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The state assembly is about to vote on legislation that would force companies to reveal their emissions and climate risks. Here's why that matters.
Corporate sustainability is a mess. For consumers, investors, employees, and anyone else trying to wrap their heads around a business’ greenhouse-gas emissions, it’s hard to know where to look for information or how one company stacks up against another. The businesses that share data publicly do so on a number of different forums and in wildly different formats. Then there are still many that don’t disclose any info at all.
“It's like a climate ‘Tower of Babel,’” Steven Rothstein, a managing director at the nonprofit Ceres, which advocates for market-based climate solutions, told me.
But the tower is close to crumbling. Two landmark bills that passed the California State Senate in May and head to a vote in the Assembly this week or next could finally put systems and standards in place, with wide-reaching effects, as California is the fifth largest economy in the world.
One would require companies doing business in the state with annual revenues over $1 billion to report their greenhouse gas emissions each year. It would cover an estimated 5,300 U.S. corporations, according to Ceres.
The second bill orders businesses with revenues of more than $500 million to produce annual assessments of their exposure to climate-related risks, and what they are doing about those risks. More than 10,000 companies would have to report on whether heat waves that idle outdoor workers could hurt their profits, for example, or how vulnerable their facilities are to wildfires and floods.
Though the federal Securities and Exchange Commission is considering similar disclosure rules, the California bills go further by applying to privately-owned firms in addition to public-traded companies. About 73% of the companies that would have to report their emissions to California are private, according to Ceres.
Proponents of the policies say investors don’t currently have enough information to understand how exposed their investments are to the effects of global warming or to future climate-related policies.
“If I'm an investor, or I'm going to go work for a company and I want to think about how they're going to grow, knowing what they're doing will affect your decision making,” said Rothstein. “This is really a financial disclosure bill. It's really helping people understand more about the safety and soundness of those companies.”
These new disclosure laws would also ripple through the currently opaque practice of environmental, social, and governance, or ESG investing, making it easier to scrutinize claims made by index fund providers. As Madison Condon, a Boston University law professor summed it up to me, “How is Blackrock supposed to report on the emissions of its S&P 500 portfolio if the S&P 500 companies have not been required to report their emissions?”
But many believe these types of laws would be useful beyond Wall Street and help unlock more progress on climate change.
“Put plainly, it is difficult to imagine a successful approach to the climate challenge that does not have widespread mandatory disclosure as its foundation,” wrote the authors of a recent study on corporate emissions published in the journal Science. They argue that reliable measurement and credible data is an essential prerequisite for both market-based policies, like a carbon tax, and more straightforward regulations on carbon.
The data would also empower outside groups to hold firms accountable to their climate claims. Suddenly, it would be relatively easy to compare the carbon emitted by Uniqlo versus Gap, In-N-Out versus Taco Bell, or Amazon versus Walmart, for example. Legal scholars Michael Gerrard of Columbia University and Eric Orts of University of Pennsylvania expect advocacy groups will also rank companies by their emissions, as many do with the limited data available today, which could lead firms to try and improve their ranking.
The Science study I referenced earlier illustrates the opportunity there. The authors analyzed voluntarily reported emissions data for nearly 15,000 publicly traded companies. After normalizing the data by calculating it as a fraction of those firms’ operating profits, emissions varied widely even within each industry, with medians that were much lower than the means. They found that if all firms with emissions above their industry’s median made reductions to achieve the median, total emissions would decline by more than 70%.
A number of companies have come out in support of the California bills, like Microsoft, Ikea, and some of the biggest trade groups representing American clothing brands. There has also been intense opposition from agricultural and food businesses, airlines, cement companies, chambers of commerce, and the Western States Petroleum Association, which represents the oil and gas industry. Opponents have spent more than $7 million on lobbying efforts, according to an analysis by The Lever’s Rebecca Burns.
But it seems that even if the California bills don’t pass, it’s only a matter of time before companies face similar requirements elsewhere. The European Union is close to finalizing standards for emissions disclosure that will apply to some 50,000 companies, including many headquartered in the United States, beginning in 2024. In the U.S., the Biden administration’s “Buy Clean” initiative requires the government to procure building materials that meet certain carbon thresholds, meaning manufacturers will have to measure and report their emissions. A number of states have passed or are contemplating similar programs. There are also the upcoming SEC rules I mentioned earlier.
“When you take a step back, it is an unequivocal trend that the world is moving to more mandatory climate disclosure,” said Rothstein.
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A conversation with Mary King, a vice president handling venture strategy at Aligned Capital
Today’s conversation is with Mary King, a vice president handling venture strategy at Aligned Capital, which has invested in developers like Summit Ridge and Brightnight. I reached out to Mary as a part of the broader range of conversations I’ve had with industry professionals since it has become clear Republicans in Congress will be taking a chainsaw to the Inflation Reduction Act. I wanted to ask her about investment philosophies in this trying time and how the landscape for putting capital into renewable energy has shifted. But Mary’s quite open with her view: these technologies aren’t going anywhere.
The following conversation has been lightly edited and abridged for clarity.
How do you approach working in this field given all the macro uncertainties?
It’s a really fair question. One, macro uncertainties aside, when you look at the levelized cost of energy report Lazard releases it is clear that there are forms of clean energy that are by far the cheapest to deploy. There are all kinds of reasons to do decarbonizing projects that aren’t clean energy generation: storage, resiliency, energy efficiency – this is massively cost saving. Like, a lot of the methane industry [exists] because there’s value in not leaking methane. There’s all sorts of stuff you can do that you don’t need policy incentives for.
That said, the policy questions are unavoidable. You can’t really ignore them and I don’t want to say they don’t matter to the industry – they do. It’s just, my belief in this being an investable asset class and incredibly important from a humanity perspective is unwavering. That’s the perspective I’ve been taking. This maybe isn’t going to be the most fun market, investing in decarbonizing things, but the sense of purpose and the belief in the underlying drivers of the industry outweigh that.
With respect to clean energy development, and the investment class working in development, how have things changed since January and the introduction of these bills that would pare back the IRA?
Both investors and companies are worried. There’s a lot more political and policy engagement. We’re seeing a lot of firms and organizations getting involved. I think companies are really trying to find ways to structure around the incentives. Companies and developers, I think everybody is trying to – for lack of a better term – future-proof themselves against the worst eventuality.
One of the things I’ve been personally thinking about is that the way developers generally make money is, you have a financier that’s going to buy a project from them, and the financier is going to have a certain investment rate of return, or IRR. So ITC [investment tax credit] or no ITC, that IRR is going to be the same. And the developer captures the difference.
My guess – and I’m not incredibly confident yet – but I think the industry just focuses on being less ITC dependent. Finding the projects that are juicier regardless of the ITC.
The other thing is that as drafts come out for what we’re expecting to see, it’s gone from bad to terrible to a little bit better. We’ll see what else happens as we see other iterations.
How are you evaluating companies and projects differently today, compared to how you were maybe before it was clear the IRA would be targeted?
Let’s say that we’re looking at a project developer and they have a series of projects. Right now we’re thinking about a few things. First, what assets are these? It’s not all ITC and PTC. A lot of it is other credits. Going through and asking, how at risk are these credits? And then, once we know how at risk those credits are we apply it at a project level.
This also raises a question of whether you’re going to be able to find as many projects. Is there going to be as much demand if you’re not able to get to an IRR? Is the industry going to pay that?
What gives you optimism in this moment?
I’ll just look at the levelized cost of energy and looking at the unsubsidized tables say these are the projects that make sense and will still get built. Utility-scale solar? Really attractive. Some of these next-gen geothermal projects, I think those are going to be cost effective.
The other thing is that the cost of battery storage is just declining so rapidly and it’s continuing to decline. We are as a country expected to compare the current price of these technologies in perpetuity to the current price of oil and gas, which is challenging and where the technologies have not changed materially. So we’re not going to see the cost decline we’re going to see in renewables.
And more news around renewable energy conflicts.
1. Nantucket County, Massachusetts – The SouthCoast offshore wind project will be forced to abandon its existing power purchase agreements with Massachusetts and Rhode Island if the Trump administration’s wind permitting freeze continues, according to court filings submitted last week.
2. Tippacanoe County, Indiana – This county has now passed a full solar moratorium but is looking at grandfathering one large utility-scale project: RWE and Geenex’s Rainbow Trout solar farm.
3. Columbia County, Wisconsin – An Alliant wind farm named after this county is facing its own pushback as the developer begins the state permitting process and is seeking community buy-in through public info hearings.
4. Washington County, Arkansas – It turns out even mere exploration for a wind project out in this stretch of northwest Arkansas can get you in trouble with locals.
5. Wagoner County, Oklahoma – A large NextEra solar project has been blocked by county officials despite support from some Republican politicians in the Sooner state.
6. Skagit County, Washington – If you’re looking for a ray of developer sunshine on a cloudy day, look no further than this Washington State county that’s bucking opposition to a BESS facility.
7. Orange County, California – A progressive Democratic congressman is now opposing a large battery storage project in his district and talking about battery fire risks, the latest sign of a populist revolt in California against BESS facilities.
Permitting delays and missed deadlines are bedeviling solar developers and activist groups alike. What’s going on?
It’s no longer possible to say the Trump administration is moving solar projects along as one of the nation’s largest solar farms is being quietly delayed and even observers fighting the project aren’t sure why.
Months ago, it looked like Trump was going to start greenlighting large-scale solar with an emphasis out West. Agency spokespeople told me Trump’s 60-day pause on permitting solar projects had been lifted and then the Bureau of Land Management formally approved its first utility-scale project under this administration, Leeward Renewable Energy’s Elisabeth solar project in Arizona, and BLM also unveiled other solar projects it “reasonably” expected would be developed in the area surrounding Elisabeth.
But the biggest indicator of Trump’s thinking on solar out west was Esmeralda 7, a compilation of solar project proposals in western Nevada from NextEra, Invenergy, Arevia, ConnectGen, and other developers that would, if constructed, produce at least 6 gigawatts of power. My colleague Matthew Zeitlin was first to report that BLM officials updated the timetable for fully permitting the expansive project to say it would complete its environmental review by late April and be completely finished with the federal bureaucratic process by mid-July. BLM told Matthew that the final environmental impact statement – the official study completing the environmental review – would be published “in the coming days or week or so.”
More than two months later, it’s crickets from BLM on Esmeralda 7. BLM never released the study that its website as of today still says should’ve come out in late April. I asked BLM for comment on this and a spokesperson simply told me the agency “does not have any updates to share on this project at this time.”
This state of quiet stasis is not unique to Esmeralda; for example, Leeward has yet to receive a final environmental impact statement for its 700 mega-watt Copper Rays solar project in Nevada’s Pahrump Valley that BLM records state was to be published in early May. Earlier this month, BLM updated the project timeline for another Nevada solar project – EDF’s Bonanza – to say it would come out imminently, too, but nothing’s been released.
Delays happen in the federal government and timelines aren’t always met. But on its face, it is hard for stakeholders I speak with out in Nevada to take these months-long stutters as simply good faith bureaucratic hold-ups. And it’s even making work fighting solar for activists out in the desert much more confusing.
For Shaaron Netherton, executive director of the conservation group Friends of the Nevada Wilderness, these solar project permitting delays mean an uncertain future. Friends of the Nevada Wilderness is a volunteer group of ecology protection activists that is opposing Esmeralda 7 and filed its first lawsuit against Greenlink West, a transmission project that will connect the massive solar constellation to the energy grid. Netherton told me her group may sue against the approval of Esmeralda 7… but that the next phase of their battle against the project is a hazy unknown.
“It’s just kind of a black hole,” she told me of the Esmeralda 7 permitting process. “We will litigate Esmeralda 7 if we have to, and we were hoping that with this administration there would be a little bit of a pause. There may be. That’s still up in the air.”
I’d like to note that Netherton’s organization has different reasons for opposition than I normally write about in The Fight. Instead of concerns about property values or conspiracies about battery fires, her organization and a multitude of other desert ecosystem advocates are trying to avoid a future where large industries of any type harm or damage one of the nation’s most biodiverse and undeveloped areas.
This concern for nature has historically motivated environmental activism. But it’s also precisely the sort of advocacy that Trump officials have opposed tooth-and-nail, dating back to the president’s previous term, when advocates successfully opposed his rewrite of Endangered Species Act regulations. This reason – a motivation to hippie-punch, so to speak – is a reason why I hardly expect species protection to be enough of a concern to stop solar projects in their tracks under Trump, at least for now. There’s also the whole “energy dominance” thing, though Trump has been wishy-washy on adhering to that goal.
Patrick Donnelly, great basin director at the Center for Biological Diversity, agrees that this is a period of confusion but not necessarily an end to solar permitting on BLM land.
“[Solar] is moving a lot slower than it was six months ago, when it was coming at a breakneck pace,” said Patrick Donnelly of the Center for Biological Diversity. “How much of that is ideological versus 15-20% of the agencies taking early retirement and utter chaos inside the agencies? I’m not sure. But my feeling is it’s less ideological. I really don’t think Trump’s going to just start saying no to these energy projects.”