Industrials Regulatory News and Trends - November 21, 2024

Welcome to Industrials Regulatory News and Trends. In this regular bulletin, DLA Piper lawyers provide concise updates on key developments in the industrials sector to help you navigate the ever-changing business, legal, and regulatory landscape.

DOE grants major loan to battery recycling company. On November 7, the US Department of Energy finalized a $475 million loan facility to help Li-Cycle Holdings complete construction of its Rochester Hub, a lithium-ion battery resource recovery facility in New York state. This is the first time the DOE has funded a lithium-ion battery recycler. The Rochester Hub, Li-Cycle says, will be North America’s first “commercial hydrometallurgical resource recovery facility,” recycling lithium-ion batteries used in a broad range of products, from household electronics to electric vehicles. When it is operational, it will become a significant domestic source of recycled critical materials for use in manufacturing new lithium-ion batteries, thus contributing to the buildout of a sustainable, domestically sourced battery supply chain. Observers are also noting that the loan cannot be revoked.

Cutting nitrous oxide emissions from Chinese chemical factories. Pennsylvania-based sustainability company ClimeCo has announced its agreement with four Chinese chemical companies to nearly eliminate their emissions of the potent greenhouse gas nitrous oxide. Some observers are describing the agreement, announced during COP 29, the United Nations Climate Change Conference in Baku, as a win for the US State Department and a significant step in combating climate change through industrial emission controls. The chemical companies’ factories in eastern and southern China manufacture adipic acid, which is used to produce nylon 6,6, a high-strength polymer widely used in the automotive industry. N2O is a byproduct of the manufacturing process. ClimeCo is working with the Chinese companies to install pollution-control systems that separate N2O into harmless nitrogen and oxygen gas. It estimates that 97 to 98 percent of the factories’ N2O emissions will be eliminated. ClimeCo is also installing real-time monitoring equipment to quantify the volume of N2O destroyed and will sell carbon-offset credits for a portion of that. Earlier this year, ClimeCo helped US-based Ascend Performance Materials abate more than 99 percent of its N2O emissions.

CARB updates Low Carbon Fuel Standard. The California Air Resources Board (CARB) has approved updates to the state's Low Carbon Fuel Standard (LCFS) to meet its 2030 goals for reducing oil and gas consumption. The new rules will impose additional costs on oil refiners, aiming to cut the carbon intensity of transportation fuels by 30 percent by 2030 and 90 percent by 2045. Producers failing to meet these targets can buy credits from those who do, with proceeds funding zero-emission vehicle infrastructure, especially in underserved areas. CARB projects gas prices could increase by up to 47 cents per gallon next year as producers seek to pass through the increased costs associated with the new standards to consumers.

Pentagon will add new drones and software under Replicator initiative. On November 13, the Pentagon announced that it is purchasing two new types of smart drones as well as more networking software to its ambitious Replicator initiative. The initiative, rolled out last year, was designed to be a “pathfinder” to a new way for the Pentagon to quickly solve thorny problems in the acquisition process – a streamlined approach which future administrations may find useful. Under the program, the Pentagon intends to quickly muster and deploy thousands of inexpensive smart drones by August 2025 in readiness for possible future conflicts. It has budgeted $500 million a year on the plan to network and task combat drones for any future conflict.

Treasury finalizes rule restricting US outbound investment in China, including Hong Kong and Macau. The Department of the Treasury has announced the Final Outbound Investment Rule, restricting investments by US persons in certain products and technologies deemed to pose a threat to US national security. Effective January 2, 2025, the rule marks a major change in the US investment environment and a major step forward in US monitoring of outbound investments. See our alert.

Setbacks for wind power industry. In 2023, world governments set a global target of tripling overall renewable energy use by 2030, which IRENA, the International Renewable Energy Agency, said could be achieved if offshore wind capacity were to rise to 494 GW by the end of 2030. At present that capacity is at 73 GW. But a range of setbacks during 2024 are reducing hope that the global offshore wind industry will be able to do its part in hitting net-zero and decarbonization targets. A November 18 report by Reuters, the result of interviews with 12 offshore wind companies, industry researchers, trade associations, and government officials in six countries, found that a year of soaring costs, limited supply chain investment, "canceled projects, broken turbines, and abandoned lease sales" has impacted government strategies to advance renewable energy. Reuters reports that, as a result of these challenges, a number of industry leaders are planning to retreat from their offshore wind commitments. IRENA now forecasts that the world will fall short of the target by about a third. Reuters added, "Missing targets by a wide margin will leave a gap that could be hard to fill."

NAM emphasizes its “post-partisanship” in the wake of the election. In the aftermath of the national election, the National Association of Manufacturers said on November 8 that “with a new administration and Congress on the horizon, the NAM is signaling confidence in its ability to secure wins for manufacturing in the United States, highlighting both recent achievement and policy priorities moving forward.” The manufacturers group stressed that it does not take partisan stances. “The NAM has always focused on what’s best for manufacturing in America, and our track record speaks to that,” said NAM Executive Vice President Erin Streeter in the group’s statement. “Our approach is consistent because we know what it takes to get results.” She noted that because of its “post-partisan engagement,” the NAM has achieved historic policy wins in both the Trump and Biden Administrations.