We’re expanding our core capabilities and evolving new ways to partner with you. Make sure you follow us at… https://t.co/g1VkE0UlKB
Biden administration aims to finalize key climate rules before mid-term elections
The Biden administration is looking to finalize a suite of rules that would cement its climate agenda before mid-term elections in November.
Recognizing the need to act on climate change, President Joe Biden upon taking office in January 2021 pledged an all-of-government approach to tackling climate change.
Following through on that pledge, the US government released a regulatory agenda on 21 June that eyes issuing some key rules by October to tackle the threat of climate pollution and associated risks posed to the financial sector.
These include capping methane leaks at oil and natural gas facilities; requiring publicly traded companies to disclose climate-related risks; and naming funds—particularly those considering environmental, social and government (ESG) factors—to reflect their investment focus.
An indicator of priorities
The federal regulatory agenda is a good indicator of the administration's priorities as well as when federal rules will be issued, though more often than not the timelines slip by a month or two unless they are mandated by courts.
In November, all 435 seats in the US House of Representatives are up for reelection as are 34 seats in the 100-member US Senate, where the Democrats and Republicans are tied. Currently, Biden's Democratic party holds the majority in the House. However, political pundits, such as Cook's Political Report with Amy Walter, are tipping their hat in favor of a Republican takeover come November.
Republican lawmakers on Capitol Hill have repeatedly questioned the need for the US Securities and Exchange Commission (SEC) to get into the business of tackling climate change, which they see as an environmental issue. They also have taken on the administration for regulations on the oil and gas industry when prices for both commodities are skyrocketing.
Climate crisis is driving agenda
While the regulatory agenda will be driven by the federal government, a Republican-dominated Congress, which controls the purse strings, could erect potential roadblocks by withholding funds.
However, Amit Narang, regulatory affairs advocate for the nonprofit Public Citizen, is not persuaded that the Biden administration's regulatory agenda is driven by the elections.
"The timing is pushed by the urgency of the Biden administration to take action on climate change rather than political considerations about how the upcoming elections will play out," Narang told Net-Zero Business Daily by S&P Global Commodity Insights.
In fact, Narang said, "I am glad the agencies are projecting they will move efficiently. Usually regulations take much longer, so this is a good sign."
Methane rules are coming
During the UN COP26 conference last November, the US Environmental Protection Agency (EPA) proposed regulations to cap methane emissions leaks from new, modified, and existing oil and gas production, extraction, and processing facilities.
The oil and gas industry remains the largest industrial source in the US for methane, which is at least 80 times more potent a GHG than CO2. This sector was responsible for about 197 million metric tons (mt) of emissions in 2019, according to EPA.
EPA said its rule for the first time would extend methane reductions to an estimated 300,000 existing oil and gas wells and processing equipment. The prior rules covered only new and modified sources.
Once in place, EPA said the rule would reduce 41 million mt of methane emissions from 2023 to 2035, the equivalent of 920 million mt of CO2. By 2030, EPA argues this rule would reduce methane emissions from sources covered in the proposal by 74% compared with 2005 levels. And it would help the country move towards Biden's goal of halving GHG emissions from 2005 levels by 2030. The rule also would contribute to the US share of meeting the Global Methane Pledge, which the EU and US jointly launched in November, to reduce 30% of worldwide methane emissions by 2030. Now, this pledge includes 113 countries representing half the world's methane emissions.
Power plant regulation in a holding pattern
EPA also indicated plans to issue Clean Air Act regulations to cap GHGs emitted by fossil fuel-powered plants by March 2023.
The shape these GHG regulations take will be formed by the US Supreme Court, which is expected any day to rule on EPA's regulatory reach to curb GHGs from the power sector.
The case against EPA's regulatory power was brought by a West Virginia-led coalition of states and coal companies, but not the power sector. During oral arguments in late February, the state-led coalition argued EPA has given itself "unfettered access" to promote GHG reduction approaches that would encourage the power sector to switch away from coal-fired generation, the mainstay in states like West Virginia and Wyoming, where mines are located, to relatively cleaner-burning gas or renewables to meet reduction targets.
Investor protection against climate risk
Like EPA, the SEC, which is charged with enforcing laws to prevent market manipulation, is expected to finalize by October a regulation that will require publicly listed companies for the first time to disclose their strategy, governance, and risk management with respect to climate-related risks. Issued in late March, the proposal was demanded by investors who are concerned the poor quality of climate risk reporting doesn't allow them to allocate capital properly to clean energy projects. The SEC took comments on this proposal until 20 June.
SEC pushing for greater disclosure
Also on tap for October for the SEC agenda is finalizing one of two regulations that it proposed in late May to crack down on greenwashing claims. This includes the names rule, which will require funds to match the names with 80% of their investments and will supplement the proposal requiring enhanced disclosure from funds that have an ESG focus or are factoring ESG into their investment decisions.
Owing to heightened awareness of climate risks posed to the financial sector by its exposure to fossil fuel investments and climate-fueled disasters like property damage caused by wildfires and hurricanes, and calls for accountability from shareholders, the SEC said it would revisit the regulations governing shareholder resolutions known as 14a-8 also in October. The 14a-8 rule, which was revised in September 2020 under the Trump administration, limited the ability of shareholders to file resolutions by establishing "filing thresholds, re-submission thresholds, and representation. It is currently under litigation.
SEC Commissioner Hester Peirce, who former President Donald Trump appointed in 2018, criticized the SEC for following an agenda that will roil markets. She has voted against the SEC's adoption of the climate and ESG disclosure proposals, and has made her distaste known for turning the SEC into the "Securities and Environment Commission."
"We used to focus on companies' disclosure of economically material information; we now focus on disclosure of hot-button matters outside our remit," she said in a 22 June statement.
This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.
- Canada eyes methane regulations for oil and gas sector as early as 2023
- US Supreme Court ruling may pave way for cofiring, CCS at coal-fired power plants
- US Supreme Court curtails federal authority to limit power plant GHGs through fuel switching
- Energy Charter Treaty “modernized” to reflect low-carbon transition needs after two years of talks
- Record-high prices forecast across global carbon markets, and still room for more
- Filipino president’s nuclear revival plan faces regulatory, technical, financial hurdles
- Net-zero pledges reveal Global South-North divide in climate commitments: research
- Canada targets municipal landfills with GHG offset program