New Regulations and Government Policies Key in Combating Climate Change
As part of the world’s continued efforts to combat climate change and transition towards net zero, new regulations and government policies are crucial. Government regulation covers every sector, both public and private, and has been instrumental in driving important shifts in industry.
The oldest consumer protection agency in the United States is the Food and Drug Administration (FDA). Its origins can be traced back to the late 19th century when the U.S. Department of Agriculture’s Division of Chemistry, a research wing, was established. However, it had no regulatory powers. It was only after several food and drug-related scandals, such as Upton Sinclair’s exposé on working conditions in animal feeding operations and the diphtheria antitoxin contamination incident in 1901, that new laws were implemented. These laws eventually led to President Roosevelt signing the Food and Drug Act in 1906.
Since its inception, the FDA has introduced countless regulations that have benefited the general public. Examples include banning radioactive drinks and harmful drugs, establishing canning and packaging standards, authorizing the inspection of factories, and regulating drugs before they hit the market. The FDA’s extensive protections have significantly improved the safety of food and drugs, ensuring that people are less likely to get sick from ingredients.
In the modern day, the fight against climate change is the next area where government intervention is necessary to drive compliance. Oil and gas companies like Exxon have known about climate change since the 1970s. They invested millions in research, hired top scientists, and built their own climate models. However, they chose to cover up the truth to protect their bottom line. Exxon was one of the leaders behind the Global Climate Coalition, which aimed to question the science behind climate change and raise skepticism.
Climate disclosure rules are a crucial component of the global efforts to achieve net zero emissions. These rules make it mandatory for companies to disclose the impact of their business operations on climate change and how climate change affects them. Currently, corporations adhere to various reporting standards, including financial reporting and non-financial reporting metrics such as Environmental, Social, and Governance (ESG) reporting. However, there is a lack of standardization, leading to inconsistencies in reporting.
Proper climate disclosure regulation would establish a standard framework that companies must follow when reporting their emissions and other climate-change-related details. This regulation would work similarly to the U.S. Securities and Exchange Commission’s (SEC) requirement for listed companies to file annual reports according to accounting standards. Standardized reporting would enable informed investor decisions and compel companies to reveal their true operations, similar to the FDA-imposed nutrition labels.
In emissions reporting, terms such as “Scope 1,” “Scope 2,” and “Scope 3” are often used. These terms originate from the Greenhouse Gas Protocol, a third-party emissions reporting standard. Scope 1 emissions cover the emissions directly resulting from a company’s operations, including sources they own and control. Scope 2 emissions are indirect emissions from the energy the company uses, such as electricity. Scope 3 emissions cover the entire rest of a company’s value chain, including emissions from products or services used or produced by the company.
For example, an auto manufacturer’s Scope 1 emissions would include emissions from their offices, manufacturing plants, and fleet of vehicles. Scope 2 emissions would encompass emissions from the electricity used to power the plants and the oil used by their vehicles. Scope 3 emissions would cover emissions from mining and producing materials and parts, as well as emissions from the cars themselves when driven by customers. Proper climate disclosure regulations are necessary to address the significant impact of Scope 3 emissions.
Climate disclosure is important because it provides transparency and accountability. With standardized reporting, investors can make informed decisions based on a company’s environmental impact. It also encourages companies to take responsibility for their emissions and adopt sustainable practices. By disclosing their climate-related information, companies can contribute to the global efforts to combat climate change and transition towards a net zero future.
In conclusion, new regulations and government policies play a crucial role in combating climate change and achieving net zero emissions. Just as the FDA has implemented regulations to protect public health, climate disclosure regulations are necessary to ensure transparency and accountability in corporate operations. Standardized reporting will enable informed investor decisions and drive companies towards sustainable practices. The fight against climate change requires collective action, and government intervention is essential in driving the necessary changes.