In July last year, the Trump Administration’s Environmental Protection Agency (EPA) released a proposal to rescind the Endangerment Finding – a 17-year old legal finding that greenhouse gases like carbon dioxide threaten people’s health and the environment. This finding provided the government authority to regulate greenhouse gases under the Clean Air Act. Yesterday, the EPA announced the finding would be fully repealed.

Ending the endangerment finding will immediately eliminate all limits on automotive, industrial, and power-plant emissions and - importantly - will make it much harder for future administrations to implement climate regulations. Former Trump EPA staffer and climate skeptic Myron Ebell said, “We are pretty close to total victory.”

This drama is now poised for a showdown in the US Supreme Court. The Trump administration has moved much faster than in its first term to overturn climate policy precedents, and that is very much by design. The Administration wants the Supreme Court to issue a decision while it has a Republican majority this term, and at a time when the courts are increasingly politicized. The Federal Judicial Center, a government agency that provides resources to judges, was forced to remove a climate science chapter from its Reference Manual on Scientific Evidence this month after receiving pressure from Republican Attorneys General.

There is growing pushback against these actions. Last month, a federal judge ruled that a Department of Energy climate science report, cited by EPA Administrator Lee Zedlin in the decision to repeal the Endangerment Finding, was unlawful. The judge ruled that the report, produced by five handpicked climate skeptics and casting doubt on the scientific consensus on climate change, violated the law because public agencies are not permitted to recruit or rely on secret groups for policymaking. This ruling means the Administration is unlikely to challenge the scientific basis of the finding. Instead, they will challenge the Supreme Court’s 2007 (Massachusetts v. EPA) ruling, arguing that the EPA never had explicit authority to limit emissions.

Even if the Trump administration succeeds in repealing the Endangerment Finding, legal experts believe it would expose companies to a patchwork of new litigation under "public nuisance" cases. Environmental law professor Robert Percival said, "This may be another classic case where overreach by the Trump administration comes back to bite it." It could also increase costs and confusion for the business and investment communities, Jonathan Pragel of Morgan Stanley Investment Management said, "The cost of eliminating this infrastructure, and then needing to rebuild it if there is some kind of another change in the reporting regime, that's a really expensive proposition."

Jeffrey Holmstead, an attorney with the law firm Bracewell and a former E.P.A. official under President George W. Bush, summed the Trump 2.0 actions well: “This time they’re much more organized, and they have a pretty clear playbook.”

In related news, the Trump administration mandated that the military procure coal-fired electricity and awarded $175 million in grants to 6 coal plants. Over the past nine months, the Energy Department has taken the extraordinary step of ordering eight coal-burning units that had been headed for retirement to stay open and keep running. Administration officials say they plan to stop the closing of as many additional coal plants as they can over the next three years.

“The 19th century called, and it wants its fuel source back,” said Manish Bapna, president of the Natural Resources Defense Council. “The Trump administration is using our tax dollars to prop up the nation’s dirtiest, least efficient power plants.”

2. California and New York Climate Rules Advance

As federal climate action slows, state-level action is accelerating. This week, the New York State Senate passed the Climate Corporate Data Accountability Act (S9072A), which is its emissions reporting rule. The bill duplicates California’s emissions reporting law (SB 253), requiring companies with more than $1billion in revenue doing business in the state to phase-in disclosure of their Scope 1, 2, and 3 emissions. The emissions reporting bill still needs to pass the state assembly. New York also has a bill requiring climate risk reporting (S3456), which has made limited progress to date.

In California, the public comment period closed this week for the state's new climate reporting rules. Of the 80 public comments filed, most supported the proposals with minor changes. About 15% of the comments opposed the rules. The next step is a public hearing on February 26th.

The climate risk component of the rule remains frozen by a Ninth Circuit Court-ordered stay, with no update on when the case will be finalized. Regardless of the legal machinations, 112 companies have already filed reports in the public docket.

3. EU Carbon Market Under Fire

Europe’s Emissions Trading Scheme (ETS) is under attack from German chemical giant BASF. BASF CEO Markus Kamieth said that being the only global market that imposes carbon fees puts EU companies at a “significant competitive disadvantage.”

Europe’s ETS is a “cap-and-trade” system in which companies must purchase credits if their emissions are above a threshold and the cost of those credits is rising. In addition, Europe’s new Carbon Border Adjustment Mechanism (CBAM) - which went into effect last month - will cost EU companies €8 billion in import taxes.

BASF is a chemical behemoth with more than €65B in revenues and employing tens of thousands of people. In recent years, Chinese producers have undercut the prices of chemicals produced in Europe, prompting calls for Europe to further relax sustainability rules. However, proponents of the ETS claim that higher environmental standards are the EU’s long-term competitive advantage.

4. More EU Sustainability Goals and Rules

The EU has been watering down its sustainability rules through the Omnibus Simplification processes. Despite this trend, Europe continues to be a global leader and this week issued three new ambitious sustainability goals and rules:

EU Climate Law: The European Parliament voted this week to confirm a 90% emissions reduction target by 2050 relative to 1990 levels, with some new flexibility for member states.
Ban on destroying unsold clothes: Europe’s Ecodesign for Sustainable Products Regulation (ESPR) now bans apparel companies from destroying unsold clothes and shoes, and requires them to report on the unsold amount.
First-ever carbon removal standard: Earlier in the month, the EU released the first-ever standard for measuring permanent carbon removals. The standard encourages innovation and investment in these new technologies and avoids greenwashing.

5. ISSB Reporting Study Shows Disclosure Divergences

The first study on the application of the reporting standards from the International Sustainability Standard Board (ISSB) identified significant divergence. The study was based on mandatory reports from 370 Turkish companies, as Turkey was the first country to adopt the ISSB climate standard (S2) in 2024. Findings include:

Despite all companies using the same standards, there were significant differences in how they applied materiality, climate scenarios, base years for reductions, and more.
While the ISSB requires companies to report only financially material impacts, nearly a quarter (22%) of Turkey’s 100 largest companies also reported sustainability impacts. Considering both societal and financial impacts is a widely adopted method and required in the European Union and by some voluntary reporting schemes.

The study found, “These differences arise due to the flexibility offered by the standards. Our findings raise questions about the extent to which flexibility in ISSB standards may limit cross-firm comparability.” Advising the ISSB to be more prescriptive in any updates.

The views expressed on this website/weblog are mine alone and do not necessarily reflect the views of my employer.