The Inflation Reduction Act of 2022
On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (IRA). The IRA reconciliation package includes $369 billion in funding and subsidies to support the transition to renewable energy and reduce greenhouse gas emissions from the energy sector. While the IRA’s clean energy investment and tax credit provisions have garnered much attention, one lesser-noticed provision relates to corporate greenhouse gas reporting and potential enforcement of climate-related environmental, social, and governance (ESG) disclosures. Section 60111 of the IRA provides $5 million for the EPA to improve standardization and transparency of corporate climate pledges. This funding boost means that even if the Securities & Exchange Commission trims its proposed climate-related disclosure rule for public companies in response to comments and objections, EPA may nevertheless enhance its review and enforcement of such pledges.
Section 60111 – Greenhouse Gas Corporate Reporting
The IRA reconciliation package advances the Biden Administration’s “whole of government approach” to addressing climate change. Key features of the $369 billion in support and subsidies for renewable energy and reducing greenhouse gases include the following, among others:
- clean energy production tax credits;
- clean energy investment tax credits;
- clean fuel tax credits;
- a host of residential tax credits, including for energy efficiency home improvements, and residential soil, wind, geothermal, and biomass;
- electric vehicle tax credits for consumers;
- money for environmental and climate justice;
- a methane emissions reduction program; and
- incentives for “climate-smart” agricultural processes.
In addition to these financial provisions, the package includes a Greenhouse Gas Corporate Reporting section. In this section, the IRA appropriates $5 million to the EPA for fiscal year 2022 for the EPA to support:
- Enhanced standardization and transparency of corporate climate action commitments and plans to reduce greenhouse gas emissions;
- Enhanced transparency regarding progress toward meeting such commitments and implementing such plans; and
- Progress toward meeting such commitments and implementing such plans.[1]
Departing from the normal one-year budget process typically used by Congress, these funds are to remain available until September 30, 2031. Through this provision, Congress gives EPA money and broad direction to review whether companies stay on track to meet announced corporate climate action commitments and plans.
Section 60111 Reflects Growing Third-Party Scrutiny of Climate-Related Claims
This provision in the IRA empowering EPA to further scrutinize corporate greenhouse gas emission targets and disclosures occurs at a time of growing third-party scrutiny of ESG disclosures.
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