ESG International Weekly News 5/13 -5/19

1. California to Extend Cap-and-Invest Program through 2045, Raising $60 Billion

Summary:
In his 2025–2026 budget proposal, Governor Gavin Newsom unveiled plans to extend California’s Cap-and-Invest program—originally set to expire in 2030—through 2045, with an expected revenue of $60 billion. This move underscores California’s commitment to climate action despite pressure from the Trump administration and legal challenges by Republican-led states. The program will continue its allowance auction and trading mechanisms, requiring major emitters like power plants and refineries to purchase emissions allowances, and will direct proceeds toward transformative climate projects, including high-speed rail. Newsom emphasized that even amid federal “Trump Slump” pressures, California will prioritize supporting working families and future generations.

Key Highlights:

• Program Extension: Extending cap-and-invest from 2030 to 2045, targeting $60 billion in proceeds

• Covered Sectors: Power generation, fuel distribution, cement, food processing, and other major emitters

• Use of Proceeds: Funding high-speed rail and other transformative climate initiatives

• Political Context: Upholding state climate policies under Trump administration scrutiny and legal challenges

• Budget Adjustment: Addressing a $12 billion shortfall attributed to federal instability, tariffs, and tourism decline

Quote:

“California’s fundamental values don’t change just because the federal winds have shifted. Even as the Trump Slump slows the economy and hits our revenues, we’re delivering bold proposals to build more housing, lower costs for working families, and invest in our kids.” — Governor Gavin Newsom

2. New York’s 2025–2026 Budget Commits Over $1 Billion to Climate Initiatives, Defers Cap-and-Invest Program

Summary:
Governor Kathy Hochul signed the state’s 2025–2026 budget on Friday, directing over $1 billion toward emissions reduction in buildings and accelerating electrified transportation. Notably, the budget omits the long-proposed cap-and-invest program, which would have charged large GHG emitters and fuel distributors more than $1 billion annually for emissions allowances, with proceeds funding climate initiatives and supporting vulnerable communities. The Department of Environmental Conservation now requires only GHG disclosures through 2027, postponing the cap-and-invest roll-out.

Key Highlights:

• Total Climate Funding: Over $1 billion allocated across multiple sectors

• Building Emissions: $450 million for energy-efficient retrofits and clean heating (e.g., heat pumps)

• Thermal Networks: $200 million to develop thermal energy distribution systems

• Electrified Transportation: $250 million supporting electric school buses, fast chargers, and EV charging rebates via NYSERDA

• Renewables & Grid: $200 million for renewable energy expansion and grid modernization

• Cap-and-Invest Deferred: The planned program—originally to charge emitters over $1 billion yearly—will not launch now; DEC mandates GHG reporting only through 2027

Quote:

“We have secured a record $1 billion to build a greener, more sustainable New York as well as key investments to construct more playgrounds, swimming pools, and community centers that provide greater access to outdoor recreation.” — Governor Kathy Hochul

3.Chancellor Merz Urges EU to Abolish Corporate Sustainability Due Diligence Directive (CSDDD)

Summary:
During his first visit to Brussels, German Chancellor Friedrich Merz called on the European Union to repeal the Corporate Sustainability Due Diligence Directive (CSDDD), which was adopted in May 2024 and mandates companies to conduct due diligence on human rights and environmental impacts across their value chains. Merz’s demand follows Germany’s own coalition agreement to abolish its Supply Chain Act (LkSG) and replace it with the CSDDD. Despite ongoing EU proposals to simplify compliance—narrowing due diligence to direct business partners, extending monitoring intervals to five years, and delaying full implementation until 2028—Merz insists on the directive’s complete repeal to reduce regulatory burdens on businesses.

Key Highlights:

• Domestic Repeal: Germany to revoke the 2023 Supply Chain Act (LkSG) and push the EU to cancel the CSDDD

• Directive Scope: Requires companies to identify, assess, prevent, mitigate, and remedy adverse human rights and environmental impacts, from child labor and pollution to deforestation and ecosystem damage

• EU Amendments: Proposed changes include limiting due diligence to direct partners, monitoring every five years, and postponing full rollout to 2028

• Political Context: Part of Germany’s coalition pledge to ease corporate compliance and align with broader EU regulatory simplification efforts

Quote:

“We will revoke the national law in Germany, and I also expect the European Union to follow suit and really cancel this directive.” — Chancellor Friedrich Merz

4.ECB Urges Retention of CSRD Scope, Opposes Omnibus I’s Major Cuts

Summary:
The European Central Bank (ECB) issued an opinion on the European Commission’s Omnibus I proposals to simplify sustainability reporting and due diligence requirements. While welcoming efforts to reduce corporate compliance burdens, the ECB warned that drastic reductions—removing 80% of companies from the Corporate Sustainability Reporting Directive (CSRD)—would undermine investor information, economic stability, and the EU’s sustainability objectives. It recommends mandatory reporting for companies with 500–1,000 employees under simplified standards, opposing the exclusion of these mid-sized firms. The ECB also calls for scrapping the plan to extend CSRD to non-EU companies to avoid data gaps and competitive disadvantages. Emphasizing the necessity of high-quality, standardized sustainability data for capital flows, risk pricing, financial stability, and monetary policy, the ECB advises retaining key climate (ESRS E1) and biodiversity (ESRS E4) data points and adopting sector-specific guidelines when sectoral standards are unavailable.

Key Highlights:

• Scope Reduction Opposition: Omnibus would exclude 80% of firms; ECB urges inclusion of 500–1,000-employee companies

• Third-Country Scope: Recommends eliminating the proposal to cover non-EU companies to prevent data inconsistencies and competitive imbalance

• Critical Data Retention: Advocates keeping most climate (ESRS E1) and essential biodiversity (ESRS E4) indicators

• Sectoral Guidelines: Suggests issuing sector-specific guidance if dedicated reporting standards are not introduced

• Importance of Information: High-quality sustainability data is vital for directing capital, pricing risks, and ensuring financial stability and effective monetary policy

“The availability of harmonised, standardised and reliable sustainability information is essential for ensuring capital flows to activities supporting the EU’s sustainability goals and for market participants to understand and price sustainability-related financial risks.” — ECB Opinion

5.European Energy Launches World’s First Large-Scale Commercial e-Methanol Plant

Summary:
Denmark’s renewable energy developer European Energy has commissioned its Kassø facility in Aabenraa, marking the first commercial-scale e-methanol plant globally with an annual capacity of 42,000 tonnes. By combining on-site green hydrogen with captured biogenic CO₂, the plant delivers e-methanol with up to a 97% lower carbon footprint than fossil-based methanol. Fully powered by renewables, Kassø already supplies e-methanol to the LEGO Group, Novo Nordisk, and A.P. Moller – Maersk for plastics, medical devices, and marine fuel applications.

Key Highlights:

• Pioneering Scale: First commercial e-methanol production at 42,000 t/year

• Massive Emissions Reduction: Up to 97% lower lifecycle emissions versus fossil methanol

• Renewable-Powered: Located alongside Northern Europe’s largest solar park, with integrated wind power

• Ownership: European Energy (51%) and Mitsui & Co. (49%) joint venture

• Strategic Offtakers: Long-term supply agreements with LEGO, Novo Nordisk, and Maersk

“The start of operations at Kassø marks a major step forward in bringing Power-to-X technologies into real-world use. This is renewable energy in action, transforming how we use electricity.” — Knud Erik Andersen, CEO of European Energy