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Legislation over Litigation
Recently Rick Boucher, who has served as a Member of the U.S. House of Representatives, wrote an op-ed for the Richmond Times-Dispatch (July 30, 2022). The op-ed starts as follows,
Climate change is a global existential threat. It’s a byproduct of a modern society and presents a global societal challenge. Urgent government action is required to limit greenhouse gas emissions, but as important as acting quickly is acting correctly.
The proper way to achieve a comprehensive, durable and effective policy is for Congress to pass legislation. Given the global nature of the challenge, state by state policymaking or litigation simply is not an option. It inevitably would create a patchwork of laws and court rulings that make compliance unnecessarily costly if not impossible.
I sent the following email to Mr. Boucher:
I read your recent op-ed in the Richmond Times-Dispatch To combat climate change, pursue legislation over litigation with interest.
Currently, the Securities and Exchange Commission (SEC) is proposing a Climate-disclosure rule that would have a nation-wide impact. This is not as good as Congressional action, but it is a start. I am currently writing a book The SEC Climate Rule that describes the background and scope of the proposed rule.
In your op-ed you say that legislation is preferable to litigation. I agree, but I think that it goes further than that. The SEC rule, or its equivalent from Congress, offers the following benefits.
It provides a consistent format and structure for all companies to use. This will save time and money, and it will become much easier for investors to compare businesses with one another.
Currently, a small number of companies prepare voluntary reports, but this means that they bear an extra expense compared to their competitors.
The SEC draws heavily on guidance from the TCFD (Task Force on Climate-Related Financial Disclosures). This guidance is being used by a many regulators in other nations. Therefore, the SEC rule has international scope.
Note that the SEC rule in its present form require companies to (a) report on their greenhouse gas emissions, and (b) identify the risks they face due to climate change. The rule does not require that companies actually do anything. The rule assumes that companies will act in response to investor pressure.
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