States Sue SEC for Requiring Companies to Disclose Emissions
WASHINGTON — Ten states sued the Securities and Exchange Commission this week over new rules requiring large companies to publicly disclose their greenhouse gas emissions.
The state attorneys general say the new rules place an unfair regulatory and financial burden on corporations.
The rules require large corporations to disclose to the SEC and investors their energy use and the emissions they generate during business operations.
They are supposed to help investors decide whether corporations are likely to be harmed by climate change in a way that impairs their growth and finances.
They also would give more complete information to investors concerned about a corporation’s environmental policies.
Other parts of the rules require companies to report their climate-related risks, such as higher insurance rates from weather disasters. Moreover, they must disclose their transition plan to adapt to climate science recommendations and their losses from severe weather events.
Enforcement of the rules will begin next year. The entire regulatory scheme is scheduled to be phased in over the next decade.
The attorneys general filed their lawsuit in the Atlanta, Georgia-based 11th U.S. Circuit Court of Appeals hours after the SEC voted to approve the plan.
West Virginia Attorney General Patrick Morrisey, who is a leader of the 10-state coalition, said during a press conference that the rules are “wildly in defect, and illegal and unconstitutional.”
The SEC has no authority under federal law to move into environmental regulation, he said.
“Congress only wanted the SEC to focus on financial regulation,” Morrisey said.
He questioned the effectiveness of the rules in controlling pollution.
“How is a company supposed to know whether greenhouse gas is going to affect their business,” he asked.
The attorneys’ general lawsuit asked the court to vacate the SEC rules, saying they “will show that the final rule exceeds the agency’s statutory authority and otherwise is arbitrary, capricious, an abuse of discretion and not in accordance with law.”
The SEC rules advance President Joe Biden’s pledge to be the first climate-oriented president, which he repeated during his State of the Union address Thursday evening.
Biden said his administration is “making history by confronting the climate crisis, not denying it,” as he listed some of his climate-friendly accomplishments. “I’m taking the most significant action on climate ever in the history of the world,” he said.
The SEC rules also represent a pull-back from the original proposal the agency considered, similar to Biden’s withdrawal from his most ambitious goals for electric vehicles and cutting U.S. greenhouse gas emissions in half by 2030.
The SEC initially planned to require large corporations to disclose both their own emissions as well as emissions from all the contractors in their supply chain.
Industry groups and Republican lawmakers put up stiff opposition, saying the regulatory burden would be extreme and impractical. The supply chain could have included family farmers who sell agricultural products to corporations.
Corporate executives said they would have been forced to reveal proprietary information they need to keep confidential to make their business plans succeed.
As the complaints surged, the SEC scaled back its rule by ordering corporations to disclose only their own emissions and energy use.
The case is State of West Virginia et al. v. U.S. Securities and Exchange Commission.
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