Introduction.

• Author: Brannon, Ike

The Securities and Exchange Commission (SEC) recently proposed that publicly traded firms be required to disclose their carbon emissions and those of their suppliers. The proposal is problematic on several levels. If implemented, it would increase the cost of doing business without providing a discernible benefit for investors.

The SEC's estimated compliance costs for the proposed rule are significant across all industries, but the requirement would doubtless be more complicated--politically and practically--for companies involved in fossil fuels in some way. After all, the intent of the rule is to advance President Biden's agenda item of reducing carbon emissions and slowing climate change. Given that Congress has made it impossible to advance major legislation to do so, the administration is relying on the various agencies to pursue this policy.

In the following essays, several economists comment on the rule. They offer numerous concerns.

For starters, the SEC's estimated economic cost of the rule is likely well below the true cost. Matthew Winden looks at the effects the rule would have on the broader economy, going beyond the SEC's aggregation of the cumulative compliance costs to public corporations.

Indraneel Chakraborty writes that the insertion of additional and somewhat superfluous information in a company's financial statement reduces the value of the statement and makes it more difficult for investors to...