Will Climate Thuggery Capture the SEC?

by Marlo Lewis on July 13, 2009

The Securities and Exchange Commission (SEC) may require corporations to assess and report the impacts of global warming and climate change policy on their bottom lines, today’s Greenwire (subscription required) reports. The story indicates that Commissioner Elisse Walter is a key proponent inside the agency. The big outside push–no surprise–comes from Ceres, eco-sustainability investment network. Wisconsin insurance regulatory Sean Dilweg and Maryland Treasurer Nancy Kopp are also mentioned as leading advocates of SEC-mandated “climate risk disclosure.”

Greenwire rightly notes that, “The move would drive the government deeper into the climate debate, potentially reshaping management decisions at companies across the country.”

Greenwire indicates that the SEC, stung by criticism that its lax regulation contributed to the financial crisis, now views an assertive stance on climate risk as a way to shore up its image.

The prospect of SEC-required disclosure of climate risk scares the bejesus out of fossil energy producers and energy-intensive manufacturers, Greenwire says:

Big emitters like oil and gas companies, for example, might have to formally reveal the output of their greenhouse gases and the disadvantages they face from federal efforts to charge polluters for every ton of carbon that’s released.

Even more, the revelations could spark financial fallout. Institutional investment groups with trillions of dollars in assets could use the disclosures as the basis for withdrawing money from companies they consider unprepared for rising risk related to regulation and climatic convulsions.

But the CERES agenda may be too clever by half. Disclosure of climate risk could cut against the global warming movement, by revealing the potential of regulatory climate policy to wreck the economy.

For example, the application of Clean Air Act permitting rules to stationary sources of carbon dioxide (CO2) emissions–an inescapable consequence of EPA establishing greenhouse gas (GHG) emission standards for new motor vehicles in response to the Supreme Court’s April 2007 Massachusetts v. EPA decision–would potentially expose an estimated 1.2 million previously unregulated firms to new controls, paperwork, penalties, and litigation.

Moreover, the endangerment finding prerequisite to EPA adoption of GHG controls for motor vehicles could also compel the Agency to promulgate National Ambient Air Quality Standards (NAAQS) for GHG-related “air pollution.” Logically, NAAQS for CO2 and other GHGs would have to be set below current atmospheric levels and, thus, could not be attained even if EPA shut down every car, power plant, and factory in the United States. Once the regulatory cascade starts, “climate policy risk” to the U.S. economy could easily become a gigantic Anti-Stimulus Package. For the gory details, see my comment on EPA’s endangerment proposal, especially pp. 33-48.

It’s not enough for Ceres and other eco-zealots to clobber fossil energy producers and energy-intensive manufacturers with costly regulation. They want those companies to scare away investors in advance of climate regulations via public disclosure of the potential burdens. However, the Ceres strategy could backfire, because targeted corporations could use the mandated information to publicize the destructive impacts of climate policy on jobs, growth, investment, and shareholder value. Such information would reveal that the risks of climate policy vastly outweigh those of climate change.   


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