact. Ever since the election of President Trump in 2024, it was anticipated that the SEC climate disclosure rule would not long survive the changed administration. And even before then, due to the substantive legal challenges to the regulation, a number of scholars had opined that the climate disclosure rule was imperiled. Further, the impact of Uyeda’s announcement is even further diminished since the enforcement of the climate disclosure rule had already been voluntarily stayed by the SEC pending the resolution of the legal challenges–so there was not any currently binding regulation applicable to reporting entities.
However, despite the likely demise of the SEC climate disclosure rule, there are mandatory climate disclosure regulations that will apply to many U.S. companies still on the books–as both California and the European Union have issued such regulatory requirements.
The SEC’s interim leader on Tuesday began unraveling the agency’s legal defense of Biden-era climate reporting rules for public companies. Mark Uyeda, acting chairman of the US Securities and Exchange Commission, announced the agency would ask the US Court of Appeals for the Eighth Circuit not to schedule arguments in the case brought by business interests and Republican state attorneys general. The commission needs time to “deliberate and determine the appropriate next steps,” Uyeda said.
www.bloomberglaw.com/…
Prospects for Latin American Finance Under a Second Trump Administration
Latin American economies are uniquely positioned due to their geographical proximity to the United States, extensive economic integration, significant immigration patterns and potential for growth. The U.S. serves as the dominant market for exports from the region, while millions of Latin American migrants contribute substantial remittance flows to their countries of origin. As the region prepares for potential changes under a second Trump administration, there could be profound implications for Latin American economies, regional trade, and financing available from international sources.
One of the primary concerns surrounding Donald Trump’s return to the White House is the resurgence of high tariffs that characterized his previous administration. These tariffs, often imposed on key trading partners, could disrupt Latin American economies by increasing the cost of exporting goods to the U.S. But beyond that, the new administration has begun to make significant changes that will have considerable effects on the financial markets and the access to capital in Latin America.
Banking Markets
Under President Trump, the expected revival of U.S. banking sector deregulation might have ripple effects on Latin American banks. If the Trump administration continues to emphasize its expansionist view and priorities, Latin American banks could see increased competition, especially from U.S. institutions looking to expand their footprint in the region. This could lead to more favorable lending conditions for Latin American borrowers, provided they meet stringent compliance and creditworthiness standards that may be utilized by U.S.-based banks.
U.S. banks could see renewed interest in Latin America as they seek to diversify their portfolios and tap into emerging markets. The potential for infrastructure projects, especially in countries like Brazil and Mexico, should attract U.S. bank financing. This scenario could also lead to increased lending activity, particularly for sectors such as energy, agriculture and technology. The ability to navigate regulatory challenges and foster relationships with U.S. banks could unlock new avenues for financing.
Additionally, international credit providers might be more inclined to engage in syndicated loans with Latin American banks, particularly those demonstrating resilience in their financial metrics. This may well result in a more robust banking market and tighter spreads available to Latin American borrowers.
Bond Markets
The second Trump presidency could have both negative and positive implications for Latin American issuers in the bond markets. On one hand, a strong dollar policy may deter Latin American issuers from accessing international markets as it would be more expensive for Latin American countries to issue bonds in U.S. dollars. In addition, the levels of uncertainty that in many ways characterized the first as well as the current Trump administration could have a chilling effect on the financial markets, where stability typically favors more robust issuance levels. However, if the Trump administration pursues policies that favor economic growth, commodity prices could increase, thereby enhancing the scenario for commodity-dependent Latin American nations. This could also lead to a resurgence in demand for sovereign bonds, especially from more frequent issuers such as Mexico and Brazil.
The bond markets may experience a surge in issuance from Latin American sovereigns and corporates looking for capital from international investors. A favorable U.S. interest rate environment could encourage more capital flow into Latin American bonds, especially if U.S. yields remain low. Furthermore, an increase in the issuance of project bonds could result from increased interest by U.S. authorities or, in the absence of U.S. interest, multilateral institutions, in prioritizing infrastructure projects in the region. This trend could also see increased participation from ESG-focused investors, as Latin American issuers adapt to global sustainability trends while U.S. based issuers move away from ESG in line with the administration’s priorities.
As Latin American economies seek to grow, there may be increased opportunities for securitization of various cash flows—such as those from infrastructure, real estate, and consumer finance. This could attract international investors seeking higher yields. A robust structured finance market may be available to potential borrowers when there are less than favorable financial terms available in the more traditional debt and credit markets. These types of transactions are typically executed in the bank market or as a private placement of securities to a small group of investors, although in some instances where the deal size exceeds $100 million, sponsors have chosen to tap the Rule 144A market for a wider distribution to investors and increased liquidity.
Finally, the potential for increased U.S.-Latin America trade agreements could bolster confidence among international investors, resulting in more favorable yields for bond issuers. Regional governments may capitalize on this by issuing longer-term bonds to finance infrastructure projects, thus attracting more foreign capital.
Equity Markets
In the equity markets, Latin American companies could benefit from a favorable investment climate if the Trump administration takes steps to foster a business-friendly approach. Increased foreign direct investment from the U.S. could lead to a surge in initial public offerings (IPOs) and secondary offerings for issuers in the region. Sectors that could see significant interest include technology, renewable energy, and agribusiness, as investors seek to diversify their portfolios.
However, equity markets in Latin America could face volatility under a second Trump presidency, driven by fluctuating U.S.-Latin America relations. Despite and as a result of the volatility, international investors could find investment opportunities in emerging tech companies and renewable energy initiatives, especially in countries like Chile and Colombia, which are positioning themselves as leaders in these sectors. The Brazilian markets have been particularly slow after a flurry of activity during the COVID pandemic, although penned up need for capital and investor interest are expected to contribute to a more active market in 2025.
Geopolitical tensions, particularly between the U.S. and China, could further complicate matters for Latin American companies that rely heavily on export markets. A number of tariffs have been levied on various countries and industries during the early days of the second Trump administration, demonstrating that the administration will continue to use tariffs and the threat thereof as a foreign policy tool. Potential equity issuers and investors will certainly monitor how the Trump administration’s policies influence trade relationships and the macroeconomic environment.
ESG Finance
The return of Donald Trump to the White House has resulted in concerns about significant shifts in U.S. climate policy. Although the green bond market for Latin American corporate issuers is expected to grow, diminished political support for ESG investing in Washington could challenge the lending strategies of U.S.-based banks. President Trump has openly criticized ESG regulations, and his administration has advocated for the reversal of climate-related disclosure mandates. The administration is also anticipated to reduce the regulatory authority of federal agencies on issues like air quality, potentially resulting in increased greenhouse gas emissions. Signing a presidential executive order withdrawing the United States from the Paris Agreement was one of President Trump’s first actions as President, which could impact the decarbonization goals of the world’s largest economy.
While climate policy might not be prioritized under President Trump, Latin American companies’ investments in decarbonization and sustainability efforts are likely to ensure a consistent supply of green and other labeled bonds from the region. Global investor demand is expected to remain strong, particularly from investors located outside of the United States. European portfolio managers often have mandates to incorporate ESG fixed income into their portfolios. However, this does not preclude investors—whether in the U.S. or Europe—without such mandates from investing in green bonds, especially if they foresee long-term returns. The demand for these bonds is expected to continue, with a robust buyer base potentially enhancing their performance in secondary markets.
Expectations of inflation under President Trump, partly due to protectionist trade policies, could exert upward pressure on U.S. Treasury yields, affecting Latin American issuers of both ESG and conventional bonds. While rising yields may slightly increase funding costs, they are not anticipated to close the market for Latin American issuers.
One area of concern is the potential impact on multilateral development banks (MDBs) from an anticipated shift away from climate finance under the Trump administration. Given the significant influence of the U.S. on major multilateral lenders, these institutions may face pressure to reduce their focus on ESG strategies. Many market participants have suggested that priorities may shift away from climate issues towards other areas, such as poverty alleviation. This shift would likely reflect changes in priorities from the U.S. Treasury, which holds substantial voting power at institutions like the International Monetary Fund and the World Bank, as well as the Inter-American Development Bank (IDB), where it possesses 30% of the voting shares.
Despite these potential changes, the World Bank Group and the IDB are looking to enhance their role in mobilizing private-sector support for climate-friendly infrastructure projects in the region. However, challenges such as contingent risks associated with infrastructure projects may hinder public-private financing arrangements. These risks raise concerns about repayment flows, which can deter private sector participation in these initiatives.
Finally, Wall Street banks are likely to remain engaged in the ESG market despite potential political shifts in the U.S. This suggests that regardless of the political climate, the financial sector may continue to facilitate the growth of the green bond market in Latin America, driven by global investor interest in sustainable investments.
Securities Law Considerations
Under a second Trump administration, changes in U.S. trade and economic policies could significantly impact the securities markets in Latin America. U.S. federal securities laws, primarily governed by the Securities Act of 1933 and the Securities Exchange Act of 1934 regulate the issuance and trading of securities. Latin American issuers seeking to raise capital from U.S. investors must navigate these regulations, including registration requirements and exemptions such as Rule 144A for private placements to qualified institutional buyers and Regulation D for less widely distributed private placements.
The Trump administration’s expected emphasis on deregulation could lead to a more favorable environment for cross-border investments, potentially easing regulatory constraints for Latin American companies accessing U.S. capital markets. Additionally, the U.S. Securities and Exchange Commission (SEC) might adopt a more lenient stance on compliance requirements, encouraging more Latin American companies to seek U.S. listings or engage in debt offerings to U.S. investors. In the early days of the Trump administration, the SEC has shifted resources away from crypto enforcement and has taken steps to dramatically reduce staff which should result in less regulatory overview with respect to the securities markets. These initiatives, as well as others, highlight the dynamic pace of change within the SEC and should result in a shifting regulatory landscape for issuers and market professionals.
Banking Law Considerations
In the banking sector, U.S. federal laws like the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Bank Holding Company Act regulate the operations of U.S. banks and their international transactions. A deregulatory approach under the Trump administration could reduce compliance burdens, making it easier for U.S. banks to operate and extend credit in Latin America. This may enhance competition and lead to more dynamic banking relationships between U.S. and Latin American financial institutions. Since assuming office in January 2025, Trump has signed a number of executive orders that indicate an aggressive agenda that will have significant effects on the banking industry. The administration has focused on rescinding diversity, equity and inclusion (DEI) initiatives within federal agencies, sought to ease the use of digital assets in the financial system and implemented a freeze on regulatory rulemaking while the administration evaluates its regulatory priorities. These various initiatives could affect the landscape applicable to Latin American borrowers seeking to access the credit markets.
Latin American banks looking to partner with U.S. entities must carefully consider compliance with anti-money laundering (AML) and know-your-customer (KYC) regulations, which are likely to remain stringent regardless of broader deregulatory trends. These regulations ensure the integrity of international banking operations and prevent illicit financial activities.
Conclusion
The return of Donald Trump to the U.S. presidency has already introduced significant shifts in trade, economic, and financial policies affecting Latin America. While increased tariffs and restrictive immigration policies may pose challenges, opportunities in banking, securities, and structured finance could arise from a deregulatory environment and a renewed focus on U.S.-Latin American relations.
Latin American economies will need to strategically navigate these changes to optimize their financial and trade engagements with the U.S. Enhanced cooperation with U.S. financial institutions, coupled with a focus on sectors aligned with global sustainability trends, could create opportunities for Latin American issuers and borrowers.
Ultimately, the ability of Latin American economies to adapt to evolving U.S. policies will be crucial in maintaining economic stability and fostering long-term development in the region. International investors and Latin American issuers and borrowers should remain vigilant, balancing the benefits of increased capital access and investment opportunities with the potential risks posed by geopolitical shifts and regulatory changes. By leveraging strategic partnerships and maintaining robust compliance frameworks, Latin American companies and financial institutions can position themselves to capitalize on emerging trends and mitigate the anticipated challenges.
Context for the Five Pillars of EPA’s ‘Powering the Great American Comeback Initiative’
On February 4, new US Environmental Protection Agency (EPA) Administrator Lee Zeldin announced EPA’s “Powering the Great American Comeback Initiative,” which is intended to achieve EPA’s mission “while emerging the greatness of the American Economy.” The initiative has five “pillars” intended to “guide the EPA’s work over the first 100 days and beyond.” These are:
Pillar 1: Clean Air, Land, and Water for Every American.
Pillar 2: Restore American Energy Dominance.
Pillar 3: Permitting Reform, Cooperative Federalism, and Cross-Agency Partnership.
Pillar 4: Make the United States the Artificial Intelligence Capital of the World.
Pillar 5: Protecting and Bringing Back American Auto Jobs.
Below, we break down each of the five pillars and present context what these pillars may mean to the regulated community.
Pillar 1: “Clean Air, Land, and Water for Every American”
The first pillar is intended to emphasize the Trump Administration’s continued commitment to EPA’s traditional mission of protecting human health and the environment, including emergency response efforts. To emphasize this focus, accompanied by Vice President JD Vance, Zeldin’s first trip as EPA Administrator was to East Palatine, Ohio, on the two-year anniversary of a train derailment. While there, Administrator Zeldin noted that the “administration will fight hard to make sure every American has access to clean air, land, and water. It was an honor to meet with local residents, and I leave this trip more motivated to this cause than ever before. I will make sure EPA continues to clean up East Palestine as quickly as possible.” After surveying the site of the train derailment to survey the cleanup, Zeldin and Vance “participated in a meeting with local residents and community leaders to learn more” about how to expedite the cleanup.
Taken alone or in conjunction with Administrator Zeldin’s trip to an environmentally impacted site in Ohio, Pillar 1 appears consistent with past EPA practice.
Read in the context of the Trump Administration’s first-day executive orders (for more, see here) and related actions such as a memoranda from Attorney General Pam Bondi on “Eliminating Internal Discriminatory Practices” and “Rescinding ‘Environmental Justice’ Memoranda.” Pillar 1 should be construed as meaning that EPA no longer intends to proactively work to redress issues in “environmentally overburdened” communities. Consequently, programs under the Biden Administration that focus on environmental justice (EJ) and related equity issues are ended. (For more, see here.)
Pillar 2: Restoring American Energy Dominance
Pillar 2 focuses on “Restoring American Energy Dominance.” What this means in practice is little surprise given President Trump’s promises during his inauguration to “drill, baby, drill.” Two first-day Executive Orders provide further context to this pillar:
The Executive Order “Declaring a National Energy Emergency” declares a national energy emergency due to inadequate energy infrastructure and supply, exacerbated by previous policies. It emphasizes the need for a reliable, diversified, and affordable energy supply to support national security and economic prosperity. The order calls for immediate action to expand and secure the nation’s energy infrastructure to protect national and economic security.
The Executive Order on “Unleashing American Energy,” seeks to encourage the domestic production of energy and rare earth minerals while reversing various Biden Administration actions that limited the export of liquid natural gas (LNG), promoted electric vehicles and energy efficient appliances and fixtures, and required accounting for the social cost of carbon. (For context on the social context of carbon, see here and here.)
Pillar 3: Permitting Reform, Cooperative Federalism, and Cross-Agency Partnership
Pillar 3 focuses on government efficiency including permitting reform, cooperative federalism, and cross-agency partnerships. As with Pillar 1, two of these goals (cooperative federalism and cross-agency partnership) are generally consistent with typical agency practice across all administrations even if administrations approach them in different ways.
“Permitting reform” generally means streamlining the permitting processes so that the time from permitting submission to conclusion is shorter.
Current events, most notably three court decisions involving the National Environmental Policy Act (NEPA), require a deeper exploration of “permitting reform.” NEPA is a procedural environmental statute that requires federal agencies to evaluate the potential environmental impacts of major decisions before acting and provides the public with information about the environmental impacts of potential agency actions. The Council on Environmental Quality (CEQ), an agency within the Executive Office of the president, was created in 1969 to advise the president and develop policies on environmental issues, including ensuring that agencies comply with NEPA by conducting sufficiently rigorous environmental reviews.
Energy-related infrastructure ranging from transmission lines to ports needed to ship LNG often require NEPA reviews. During his first term, President Trump sought to streamline NEPA reviews. As we previously discussed, in 2020, CEQ regulations were overhauled to exclude requirements to discuss cumulative effects of permitting and, among other things, to set time and page limits on NEPA environmental impact statements. During the Biden Administration, in one phase of revisions, CEQ reversed course to undo the Trump Administration’s changes, and, in a second phase, the Biden Administration required evaluation of EJ concerns, climate-related issues, and increased community engagement. (For more, see here.) Predictably, litigation followed these changes. Additionally, we are waiting on the US Supreme Court’s decision in Seven County Infrastructure Coalition v. Eagle County, Colorado, which addresses whether NEPA requires federal agencies to identify and disclose environmental effects of activities which are outside their regulatory purview.
These two recent decisions add to the ongoing debate about whether CEQ ever had the authority to issue regulations that have been relied upon for decades. These include the DC Circuit’s decision in Marin Audubon Society v. FAA (for more, see here) and a second decision by a North Dakota trial court in in Iowa v. Council on Environmental Quality.
Pillar 4: Make the United States the Artificial Intelligence Capital of the World
EPA’s Pillar 4 seeks to promote artificial intelligence (AI) so that America is the AI “Capital of the World.”
AI issues fall into EPA’s purview because development of AI technologies is highly dependent on electric generation, transmission, and distribution. EPA plays a key role in overseeing permitting and compliance activities related to facilities like these. As we have discussed, AI requires significant energy to power the data centers it needs to function, and a study indicates that the carbon footprint of training a single AI natural language processing model produced similar emissions to 125 round-trip flights between New York and Beijing. Because data center developments tend to be clustered in specific regions, more than 10% of the electricity consumption in at least five states is used by data centers. (Report available here.)
Pillar 5: Protecting and Bringing Back American Auto Jobs
Pillar 5 focuses on supporting the American automobile industry. As was discussed in relation to Pillar 2, EPA seeks to support the American automobile industry. Regarding this sector, EPA intends to “streamline and develop smart regulations that will allow for American workers to lead the great comeback of the auto industry.” Additionally, the US Office of Management and Budget released a memo on January 21, clarifying that provisions of the “Unleashing American Energy” Executive Order were intended to pause disbursement of Inflation Reduction Act funds, including those for electric vehicle charging stations.
While the particulars of this pillar are less clear than some others, we expect that EPA’s efforts in this area will involve some combination of permitting reform and rollback to prior EPA decisions related to vehicle emissions.
United States: Unsustainable—Acting SEC Chairman Signals Reconsideration of Climate Risk Disclosure Rules
In March 2024, the SEC adopted The Enhancement and Standardization of Climate-Related Disclosures for Investors final rule, which required companies to make disclosures regarding climate risks and disclosures of Scope 1 and 2 emissions information (the Climate Risk Reporting Rule). The Climate Risk Reporting Rule was promptly challenged by several lawsuits that were ultimately consolidated in the Eighth Circuit Court of Appeals.
With the change in presidential administration, it has been widely expected that the Climate Risk Reporting Rule would be rescinded and that the SEC, under new leadership, could alter its litigation strategy. On 11 February 2025, Acting SEC Chairman Uyeda did just that. He issued a statement noting that, due to “changed circumstances,” he had directed the SEC staff to request that the Eighth Circuit delay the litigation to provide time for the SEC to “deliberate and determine the appropriate next steps in these cases.” In his statement, he noted that both he and Commissioner Peirce (who now represent a majority of the SEC Commissioners) had voted against the Climate Risk Reporting Rule, and he explained his concerns regarding whether the SEC had the statutory authority to adopt the rule, the necessity of the rule, and whether the SEC had followed the appropriate procedures required under the Administrative Procedure Act.
In response to the statement put out by Acting Chairman Uyeda, Commissioner Crenshaw released a statement that the SEC did not act outside of its remit by passing the Climate Risk Reporting Rule and that Acting Chairman Uyeda acted without the full Commission’s input in making this decision.
While Acting Chairman Uyeda’s statement does not necessarily have a practical impact on the rule itself, it is an affirmative signal that this Commission is not supportive of the Climate Risk Reporting Rule and will likely take future action to rescind it. This statement, coupled with earlier statements from Paul Atkins, the President’s nominee for SEC Chairman, that were critical of the Climate Risk Reporting Rule, likely serve as confirmation of the expectations that the Climate Risk Reporting Rule will not go into effect.