June 2024 Energy Regulation Round-Up

The “Global Energy Regulation Roundup” is dedicated to capturing and understanding emerging climate, energy, and reporting measures. Currently, international governments are increasingly establishing stricter policies on emissions reporting, trade, and energy. The purpose of this monthly blog is to highlight approaching regulations and educate key stakeholders about their effects on a range of industries.

European Union

Prior to the Ukrainian invasion, an EU sanction on Russian LNG imports would have been unprecedented. Since the invasion, the EU has had to rethink its relationship with cheap Russian LNG. After a stiff battle, EU ambassadors have decided to sanction Russian LNG. Instead of sanctioning the exportation of Russian LNG to the EU, they have banned EU ports from reselling Russian LNG after it has arrived. Additionally, the package included a blockage of continued financing to the previously planned Russian Artic and Baltic LNG terminals. 

Farmers in Denmark have been hit with a tax on the gas emitted by their cows, sheep, and pigs beginning in 2030. This is the first country to implement such a tax as it targets one of the most potent sources of greenhouse gases, methane. The Danish government aims to reduce greenhouse gas emission by 70% from 1990 levels by 2030. In 2030, Danish livestock farmers will be taxed three hundred kroner ($43) per ton of carbon dioxide equivalent in 2030. The tax will then increase to 750 kroner ($108) by 2035. Additionally, there is a 60% income tax deduction that will decrease three hundred kroner to 120 kroner in 2030. For context, livestock accounts for about 32% of human-caused methane emissions. A typical Danish cow produces six metric tons (6.6 tons) of CO2 equivalent per year.

United States

The US Department of the Treasury, and IRS Release final rules to ensure good-paying clean energy jobs and expand the clean energy workforce. In general, if taxpayers pay prevailing wages to laborers and mechanics and hire registered apprentices for projects supported by most of the Inflation Reduction Act’s clean energy tax incentives, then taxpayers can claim an increased credit equal to five times the base incentive. This includes projects utilizing the investment and production tax credits that help finance utility-scale wind, solar, and battery storage projects, as well as for credits for carbon capture, utilization, and storage and clean hydrogen projects.

Here is a brief overview of some of the final rules:

• Requiring that determinations of prevailing wage rates be made by DOL, consistent with the Davis-Bacon Act. 

• Incentivizing practices that will encourage contemporaneous compliance.

• Implementing strong recordkeeping requirements.

• Guaranteeing that taxpayers with projects covered by qualifying project labor agreements do not need to pay penalties; and

• Clarifying apprenticeship requirements such as clearly defining what constitutes a request for qualified apprentices, what constitutes a response, and when the good faith effort exception applies.

Additionally, the New York Public Service Commission adopted an energy storage roadmap detailing the path to 6GW by 2030. The 6 GW storage target represents at least 20% of New York’s peak electricity load and could trim $2 billion from projected future statewide electric system costs as New York works toward generating 70% of its electricity from renewable sources by 2030, the announcement said. It will require an additional 4.7 GW in new storage deployments to complement 1.3 gigawatts of existing storage assets already being procured or under contract. New York has awarded about $200 million to support about 396 MW of operational energy storage assets and has more than 581 MW of additional storage “under contract with the State and moving towards commercial operation” as of April 1, the governor’s office announcement said. New York’s road map aims for 3 GW of new bulk, or utility-scale, storage to be procured under the state’s new competitive Index Storage Credit mechanism and 1.5 GW of new retail storage, both for assets with discharge durations of up to four hours, the announcement said. Retail storage includes commercial, industrial, and community-scale installations.

Asia

Japan Solar Panel on Recycling is set to introduce a landmark recycling mandate for solar panels to combat the surge in decommissioned panels expected around the mid-2030s. This move is expected to arrive on the parliament floor early next year. The Japanese Environmental Ministry is estimating around 500,000- 800,000 tons of solar panel waste will need to be managed annually by the mid-2030s. The proposed legislation will classify used solar panels as industrial waste, mandating their recycling like the EU’s Waste from Electrical and Electronic Directive. As the solar industry expands in Japan, this is a crucial strategy to invest in sustainability and manage the expected waste from the industry. 

Natural gas demand dipped in the early summer of 2024 in China. Thanks to an unexpected bump in available hydro power, baseline coal, and higher LNG prices. Producers of LNG in China operate on the spot market which helps meet summer demand peaks. Hydropower supply in China has exceeded previous years' levels, according to the National Development and Reform Commission. Electricity imports into the Guangdong province, hydroelectricity from Yuman province, have increased since May, reaching almost 1TWh per day. In addition, renewable energy production in China is on track to exponentially increase by more than 25% year on year in the third quarter of 2024, according to the China Electricity Council.