Thursday, August 15, 2019

Advocacy group claims registrants mislead in connection climate-related disclosures

By Brad Rosen, J.D.

The Energy and Environmental Legal Institute (EELI), a 501(c)(3) advocacy group based in McLean, Virginia, is urging the SEC to issue new climate guidance to registrants with regard the manner climate-related undertakings and progress are reported and described. The submission, which is referenced as Petition for Action Regarding Misleading Climate Disclosures, makes the core argument that reductions in carbon emissions by a particular company, or even taking all U.S. companies in the aggregate, is not significant or meaningful in the context of overall worldwide carbon emissions. Accordingly, the EELI contends that the disclosure of any such emissions reductions would be incomplete and tantamount to engaging in fraud, absent providing information regarding overall global carbon emissions.

The Energy and Environment Legal Institute bills itself as championing “responsible and balanced environmentalism which seeks to conserve the nation’s natural resources while ensuring a stable and strong economy through energy dominance.” The organization’s website also states that “E&E Legal advocates responsible resource development, conservation, sound science, and a respect for property rights.”

Assertions regarding today’s climate change reality. A significant portion of the petition is devoted to what EELI characterizes as facts which are “not in dispute.” These include:
  • Manmade greenhouse gas emissions are presently about 53.5 billion tons (CO2-equivalent) annually;
  • Manmade greenhouse gas emissions are growing;
  • U.S. emissions are relatively insignificant and irrelevant to climate, according to UN models;
  • Even if the U.S. emissions were ZERO, the rest of the world’s emissions are way above the Kyoto Protocol’s goal (i.e., 46.5 billion tons vs 35 billion tons); and
  • Even if the U.S. stopped emitting today, the difference in atmospheric greenhouse gas concentrations and global temperature would not be meaningfully different from the U.S. not cutting emissions. 
The crux of the of the EELI’s argument, as reflected above, is that U.S. emissions, in the aggregate, are relatively insignificant and irrelevant to climate change. Accordingly, the petitioner asserts it goes without saying that emissions cuts by registrants are even more insignificant and irrelevant.

EELI contends registrants are making false and misleading claims about climate. Consistent with argumentation set forth above, EELI claims that a number of major corporations have made false and misleading disclosures in their public filings. Some of the examples cited in the petition include the following:
  • Apple, Inc. “In absence of any other information, Apple’s claimed reduction of 4.8 million tons of CO2 appears to be a significant cut in emissions. However, in the context of global CO2 emissions it is obviously insignificant and meaningless. Apple’s total carbon footprint of 25 million tons is similarly insignificant and meaningless. The statement, then, that Apple is “significantly reducing emissions to address climate change” is materially false and/or misleading.”
  • ExxonMobil Corporation. “So if there is a climate change problem caused by manmade CO2 emissions, ExxonMobil is only responsible for about 1 percent of it. If ExxonMobil magically stopped operating, about 99 percent of the supposed problem would still remain. It is doubtful that any climate model could discern the climatic difference between 53.5 BILLION tons of emissions and only 47.6 BILLION tons.”
  • Exelon. “Global CO2 emissions are at 53.5 BILLION tons. Exelon’s goal of reducing its CO2 emissions by 15 MILLION tons per year is miniscule and irrelevant in the context of global emissions. Exelon’s retirement of its coal plants is also irrelevant. While Exelon shutters a coal pant or two, China alone aims to build 500 new coal plants by 2030, as previously mentioned. Exelon states that its ‘clean energy solutions are working.” What does that mean? Exelon’s emissions may be decreasing, but global emissions are not. So precisely how are Exelon’s solutions ‘working’?” 
Action sought. In the petition, EELI requests that the SEC issue new climate guidance to registrants instructing them that, if they choose to talk about climate, they must do so honestly and with full disclosure with respect to the significance of their actions. According to EELI, this meant that if a registrant wants to report that it has cut its emissions by 25 MILLION tons, it should also be required to report that, in the context of a world where manmade emissions amount to 53.5 billion tons, the 25 million tons of emissions cuts amounts to 0.047 percent of global emissions.

As is the case with all petitions for rulemaking, EELI’s submission will be forwarded to the appropriate office or division of the SEC for consideration and recommendation. Following submission of the staff's recommendation to the Commission, EELI will be notified of any action taken by the SEC.