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The SEC is turning up the climate disclosure heat

Protocol Climate

Good morning,and welcome to the second week of Protocol’s climate newsletter! We’re very happy to have you. Today, we’re taking a close look at the SEC’s new climate rules and what they mean for the tech industry. Also: why you shouldn’t pin all your hopes on seaweed. (Sorry, seaweed lovers!)

New SEC climate rules just dropped

It might soon get easier for investors to separate the wheat from the corporate climate pledge chaff. On Monday, the Securities and Exchange Commission released its proposed climate rules, which would create a framework to govern how publicly traded companies report their emissions and climate pledges. Is it a step in the right direction? Yes. Is it long overdue? Also yes.

This is all about accountability. As Brian so eloquently demystified last week, a company’s climate pledge is only as good as its accountability mechanism, which leads us to the question: Will the proposed SEC rules push these companies to improve how they carry out their plans, in the interest of both investors and the public at large?

  • Short answer: Maybe! If the rules are finalized in something close to their current form, they will require companies to detail how they plan to meet their pledges, as well as to disclose how much progress they have made each fiscal year. The goal is a uniform process for climate reporting, which would in theory allow investors to compare companies in an apples-to-apples fashion.
  • “The SEC would have been remiss to pretend that there is no climate risk, and that investors don't want to know about the impacts of climate risks on their investments,” Tracey Lewis, policy counsel for the climate program at the think tank and advocacy organization Public Citizen, told Protocol.

There’s potential for this to be very revealing. Though, to be fair, the word “potential” is doing quite a lot of work. The rules would require companies to report Scope 3 emissions — those from their manufacturers and customers using their products — only if those emissions are already included in their climate plans, or are deemed “material” to investors. (For context, the vast majority of emissions for most companies fall under Scope 3.)

  • What constitutes “material” has been a matter of fierce debate. Given that Exxon’s business is predominantly oil and gas, its Scope 3 emissions tied to people driving around certainly seem material. But what about Microsoft’s Xbox customers plugging in their machines around the world?
  • Even now, stakeholders say more clarity is needed around the phrase, but it would be very difficult for many major emitters to avoid disclosing their Scope 3 emissions to the SEC, given the demands of shareholders.

But what if companies fail in their purported climate goals? While the rules’ widespread implementation is still a few years out, they could eventually turn the SEC into one of the country’s main enforcers of climate disclosures.

  • Lewis said that she assumes the SEC would rely on the enforcement mechanisms it uses in any other regulatory context.
  • While existing SEC investigations of inadequate disclosures typically start with a letter asking for more details, the agency also has other tools. These include fines for companies and individual officers; suspension of offerings; shutting down funds; or even prosecution in civil courts.

Part of the tech sector seems to dig the idea. While there has been some pushback on the rules so far from both conservative policymakers (no surprises here) and certain business groups (cough, cough, oil lobbyists), the tech sector generally appears happy.

  • In June, seven major tech companies submitted a letter in response to the SEC’s request for information on climate change disclosure, which gave the then-fledgling efforts a thumbs-up. “We believe that it is critical to regularly measure and report on our progress towards our climate commitments and to share updates with investors and other stakeholders,” the companies wrote at the time.
  • The group — Alphabet, Amazon, Autodesk, eBay, Facebook (now Meta), Intel and Salesforce — included some notes for the SEC. Those notes were mostly about standardization across existing frameworks, both for the sake of consistency and — let’s be honest — to save some paperwork and legal wrangling.

But the approval comes with a caveat. My eye was drawn to one sentence buried in the final paragraph of the Big Tech letter, which raises questions about enforceability.

  • “Given that climate disclosures rely on estimates and assumptions that involve inherent uncertainty, it is important not to subject companies to undue liability, including from private parties,” the group wrote.
  • Translation: Tech companies were angling for neither the SEC nor private parties to be able to sue them over their emissions disclosures. That’s partly because those disclosures are based on data the companies are characterizing as potentially unreliable.
  • Sadly for them, this does not appear to be a door that the SEC has left cracked.

The letter-writing group by no means represents the whole tech sector. But its members are big fish. Their qualified support reflects the increasing ubiquity of climate pledges across the industry, and the fact that the sector is willing to make those pledges central to regulatory dealings.

Now, to wait and see if and when the proposed rule gets implemented, and whether tech companies stay the course enthusiasm-wise. The comment period lasts 60 days. You can bet we’ll be watching for what, if anything, Big Tech has to say.

— Lisa Martine Jenkins (email | twitter)

Seaweed probably won’t save us 🌊

Carbon dioxide removal doesn’t have to be all shiny chrome or whatever they make fancy machines out of these days. It can be as humble as seaweed.

A handful of companies have arisen to capture carbon with kelp and then either sink it into the deep sea or turn it into products we can use, including Running Tide, which Stripe bought carbon removal services from in May 2021. (A deal with Stripe is considered a gold star in CDR land.) The National Academies of Sciences also explored seaweed as a potential way to suck carbon from the atmosphere in a report last year.

But a new preprint paper from climate solutions research group CarbonPlan throws a little, ahem, cold water on the idea. Researchers modeled the costs of seaweed-based CDR all across the high seas and found that growing seaweed and sinking it could cost far more than the $100 per ton that’s considered the price point for CDR to be viable economically. The scientists also noted that the assumptions in their model mean that “scaling up these approaches in practice would be even more challenging.” Eep.

To get gigaton levels of carbon removal — in other words, functional at a scale that matters for protecting the climate — would also require a massive expansion of seaweed farming. If we want seaweed to save us this decade, the area farmed for growing and sinking seaweed would have to expand more than 60% per year. Double eep.

A single preprint paper doesn’t mean we should write off seaweed, of course. But it is a reminder the world needs to be thinking smart about what kinds of CDR tech it invests in and not to put all the seaweed-wrapped eggs in one basket.

— Brian Kahn (email | twitter)


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One big number: How to save 2.7 million barrels of oil

I would like us to stop using fossil fuels for the climate’s sake. But there’s another reason: doing would be a dropkick to the face of Russia and its unprovoked war against Ukraine that has sent oil and gas prices spiraling to wild highs. To help cope with rising prices and make up for the 2.5-million-barrels-per-day hole in the global energy market due to Russian oil and gas bans, the International Energy Agency has come up with 10 helpful steps that OECD countries can take to mind the gap.

Lisa already highlighted an all-too-familiar one: working from home a few days a week. But I also want us to step back and consider the other options. Like seaweed, some of these are decidedly low-tech, from making public transit cheaper to encouraging rideshares to using high-speed rail instead of flying. But then, that in itself is interesting to me! According to the IEA document, we literally already have the tools to reduce oil demand by 2.7 million freaking barrels per day in just four freaking months. Am I yelling at you? Yes, yes I am.

I do so because we often think about technology in terms of the things that are yet to be created or built at scale. You know: self-driving cars, lab-cultured meat, nuclear fusion. When it comes to climate, there’s a tendency to do that too. Sure, we should do big things to protect the climate. But we have technology laying around and strategies we could flip a switch on that would start cutting oil and gas demand — and with that, carbon pollution — right now. Every day we discount them or wait for the big things to happen is a day that brings us further down the path of, as United Nations Secretary-General António Guterres put it this week, “mutually assured destruction.”

— Brian Kahn

Hot links

EV battery swapping was left for dead last decade. But it’s making a comeback in China.

In case you needed another reason to be devastated about the war in Ukraine: U.N. Secretary-General António Guterres said this week that it threatens to derail global climate goals.

President Joe Biden warned that Russian cyberattacks are coming, and they could potentially impact the grid.

Energy companies are making a pretty penny helping bitcoin miners. Great for them, terrible for the climate.

A fight over a solar farm and Texas’ largest stretch of tallgrass prairie is a reminder that we can’t think about climate tech in a vacuum.


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Thanks for reading! As ever, you can send any and all feedback to climate@protocol.com. See you Thursday!

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