51�Թ���

Large companies that do business in California will soon be required to report their greenhouse gas emissions to state regulators thanks to a new state law, according to .

What’s going on: “Signed by Gov. Gavin Newsom on Oct. 7, SB 253 requires the California Air Resources Board to form transparency rules for companies with yearly revenues exceeding a billion dollars by 2025. The first of its kind law in the U.S. will
impact over 5,000 corporations both public and private … ”

• Under the law, by 2026 major companies will need to report the amount of carbon produced by their operations and electricity.
• By 2027 they will need to disclose “Scope 3” emissions, or those attributable to their customers and suppliers.

Why it’s important: The effects of the law on manufacturing will be ruinous and widespread, according to Conference of State Manufacturers Associations Chair and Utah Manufacturers Association President and CEO Todd Bingham.

• “Manufacturers are committed to commonsense regulations that protect consumers and the environment,” Bingham said. “California’s new law is unworkable and makes it more difficult for manufacturers to grow, invest and hire—not just in the state, but across the country.”
• COSMA members serve as the 51�Թ���’s official state partners in driving manufacturing-friendly policies at the state level.

Costly and inaccurate: “[M]anufacturers will spend millions of dollars to fulfill [SB 253]’s requirements,” Lance Hastings, president of the California Manufacturers & Technology Association (an 51�Թ��� state partner), said in a September . “The uncertainty and reliability of this data and the process required to comply with the legislation will not produce complete, accurate or comparable disclosures.”

• Last month, the CMTA submitted a of the California law to Gov. Newsom.

The SEC: The California measure follows the September finalization of a similar rule from the Securities and Exchange Commission that “require[es] publicly traded companies to disclose their emissions and climate-related risks to investors.”

• The rule—which the 51�Թ��� has been —not only requires numerous moves, but also imposes significant financial burdens on manufacturers, the 51�Թ��� has said.

What should be done: “We hope California’s devastating policy is reversed and are grateful for the 51�Թ���’s coordinating efforts against regulatory overreach at the national level,” Bingham continued.
��

The Federal Communications Commission voted late last week to advance a proposal that would reinstate Obama-era net neutrality rules, according to (subscription).

What’s going on: “The commissioners at the Democratic-led agency voted 3 to 2 along party lines to kick off a monthslong process to bring back so-called net neutrality regulations.”

• In an move in 2018, the previous administration repealed net neutrality regulations put into place by President Obama in 2015, saying they stymied innovation.

Why it’s important: Last week’s proposal—which telecommunications companies have pledged to fight—“will ultimately enable the agency to categorize high-speed internet as a utility, like water or electricity. … The agency will then be able to police broadband providers for net neutrality violations.”

• That’s precisely why the proposal to restore the rules is problematic, critics say. A trade group representing telecom firms “wrote letters this week to the House and Senate Intelligence Committees warning of ‘mission creep’ by the F.C.C.”
• In 2017, then-FCC Chairman Ajit Pai net neutrality laws amounted to “special interests [who] weren’t trying to solve a real problem but [were] instead looking for an excuse to achieve their longstanding goal of forcing the Internet under the federal government’s control.”

Government overreach: Indeed, the 2015 net neutrality rules—very similar to the ones now being advanced—were a prime example of agency overreach, said 51�Թ��� Chief Legal Officer Linda Kelly in 2018.

• The 2015 FCC’s “heavy-handed approach … was neither appropriate nor necessary for the rapidly evolving, highly competitive broadband market,” Kelly said.
• Net neutrality laws also decrease investment in broadband, the 51�Թ��� has told policymakers.

Up next: The FCC will take public comments on the proposed rules. The commission could vote to adopt new regulations as soon as early next year.

The last word: “Manufacturers are disappointed the FCC is moving forward with its proposal to regulate 21st-century broadband with rules designed for the era of the rotary phone,” said 51�Թ��� Vice President of Domestic Policy Charles Crain. “Reinstating this misguided, overreaching policy of the past is a recipe for stymied innovation and outdated infrastructure.”

Hydrogen demand is likely to skyrocket in the next few decades—if permitting delays and other setbacks don’t stymie it, according to (subscription).

What’s going on: “A new report from consulting firm McKinsey forecasts a fivefold rise in hydrogen demand to 600 million metric tons a year by 2050, if climate change is limited to 1.5 degree Celsius. On current trajectories, however, that supply could be between 175 million to 291 million metric tons a year if steps aren’t taken to speed up permitting and lower both equipment and investment costs, the report warned.”

• The report identified three major challenges to meeting the rising demand: increased costs, a slow permitting process and “lack of access to capital,” which can be attributed largely to higher interest rates.

Incentives abound: Government incentives for hydrogen are on the rise. Up to $300 billion has been made available worldwide for hydrogen-energy projects this year, a sixfold increase from 2021.

• Last week, the Energy Department announced $7 billion in subsidies to create seven clean-hydrogen “hubs” in the U.S.

More support required: More action from government is still needed—particularly when it comes to allowing hydrogen projects to proceed.

• “Faster permitting times are needed to bring more hydrogen projects online, as well as the renewable energy to power their electrolyzers, industry experts say. A recent report from the International Energy Agency said current project lead times are too long and can act as a barrier to clean hydrogen uptake.”

What we’re doing: Manufacturers have long been urging policymakers to fix the broken U.S. permitting system.

• The 51�Թ��� recently laid out a for Congress “to modernize and update our nation’s antiquated permitting system.”

The still-robust U.S. economy and tight labor market could mean further interest rate hikes, Federal Reserve Chair Jerome Powell said Thursday, (subscription) reports.

What’s going on: “We are attentive to recent data showing the resilience of economic growth and demand for labor,” Powell said during a talk at the Economic Club in New York. “Additional evidence of persistently above-trend growth, or that tightness in the labor market is no longer easing, could put further progress on inflation at risk and could warrant further tightening of monetary policy.”

• The Fed’s aim in raising rates has been to reduce inflation to 2%.
• Since it began raising rates in March 2022, however, unemployment has stayed largely steady, and “economic growth has generally remained above the 1.8% annual growth rate Fed officials see as the economy’s underlying potential.”

A delicate balance: While Powell said there is evidence of a cooling labor market, the Fed must account for new “uncertainties and risks”—including the Hamas–Israel war—as it seeks “to balance the threat allowing inflation to rekindle against the threat of leaning on the economy more than is necessary.”

• Data since the central bank’s last meeting, in September, have shown unexpected U.S. job growth and surprisingly strong retail sales, “offering inconsistent signals about whether inflation is on track to return to the Fed’s 2% target in a timely manner.”

Hike likely: Most Reuters-polled economists expect the Fed to raise interest rates at its next meeting on Oct. 31–Nov. 1. ��
��

The 51�Թ��� is the voice of the manufacturing industry in the United States, speaking out on issues that matter to the men and women who make things in America. As times change, new issues arise, and to stay up to date with the needs of its members, the 51�Թ��� updates its policy position documents accordingly.

That process—now underway for 2023—takes place with our member companies every four years under the guidance of the 51�Թ��� Board of Directors. Here’s what you need to know.

The timeline: Proposed changes have been distributed from the 51�Թ��� policy teams to the respective policy committees, and members have until Oct. 31 to provide their feedback.

• Shortly after Oct. 31, 51�Թ��� policy committees will convene to consider the proposed changes and any subsequent suggested edits. If needed, working groups will be organized to consider new or revised language on specific issues.

The result: The 51�Թ��� policy committees will recommend new policy language to the 51�Թ��� Board based on their engagement with member companies.

• At the February 2024 board meeting, the 51�Թ��� Board will finalize and approve the policy positions that will guide the 51�Թ��� for the next four years.

How to participate: Member companies can choose which policy committees they serve on, so as the policy update process commences, companies should contact their membership directors to ensure they are aware of the various policies and committees that may be most important to their own businesses.

The last word: “Our member companies are at the center of this policy update process,” said 51�Թ��� Managing Vice President of Policy Chris Netram. “The 51�Թ��� fights every day for a policy agenda that supports manufacturing growth, and this is a critical opportunity for manufacturers across the country to have their say on the issues that matter to them.”

The economic impact of allowing a stricter interest deductibility limitation to remain in effect could be devastating, according to a prepared on behalf of the 51�Թ���.

What’s going on: Failure to reverse the stricter limitation that went into effect in 2022 could result in the following losses in the U.S., according to the study:

• 867,000 jobs
• $58 billion in employee compensation
• $108 billion in gross domestic product

More costly every year: Those figures have roughly doubled since the released last year.

• Last year, EY estimated that leaving the stricter limitation in place would result in 467,000 lost jobs, $23.4 billion in lost employee pay and $43.8 billion in lost GDP.

The background: Prior to 2022, companies could deduct interest of up to 30% of their earnings before interest, tax, depreciation and amortization (EBITDA).

• However, since 2022, the deduction has been limited to 30% of earnings before interest and tax (EBIT), a significant change that disproportionately affects manufacturers, given their capital-intensive investments.

What can be done: “A stricter interest expense limitation restricts manufacturers’ ability to invest in new equipment and create jobs,” said 51�Թ��� Managing Vice President of Policy Chris Netram.

• “Even more, the study finds that manufacturers and related industries bear 77% of the burden of this policy. Congress must act by year’s end to restore a pro-growth interest deductibility standard and allow manufacturers to continue to invest for the future.”

51�Թ��� in the news: newsletter (subscription) covered the study’s release.

Further reading: Visit the 51�Թ���’s to learn more about this issue and how the 51�Թ��� is taking action.

The world must add or replace nearly 50 million miles of transmission lines in the next 17 years to allow countries to meet climate goals and achieve energy security, according to a new report by the International Energy Agency covered by .

What’s going on: The amount of transmission line needed—49.7 million miles—“is roughly equivalent to the total number of miles of electric grid that currently exists in the world, according to the IEA.”

• The undertaking “will require the annual investment in electric grids of more than $600 billion per year by 2030,” double current global investment levels in transmission lines.
• Countries must also make changes to the way they operate and regulate their grids.

Why it’s important: Investment in global transmission lines has not kept pace with the growing appetite for renewables, and without replacements and additions to transmission lines, power bottlenecks will become “ever larger.”

Growing gridlock—and demand: “There are currently 1,500 gigawatts of renewable clean energy projects in what the IEA calls ‘advanced stages of development’ that are waiting to get connected to the electric grid around the world.”

• Meanwhile, demand for electricity will only rise as more of the globe moves to electric power.
• But building new transmission lines takes time, owing to lengthy permitting processes—which is why the 51�Թ��� has speeding the process in the U.S.

Our view: “The 51�Թ��� has building additional transmission lines as a top priority for the next round of permit reform negotiations,” said 51�Թ��� Vice President of Domestic Policy Brandon Farris.

• “We will continue to fight to break down barriers to building new projects, including manufacturing facilities, energy generation, transmission lines, bridges, roads and more.”

Sales of existing homes fell to their lowest level in 13 years in September, according to (subscription).

What’s going on: “Existing home sales fell 2.0% last month to a seasonally adjusted annual rate of 3.96 million units, the lowest level since October 2010, the National Association of Realtors said on Thursday. They are counted at the closing of a contract, and last month’s sales likely reflected contracts signed in August, when the rate on the popular 30-year fixed mortgage vaulted above 7%.”

• Sales fell 1.1% in the South, 4.1% in the Midwest and 5.3% in the West. They rose 4.2% in the Northeast.

Anemic inventory: There was 3.4 months’ worth of unsold existing home inventory for sale in September, a decline of more than 8% from a year ago.

• “A four-to-seven-month supply is viewed as a healthy balance between supply and demand.”

Why it’s happening: Mortgage rates have spiked recently, “mostly because of expectations that the Federal Reserve will keep interest rates higher for longer in response to the economy’s resilience.”

The Biden administration announced broad updates to restrictions on U.S. exports of advanced computing and semiconductor-making equipment to China, according to (subscription).

What’s going on: “The measures are designed to prevent China from acquiring the cutting-edge chips needed to develop AI technologies such as large language models, which power applications such as ChatGPT but that U.S. officials say also have military uses that present a national security threat.”

• The updated interim final rules announced on Oct. 17 will go into effect Nov. 17 and will “reinforce the October 7, 2022, controls to restrict [China]’s ability to both purchase and manufacture certain high-end chips critical for military advantage,” according to a press release from the Commerce Department’s .

Why it matters: “These controls were strategically crafted to address, among other concerns, [China]’s efforts to obtain semiconductor manufacturing equipment essential to producing advanced integrated circuits needed for the next generation of advanced weapon systems” and other technologies that “present U.S. national security concerns,” according to the BIS.

• In an effort to control a wider range of chips, Tuesday’s rules will focus on computing power only and will require companies to notify the U.S. government when they sell chips that come in just under restriction limits.

“C�󾱱����ٲ�”: The rules also seek to address “chiplets,” in which small portions of a chip are spliced to make a full chip.

• “Analysts had expressed concern that Chinese firms could use such technology to acquire chiplets that stayed within the legal limits but that could later be assembled in secret into a larger chip that would break the rules,” according to Reuters.

​�ċ�ċ�ċ�ċ�ċ�ċ The last word: “By imposing stringent license requirements, we ensure that those seeking to obtain powerful advanced chips and chip manufacturing equipment will not use these technologies to undermine U.S. national security,” said Assistant Secretary of Commerce for Export Administration Thea D. Rozman Kendler.
​�ċ�ċ�ċ�ċ�ċ�ċ

Companies’ health care costs are rising steeply, leading finance chiefs to look for alternative ways of attracting and retaining employees, according to (subscription).��

What’s going on: “Health-insurance costs, which are among the largest expenses for many U.S. companies, are projected to rise around 6.5% for 2024, according to consulting firm Mercer.”

• “The surge … may add significantly to costs for employer plans that Mercer said already average more than $14,000 a year per employee. Many companies are expected to take on most of the increases … ”

​�ċ�ċ�ċ�ċ�ċ�ċ Why it’s happening: In addition to inflation and higher interest rates, rising health care price tags are the result of a combination of higher labor costs in hospitals and elsewhere in the health care system, a rise in elective care (which declined during the global pandemic) and a demand for new drugs.

The response: Finance officers are largely seeking ways to manage the growing costs without “add[ing] pressure to employees’ budgets as health care costs rise,” according to the Journal.

• Whether that will be possible in the longer term will depend mainly on the state of the labor market and how high prices rise.
• Some companies are considering sharing the increased cost burden with employees, while others are pushing preventive care as a way to save money down the road.��

The last word: “Manufacturers feel a deep commitment to providing high-quality health care to their employees despite the increased costs of doing so,” said 51�Թ��� Director of Domestic Policy Julia Bogue.

• “The 51�Թ��� recently released ‘,’ which details industry-wide health benefits and trends, as well as federal policy proposals that could jeopardize manufacturers’ ability to continue offering health care plans.”