This how-to guide provides an overview of the key business and legal developments related to climate change in the United States. This guide covers the following:
- Background
- Business and technological developments – standards, protocols, and developing technologies in energy consumption as well as incentives/penalties facing organizations
- Legal and regulatory developments
- US political developments
This guide can be read in conjunction with How-to guides: Understanding environmental, social and governance (ESG); What general counsel (GC) need to know about environmental, social and governance (ESG); and How to understand and implement the ‘E’ in environmental, social and governance (ESG).
Section 1 - Background
The issue of climate change is impacting many aspects of business and driving regulatory change. Many organizations are developing energy management policies and identifying technologies and practices that will reduce their energy consumption. This is being driven by a number of factors, including the current US and global focus on the climate crisis, legislative and regulatory developments, and incentive and penalty schemes linked to energy consumption.
Energy consumption is a major cost in any industry, and developments in renewable energy and incentives/penalties issued to utility providers will impact the bottom line of virtually every business.
In association with the Organisation for Economic Co-operation and Development (OECD), Climate Action Monitor reports for 2023 and 2024 were published by the International Programme for Action on Climate (IPAC). Notably, many of the comments in both reports are taken within the context of the commitments made in the Paris Agreement.
A few observations from the 2023 report were:
- There is progress but more ambition and efforts are needed to achieve carbon neutrality by 2050;
- The number of adopted national climate policies, tracked by the OECD, slowed in 2022;
- Making progress towards the net-zero challenge demands ambitious mitigation targets and effective implementation, as well as navigating the policy landscape.
Some of the observations from the 2024 report included:
- Greenhouse Gas (GHG) emission reduction commitments are not consistent with the Paris Agreement temperature goals, and more ambition and efforts are needed to achieve net zero by 2050;
- Progress in national climate policy efforts remains insufficient, and policy implementation needs to be scaled-up;
- Making progress towards the net-zero goals requires ambitious mitigation targets, effective implementation, and the adept navigation of the policy landscape.
As the selected highlights from these reports show, political pressures related to climate change resonate throughout the world and US economy. This was demonstrated by regulations that were issued by the Securities and Exchange Commission (SEC), Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency (OCC), and the Federal Reserve (see section 3 below). These developments were all relatively recent, leading to speculation that many more regulatory developments are likely in the future.
The American Council for an Energy-Efficient Economy (ACEEE) – Energy Efficiency and Corporate Sustainability topic brief dated November 20, 2019, considers how the behaviors of many US organizations were changing as the focus of investors, customers, governments, and employees moved towards corporate sustainability initiatives.
From a business perspective, some of the actions organizations took were focused on energy use and the corresponding impact on GHG emissions. The specific actions being taken include:
- setting sustainability goals;
- taking steps to reduce emissions; and
- reporting progress in sustainability reports and financial disclosures.
Section 2 - Business and technological developments
As outlined in the ACEEE topic brief referred to above, there is an ever-increasing focus on green business practices and achieving ‘net-zero’. As a result, organizations are finding that they need to look for ways to reduce their energy consumption.
Measures that organizations can take include adopting internationally recognized standards and embracing new technologies. Businesses should be aware of some of the key developments in these areas, which are outlined below.
2.1 Standards, protocols, and developing technologies in energy consumption
2.1.1 ISO 50001 – Energy management
The International Organization for Standardization (ISO) first published its standard ISO 50001 in 2011. ISO50001 is a framework to enable organizations to manage their energy performance more efficiently and effectively, to help reduce their environmental impact, and meet emissions reduction targets.
Based on a management system model of continual improvement also used for other well-known ISO standards (eg, ISO 9001, ISO 14001), ISO 50001 provides a framework for organizations to:
- develop a policy for more efficient use of energy;
- fix targets and objectives to meet the policy;
- use data to better understand and make decisions about energy use;
- measure the results;
- review how well the policy works; and
- continually improve energy management.
While certification is not required to use ISO50001, becoming certified demonstrates to external parties that an organization has implemented the framework. Examples of companies that have the highest (platinum) level of ISO 50001 certification at some or all of their facilities include Volvo North America, Detroit Diesel, 3M, JW Marriott, and Harbec, Inc.
An organization that has ISO 50001 certification will not only save money on its energy costs but will be able to market itself as environmentally conscious.
Beyond the direct savings on energy costs, ISO 50001 certification offers a multitude of potential benefits for organizations committed to sustainable practices:
- enhanced reputation and brand image;
- compliance with regulations;
- improved operational efficiency;
- reduced carbon footprint;
- increased employee engagement;
- competitive advantage;
- access to incentives and rebates;
- better risk management;
- framework for continuous improvement; and
- integration with other management systems.
2.1.2 Greenhouse gas (GHG) protocol
When measuring GHG emissions, most organizations use the GHG Protocol, which was developed by the World Resources Institute and the World Business Council for Sustainable Development.
The GHG Protocol classifies corporate emissions into three scopes:
- direct emissions from sources the company owns or controls;
- indirect emissions from the generation of electricity the company purchases;
- indirect emissions other than scope two from the value chain of the company, including both upstream and downstream emissions.
The GHG Protocol helps companies measure and keep inventories of the greenhouse gases produced in their operations and helps with carbon accounting and reduction of emissions. The Protocol also helps companies adhere to the recommendations of ESG frameworks.
2.1.3 Combined Heat and Power (CHP)
Combined Heat and Power (CHP) is the process of generating electricity by capturing and repurposing heat generated from a turbine or engine that would otherwise be wasted. CHP provides thermal energy such as steam or hot water that is then used for space heating, cooling, domestic hot water, and industrial processes. While conventional technologies (ie, grid-supplied electricity and an on-site boiler) provide only 50% efficiency, CHP delivers efficiencies of over 80%, delivering reduced electricity cost, reduced emissions of greenhouse gases and other pollutants, and increased electricity-supply reliability. As a result of the significant benefits of CHP, it is now used in US factories, apartment buildings, and commercial/institutional buildings such as offices, hospitals, and universities. It is also used in municipal applications such as waste-water treatment facilities and swimming pools.
CHP has many benefits for businesses. A business with a CHP system in place can protect itself against energy price increases. CHP also ensures that the business’s power supply will not be interrupted in the event of adverse weather or some other cause. The 2021 electrical grid failures in Texas showed some of the vulnerabilities in the power grid. Some experts are also pointing out utility infrastructure problems and vulnerabilities that exist across the nation. A self-contained reliable source for electricity is a wise move considering these problems.
The importance of this technology is highlighted by the fact that the Environmental Protection Agency (EPA) (which works to protect human health and the environment in the United States) has formed the CHP Partnership, which consists of stakeholders such as clean-air officials and environmental agencies and works to provide guidance and information, technical tools, and resources relating to CHP.
2.2 Environmental incentives and penalties for organizations
2.2.1 Cap-and-trade programs
Cap-and-trade (also referred to as ‘emissions trading’) programs provide:
- a limit (or cap) on the pollution an organization may produce; and
- tradable allowances, which enable participating organizations to buy further capacity from other organizations that have not used their full allowance.
The limit ensures that one of the largest environmental goals – to reduce greenhouse gas emissions – is met, while providing flexibility through the use of the trading allowances. The allowances are typically referred to as ‘market-based’ because they can be bought and sold in an established allowance market.
Optimal circumstances to establish a cap-and-trade program are when:
- the environment or public health concerns occur over a relatively large geographic area;
- a significant number of sources are responsible for the pollution problem; and
- emissions can be consistently and accurately measured.
One of the largest cap-and-trade programs is in California. The program sets a statewide limit on sources responsible for 85% of the greenhouse gas emissions in California and establishes a price signal to help drive long-term investment in cleaner fuels and more efficient use of energy. The program is designed to provide covered organizations the flexibility to seek out and implement the lowest-cost options to reduce their emissions.
Additional trading program resources can be found on the Environmental Protection Agency’s Emissions Trading Resources website.
2.2.2 Civil Penalties for Energy Conservation Standards Program Violations Statement
The US Department of Energy (DOE) has issued a policy statement regarding civil penalty assessment for violations of energy and water conservation standards and requirements under the Energy Policy and Conservation Act (EPCA), as amended.
In that statement, the DOE indicates that penalty assessments will be imposed for two of the acts prohibited by the EPCA (listed below).
- Failure to comply with applicable EPCA energy and water conservation standards by any manufacturer or private label maker within the United States who knowingly distributes products or equipment that do not conform.
- Failure by a manufacturer to submit valid reports certifying that each basic model of the products manufactured by the manufacturer meets all applicable federal energy or water conservation standards with the DOE.
The maximum penalty is $575 per violation, and is adjusted annually for inflation. Each product sold in violation of the certification requirements is a separate violation.
Notably, in 2023, the DOE issued a revised policy statement indicating that, in the past, it has made certain reductions in penalties in order to resolve cases via settlement. While the DOE ‘remains committed to offering settlement as an option for resolution, [it] expects that it will offer fewer reductions in penalties as the DOE’s enforcement program continues to mature.’ In resolving enforcement actions, the DOE will consider a number of additional factors, including, but not limited to:
- the nature and scope of the violation;
- a history of noncompliance;
- whether the entity is a small business;
- demonstrated inability to pay;
- the type of product at issue;
- whether the entity timely self-reported the potential violation; and
- the entity’s self-initiated corrective action, if any.
The purpose of taking such considerations into account is to ‘ensure consistency and equity in settlements by taking into account legitimate differences among EPCA violations, including specific mitigating and aggravating circumstances in individual cases.’
On December 17, 2024 the DOE issued an updated Civil Penalties for Energy Conservation Standards Program Violations – Policy Statement. This updated policy statement provides background on DOE’s penalty authority and sets forth its basic approach to assess penalties for violations of DOE’s standards and certification requirements.
2.2.3 Deductions for energy-efficient commercial buildings – section 179D of the Internal Revenue Code
The 179D commercial buildings energy efficiency tax deduction enables building owners to claim a tax deduction for installing ‘qualifying systems’ in buildings. A tax deduction is available to owners of new or existing buildings who install interior lighting; a building envelope; or heating, cooling, ventilation, or hot water systems that reduce the energy and power cost of the interior lighting; heating, ventilation, and air conditioning (HVAC); and hot water systems by 50% or more when compared to a building meeting established minimum requirements.
Section 3 - Legal and regulatory developments
A number of legal and regulatory developments have recently taken place on the issue of climate change, including those involving several financial regulatory agencies. The potential impact of these changes (especially given that many are only proposed at this point) may take time to fully assess; however, they signal the political and societal pressure to incorporate climate change into current and future public policy discussions. It should be noted that many of the actions outlined in this document were taken during the Biden Administration's tenure, and, since the change in presidential administrations, steps are being taken to scale back many of the initiatives. Further information about these steps is provided below where relevant, and information about the changing political landscape can be found in section 4 below.
Some examples are listed below.
3.1 Securities and Exchange Commission: Climate Disclosure Regulation
In March 2022 the SEC issued proposed rules that would require SEC registrants to include certain climate-related disclosures in their registration statements and periodic reports, including information about climate-related risks that are reasonably likely to have a material impact on their business, results of operations, or financial condition. Also, certain climate-related financial statement metrics would be required in a note to a registrant’s audited financial statements. The required information about climate-related risks also would include disclosure of a registrant’s greenhouse gas emissions.
On March 6, 2024, the SEC adopted Rules to Enhance and Standardize Climate-Related Disclosures for Investors with release number 2024-31. Per the SEC
‘The final rules reflect the Commission’s efforts to respond to investors’ demand for more consistent, comparable, and reliable information about the financial effects of climate-related risks on a registrant’s operations and how it manages those risks while balancing concerns about mitigating the associated costs of the rules.’
However, on March 27, 2025, the SEC announced its decision to stop defending its climate-related disclosure rules for investors (see SEC Press Release). This move comes after significant pushback from various groups, including members of Congress, industry trade associations, state attorneys general, and other businesses.
3.2 FDIC Statement of Principles for Climate-Related Financial Risk Management for Large Financial Institutions
On December 8, 2022, the Federal Deposit Insurance Corporation (FDIC) issued the Statement of Principles for Climate-Related Financial Risk Management for Large Financial Institutions (FDIC Statement).
The FDIC Statement is based on the presumption that financial institutions are likely to be affected by climate-related financial risks, including those listed below.
- Physical risks – the harm to people and property arising from acute, climate-related events such as hurricanes, wildfires, floods, and heatwaves, as well as chronic shifts in the climate including higher average temperatures, changes in precipitation patterns, sea-level rise, and ocean acidification.
- Transition risks – stressors to certain financial institutions or sectors arising from the shifts in policy, consumer and business sentiment, or technologies associated with a transition toward reduced carbon reliance.
The FDIC Statement provides a high-level framework for the management of climate-related financial risks for large financial institutions. The FDIC Statement is consistent with the risk management framework described in existing FDIC rules and guidance. Comments on the draft principles were requested to be received on or before February 6, 2023. The FDIC issued the final rules on October 30, 2023, with the Principles for Climate-Related Financial Risk Management for Large Financial Institutions.
It is anticipated that the FDIC and the Federal Reserve will withdraw their participation in these Climate Principles in 2025.
3.3 OCC Principles for Climate-Related Financial Risk Management for Large Banks
The OCC announced on December 16, 2021, draft Principles for Climate-Related Financial Risk Management for Large Banks (Principles). The Principles are designed to support the identification and management of climate-related financial risks by banks with more than $100 billion in total consolidated assets. The risks to banks include physical risks such as the harm to people and property arising from acute, climate-related events (eg, hurricanes, wildfires, floods, heatwaves, etc), and chronic shifts in climate, including higher average temperatures, changes in precipitation patterns, sea-level rise, and ocean acidification. Other types of risk include shifts in policy, consumer and business sentiment, or technologies associated with the changes necessary to limit climate change. The content of the OCC Principles is similar to the FDIC Statement outlined above. On October 24, 2023 the OCC issued the final Principles for Climate-Related Financial Risk Management for Large Financial Institutions.
In addition to the FDIC Statement and the OCC Principles, the Federal Reserve has also proposed similar principles. These draft principles would ‘provide a high-level framework for the safe and sound management of exposures to climate-related financial risks for financial institutions with over $100 billion in assets.’
The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency likewise issued an interagency guidance on 24 October 2023, titled, ‘Principles for Climate-Related Financial Risk Management for Large Financial Institutions.’ The principles are intended to ‘support efforts by financial institutions to focus on key aspects of climate-related financial risk management [and] cover six areas: governance; policies, procedures, and limits; strategic planning; risk management; data, risk measurement, and reporting; and scenario analysis.’
On March 31, 2025, the OCC officially announced its withdrawal from the interagency ‘Climate Principles’ for managing climate-related financial risks in large financial institutions (see OCC Press Release). This move was largely anticipated following the recent change in presidential administrations. The OCC's formal withdrawal is expected to empower banks to challenge examiners who might try to enforce climate risk management requirements through the confidential supervisory process.
Section 4 – US political developments
In his first term, President Trump withdrew from the Paris Agreement. Subsequently, President Biden, on January 20, 2021 (his first day in office), signed an order to bring the US back into the Paris Agreement, indicating a clear ideological division between the two administrations. President Trump withdrew again from the Paris Agreement on January 20, 2025 (see Putting America First in International Environmental Agreements).
4.1 Potential impact on US climate change efforts
With President Trump currently in office for his second non-consecutive term, the landscape for US climate change efforts is experiencing a significant shift, continuing the priorities and approaches seen in his previous administration. A central aspect of this impact is likely to be a further emphasis on deregulation and the promotion of domestic fossil fuel production. The continued re-evaluation or dismantling of existing environmental regulations is anticipated, including those related to emissions standards for power plants and vehicles, and a potential reduction in federal support and incentives for renewable energy and energy efficiency programs. This policy direction could lead to a slowdown in the national transition to clean energy sources, a potential increase in domestic greenhouse gas emissions, and a reduced federal focus on climate resilience and adaptation measures, thereby impeding the US's progress toward climate goals.
4.2 Potential impact on global climate change efforts
President Trump's current term is expected to continue to reshape the global approach to climate change, largely through a consistent prioritization of national economic interests over multilateral climate agreements. His administration's continued stance of disengagement from, or renegotiation of, international climate accords like the Paris Agreement could further weaken the collective global response to climate change. This might encourage other nations to re-evaluate their own commitments, potentially leading to a more fragmented and less ambitious international climate agenda. A diminished US presence and financial contribution to global climate initiatives could also hinder the capacity of developing nations to implement green technologies and adapt to climate impacts. This could collectively make the ambitious global targets for emissions reduction and climate stabilization more challenging to achieve, fostering an environment where individual national interests may overshadow the urgent need for a unified international climate strategy.
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