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Climate disclosure rule's fireworks

SEC offices

The SEC's offices. Photo: Valerie Plesch/Bloomberg via Getty Images

The SEC's new climate rule is on a collision course with Congress.

Why it matters: One of the year's most closely watched regulations is in the House GOP's sights. Expect fireworks accordingly via the Congressional Review Act.

Driving the news: SEC commissioners today approved a final rule requiring public companies to give investors information on various risks they face from climate change in regular disclosures.

  • As part of that effort, the SEC is compelling certain firms to disclose carbon emissions resulting from their operations (known as Scope 1) and from their energy use (Scope 2).
  • Some observers are calling it a watered-down rule because it no longer includes a wider supply chain emissions requirement (known as Scope 3) that the commission had previously proposed.

We were already expecting court challenges. But we've learned Congress is also likely to step into the fray.

  • Rep. Andy Barr told Axios last night he expects a CRA resolution in response to this rulemaking. Today, Senate EPW ranking member Shelley Moore Capito told us the same.
  • "I'd be happy to lead it, but I'm going to confer with my colleagues," said Barr, who named House Financial Services Chair Patrick McHenry and Reps. Bill Huizenga and Ann Wagner.

Between the lines: Some activists are bashing the SEC for ditching Scope 3. But it's unlikely that most congressional Democrats will join them.

  • Sen. Brian Schatz told Axios yesterday that ditching Scope 3 could concern him "depending on how they do [it]" and that some have voiced "legitimate concerns" about how "that would be quantified."
  • But overall, Schatz is still enthusiastic that the agency's stepping into the fray.
  • "Risk is risk. Just because it's politically uncomfortable doesn't mean this particularly risk shouldn't be disclosed," he said, adding: "I'm not going to trash it before I read it."
  • The House Sustainable Energy and Environment Coalition, a group of climate-hawk Dems, put out a statement praising the rule with zero mention of Scope 3.

Reality check: Supporters of SEC's action say it isn't intended to confront climate change at all but instead is purely for investors to know financial risks due to extreme weather and decarbonization plans.

  • This is likely to be central to legal arguments against the rule, especially in light of recent Supreme Court rulings limiting agency authority to step beyond powers explicitly laid out in statute.
  • "'How does this emissions disclosure rule save the planet?' That's kind of a different question than what the rule is trying to ask," said Laura Peterson of the Union of Concerned Scientists.

What we're watching: If/when lawmakers chafe over how frequently they're using the CRA to make policy.

  • "It is a little tricky if you don't control all branches of government," Sen. Mike Braun told Axios. But if Donald Trump wins in November, he said, expect the GOP to focus on "the most egregious" regulations.
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