Alarmists Use Calif. To Mandate Nationwide ‘Death By Disclosure’ Scheme

California has long been a handy backup for activists seeking to implement progressive policies when these fail federally.

Last Wednesday, as Securities and Exchange Commission (SEC) chairman Gary Gensler [pictured] took heat from Congress for the commission’s long-delayed climate disclosure rule, California’s own climate disclosure regime took center stage. [emphasis, links added]

During congressional testimony, Gensler suggested that the SEC may lean on California to prop up its controversial climate disclosure proposal, arguing that if California’s climate disclosure legislation is signed into law, it would reduce the cost of compliance for companies reporting climate disclosure to the SEC.

Gensler said that if companies are already “reporting to California, then it would be, in essence, less costly because they’d already be producing that information.”

The SEC’s pivot to California for air cover is taken from a familiar playbook: With the support of federal lawmakers, California crafts burdensome regulation and exports it across the country, either by manipulating its market power or abusing legal loopholes.

California recently deployed similar tactics to reshape national vehicle emissions standards by using its Clean Air Act waiver to ban new sales of gas-fueled vehicles in the state after 2035, allowing only narrowly defined hybrids and electric vehicles.

Lawmakers such as Representatives Doug LaMalfa (R., Calif.) and Jay Obernolte (R., Calif.) described the move as an abuse of the state’s waiver authority and market power, cautioning that California’s mandate can quickly and undemocratically become national policy.

To access California’s gargantuan market, companies would aim to meet California’s standards in their products sold nationwide, regardless of laws set by the federal government and how those standards change under different administrations.

California’s climate disclosure laws are on a similar track. While the SEC struggles to finalize its proposed climate disclosure rule, California lawmakers are one step away from completing the state’s disclosure laws, which would have extraterritorial impacts similar to California’s emissions standards.

The legislation’s broad reach is the point for the activists pushing climate disclosure.

Environmental activists aren’t fighting for a lawful, federal standard that would simply inform investors of material risks, per the SEC’s mission; instead, they want comparable and public climate disclosures to name and shame investors and companies for their greenhouse gas emissions.

During the rulemaking process, Chairman Gensler said that the focus of rulemaking is on investment risk, and supporters echoed this message.

However, when celebrating California’s sweeping legislation, the same climate disclosure proponents show their hand, praising the state’s “commitment to addressing climate change holistically” through “corporate accountability.”

Until recently, California’s proposed disclosure laws have mostly flown under the radar, although they are even more aggressive in scope than the SEC’s climate proposal.

This month, Governor Newsom is set to sign into law a pair of bills that would impose an unprecedented regulatory burden on more than 10,000 private and public businesses operating in the state by requiring the disclosure of companies’ Scope 1, 2, and 3 greenhouse gas emissions.

While Scopes 1 and 2 deal with direct greenhouse gas emissions and indirect emissions from purchased electricity, respectively, Scope 3 emissions encompass all emissions up and down a company’s supply chain.

By nature, Scope 3 reporting would require companies to estimate or track emissions data from actors far outside the SEC’s mandate but covered by California’s proposed legislation, including private companies.

Since many affected companies have national or even global operations, the impact wouldn’t be confined to California’s borders. Like the state’s EV mandate, California’s costly climate disclosure proposal could become a de facto national policy for businesses and investors.

Ultimately, California’s proposed disclosure laws would impose costly burdens on producers and jack up consumer prices in every state — all in the name of satisfying Californians’ desire to know how much carbon the companies doing business in the state emit, let alone do anything about it.

As Gensler’s testimony and recent comments have indicated, it’s no accident that California’s proposed disclosure laws are set up to backstop the SEC’s proposed rule and fill in gaps, such as Scope 3 disclosures, where the federal proposal might be weak or vulnerable to litigation.

According to the recently passed S.B. 253, Scope 3 reporting includes emissions disclosures from “sources that the reporting entity does not own or directly control” and may include emissions from “purchased goods and services, business travel, employee commutes, and processing and use of sold products.”

Unsurprisingly, the same anti-fossil-fuel activists are pulling the strings behind both climate-disclosure proposals.

Ceres, a nonprofit “working with the most influential capital market leaders to solve the world’s greatest sustainability challenges,” has long been working on a “death by disclosure” scheme aimed at starving the traditional American energy industry of capital and has been behind the push for climate disclosures in California and in Washington, D.C., from the very beginning.

According to a report recently released by Consumers’ Research, Ceres has lobbied the SEC on climate disclosure since at least 2010 and played a disproportionate role in shaping the commission’s current climate-disclosure proposal.

Ceres also colluded with its various coalitions, including the activist-investor network Climate Action 100+, to force climate disclosure into the market through shareholder resolutions.

Ceres has been cited as the “source” of California’s climate disclosure legislation, and accordingly, the group has been quick to drum up support for the bill and applaud its progression through the state senate.

But despite their best efforts, activists know that SEC’s climate rule as it currently stands is on shaky legal ground, particularly regarding cost-of-compliance concerns.

Even the commission’s chairman has admitted that reliable data on Scope 3 emissions is not “well developed” and that the “economic baseline” may need to shift.

That’s why Ceres and its allies have turned to California — the country’s largest state economy — as a fallback.

Read rest at NRO