The Climate Report - First Quarter 2026
REGULATORY ISSUES & UPDATES
The CBAM Definitive Phase: Between Regulatory Ambition and Political Hesitation
The EU's Carbon Border Adjustment Mechanism ("CBAM") imposes carbon costs on imports of cement, iron, steel, aluminum, fertilizers, electricity, and hydrogen to prevent carbon leakage and maintain competitiveness. Following a transitional reporting period, the definitive phase began January 1, 2026, introducing financial obligations for importers and transforming CBAM from a monitoring tool into an economic instrument.
New York's Two-Track Climate Reporting Regime: From Measurement to Mandatory Disclosure
New York's greenhouse gas ("GHG") reporting framework has two tracks: a facility/supplier-based rule (which is already in effect); and a proposed corporate disclosure rule, which would apply to more companies. Both address GHG data, but differ in legal status, scope, and compliance impact.
French "Warming Trajectory" for Climate Change Adaptation Purposes
On January 23, 2026, the French government adopted a decree and a ministerial order regarding the "reference warming trajectory for adaptation to climate change." The purpose of this new regulation is to identify a likely global warming scenario for different time horizons in the near and longer term.
U.S. EPA Finalizes Repeal of Greenhouse Gas Endangerment Finding
On February 12, 2026, the U.S. Environmental Protection Agency repealed the 2009 GHG Endangerment Finding, eliminating federal vehicle emission standards. Multiple petitions challenging the rule have been filed in the D.C. Circuit.
Proposed Regulations Issued on the Section 45Z Clean Fuel Production Credit
Through December 31, 2029, eligible producers may claim a credit for producing transportation fuels, such as ethanol, biodiesel, and renewable natural gas, and selling them to unrelated buyers.
LITIGATION ISSUES & UPDATES
Recent Rulings Confirm Procedural Safeguards for U.S. Energy Infrastructure
Recent federal court rulings have affirmed that executive agencies must follow procedural and constitutional requirements when administering Biden-era infrastructure and climate funds. These decisions carry significant implications for businesses in the energy and infrastructure sectors and warrant continued monitoring.
Offshore Wind Projects Find Success in U.S. Courts
On December 22, 2025, the Bureau of Ocean Energy Management suspended five offshore wind projects citing national security concerns. Project developers challenged the orders as arbitrary and procedurally unlawful. By February 2, 2026, all projects obtained preliminary injunctions.
TRANSACTIONAL ISSUES & UPDATES
Climate Disclosure Readiness in Transactions: Using Due Diligence to Prevent Post-Closing Reporting Surprises
Despite sustainability rule changes in the United States and Europe, acquirers should still conduct diligence or risk post-close surprises, including emissions data gaps, weak controls over sustainability metrics, and unexpected reporting obligations.
EPC C by 2030: What Real Estate Investors Need to Know About the UK's New Minimum Energy Efficiency Standards
The UK's Warm Homes Plan, published January 21, 2026, overhauls private rented sector energy standards to boost energy efficiency. Backed by £15 billion, it requires all privately rented homes in England and Wales to achieve Energy Performance Certificate ("EPC") band C equivalent by October 1, 2030. For portfolio landlords, asset managers, and investors, implications for capital planning, asset valuations, and compliance strategy are substantial.
LAWYER SPOTLIGHT
Olga Gidalevitz Ph.D., an associate in the Chicago Office, has nearly two decades of experience advising public and private companies, governmental agencies, and financial institutions across the EU, Middle East, and United States on ESG and human rights compliance. She advises multinational clients on complex and evolving regulatory frameworks, including EU, Mexican, and California ESG reporting requirements—areas seeing significant developments this quarter, including the EU Omnibus simplification package.
Olga's practice also encompasses strategic advice on value chain considerations and voluntary ESG disclosures under frameworks such as the Global Reporting Initiative and the Task Force on Climate-related Financial Disclosures, helping clients reduce greenwashing litigation risk in public-facing materials. She has published extensively on ESG topics, including a book on climate change.
