Shaping Tomorrow: A global perspective on the future of US climate regulations

As the topic of climate change evolves, more laws controlling both federal and state rules on environmental impacts continue to shape the regulatory landscape in the United States. In the second of three Global Outlook webinars, Senior Expert Services Manager, Elaine Ye, outlined the current state of climate regulations in the United States, detailing potential delays in climate disclosure regulations, key climate-related EPA actions, and strategies to help businesses prepare for uncertain future requirements. 

In this article, we highlight the main takeaways from the presentation, including the US’ continued push for transparency, convergence at the state level, and the impact of the political climate.  

Watch the full recording here for a more detailed analysis of future US regulations.

Continued push for transparency

As the environmental damage triggered by climate change becomes more severe, many regulatory authorities are mandating stricter reporting from US businesses, to encourage transparency in the impacts of their operations.
 

Mandating GHG emissions reporting 

The US Environmental Protection Agency (EPA) has extended its GHG reporting protocol to cover the oil and gas sector. The specified reporting requirements will be in effect from 2025 for facilities emitting over 25,000 metric tons of carbon dioxide. The aim of this expansion is to address gaps in emissions reporting, improve accuracy on methane emissions, and gather data at a more granular level for verification. 

Specific US states have proposed and implemented further legislation to enhance GHG reporting. 

• California — in California, the Climate Corporate Accountability Act requires businesses with over USD 1 billion annual revenue to disclose GHG emissions (scope1, 2, and 3). Further, the Climate-Related Financial Risk Act requires companies with over USD 500 million annual revenue to disclose climate-related financial risks 

• New York — the state of NY also requires public and private US entities to disclose GHG emissions, alongside climate-related information such as climate risks to business and actions taken to mitigate said risks, annually 

Washington and Illinois have both introduced bills mirroring California’s to mandate corporate GHG emissions disclosures. In the meantime, some states may also ask businesses to disclose more sustainability related information, such as carbon offsets, to improve accountability and transparency.
 

Enhancement and Standardization of Climate-Related Disclosures for Investors 

Also at the federal level, the SEC finalized the Enhancement and Standardization of Climate-Related Disclosures for Investors, requiring public companies to disclose climate-related risks and information. 

Before finalization, there was a lengthy debate and consultation period, which ended in March 2024. However, the confirmed rules have been temporarily stayed due to ongoing litigation, primarily driven by states and groups arguing that the rules would place undue burden on many companies.

Convergence at the state level

As federal progress stalls, US states are taking the initiative to implement climate-related disclosures.

Vermont’s Climate Superfund Act 

Thirdly, in May 2024, Vermont published its Climate Superfund Act. This cost-recovery act targets large GHG emitters to fund climate adaptation and mitigation. It’s aimed at entities involved in extracting fossil fuels or refining crude oil that are accountable for over 1 billion metric tons of GHG emissions between 1 January 1995 and 31 December 2024.  

The Act requires those specific companies to contribute funds towards climate change mitigation and adaptation projects in the US. Entering into effect from 1 July 2024, it also requires the administering agency, Vermont Agency of Natural Resources, to submit a report detailing the feasibility of their program in 2025 and implementing regulations in 2026.  

Other states, including New York, California, Maryland, and Massachusetts have proposed similar legislations to enact stricter liabilities.  

Businesses should monitor these state developments closely to ensure they meet increasing regulatory obligations in their area. State emission disclosure impacts could have extensive impacts, such as banking sectors being required to look into GHG emissions information for financial entities, and businesses using significant time and resources to keep track of regulatory updates and reports.

Political divide adds environmental uncertainty

The 2024 presidential election in the United States stands as a critical crossroads on environmental protection, adding further uncertainty to the US regulatory landscape. 

The current political landscape presents broad divisions on the topic of climate change: 

• The democratic party continues to emphasize strong intentions on tackling climate change, presenting it as an environmental and economic necessity. They continue to implement inflation and reduction acts to cut down carbon emissions, and push for more opportunities for sustainability-related rules 

• The republican party emphasizes traditional energy sectors and proposes the deregulation of some aspects of US climate control. Consequently, there’s potentially space for roll-back on some of the previously adopted US EPA’s climate and environmental regulations, such as the Clean Power Plan, and rules on air and water quality regulations 

The continual path of US politics will impact how current and future climate policies are implemented at both the federal and state level.