Future Clean Energy Standards and Business Impact

Clean energy provides power to businesses and consumers without directly producing carbon emissions. The most immediate benefit of solar, wind, and hydroelectric power is that they do not emit carbon.

Currently, 60% of the electricity in the U.S. comes from fossil fuels. These materials, including coal and natural gas, account for 75% of the greenhouse gases (GHGs) causing global warming. Replacing these fossil fuels with clean energy sources can reduce or eliminate carbon emissions, which the U.S. hopes to do by 2035.

More and more consumers are becoming aware of the environmental benefits of clean energy and supporting businesses adopting sustainable electricity production using rooftop solar or wind power. Government agencies and regulators have noticed this public sentiment and sought to address it by enacting new environmental laws.

These rules are aimed at reducing greenhouse gas emissions, but they can also introduce new challenges for businesses. For instance, the regulations could require emissions reductions, process changes, and other compliance steps that could complicate company operations and reduce profits.

Here is a closer look at current and future sustainability-related regulations and how businesses can use clean energy solutions to lessen their impact.

Tighter vehicle emissions standards

The U.S. Environmental Protection Agency is introducing new emissions standards aimed at reducing the carbon footprint from transportation. These new regulations will affect both consumers and businesses.

One set of emissions standards will deal with light and medium-duty vehicles — with requirements phasing in over a five-year period starting in 2027.

By 2027, the third phase of the plan will be in effect and reduce heavy-duty truck emissions. These standards will apply to all new vehicles from the 2027 model year and will cover delivery vehicles, buses, cargo trucks, and other heavy vehicles. The regulations will include an 80% reduction in nitrogen oxide (NOx) emissions compared to current standards.

What it means for businesses

Businesses will need to take these standards into account when purchasing new vehicles. An investment in more fuel-efficient vehicles, EVs, or hybrid powertrains could help companies meet these new requirements.

When making this switch, businesses will need to factor in the demand for compliant vehicles. As the 2027 deadline approaches, more of these vehicles will be in demand, increasing prices due to lack of availability. Therefore, businesses should make the switch sooner rather than later before this occurs.

More efficient vehicles may require different maintenance processes. Fleet managers need to make sure they can maintain vehicles using new technologies like hybrid engines. Also, they have to plan maintenance to guarantee that their fleet continues to meet efficiency standards.

Increased carbon reporting requirements

The Greenhouse Gas Reporting Program (GHGRP) requires the reporting of greenhouse gas emissions for facilities in certain industrial categories. The rule applies to companies in specific categories responsible for at least 25,000 metric tons of GHG emissions. The emissions information needs to be available publicly and accessible to investors.

The GHGRP covers 41 sectors — from food processing plants and fuel refineries to electricity producers and mining operations.

These reporting requirements could soon become more complex due to Scope 3 reporting. Scope 3 looks beyond a business’s facilities to include carbon produced as an indirect result of operations. For instance, Scope 3 would require a company to calculate carbon emissions from the production and transportation of raw materials used in its operations. It could also include carbon from employee commutes and the processing of waste from company operations.

The global consensus is that Scope 3 reporting is necessary, and it could become mandatory in the near future.

What it means for businesses

Reporting mandates will make it easier for investors and consumers to see a company’s pollution levels and sustainability efforts. Companies with strong sustainability practices will be able to meet investors’ expectations, which often include GHG reduction, reduced environmental impact, and responsible sourcing and supply chain policies.

One of the best ways to reduce emissions and meet investor expectations is through the use of well-designed commercial solar installations. A one-acre array can reduce carbon emissions by 175 to 198 metric tons each year. This project would result in a measurable reduction in carbon emissions that would be evident on a GHGRP and serve as evidence of sustainability improvements in the company.

More expansive carbon pricing mechanisms

Carbon pricing mechanisms, like carbon taxes and carbon trading systems, serve as incentives for companies to reduce GHG emissions. Companies have to pay taxes based on the amount they produce. Or, they have a predefined cap on carbon emissions that they need to meet. If they exceed this amount, they have to pay taxes.

They can use an emissions trading system to purchase offsets or credits that they can use to effectively reduce their emissions below the required amount.

The use of carbon pricing is expanding. However, other financial incentives are already in place and provide benefits for companies willing to take steps to reduce GHG emissions.

What it means for businesses

Companies with low GHG emissions or an effective carbon offset plan can become carbon neutral. For most businesses, carbon neutrality requires a combination of strategies — including efficiency improvements, offsetting programs, and the adoption of renewable energy.

For instance, a company could install solar panels to reduce its carbon footprint (and enjoy decreased energy costs). This improvement could help the business avoid carbon taxes or provide it with carbon credits to trade as an additional source of revenue.

More comprehensive building energy codes

Building energy codes lay out the minimum efficiency requirements for new constructions or renovations of existing businesses. The Department of Energy is actively working with states to create and implement such codes.

Codes seek to ensure efficiency, limit greenhouse gas emissions from heating and cooling, and improve overall building energy usage. The regulations can cover everything from insulation, windows, and lighting to HVAC systems.

Local, county, or state authorities are responsible for inspections and enforcing codes. Though the Department of Energy often provides input, energy codes vary from place to place and can be different depending on the size and nature of a business. In most cases, however, failure to comply will lead to penalties such as fines or other sanctions.

What it means for businesses

Companies investing in new constructions or renovations need to understand the local energy codes and verify that their construction plans will result in a compliant building. In some cases, compliance may require additional costs for higher-quality insulation or a more efficient HVAC system.

A business can adopt a net zero energy building strategy. Such building designs require maximizing efficiency features and offsetting any use of outside energy with onsite renewables. For instance, a company could design a rooftop solar array to provide energy. It could rely on net metering to feed excess energy back into the grid, offsetting any power drawn from the utility provider after dark.

Increased incentives for renewable energy

Not all sustainability-related standards present challenges for companies. For instance, the U.S. federal government currently offers solar tax credits for businesses that install PV panels. Companies can enjoy a 30% base tax credit until 2033 if their project meets specific labor requirements.

Additional incentives are available for the use of domestically produced hardware or for projects that provide energy to a community or low-income housing. States may offer additional incentives, though the details of these incentives vary.

Currently, the tax incentives run through 2033, when the amount of the credits will scale down.

What it means for businesses

Companies can use these incentives to offset a portion of the cost of a solar installation project. Solar PV systems require little maintenance, so the bulk of the cost is associated with installation and equipment purchases. The credits can lower the initial cost and also shorten the time it takes the energy savings to pay off the cost of installation.

A company can also use credits to increase the size of its system. For instance, the business can opt for a larger ground-mounted system that can provide more energy, further reduce reliance on the grid, and achieve a greater amount of energy independence.

With stricter carbon reporting, emissions caps, and energy codes likely in the near future, the addition of a solar system during the incentive period can be an excellent way for a business to prepare for the future. Clean energy will not only help address these challenges, but it will also allow the business to lower energy costs for the lifespan of the solar array.