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SEC’s Self-Inflicted Stay and Legal Battles Continue

SEC’s Self-Inflicted Stay and Legal Battles Continue

Tim Mohin & Andy Paterson
05 Apr

In an unprecedented move, late on Thursday, the SEC decided to stay their own rule while the litigation is settled to “avoid any regulatory uncertainty.”

Meanwhile, Liberty Energy, a Denver-based fracking company, was the first company to sue the SEC and has emerged as the most outspoken opponent of the climate rule. CEO Chris Wright has litigated other environmental rules in the past.

He is attempting to carve out a new position: While stipulating that the climate is warming and human-caused emissions are a cause, he claims it is not a crisis and has been overhyped. This LinkedIn video—which was temporarily removed for saying, “There is no climate crisis”—outlines his views.

Mr. Wright is trying to block the SEC’s climate rule because of regulatory overreach, claiming, “They’re just way out of their lane. Unfortunately, bigger governments and more overbearing governments hurt small upstarts and the dynamism of our marketplace. And I’m very opposed to that.”

The SEC Climate Rule, finalized on March 6 and litigated immediately by Liberty, was halted by the 5th Circuit Court. Since then, nine lawsuits (7 against the rule and 2 claiming it is too weak) have been filed, and two were consolidated in the 8th Circuit Court.

Notably, the stay on implementing the new rule was lifted when the cases were consolidated. Earlier in the week, the SEC fought to delay the rule, saying that Liberty “identified no imminent harm justifying such emergency relief” because the rule does not require disclosures from Liberty Energy until 2026. Now, in a stunning turnaround, the SEC decided to unilaterally pause the implementation of this rule while the litigation is ongoing.

You are forgiven if you find this tale confusing...it is. While no one knows the final outcome, suffice it to say, it’s an interesting and fast-moving story.

California Dreamin’

Late last year, California approved two laws (SB 253 and 261) that are more stringent than the SEC's climate regulation, given they apply to both public and private companies and require reporting of Scope 3 value chain emissions. Back in January, the US Chamber of Commerce and California business groups sued to block the new laws, arguing they violate the First Amendment because they would “compel speech.” Last week, the California State Attorney asked the court to throw out the cases because it was too early to know the burden since there were no rules for implementing the new laws.

As the litigation unfolds, recently leaked internal emails and documents revealed that the California Climate Laws were on the verge of being significantly diluted before being passed last year. In another twist, the Obama-appointed judge assigned to the California case, Fernando Olguin, recused himself because his wife is a climate consultant. The new judge, Otis Wright II, appointed by George W. Bush, will now preside over the case on June 20th.

The future of these policies is unknown, but expect a drawn-out process in both state and federal courts. Most firms are not waiting on the outcome and are beginning preparations for disclosure. Last week, my colleagues and I issued a summary of the SEC rule and five “no regrets” moves that companies can take now.

More Landmark Climate Cases

Joining US climate policy in the docket this week, Shell will appeal the landmark decision from a Dutch court, which requires them to reduce emissions by 45% by 2030 (from 2019 levels). Shell hopes to prove that the court went above their remit. Law Professor Klaas Hendrik Eller called this “the mother of all cases… which fuelled this idea of courts being an important actor in combating climate change.”

Other oil and gas companies are watching closely as the case will set a benchmark for judging fossil fuel companies' role in climate change.

An Australian court found that Vanguard Investments Australia was guilty of making false claims about one of its ESG funds, which still included fossil fuel interests despite its prospectus claiming otherwise. This is one of a series of greenwashing cases the Australian Securities & Investments Commission (ASIC) is considering. Penalties will be decided in August.

Engineering Climate Change

With mounting evidence of climate change, scientists and policymakers are ‘warming’ to the idea of engineered solutions. Technologies that were once thought of as too expensive, unproven, and an excuse for the fossil fuel industry are getting a fresh look.

Direct Air Capture (DAC), where carbon dioxide is pulled out of the air, is now considered a legitimate answer to climate change. For example, Occidental paid $1.1 billion for a start-up called Carbon Engineering that had developed a way to soak up carbon dioxide from the air, and began building 100 facilities, each capable of capturing one million metric tons of carbon dioxide a year. This was funded in part by $1.2 billion the Biden administration awarded to direct air capture projects.

Researchers are also adding iron to the oceans to see if it will trap carbon dioxide on the seafloor and considering giant space parasols to block the sun. Former Vice President Al Gore said, “People have woken up and are looking to see if there’s any miraculous deus ex machina that can help.”

They also tested a new aerosol canon in California, which will create shiny clouds and reflect the sun's rays. The NYT article ominously concludes: “If the current extreme weather and temperature rise came about inadvertently, as the unintentional consequence of human development, what might happen when we begin actively trying to control the planet’s atmosphere?”

EU’s “Bad” Nature Restoration Law Fails

After last week’s surprise postponement of the EU’s Nature Restoration Law, Belgian Prime Minister Alexander De Croo said it “may sound good, but it is a bad law” and needs to be revised after the June elections.

These comments from a Belgian leader who currently holds the rotating EU Presidency drew consternation from some, including one environment minister, Alain Maron, who said De Croo’s comments were “unworthy of a President of the Council.”

Despite Belgian and other member states’ objections to the bill, many are still blaming German politics for the recent spate of last-minute withdrawals of support for environmental bills.

Farmers Reshape the EU Green Deal

Angry farmers have had a huge impact on EU policymakers in Brussels, with the scaling back of the Due Diligence Directive, the postponement of the Nature Restoration Law, a scrapped pesticide ban, and a limit to Ukrainian grain imports.

The backlash has taken a toll on the EU climate goals — instead of meeting its 55% emissions reduction target by 2030, 48% is more likely. As every new green policy becomes a political flashpoint, politicians are holding back until after the June elections.

This backlash has flipped political fortunes from the 2019 EU elections when Greta Thunberg was Time’s Person of the Year, and the Greens won a substantial number of European Parliament seats. Far-right parties claim to be the flag bearers of the farming sector and are predicted to win votes based on that. "The elections in 2024 will be elections in the year of angry farmers," said Franc Bogovic, a Slovenian farmer and MEP.

The views expressed on this website/weblog are mine alone and do not necessarily reflect the views of my employer.

Other Notable News:

My company, BCG, has been selected to help the European Financial Reporting Action Group (EFRAG) conduct a market study on “Emerging European Sustainability Reporting Standards Market Practices.”
To help better navigate the complex 1,000 metrics within the European Sustainability Reporting Standards, AI sustainability company, the Palau Project, has created this ESRS Navigator to tell companies what data to report and what steps to implement.
Want a crash course in climate science, risks, and solutions? This tremendous resource from MIT Atmospheric scientist Dr. Kerry Emanuel will introduce you to all of the important aspects of climate science.
US Treasury Secretary Janet Yellen went after China’s ‘overproduction’ of clean energy. Saying that flooding global markets with cheap solar, EVs, and batteries impacts global prices, employment, and production patterns.
What if governments could just charge companies for their carbon emissions? That is the idea of “climate superfunds.” Four US states currently have one, and the EU wants to do it too. It’s estimated that hundreds of millions of dollars could be put into state coffers or that it could make $500 billion if it were done on a federal level.
Biden’s oil boom. This article shows how, despite having a robust climate agenda, the US became the world’s biggest producer and exporter of fossil fuels under the Biden administration, to the anger of those both on the left and right of him.

Notable Podcasts:

In this week’s episode of Outrage and Optimism, hosts Christiana Figueres, Tom Rivett-Carnac, and Paul Dickinson were joined by Oxford Researcher Hannah Ritchie to discuss Hannah’s new book, “Not the End of the World, How We Can Be the First Generation to Build a Sustainable Planet.” Together, they touch on topics including cautious optimism and doomerism.
In this week’s edition of the BBC’s The Climate Question, the hosts talk to Tanzanian safari guide Neema Amos and shark expert Trisha Atwood. Together, they discuss how climate change is impacting some of the most important animal migrations, how climate change is impacting them, and the knock-on effects.

Notable Job Opportunities:

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