Last week, Manhattan Institute policy analyst Jordan McGillis wrote an op-ed for The American Spectator, “SEC’s Proposed Climate-Change Rules Would Cripple Public Companies,” that discussed how the SEC’s proposed climate disclosure rule will negatively affect the energy sector.
McGillis explains this rule would add numerous new reporting requirements “including on companies’ direct emissions, e.g., from their own facilities and vehicles; their indirect emissions, e.g., those from on-grid power plants in their area; and, most expansively, emissions from upstream and downstream activities in their value chains, that is, the emissions from their suppliers and customers.” This addition of immaterial reporting standards will add enormous costs for companies and eventually trickle down to consumers, increasing costs for everyone.
The purported purpose for these additions is to better inform investors before they take action in investing in a company. But, McGillis notably calls out the addition of Scope 3 emissions data as an example of how the new rule won’t provide clarity, but instead positions not reliable “externalized costs” as something material. Unlike Scope 1 and 2 emission reports, which are already required in disclosures, Scope 3 emissions are a complex and extremely difficult measurement for most companies to collect. In fact, given the lack of consistency, control, and availability of the data, Scope 3 figures may not be accurate and could even be double counted since third parties will have to be brought in to perform the tests. This is just one example of why these additional rules further complicate the process.
McGillis thinks this is the real goal: “The manifest purpose of the emissions inclusion in the new SEC rule is not to protect investors, but to execute President Joe Biden’s “government-wide approach” to climate change and spur economy-wide decarbonization.”
McGillis hopes this apparent overreach by the SEC will be shot down, much like what happened with the recent Supreme Court ruling in the West Virginia v. EPA case. The SEC’s purpose is not to be a leading authority for climate policy.