July 1, 2022 - ESG and Climate News

SCOTUS Turns Back the Clock

The US Supreme Court issued a ruling curtailing the Environmental Protection Agency’s authority to regulate greenhouse gas emissions. In its opinion on West Virginia v. EPA, the Court sided 6-3 with the state of West Virginia, stating that the EPA overstepped its jurisdiction in attempting to regulate power plant pollution.??

As the world’s largest economy and second largest carbon emitter, the US ruling sent shock waves through the global movement to avoid the worst effects of climate change. It also casts doubt on the United States’ 2050 carbon neutrality goal by restricting the federal government’s ability to regulate greenhouse gas (GHG) emissions.

The case pitted Attorneys General from conservative states against the federal government over their authority to regulate GHG emissions from power plants, the second-largest source of emissions. The conservative court sided with the AGs in their contention that the EPA exceeded its authority under the Clean Air Act to advance the Obama-era Clean Power Plan regulation. Chief Justice John Roberts writing for the 6-3 majority regarding cap and trade schemes stated that “it is not plausible that Congress gave EPA the authority to adopt on its own such a regulatory scheme.”

Underpinning this case is a “very weird” situation in which the subject of the case is a regulation that no longer exists. The Clean Power Plan was an Obama-era clean energy regulation nixed by Trump. Nevertheless, the conservative states argued - and won - that the mere threat of federal restrictions on greenhouse gasses from power plants outstripped the EPA’s authority of the Clean Air Act.?The fact that the court took up the case in the absence of a final rule and issued this decision is another strong indication that this will be an activist court looking to put a conservative stamp on many facets of US policy.

The ruling represents an application of what some have termed the “major questions” doctrine,?where – in the Opinion’s wording:?

?“...‘extraordinary cases’ that call for a different approach – cases in which the ‘history and?the breadth of the authority that [the agency] has asserted’, and the ‘economic and political?significance’ of that assertion, provide a ‘reason to hesitate before concluding that Congress’?meant to confer such authority...”

The Daily - A New York Times podcast - walks through the GOP plan to limit the regulatory power of what conservative activists call the “administrative state” - the creation of regulations that reflect the executive branch's agenda rather than the will of Congress. While the case was fought over the defunct Clean Power Plan, this ruling opens the door to dismantling significant regulations from other federal agencies - potentially including the SEC’s proposed climate disclosure rule.

Roe v. Wade Overturned

West Virginia v. EPA wasn’t the only ruling in which the Court reversed decades of precedent. Unless you were off the grid, by now everyone knows that the Supreme Court overturned Roe v. Wade, reversing nearly 50 years of legal precedent which provided American women the constitutional right to an abortion. In the decision, SCOTUS argued that “The Constitution does not confer a right to abortion…and the authority to regulate abortion is returned to the people and their elected representatives."

This decision has unleashed chaos in the states as authorities and ordinary citizens struggle to interpret the new landscape. When the draft decision was leaked in May, companies announced policies to fund out-of-state travel for banned procedures. Now that the decision is final, a slew of companies have joined the movement including Meta, Disney, Dick’s Sporting Goods, and Condé Nast, while many other companies remain silent on the topic.?

A few companies have spoken out on the decision - A Salesforce spokesperson stated “We will continue to offer our longstanding travel and relocation benefits to ensure employees and their families have access to critical health care services.” Lyft took its public commitments a step further, saying, “We will also continue to stand behind drivers, reimbursing legal expenses if any driver is sued under state law for providing transportation on our platform to a clinic.”

The most conservative court in decades may not be done reversing long-standing precedent: In Supreme Court Justice Clarence Thomas’ opinion, he indicated that after Roe v. Wade the court should revisit other social issues, writing, “In future cases, we should reconsider all of this Court’s substantive precedents, including Griswold, Lawrence, and Obergefell,” cases which provided Americans with rights to contraception, same-sex relationships, and same-sex marriages.

Biden in A Bind

President Biden has appeared powerless in the face of the court's rulings on abortion and climate action. With tensions running high across the US, the President called for an end to the filibuster rules that prevent votes on abortion rights.

“We have to codify Roe v. Wade in the law, and the way to do that is to make sure the Congress votes to do that,” Mr. Biden said. “And if the filibuster gets in the way, it’s like voting rights, we provide an exception for this, or an exception to the filibuster for this action.” Notably, Mr. Biden does not have the votes in his own party to set aside the Senate rules, much less bring right-leaning democratic Senators to vote for abortion or voting rights.?

Biden’s Health Secretary Xavier Becerra has said this week that when it comes to preserving abortion access, “There is no magic bullet, but if there is something we can do, we will find it and we will do it.” Unwilling to concede, Congresswoman Alexandria Ocasio-Cortez has floated several actions the President and Democratic leadership could take to combat the court’s ruling, including establishing clinics on federal lands.?

G7’s “Climate Club”

While the US is seemingly going backward on the climate agenda at home, progress is being made internationally despite the current energy crisis. The Group of Seven (G7) wealthy countries met in Germany to discuss (among other matters) how to starve Putin of oil revenues while staying on track with their climate goals.?

The G7 agreed to two landmark climate deals: They created the “climate club” as a way to coordinate decarbonization efforts, and they established a $600 billion fund to support climate resilience in developing countries.

Can’t See the Forest Through the Trees

In the eight months since the Glasgow climate meeting, a study found a lack of progress on deforestation goals. More than 90% of major forest, land and agriculture companies that have committed to net-zero climate goals are at risk of missing their targets because of a lack of progress on tropical deforestation, which is central to carbon emissions from these sectors. Of the 148 companies in the study, only nine were found to be making strong progress toward stopping deforestation. UN high-level climate action champion Nigel Topping said, “This research is a wake-up call. Companies need to go further and faster on tackling deforestation in their supply chains.”??

The CEOs of Nestle and Unilever, two of the nine companies making strong progress halting deforestation, condemned the lack of progress and offered four steps for companies to improve.

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Notable news of the week:

• Japan’s current heat wave is causing a power shortage in Tokyo as people turn up the air conditioning. This year’s rainy season, which usually provides cooler temps, was cut historically short.
• The Biden administration is waffling on a ban of offshore oil & gas drilling over worries this could exacerbate energy prices. Interior Secretary Deb Haalland promised Congress a draft plan by June 30.?
• A tiny bit of optimism this week came in the form of an unpublished study by economist Trisha Shrum which found that helping the environment gives people a warm, happy feeling similar to the feeling of helping people directly.
• ESG Today covered my employer Persefoni’s launch of Climate Trajectory Modeling (CTM) and Climate Impact Benchmarking (CIB) modules, which will allow companies to track their progress towards their climate goals and measure progress against peers.
• New machine learning models that take into account biogeochemical processes and ice dynamics allow for much more accurate climate simulations. However, there is still a lot of work to be done to build these models at scale for a more precise global climate forecast.

Notable podcasts:

• In this week’s episode of Sustainability Decoded with Tim and Caitlin, we interview the Founder of the Carbon Disclosure Project (Now CDP), Paul Dickinson. CDP is a non-profit that collects voluntary disclosures from companies on climate change, water security, and deforestation; 13,000 companies now report through CDP. We discuss the future of sustainability, new ESG reporting regulations, and optimism in the face of climate change.

• In the most recent edition of the Origins Podcast with Lawrence Krauss, Michael Shellenberger, author of Apocalypse Never, critiques the way environmentalists approach the climate change issue. While there are some heated debates, they did come to a few insightful agreements, which made for a very interesting conversation.?

Notable events:

• My colleague Kristina Wyatt will be speaking at the 7th annual Environment+Energy Leader Solutions Summit 2022 on July 19th. You can sign up to attend this free virtual event here.?
• I will be speaking along with members of Persefoni’s Sustainability Advisory Board at this year's Oxford Sustainable Finance Summit July 20 - 21. The summit brings together leading researchers from Oxford with practitioners, policymakers, regulators, and civil society organizations to examine the latest developments and trends in sustainable finance and investment. You can register for the event here.