Key highlights:

• • • Tax credit transferability survived intact— The OBBBA preserved Section 6418 transferability rules despite earlier proposals to sunset or repeal them.

    • AI-driven data center boom may revive renewable energy tax credits— With data centers projected to consume 12% of all US energy by 2028, large operators have strong incentives to advocate for preserving and expanding renewable tax credits to meet massive energy demands through solar, geothermal, and battery storage solutions.

    • 2026 market conditions favor buyers due to supply-demand imbalance—Increased supply of tax credits (particularly Section 45Z clean fuel production credits) combined with reduced buyer competition from provisions like Section 174 and bonus depreciation has created advantageous pricing.

At the start of the current Trump administration, green energy tax credits were expected to be slashed or disappear altogether. In reality, significant changes emerged instead of ceasing to exist. More specifically, the One Big Beautiful Bill Act (OBBBA), passed in July 2025, kept the transferability rules around green energy tax credits intact.

As a result, the market for these credits remains robust in 2026 and 2027, says , an energy tax authority and principal at accounting firm CliftonLarsonAllen (CLA). In addition, multiple credits still have runway, and near-term dynamics in 2026 may favor buyers.

OBBBA’s changes result in shifts in marketplace conditions

When the OBBBA bill passed, the specifics revealed a more optimistic picture than many understand. According to Hill, specific examples include:

• • Wind and solar projects — Developers that begin construction by July 4, 2026, still have a four-year window to complete their projects and still claim credits. Even projects that miss this construction deadline can qualify if they’re placed in service by December 31, 2027.
  • Clean fuel production credits — Clean fuel production credits, detailed in OBBBA’s Section 45Z, received an extended runway through 2029.
  • Tax credit transferability — The tax credit transferability aspect under Section 6418 remained whole, despite previous versions of the bill proposing either a sunset date or outright repeal of transferability. This fact provides a level of marketplace certainty that can act as critical liquidity for developers that typically lack the tax liability to use credits themselves.

In addition, the legislation altered the buyer and seller environment. Provisions including OBBBA’s Section 174 and bonus depreciation generated additional deductions for certain companies, and as a result, reduced those companies’ 2025 corporate tax liability. Simultaneously, Section 45Z clean fuel production tax credits came into force and created a supply-demand imbalance that favors buyers.

Overall, in the latter half of 2025, Hill describes the marketplace as favorable for buyers because of an increased supply of tax credits that were for sale previously with fewer buyers. Into 2026 and beyond, both developers and corporate buyers still have significant opportunities to participate in the tax credit marketplace, explains Hill.

AI-related data center demand may spur new proposals for renewables tax credits

The explosive proliferation of data centers because of the growing AI demand across the United States may become the unexpected champion for renewable energy tax credits. Hundreds of facilities are currently under construction, and the energy demand implications are staggering. In fact, the projects that by 2028, data centers will consume 12% of all US energy.

Renewable energy technologies are emerging as essential solutions to meet these demands. Solar power, as a tried-and-true technology, offers ideal supplementation for data center operations; and geothermal heating and cooling systems directly address the massive temperature control challenges these facilities face. Perhaps most significantly, battery storage is rapidly becoming standard operating procedure, with both grid-based and solar-array-tied battery systems providing critical backup power.

These developments carry substantial policy implications. In fact, large data center operators have incentives to become vocal advocates for preserving and expanding renewable tax credits, says , a leader in federal tax strategies at CLA. “We want our AI, we want our cloud-based services. To do that… we need massive data centers and massive computing demands,” DePrima explains. “And that in turn requires massive amounts of energy consumption, which renewables can certainly supplement.” This, in turn, creates the potential for a renewable energy tax credit “comeback” within two to three years, he adds.

Guidance for buyers and sellers

Looking ahead to 2026 and beyond, both buyers and sellers of renewable energy tax credits should recognize that significant opportunities remain despite regulatory changes. More specifically:

For buyers — Buyers should act now to capitalize on favorable market conditions. With increased credit supply and reduced buyer competition due to provisions like Section 174 and bonus depreciation, pricing has become more advantageous. Buyers of renewable energy tax credits should consider structuring 2026 transactions to directly offset estimated tax payments throughout the year, thereby improving cash flow by making payments to sellers rather than the IRS. Financial institutions remain particularly well-positioned as buyers, as many have explored tax credit carryback opportunities to increase their tax savings even further.

For sellers and developers — Renewable energy tax credits sellers and energy project developers can use tax-credit monetization as a critical component of project financing because the ability to convert credits into immediate cash proceeds is essential for paying down debt and funding new projects. Despite initial concerns, substantial opportunities remain with credits outlined in Sections 45Z, 45X, 48E, and 45Y which are transferable and viable through 2029 and beyond.

In either case, tax credit transferability under Section 6418 offers key opportunities in the marketplace. Whether buyers are looking to reduce their corporate tax burden while supporting clean energy goals, or developers are seeking to monetize renewable projects — tax credits offer incentives to move forward.

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting, or tax advice or opinion provided by CliftonLarsonAllen LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader’s specific circumstances or needs, and may require consideration of nontax and other tax factors if any action is to be contemplated. The reader should contact his or her CliftonLarsonAllen LLP or other tax professional prior to taking any action based upon this information. CliftonLarsonAllen LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

You can find out more about renewable energy tax credits here

Key insights:

• • • ESG is becoming more operationalized — ESG is being conducted with a lower public profile while also playing an increasingly strategic role in supplier governance frameworks.

    • Data collection remains widespreadand robust — Companies continue to collect comprehensive ESG data from their suppliers.

    • Technology usage in ESG is increasing — Greater investment in automation demonstrates continuing commitment to effectively managing ESG.

Environmental, social and governance (ESG) issues have played an increasing role in global trade operations in recent years. As the United States government sharply pulled back its role in encouraging ESG in global trade in 2025, concerns were raised over whether that would impact ESG efforts globally.

However, ESG-related efforts in global trade have not diminished, although they are evolving in form and positioning, according to the Thomson Reuters Institute’s recent 2026 Global Trade Report. In fact, the report’s survey respondents said that ESG data collection from suppliers is now largely structurally embedded in trade operations, although at the same time, it is being carried out with a lower public profile than in previous years.

ESG management remains a core trade function

Managing ESG remains one of the most widespread responsibilities among trade professionals. Almost two-thirds (62%) of those surveyed said their role includes ensuring ESG compliance throughout the supply chain. That represents a higher percentage than for other responsibilities, such as procurement and sourcing, supplier management, trade systems management, risk management, customs clearance, and regulatory compliance. The only more widespread role being done by those global trade professionals surveyed is business strategy for global trade and supply chain.

More importantly, ESG remains integral and nearly universal when it comes to the supplier selection process. All respondents in the Asia-Pacific region (APAC), Latin American and the European Union-United Kingdom, as well as 99% of US respondents, report that ESG considerations remain moderately important, important, or very important in influencing their decisions around using a supplier. And overwhelming 78% say it is an important or very important consideration.

Clearly, as the report demonstrates, ESG remains a core component of the trade function for most businesses.

ESG moves toward structural governance frameworks

Only a very small proportion of respondents — 3% in the US and 4% globally — said they stopped ESG-related data collection entirely in 2025. Meanwhile, ESG data collection has increased across several major metrics.

As companies move to embed ESG expectations directly into their supplier governance frameworks, they are shifting these efforts from being a publicly declarative initiative to becoming operationalized as a permanent compliance and sourcing discipline alongside other operational considerations.

Businesses are focusing on supplier information in areas that have direct operational relevance. For example, companies collecting data on Free Trade Agreement (FTA) eligibility status for ESG purposes can also leverage the data to reduce costs, ensure supply chain security through Customs Trade Partnership Against Terrorism (CTPAT) participation, and better maintain compliance with country-of-origin requirements. Similarly, Country of Origin (COO) and Authorized Economic Operator (AEO) status are both classified under ESG but are also highly trade operations specific. These metrics merge the lines, representing areas in which ethical considerations intersect with practical trade strategy.

Supplier data collection is shifting to operational relevance as well. Indeed, the scope of supplier data being gathered remains broad and reflects a holistic view of the supply chain. The most common areas for ESG data collection in 2025 were: i) environmental metrics, such as water usage, waste management, energy management, and carbon emissions, including Scope 3 emissions; ii) social metrics, such as health and safety, labor standards, human rights including modern slavery or indentured service, and diversity in employees; and iii) governance and compliance, including data privacy, business ethics, and anti-corruption.

Data collection from suppliers

Meanwhile, ESG data collection has been scaled back in areas such as trade evaluation, AEO/CTPAT status in some jurisdictions, diversity in ownership, and anti-corruption assessments. The most cited reason for the pullbacks was insufficient cost-benefit return for collecting data in areas in which customer scrutiny was minimal. This trade-off reflects a rational reprioritization: companies are focusing their ESG diligence in areas in which regulatory risk is more material rather than reputational.

Integrating ESG into broader trade workflows

The report also shows that businesses are leveraging ESG to make it more operationally effective, drive greater efficiency, reduce costs, and add greater value for the organization. ESG is becoming less of a marketing and brand building exercise, and more of a compliance and sourcing discipline that factors into strategic decision-making — it is subject to the same analytical rigor as financial or operational risks.

To this end, organizations are less prone to make a string of bold public goals and commitments, or issue standalone ESG reports, updates, or scorecards that tout their progress. Instead, ESG data is being seamlessly embedded into supplier evaluation and selection alongside non-ESG business metrics and other considerations. As such, organizations are using ESG to quietly build the structural frameworks, data infrastructure, and management approaches they’ll need for more strategic planning.

ESG is shifting to strategically supporting business growth and away from reputational focus

Helping this shift along, the report shows, is that the use of technology to manage ESG has accelerated significantly in 2025. One-third of respondents said their organizations use automated ESG solutions, a major increase from only 20% in 2024. This provides a clear indication that more organizations are not only continuing but strengthening their commitment to effectively managing ESG.

And this provides a boost, because greater automation can improve the efficiency and ability of trade professionals to manage ESG efforts, further enhancing the integration of ESG data into other operational workflows as organizations incorporate ESG data to drive greater value.

What lies ahead for ESG

ESG practices and organizations’ embrace of them remain near-universal across trade operations. This continuation presents a clear indication that there is no widespread retreat from ESG management. For trade professionals, ESG is here to stay and is evolving into an operational discipline to help grow their business.

For organizations to have continued success in this evolving ESG environment, they should take several steps that require strategic thinking, including:

• • • Identify which metrics truly matter — Connect ESG metrics that affect trade operations, particularly those that impact supply chain cost, efficiency, and reliability.
    • Invest in the technology infrastructure — Improve efficiency in tracking and analyzing key ESG metrics.
    • Articulate ESG value — Develop the ability to demonstrate the value of ESG to the trade function and communicate it in business terms to senior management.

The shift of ESG towards operational trade management may represent a more sustainable long-term path forward than the earlier wave of ESG enthusiasm — embedding ethical considerations into core business processes rather than treating them as separate compliance exercises. By focusing on metrics that genuinely matter to business operations, companies are building practices that will persist regardless of any political winds or public relations trends.

Those corporate trade departments that can skillfully navigate this evolving environment will be positioned to more effectively leverage ESG considerations as a strategic asset and competitive differentiator. And in an increasingly complex and volatile global trading landscape, they will find themselves playing a more central role in their organizations’ success.

You can download a copy of the Thomson Reuters Institute’s 2026 Global Trade Report here

Key insights:

• • • Elevate AI governance to the board — Companies should tie their AI deployment to enterprise risk management with explicit KPIs for energy intensity, water withdrawals and consumption, and supply‑chain human rights.

    • Make transparency a competitive asset — Implement auditable disclosures on AI workload footprints, water stewardship, and supplier traceability, and then link executive compensation and vendor contracts to measurable efficiency and resiliency outcomes.

    • Demand transparency despite practical challenges — Although demanding transparency from suppliers may not be practical now due to current challenges, collectively asking for detailed information sends a notable requirement to AI infrastructure providers that the company is seeking to drive change and preserve trust in an AI-driven economy.

AI now sits at the center of corporate sustainability governance as it supercharges data gathering, analytics, and reporting. Indeed, there is is areas of energy optimization, emissions monitoring, land‑use assessment, and climate scenario analysis.

At the same time, AI’s rise is colliding with sharply growing electricity and water demands from data centers and concerns over geopolitically exposed supply chains. The governance challenge for companies therefore is to manage risk at this intersection. This means treating AI as a capital‑intensive, cross‑border infrastructure program whose environmental footprint and supply dependencies must be actively governed.

Why electricity and water are now board‑level AI risks

AI has turned electricity and water from background utilities into constraints that should be dealt with on the board level. Indeed, AI magnifies water risk across cooling, power generation, and chip manufacturing. This makes sourcing and efficiency choices strategic imperatives for many organizations.

Electricity demand — AI use and the data centers that power the tools already account for a significant and rising share of electricity use in the United States. The finds , a figure poised to grow as AI workloads scale. Forward‑looking projections from the U.S. Department of Energy indicate that by 2028 could be attributed to AI workloads.

If you translate those projections into , you can get an idea of the potential magnitude of the problem. Together, these sources suggest that the fastest‑growing part of AI’s energy appetite is not just for training models, but the steady, pervasive inference capabilitiesĚýrequired to power AI features in everyday products and operations.

Direct and indirect water use — Data centers powering AI also negatively impact local water footprints. It shows up in three places: i) data‑center cooling; ii) the electricity feeding those facilities, including thermoelectric and hydroelectric generation; and iii) AI’s own hardware supply chain. In regions already facing scarcity, these demands compound local stress. For example, the average per capita water withdrawal is 132 gallons per day; yet a large data center consumes water .

This makes data centers one of theĚý in the country, which incidentally is home to . At the end of 2021, aroundĚý from moderately to highly stressed watersheds in the western US. This is a common situation as well.

Geopolitical exposure — The hardware that powers AI includes advanced logic and memory chips, which depend on concentrated manufacturing nodes and supply chains with access to critical minerals. Extraction and processing of inputs, such as lithium and cobalt, are often clustered in jurisdictions with elevated levels of human‑rights, environmental, or geopolitical risk. This potential amplifies exposure to export controls, sanctions, or resource nationalism, especially directly for companies’ supply chains and indirectly for those companies using AI.

Companies need to ensure their communication on legal and policy issues are pointing in the same direction in regard to these concerns. Indeed, companies need to deepen value‑chain due diligence while navigating evolving supply‑chain and AI‑specific regulatory regimes.

Recommended actions for companies

These intersections have clear implications for corporate governance. AI’s promise to accelerate decarbonization, improve transparency, and strengthen decision‑making will be realized only if leaders can properly manage the physical, political, and social realities underpinning the technology. Recommended actions to manage risk in areas in which AI and geopolitics converge include:

Demand transparency in electricity and water consumption of AI infrastructure — Companies building AI infrastructure need to conduct AI workload planning. Companies using AI can demand transparency of their suppliers’ 24- to 36-month forecast of training and inference by region with overlays in grid carbon and local water stress to better understand their indirect environmental impacts.

De‑risk impact by incentivizing clarity in supply chains — Companies using AI can begin asking AI infrastructure companies to provide due diligence in tier 2, 3, and 4 suppliers, all the way down to smelters, refiners, and miners to make sure that companies are not indirectly contributing to environmental and social harms.

The bottom line

While these recommendations generally align with evolving corporate practices in sustainability and risk management, the challenge of implementation will vary based on the company’s size, influence over suppliers, and existing governance structures. The most challenging aspect will likely be achieving transparency and clarity in supply chains, which requires cooperation from suppliers and the investment of potentially significant resources.

At the same time, however, if more companies collectively ask for this level of detailed information from their AI infrastructure providers, it will send a notable demand signal. Indeed, AI is both a sustainability tool and a sustainability liability, but its benefits will be realized only if leaders confront the physical and geopolitical constraints that make AI possible.

Those companies that begin asking for this level of transparency can preserve the trust that underwrites their license to navigate successfully in an AI‑driven economy.

You can find out more on the sustainability issues companies are facing around the environment here

Key insights:

• • • Federal deregulation triggers state-level activism — When federal standards are rolled back or enforcement wanes, many states are compelled to step in to fill gaps with their own regulations, heightened enforcement, and multistate collaborative efforts.

    • Divergent state responses create a regulatory patchwork — Some states tighten rules and enforcement while others align with federal-level deregulation, producing uneven protections for citizens and complex compliance landscapes for businesses.

    • Tension between uniformity and resilience defines US governance — Federal oversight best ensures consistency across markets, but the federal system’s resilience allows states to act as backstops when national leadership retreats, leading to increased fragmentation.

Power shifts in Washington often bring a fresh wave of rules and priorities. Each new presidential administration or Congress sets its own course, shaping how regulations are written and enforced. While that can drive momentum for new ideas, it can also disrupt ongoing efforts at compliance, risk management, and fraud prevention.

In response, some individual states have stepped in to provide a measure of continuity, aiming to keep standards more consistent even as federal policies evolve.

Under this new administration, we are seeing regulations being rolled back, watered down, or simply not enforced as strictly as they once were. Proponents of this shift argue that it’s a necessary step to cut red tape, making government more accountable, efficient, and innovative. The idea is that by streamlining processes and reducing bureaucratic hurdles, we can unlock new possibilities and opportunities for businesses.

However, not everyone is convinced that this is a positive development. Some worry that in the name of simplicity and flexibility, essential safeguards and standards might be compromised. When regulations are relaxed, corporations may choose to opt for the bare minimum, rather than striving for excellence. This approach can have unintended consequences, potentially undermining the very goals that proponents of deregulation aim to achieve.

As this trend develops at the federal level, there is uncertainty regarding the long-term implications and which entities will establish greater consistency nationally and internationally. At this pivotal moment, certain states have determined it is their responsibility to take proactive measures.

States step in

States, when confronted with a decrease in federal regulation, typically employ three main strategies: direct regulatory action, adjustments to enforcement, and legal or collaborative initiatives.

In the first approach, states may directly fill the void left by federal deregulation. This often involves enacting their own laws and regulations that mirror or even strengthen the withdrawn federal standards. State agencies then assume the regulatory authority previously held by the federal government, and state attorneys general can use existing state laws to continue enforcement in areas no longer federally prioritized.

Second, federal rollbacks can lead to shifts in state enforcement efforts. Some states may respond by increasing their inspections and prosecutions to address potential gaps, with state attorneys general initiating investigations into areas like consumer finance fraud or environmental violations. Conversely, states leaning towards deregulation might ease their own enforcement, aligning with the federal shift. This creates a wide spectrum of state responses, from bolstering efforts to scaling back.

Finally, states often can engage through legal challenges and collaborative alliances. They might challenge federal rollbacks in court, arguing a lack of proper justification. Concurrently, states may form coalitions to collectively uphold higher standards. These legal and cooperative strategies indirectly aim to reinstate or substitute federal standards through judicial processes or collective action, rather than through individual state policy changes.

States, when confronted with a decrease in federal regulation, typically employ three main strategies: direct regulatory action, adjustments to enforcement, and legal or collaborative initiatives.

The impact of each of these moves is significant: businesses must adapt to diverse regulatory regimes, citizens face different levels of protection, and the courts become arbiters in federal/state disputes. While this patchwork can be challenging, it also highlights the important role that states play in safeguarding (or not safeguarding) public interests when federal oversight ebbs.

California’s case for clean air

To look at one example, the State of California’s response to federal deregulation has been unmatched in scope and impact. California has passed state-level laws to replace rolled-back federal rules (from clean air and climate standards to net neutrality), tightened enforcement, and led legal challenges to uphold stricter standards — no other states have deployed this combination as effectively.

Over the past decade, California has cemented its role as a counterweight to federal rollbacks, especially on the environment. When federal policy wavered, the state swiftly strengthened its own rules. Notably in 2018, the legislature passed , committing the state to 100% carbon-free electricity by 2045, which then-Governor Jerry Brown hailed as reaffirming California’s global climate leadership.

Indeed, California has responded with a comprehensive strategy, including the enactment of stringent state regulations, enhanced enforcement measures, and leadership in coalitions and legal actions. These efforts have maintained important protections for citizens — such as environmental quality, climate policy, and consumer internet rights — even as federal standards have been relaxed.

Through a combination of proactive and defensive measures, California has preserved high standards for its residents while encouraging industry compliance and influencing other states to adopt similar policies. Over the past decade, this approach exemplifies continuity, the upholding of regulatory benchmarks, a response to federal/state dynamics, and an adaptive governance position in response to deregulation.

What tomorrow may bring

The evolving relationship between federal and state regulatory authority reveals a fundamental tension in American governance. While the need for regulatory consistency across markets and jurisdictions strongly suggest that federal oversight represents the optimal approach to regulation, the resilience of our federal system demonstrates that state and local governments can serve as a safety net if need be.

Federal regulation offers clear advantages: uniform standards that prevent a patchwork of conflicting requirements, economies of scale in enforcement, and the ability to address issues that transcend state boundaries. However, when federal authorities retreat from enforcement or begin to dismantle existing regulations, state governments have consistently stepped forward as crucial backstops, implementing their own protective measures and intensifying oversight to safeguard their citizens. This dynamic ensures regulatory continuity, although it inevitably creates the very fragmentation that federal consistency seeks to avoid.

Further, this pattern of state activism in response to federal rollbacks will likely persist, particularly during periods of divided government or shifting national priorities. The resulting complexity requires careful navigation by all stakeholders. While advocates for robust regulation can leverage state venues when federal action stalls, businesses and regulators face the ongoing challenge of balancing national uniformity with state-level innovation and active responsiveness.

Ultimately, this interplay between federal leadership and state resilience highlights both the strength and adaptability of the American regulatory system. Although consistency argues for federal primacy, the system’s ability to redistribute authority across alternative governmental levels in response to political and social changes ensures that regulatory protections endure — even when delivered through the more complex mechanism of state-by-state implementation.

You can find out more about the many challenges companies face from regulatory enforcement here

Key highlights:

• • • Stricter foreign entity requirements and sourcing rules — The OBBBA imposes stricter requirements for foreign entity and sourcing, especially targeting Chinese involvement, which significantly impacts clean energy project eligibility for tax credits.

    • New compliance requirements for buyers — Developers and tax credit buyers must carefully comply with new documentation, supply chain, and ownership requirements to avoid disqualification or recapture of credits.

    • Early planning is essential — Accelerated deadlines for wind and solar projects, along with ongoing uncertainty about compliance standards, make early and thorough planning essential for success.

The (OBBBA), which passed in early July, represents a major shift from the industrial and energy policies set out in 2022’s Inflation Reduction Act (IRA). For example, the OBBBA makes significant changes to the tax credits available for eligible clean energy components and facilities, while increasing support for fossil fuels.

The legislation also introduced tougher foreign entities of concern (FEOC) requirements that, while also applicable to Russia, North Korea, and Iran, will primarily restrict the participation in the US clean energy sector (whether as owner, investor, lender, or supplier) by companies owned or controlled by the Chinese government or its citizens and residents. These restrictions present significant challenges for developers given China’s dominance in the clean energy supply chain.

OBBBA’s changes to clean energy credits

The OBBBA introduces several important revisions to federal clean energy tax credits, which, as part of the IRA, had been reshaping the landscape for developers and investors in the clean energy sector. The OBBBA’s revisions include:

Stricter FEOC requirements — Clean energy tax credits are not available to any project owned by a specified foreign entity (SFE) or a foreign-influenced entity (FIE), over which an SFE has effective control, or, in some cases, that receives material assistance from an SFE or FIE. The material assistance requirement is intended to limit sourcing of equipment, components, and critical minerals from China and applies to credits under Sections 45X, 45Y, and 48E of the IRA.

Accelerated deadlines for project credit qualification — The OBBBA shortened the deadlines for several types of clean energy projects, but especially for wind and solar projects, which must begin construction by July 4, 2026, or failing that, be placed in service by December 31, 2027. These tight deadlines — coupled with potential changes to the requirements for beginning construction that are expected after an issued on July 7, 2025 — raised significant planning issues for project developers and investors in the US clean energy sector.

No changes in other areas of clean energy — The tax credits for other clean energy technologies — such as battery storage, geothermal, and nuclear — were largely left unchanged. But these projects are also subject to the more stringent FEOC regulations.

You can find from ¶¶ŇőłÉÄę Practical Law here

Continuation of key IRA innovations

The IRA introduced two new provisions that have had a material impact on clean energy project development. Bonus credits increased the amount of tax credit available to qualifying projects by 10% or 20%. This includes an energy community bonus for locating a project in communities affected by coal mine or coal plant closures.

The other was the ability to sell tax credits to unrelated parties for cash (known as transferability), which gave project owners a new and less expensive method to monetize their clean energy tax credits than traditional tax equity.

The OBBBA didn’t alter the bonus credits and producers of clean energy projects can still qualify for bonus credits if they fulfill certain conditions. It did, however, extend the energy community bonus to advanced nuclear energy facilities located in certain communities.

Transferability remains, but with FEOC restrictions. Projects subject to the new FEOC restrictions are disqualified from receiving tax credits, potentially limiting the supply of tax credits in the market. The new material assistance requirements also add a layer of complexity that buyers of tax credits subject to these requirements must consider.

You can read from ¶¶ŇőłÉÄę Practical Law here

Guidance for project developers

Going forward, project developers will need to navigate complex new laws and regulations regarding FEOCs and what it means to begin construction for wind and solar projects. To avoid credit disqualification and manage compliance risk, project developers should keep detailed records to demonstrate compliance with the FEOC ownership and establish effective control requirements.

Project developers also should audit their supply contracts and carefully track the source and costs of their equipment and other inputs to ensure compliance with applicable material-assistance caps. Similarly, they need to insert robust FEOC provisions in their supply, operation & maintenance, and construction agreements to ensure continued compliance with these requirements.

Regarding their wind and solar projects, project developers need to check their project development pipelines to determine whether they can meet the new deadlines. Unfortunately, developers are in a tough spot at the moment because they are not able to determine with any certainty the activities that may be sufficient to meet this requirement until the new guidance around beginning construction is issued. In the interim, developers should make sure that any actions they take toward construction are meaningful and not intended to manipulate this requirement, although there is no guarantee that action will prove sufficient.

Guidance for tax credit buyers

Buyers of tax credits must take action — such as conducting more extensive due diligence — to ensure the purchased credits are not disqualified or, in certain cases, recaptured, and that the credits deliver on the intended financial benefit. Buyers also should obtain detailed documentation from tax credit sellers to verify there is no direct or indirect ownership or effective control by FEOCs and to confirm that the project or component underlying the credit has not received material assistance from FEOCs in excess of the permitted caps.

Tax credit buyers should also consider inserting FEOC-specific provisions in their tax credit transfer agreements, including:

• • • adding specific representations around FEOC compliance, sourcing of materials, and eligibility under the OBBBA;
    • expanding the seller’s indemnification provisions to include losses incurred if the purchased credits are later disallowed due to FEOC or sourcing violations; and
    • requiring sellers to promptly notify them of any changes in the sellers’ FEOC status or supply chain arrangements that could affect credit eligibility. More expansive tax credit insurance policies may also be obtained to mitigate the additional risks the FEOC restrictions present.

Clearly, the OBBBA brings new challenges and opportunities for clean energy developers and investors; and careful planning and strict compliance will be essential for success in this changing landscape.

You can find more of our coverage ofĚýour coverage of environmental and sustainability issues here

Key insights:

• • • Growing energy demands — AI-driven data centers are significantly increasing energy consumption, with forecasts suggesting they will account for about 12% of US electricity usage by 2028.

    • Infrastructure investments are needed — To meet future power needs, the US grid would need to quintuple long-distance transmission capacity within the next decade, requiring an estimated investment of $720 billion.

    • Legislative measures are being enacted — Various states are introducing legislative measures to protect ratepayers from the costs associated with the rapid expansion of data centers, such as in Georgia and California.

When President Trump declared a in January, it was the first national emergency declared as such in the history of the United States. While the US continues to be a net exporter of fossil fuels, there are growing concerns surrounding the domestic electric grid’s capacity to sustain the rapidly increasing demand for electricity.

Indeed, energy usage within five years, with forecasts suggesting they will account for about by 2028. The pace of AI innovation is simply speaking, soaring past the capacity of physical infrastructure as chip supply chains and energy demands have put added strain on the US power grid.

— operated by hyperscalers, a type of large-scale data center that offers massive computingĚýresources, and utilizing large language models that are trained on vast quantities of information — require power-intensive processors and higher energy use. These AI workloads require high-power, high-density racks, and liquid cooling that result in significantly higher energy needs than general cloud computing. Data centers also need to be operational 99.999% of the time, requiring constant redundancies.

To meet future anticipated power needs, the US grid would have to quintuple long-distance transmission capacity within the next decade, which would come at an estimated investment of $720 billion.

Phantom load challenges and speculative growth

Already, AI data center growth is being compared to the real estate bubble of the 2000s billions of dollars into data infrastructure. Quality Technology Services, a major data center operator that leases space to Amazon and Meta, was acquired by Blackstone for $10 billion in 2021. Alphabet, which owns Google, and Meta announced plans to invest upwards of a combined $125 billion into AI infrastructure this year alone.

The investment surge poses serious challenges for the nation’s energy utilities. actually get built, making it difficult for grid operators and power system regulators to correctly estimate future electricity loads. So-called phantom data centers — projects that are proposed but never materialize — can create speculative interconnection requests. Developers often submit load requests in multiple markets, with the intention of only building in the market that offers the best incentives.

Thus, an overestimated load growth through duplicate requests develops and in fact, could trigger a utility to overbuild capacity without subsequent demand all at the expense of ratepayers.

And as infrastructure investment expands into both and red and blue states — such as Arizona, California, Georgia, Iowa, Nevada, North Carolina, Oregon and Texas — legislators are seeking to insulate ratepayers and ensure greater equity and transparency.

State legislative approaches to mitigate ratepayer risk

Now, utilities and lawmakers are stepping in to ensure that the risk of overbuilt infrastructure is not passed onto consumers. would prevent Georgia Power from passing on costs of data center connection to residential and small business customers; and proposes similar protections, but would additionally require energy consumption reporting annually. Even historically business-friendly Texas has sought to require developers to disclose duplicative requests and fund some interconnection requests through its .

is home to the world’s largest concentration of data centers with more than 250 facilities supplying 13% of all global and more than 25% of all domestic capacity. Yet, in Virginia, efforts to regulate after investment has occurred have largely failed. Bicameral legislation has failed or been abandoned that would require data centers to and . Where legislation has failed, however, utilities have stepped up directly to protect ratepayers: Northern Virginia utilities including Dominion Energy, Appalachian Power, and Rappahannock Electric Cooperative have proposed new large-load rate classes to insulate residential and smaller load commercial ratepayers from higher costs.

DeepSeek, chip production & global trade tensions

Data centers not only rely on large quantities of electricity for their operations, but they also rely heavily on chips as the building blocks of their servers, which means that the data center market and the chip market grow in tandem. The rapid pace of demand for AI will inevitably lead to the — the idea that as demand for a resource increases, its production will evolve to greater efficiency.

Currently, the chip and semiconductor markets are dominated by US-based Nvidia. This past winter, however, Chinese startup DeepSeek released R1, a free open-source AI assistant that uses less data and is a fraction of the cost of competitor products. This release had a short-lived, but the , as this model demonstrates that AI will in time require less data and become less costly, was significant. Indeed, it is also anticipated that as AI tasks become commoditized, XPU chips (designed for performing tasks) will be in greater demand than GPUs (chips designed for training.)

Chip access in the Trump Administration remains in flux as global tariffs loom over the tech supply chain. Malaysia has invested heavily in infrastructure for both chip and semiconductor production to meet the US desire for non-China sourced tech components. Last year Malaysia exported and nearly 20% of all semiconductors to the US. The proposed 24% reciprocal tariff on Malaysian imports into the US was , but it remains to be seen if tariffs will actually in amid AI’s robust demands — or if the cost will simply be passed onto end customers.

As AI-driven demand continues to reshape energy and infrastructure in the US, the balance between policymakers, utilities, and Big Tech investors will shape the speed of innovation and the ultimate cost to the public.

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You can find out more about how regulators are tackling the challenges of AI here

Likewise, research has shown that the announcement of an omnibus is part of a broader policy shift aimed at making the EU more industry-friendly by deregulating — an idea that’s heavily influenced by the report on EU competitiveness released by former Italian Prime Minister Mario Draghi.

Proponents of the omnibus package came from some businesses in Germany and France, but the decision was also met with disappointment from environmental and human rights advocates, several EU governments, and some investors. In addition, the goals of the EU’s sustainability due diligence and company reporting rules.

What the omnibus proposal says about reporting & due diligence requirements

The proposed simplification of EU sustainability regulations in the omnibus scales back previously approved obligations on companies to address human rights and environmental concerns as part of the EU’s Corporate Sustainability Due Diligence Directive (CSDDD), the Corporate Sustainability Reporting Directive (CSRD), and the EU Taxonomy.

Indeed, some of that may impact the CSDDDD include:

Extending the deadline — The first companies required to report will now have an additional year to comply, with the deadline moving to mid-2028, from mid-2027.

Weakened supply chain requirements — Companies will only be required to apply the rules to their direct suppliers, rather than to all subcontractors and suppliers throughout their entire supply chain. There is an exception for cases in which there is a beyond Tier One suppliers. However, this is a departure from the risk-based approach, according to the recent response to the omnibus proposal by the .

Reduced monitoring frequency — Companies will only be required to monitor the effectiveness of the measures taken every five years.

Guidance for companies while omnibus negotiations are underway

Human rights advocates are concerned that the omnibus proposal may convey to businesses that addressing human rights and environmental issues on a global scale are no longer a pressing concern.

While the simplification package is negotiated, it can be tricky for companies to know how to navigate this time of uncertainty. , co-founder of , works with companies on the practical implementation of human rights due diligence. According to Quiachon and her team, as businesses face an uncertain legal landscape with the evolving omnibus proposal, a key question often arises: Should we continue investing in human rights due diligence or wait for clearer guidelines?

The answer, based on practical observations, is clear — those businesses that have already invested significant resources in due diligence processes around human rights should continue those efforts — because stopping now would undermine these investments and destabilize supplier relationships.

In addition, companies that focus solely on compliance — adhering to the minimum legal requirements — risk missing the bigger picture. A risk-based approach allows for a more comprehensive understanding of supply chain vulnerabilities that can help ensure that businesses can better manage potential human rights risks deeper in the supply chain, where violations are often hidden.

Therefore, CORE’s key recommendations for the short term include:

• • • Recognizing human rights due diligence as a core business responsibility and path to long-term resilience: Human rights due diligence is not an optional component of a sustainable business strategy; rather, it is a fundamental requirement for responsible corporate governance. No company should wait for economic reasons to address issues like forced or child labor. Indeed, businesses that engage with these challenges early will be better positioned for long-term stability and societal expectations.
    • Leveraging human rights due diligence as a strategic advantage: Companies should treat their due diligence efforts around human rights as more than a regulatory requirement. In fact, company leaders should view it as a long-term strategy that offers a competitive edge. Businesses already practicing human rights are better prepared for both current and future regulatory requirements across multiple markets. They should continue refining processes, as new empirical data and learning-based guidelines will make implementation more efficient. A purely compliance-driven mindset can leave blind spots, whereas a proactive, risk-based approach ensures more informed and effective decision-making.
    • Ensuring continuity despite limited resources: Many companies face resource constraints and as a result, sustainability activities may be de-prioritized — however, conducting due diligence around human rights is still a requirement for many businesses. While federal laws in the US may not be as extensive as those in Europe, several key regulations and trends are pushing US companies to adopt human rights due diligence practices, including the Uyghur Forced Labor Prevention Act and Section 1502 of the Dodd-Frank Act on conflict minerals. Now is the time for companies to stay the course on human rights risk management, even if only gradual progress is possible. In fact, they need to maintain relationships with suppliers and continue educating internal teams on human rights risks.

The EC’s omnibus proposal to relax corporate sustainability regulations for European businesses has sparked a significant debate, with some businesses supporting the proposed changes while some investors, companies, and human rights advocates express concern about diminished accountability.

To deal with this regulatory uncertainty, companies should continue investing in human rights due diligence as a strategic advantage rather than merely a compliance requirement. They also should recognize it as essential for long-term business resilience and a critical way to meet societal expectations regardless of changing legal frameworks.

You can find more on this topic in the Thomson Reuters Institute’sĚýHuman Rights Crimes Resource Center

If DeepSeek’s claims of efficiency wind up being true, it is unlikely that the overall demand for energy will subside any time soon. In fact by the end of 2025, the convergence of AI and sustainability is expected to reach a critical tipping point, according to , Chief Sustainability Officer at NetApp. As AI technologies continue to advance and proliferate across industries, Acutt says their substantial computational requirements will shine a spotlight on the inefficiencies lurking within current corporate sustainability and data practices.

This collision of AI’s voracious appetite for resources and the imperative for environmental stewardship will force companies to harmonize their AI strategies with their sustainability objectives or face significant regulatory and reputational consequences. Acutt predicts that forward-thinking organizations will proactively integrate intelligent, energy-efficient practices into their AI and data infrastructure — including everything from data centers to storage solutions — and will emerge as trailblazers in this new landscape.

The energy, GenAI, and sustainability nexus

The energy-GenAI-sustainability nexus signifies a pivotal shift in which the growing energy demands of AI have significant implications for corporate sustainability goals. The surge in energy demand stems from AI’s reliance on vast data centers and computationally intensive processes, even in the wake of . As AI adoption expands across various sectors, the strain on existing energy infrastructures will become evident, showing that it is ill-equipped for the digital age and highlighting the necessity for modernization at the federal level.

Indeed, the immense energy consumption of AI necessitates a more intricate understanding of data’s embodied energy costs, which is often an overlooked factor, according to Acutt, adding that at the corporate level, another underemphasized trend that is part of the overall inefficiencies is the “embodied energy” price of data management and storage. “The reality is that so much of the AI challenge is a data challenge,” Acutt says. “We’ve got this extraordinary explosion of data, yet without the requisite innovation in managing that data real estate.”

The energy-GenAI-sustainability nexus signifies a pivotal shift in which the growing energy demands of AI have significant implications for corporate sustainability goals.

This is why modernizing data infrastructure is crucial to support the growth of AI. The current infrastructure is outdated, inefficient, and leads to significant data waste, with nearly 70% of created data only being used once, according to an . This inefficiency results in unnecessary energy consumption and costs. To address this, strategies like using data minimization, intelligent data-tiering, or data lakehouses will become paramount, as will leveraging tools to analyze a data estate’s energy footprint and using efficient storage solutions. By doing so, businesses can reduce their environmental impact, lower costs, and improve their competitiveness.

Essentially, the energy-GenAI-sustainability nexus is pointing us towards a future in which corporate energy and data strategies are intertwined. However, companies need to step up efforts and invest in a cohesive strategy that encompasses both successful AI integration and efficient data management.

Guidance for chief sustainability officers

To address the multifaceted challenges at the intersection of AI, sustainability, energy, and data, Acutt recommends corporate chief sustainability officers (CSOs) take several actions, including:

Build relationships between the company’s sustainability functions and its IT teams — We’ve previous discussed the growing role of chief information officers in sustainability and the need for data infrastructure modernization, which itself is another reason for fostering collaboration. In fact, pushing a company’s sustainability function and IT departments to align goals and integrate sustainable practices into the company’s overall IT infrastructure is an essential ingredient in this collaborative process. To do this effectively, CSOsĚý need to conduct regular cross-departmental meetings to share business priorities and identify joint projects that focus on outcomes that benefit both functions.

Support using business cases to upgrade data infrastructure — Easy wins in this include highlighting reductions in the company’s energy consumption and carbon footprint that result from implementation of energy-efficient data centers, data storage, and cloud solutions.

Prioritize resiliency and future-proofing — All capital investment proposals need to demonstrate how they add to enterprise value. CSOs should develop strategies that enhance resilience amid environmental changes, which can help future-proof operations. This process should include investing in renewable energy sources, adopting AI solutions that support predictive maintenance, and ensuring business continuity in the face of climate-related disruptions.

Simplify internal processes and systems — CSOs should streamline processes to make sustainability reporting more efficient and accurate. By using digital tools and platforms to automate data collection and reporting, CSOs can ensure compliance with regulations and transparency in sustainability efforts.

Those companies that make themselves early adopters of these actions will not only mitigate their environmental impact but will also set new benchmarks for innovation. These actions will demonstrate that cutting-edge AI capabilities and robust sustainability initiatives can coexist and even enhance one another.

As this paradigm shift unfolds, it will become increasingly clear that the future belongs to those organizations which can masterfully balance the transformative power of AI with responsible environmental stewardship.

You can find out more about how companies are grappling with sustainability issues here

This new policy direction comes at a time when EVs has surged in consumer popularity and as the American automaker and component supply chain invests heavily in a shift away from gas-powered vehicles.

Growth of the US EV market

EVs experienced a of 52% in 2023 and despite a slowed pace in 2024, those totals were still above 2023’s numbers. The gap in sales over the last year was filled by plug-in hybrid electric vehicles (PHEVs).

The State of California holds tremendous influence over the automobile industry due to its market size and is currently the — with one-third of all EV units nationally being sold in the state. California has held special authority from the Environmental Protection Agency to adopt stricter emission regulations than the federal government since the 1970s. The state received approval from the federal government toward the end of the Biden Administration to starting in 2035. California Governor Gavin Newsom has pledged to revive its own should the federal tax credits disappear.

Indeed, transmission capacity is truly a bipartisan issue — traditionally left-leaning states are seeking increased transmission to support clean energy goals while traditionally right-leaning states are seeing data-center growth.

EV-maker Tesla (of whom the largest shareholder is Trump advisor Elon Musk) currently holds reign as the and generates more profit per vehicle than its rivals. (However, the brand has had a bumpy ride over the past several weeks — despite a filmed endorsement by President Trump — because of the link between the Telsa and Musk.) Further, the removal of a federal tax credit subsidy would impact rival brands like Ford and GM more greatly than Tesla. While for federal tax credits, for their long-range variant batteries.

Market deterrents and charging needs

One of the for Americans in considering an EV purchase is range anxiety — the concern about the distance an EV can cover from one charge. Less than 5% of car trips in the United States are longer than 30 miles and only 0.1% of car trips exceed 500 miles, but the anxiety persists. EVs require consecutive coverage of charging infrastructure accessibility between cities (a minimum number of fast chargers spaced fewer than 50 miles apart).

Charging options vary widely in the wattage they deliver and speed of charging. For example, a Level 2 EV charger (such as one might have in their home) can recharge a vehicle in four to six hours, whereas DC Fast Chargers offer a much faster charge by wattage. As the industry leader, Tesla deployed its own network of fast chargers across the United States in the early 2020s and has since by modifying their chargers to be adaptable to more EV brands. Currently, only Nevada and California meet state-level fast coverage metrics, with consecutive coverage areas being highest in New England, the West Coast, and Florida for state-level minimum coverage.

Many state legislatures have changed their own utility rules to allow for private businesses to own and operate EV and PHEVs charging stations, effectively offering retail sale of electricity to the public as a non-utility. and were the final two of all 50 states to adopt these legislative changes, which were both passed early in 2024.

Interestingly, the US automobile industry and component supply chain has gone all in on EVs. Traditional automakers face substantial competition from Chinese automakers in the EV market globally, and the newly increased 20% tariff on Chinese imports also looms over auto manufacturers’ heads, which adds pressure to have a . While US-based EV battery factories numbered only two in 2019, more than 30 are planned, under construction, or operational this year.

Many state legislatures have changed their own utility rules to allow for private businesses to own and operate EV and PHEVs charging stations, effectively offering retail sale of electricity to the public as a non-utility.

States including Ohio, Georgia, Kentucky, Tennessee, Mississippi, and South Carolina have as new industry clusters. For example, represents 6% of all automobile industry employees in the US, and the $5.8 billion BlueOval SK Battery Park (serving Ford and other automobile manufacturers) located in Glendale, Kentucky, will produce domestically-made EV batteries. Toyota, Ford, Honda, BMW, Daimler, , and Hyundai all currently or will soon assembly EVs within the US.

Energy emergency and utility grid investment

President Trump has declared a — the first ever presidentially-declared national energy emergency. In his , President Trump encouraged increased domestic production of oil and gas and continued coal production — a noted de-emphasis on renewable energy sources. The US currently is a net exporter of fossil fuels and produces more oil and gas than any other country in the world and more than any point in American history. Where Trump’s call for energy investment holds is in the need to update and expand transmission capacity and the resiliency of American utility grid infrastructure.

The U.S. Department of Energy reports that the nation has a pressing need for . And while forecasted numbers for energy demand show it over the next 5 to 10 years, there is agreement that transmission capacity must be a high-priority for domestic utilities. This increased demand is also accompanied by more frequent severe and extreme weather which drives the need for grid modernization.

Indeed, transmission capacity is truly a bipartisan issue — traditionally left-leaning states are seeking increased transmission to support clean energy goals while traditionally right-leaning states are seeing data-center growth. Public utilities have at times blocked transmission buildout to protect the viability of gas and coal sources, but President Trump has promised to streamline permitting procedures for power grid enhancements. To meet projected demand, over the next decade, and that power would likely need to be sourced from a blend of renewable and non-renewable resources.

As the rapidly expanding EV market collides with shifting federal and state energy policies and as fossil fuel is prioritized by the Trump Administration, the automobile and supply chain markets continue to forge onward. Policymakers face urgent decisions to invest in their utility infrastructure and transmission investment, as well as energy source diversification to sustain future power demands.

You can find more about how companies are managing their supply chains here

On his second day in office, Trump ordered “all federal agencies to immediately under the IRA” and through his executive orders, the president issued a directive to cease financial support for the development of electric vehicle charging infrastructure and other policies that favor electric vehicles.

For companies not involved in car manufacturing, the ambiguity surrounding the IRA continues, and this is causing some discomfort for developers of clean energy projects and buyers of tax credits. While a complete repeal of the IRA is unlikely, the new administration is likely to take a strategic approach to curtailing current energy incentives, according to and , experts in energy tax services at .

“We haven’t seen any kind of fine print or any formal legislative proposals,” but that “it seems unlikely that the government is going to take a sledgehammer to the whole Act,” says Smith. Indeed, any repeal could have far-reaching implications to local employment in communities in many states whose electoral college votes went for the current president.

Distilling the ambiguity of corporate players

Developers of renewable energy projects currently face a significant dilemma with the beginning of construction safe harbor provisions under the IRS code. Generally, these provisions allow projects to qualify for tax credits if construction begins by a certain date.

However, with potential modifications to the IRA and without specificity in the time frame, developers risk starting projects that may not qualify for credits if legislative changes occur. This uncertainty is exacerbated by discussions of significant reductions or even repeal of these tax credits, which could drastically impact the financial viability of renewable energy projects. Without these incentives, many projects may become economically unfeasible.

This lack of certainty surrounding potential changes to the IRA also creates a challenging environment because it forces companies to navigate the risk of investing substantial capital into projects that may not receive the expected financial benefits.

Equally, there are concerns among some corporate purchasers of IRA tax credits amid the anticipation of changes. One of the innovations of the IRA was the creation of tax credit transferability, which allows developers to sell their tax credits to corporate buyers at a discount. This provides immediate cash flow to fund projects while enabling corporate tax credit buyers to reduce their own tax liability. This mechanism benefits developers by monetizing credits they cannot use due to limited tax liabilities and also benefits corporate buyers by offering a straightforward method to lower their taxes.

The potential impact of changes in IRA tax credit policies could significantly affect pricing and availability, Hill notes. If transferability is restricted or removed, a pool of fewer credits could lead companies to reassess their tax planning strategies.

Further, any abrupt changes could significantly affect the renewable energy market. Investor confidence may waver, and the tax credit transfer market could compress, with fewer credits available and at higher prices, which could push smaller investors out of the market. “The IRA is very much a private-public sector partnership in a lot of ways,” Smith explains. “There’s still an amount of trust that needs to be built between the private sector and the US government, and yanking the rug out from underneath renewable energy credits doesn’t create a lot of trust.”

Any changes to the IRA, especially if the transferability provisions are eliminated, will likely push companies back towards traditional tax equity structures. This could exclude some smaller investors who entered the market due to transferability’s relative simplicity.

Guidance for companies

Hill and Smith say they are trying to help businesses understand the evolving landscape and make informed decisions amid the lack of specific changes in the IRA. They both stress that complete repeal is unlikely, but targeted adjustments are possible. At the same time, changes to the tax credit provisions seem probable, and effective dates and grandfathering of existing projects will be important to monitor.

While the Trump administration’s approach has introduced uncertainty, it is crucial for stakeholders to remain adaptive. And to navigate the upcoming changes, companies need to foster collaboration and trust with their tax advisors to remain informed about policy developments so they can position themselves well with the ability to adapt their cash flow and tax strategies if necessary.

You can find out more about potential changes to here