SEC scales back climate change disclosure rule

Business groups complained loud and long about a first-of-its-kind climate change disclosure rule that’s still in the works. The Biden administration clearly got the message.

The Securities and Exchange Commission (SEC) is reportedly axing a controversial “scope 3” emissions reporting requirement. Certain large, publicly traded corporations would’ve needed to calculate greenhouse gas emissions (carbon dioxide and methane) from its vendors all along its supply and production chains to the feds.

The Chamber of Commerce, American Farm Bureau Association, and many state and congressional republican lawmakers fought the measure as it would significantly raise both clean air compliance and recordkeeping costs. SEC chairman Gary Gensler admitted that the commission would likely scale back the rule due to industry groups’ concerns.

According to Politico, the SEC is also “likely to ease proposed reporting requirements related to emissions generated directly from a company’s operations as well as its energy usage, known as scopes 1 [direct emissions from company-owned facility smokestacks, equipment and vehicle tailpipes] and 2 [indirect emissions associated with purchase of electricity, steam, heating or cooling].”

The SEC may also exempt some emissions from mandatory reporting if they’re not of material interest to investors. The exemption could be tied to a company’s size (income), industry sector and the scope category of emissions.

Race to get final rules across the finish line

There’s a chance the federal government shuts down on March 8. U.S. House and Senate lawmakers are far apart on funding agencies and a host of other important issues. A shutdown could last a few days to a week or so, according to some Capitol Hill watchers.

The SEC and other federal agencies are racing to issue final rules over the next two months. The Congressional Review Act allows a new Congress to scuttle regs that were finalized in the waning days of the previous Congress. President Trump and a GOP-controlled House and Senate scuttled several Obama regs in 2017. President Biden and the Democrat-run Congress returned the favor in 2021.

In addition to direct and indirect emissions, the SEC climate disclosure rule requires companies to disclose material risks posed by climate change to their businesses in their financial statements, physical risks to their businesses such as sea level rise and severe storms, any any risks associated with transitioning from fossil fuels to renewables.