Last week, former Securities and Exchange Commission (SEC) Commissioner Paul Atkins and former White House Office of Information and Regulatory Affairs Administrator Paul Ray wrote a Wall Street Journal op-ed explaining the ways in which the SEC’s proposed climate disclosure rule is an overreach of its authority. Atkins and Ray compare the SEC’s proposed rule with the Environmental Protection Agency’s (EPA) “Clean Power Plan,” which the Supreme Court recently struck down and ruled unlawful under the “major questions doctrine.” Like with the climate disclosure rule, the “Clean Power Plan” was out of the EPA’s purview as directed by Congressional delegated authority.

Atkins and Ray highlighted the following:

  • The climate disclosure rule lies beyond the expertise of the SEC – “In the Clean Power Plan, the EPA tried to regulate the nation’s power generation and transmission mix—a topic far outside its field of knowledge. In the eyes of the high court, this undermined the EPA’s argument that it had an implied power to set policy on that issue. In West Virginia the justices pointed out that Congress was unlikely to entrust the agency with major decisions about which it lacks expertise. So, too, for the SEC’s proposal. The commission lacks expertise in climate science, and Congress hasn’t expressly assigned it the task of deciding major questions of climate policy.”
  • The rule relies on a new interpretation of an old statute – “The SEC disclosure proposal also relies on a new interpretation of old statutes—the Securities Act and Securities Exchange Act—dating back to the 1930s. In nearly every case in which the SEC has used these statutes to demand disclosures in the past, it has claimed that it was doing so because the required information was material—that is, financially significant to the reasonable investor. But the commission does not even attempt to show that all its proposed climate disclosures are material.”
  • The rule would greatly expand the agency’s regulatory authority – “The Clean Air Act gave the EPA power to set emissions standards for particular plants based on the emission controls the plants can implement; the plan would have fundamentally changed that regulatory scheme by allowing the EPA to set limits for the grid as a whole, with little limit to the kind of changes the EPA could force plants to make. So, too, with the SEC’s proposal: By departing from the materiality standard, the commission would set itself up to compel whatever disclosures it likes, without any standards against which the need for disclosures may be measured.”
  • The rule attempts to adopt a measure that Congress has previously declined to enact – “In the Clean Power Plan case, the court pointed out that Congress ‘consistently rejected’ revisions to the Clean Air Act to require a cap-and-trade scheme, yet the EPA went ahead with one anyway. The SEC has taken the same approach in its proposed rules. Congress has already once rejected legislation that would have directed the commission to adopt new climate disclosure requirements. The SEC is plunging ahead anyway.”

Read the full Wall Street Journal op-ed HERE.

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