SEC’s Climate Disclosure Rules: A Threat to Economic Growth and Energy Security
In March 2024, the Security and Exchange Commission adopted new climate disclosure rules. These rules require major U.S. corporations to report their carbon footprint and risks to their business caused by climate change, but the rules are misguided and dangerous to our economy.
Over the past several years, sustainability advocacy groups have pushed major American companies to focus on more than just profits. The Environmental, Social, and Governance movement, or ESG for short, is based on the idea businesses should be run for the good of society and the planet in addition to making money. For most companies, the highest ESG priority has been climate change.
Up until now, these ESG initiatives have been driven by the company and its shareholders, but the new SEC rules insert the government into that conversation. The SEC is a financial regulator with the mission of keeping America’s investment markets fair, fighting fraud, and properly informing investors, so they can make smart decisions. But here’s the problem: the SEC’s new regulations draw a connection between a company’s environmental impact and its financial condition, but there’s no evidence this is true.
These rules are meant to inform investors. But, rather than simply informing, they also push companies to adopt clean energy practices with the expectation fewer people will invest in high-emitting sectors, like oil, gas, and coal, and less investment will lead to less production over time. Additionally, the SEC requires these companies to disclose all climate-related risks, including risks from extreme weather and those related to a company’s shift from fossil fuels to low-emission energy.
But let’s be honest—these rules are about putting pressure on companies that rely on oil, gas, and coal.
Despite all the talk about clean energy, our economy still runs on fossil fuels. In 2022, the energy sector was the top performing industry in the US market. Even with all the focus on ESG, the market hasn’t made a major shift toward clean energy. That’s because, like it or not, we still need oil, gas, and coal to keep things running.
The SEC’s new rules are their tool to accelerate the change. The SEC’s rules will punish fossil fuel companies by making firms report every detail of their carbon emissions and climate risks. And their ultimate goal isn’t hard to see: cutting off access to investment and making it harder for them to operate. This isn’t just about reducing emissions—it’s about reshaping our entire economy, even if we aren’t ready.
Under the SEC’s rules, we can expect energy prices to rise, slowing economic growth and creating new risks in our financial markets. And the effects would hit more than just the energy companies. These changes could ripple through the entire economy, raising costs for everyone. Higher costs make it harder for all businesses to accomplish their main goal: growing by creating economic value.
The SEC is overstepping its role here. Its mission is to oversee financial markets, not to dictate energy policy. But these new rules are trying to do just that. They aim to force an energy transition that the market isn’t demanding, and the economy isn’t ready for.
The SEC’s climate disclosure rules were set to go into effect in May 2024, but energy companies and conservative policy groups are challenging them in court. So, in April, the SEC voluntarily suspended these rules until the courts decide.
As we think about the future, we have to ask: do we want an economy driven by unproven theories and heavy regulations or one driven by sound economics and market realities?
The SEC’s new climate rules are dangerous. They may sacrifice growth, energy security, and market stability for a false vision. The real risk isn’t climate change, but misguided policies pushed in its name.
Restricting capital to fossil fuel companies in the hopes of reducing carbon emissions is a bad economic policy. It’s a recipe for trouble, regardless how well-intentioned the rules were meant to be.