This New Climate-Change Rule Would Cost Taxpayers Billions

A lmost anytime federal bureaucrats across multiple agencies can agree on something, it is bad news. That is certainly the case for a recent proposed regulation from the Biden-Harris administration, which would require almost all federal contractors to make voluminous disclosures regarding greenhouse-gas emissions and “climate-related financial risk.”

Though ostensibly intended to improve the climate, the rule wouldn’t help anyone except lawyers, accountants, and climate consultants. It certainly wouldn’t help taxpayers, who would be asked to pay more as contractors attempt to recover costs.

If finalized before the close of the Biden administration, the proposed rule would require detailed reporting by federal contractors regarding three types of greenhouse-gas emissions: Scope 1 (direct emissions by the contractor), Scope 2 (emissions related to electricity and other utilities used by the contractor), and Scope 3 (those of the contractor’s customers and suppliers).

While each of these is unnecessary, the Scope 3 emissions are the most onerous and expensive. Worse still, most of the information reported would simply be guesses, since the contractor has only very limited information about the emissions of its customers and suppliers.

The agencies, however, are attempting to downplay costs. Their one-page analysis estimates that the rule would impose 3,265,025 hours of additional work annually on contractors — resulting in an annual increase in costs of $653 million if monetized at $200 an hour. But this is no doubt a gross underestimate. A very similar proposed SEC rule involving a similar number of regulated entities was estimated to cost over $6 billion a year. And the agencies’ economic analysis fails to even consider the adverse impact on the number of contractors who would choose to compete for federal contracts

The good news is that the proposed rule’s authors were also lazy, leaving it vulnerable to legal challenges.

In addition to the inadequacies of the proposed rule’s economic analysis, the agencies decided to delegate the details of reporting requirements to the Task Force on Climate-related Financial Disclosures (TCFD). The TCFD was an opaque private organization whose leadership includes former politicians such as Michael Bloomberg, who have a major financial interest in creating complex climate regulations. The only problem is, the TCFD is now defunct. It has been taken over by the IFRS Foundation, another opaque private organization associated with the International Sustainability Standards Board.

But the acronyms don’t matter. Regardless of which shady organization the bureaucracy grants regulatory authority to, the rule will be at serious risk of being successfully challenged in court. It is a clear violation of the Supreme Court’s private non-delegation doctrine, which is grounded in the Fifth Amendment’s due-process clause and the vesting clauses of the Constitution.

The rule has other legal problems, too. Why? Because the agencies proposing it — the Department of Defense, the General Services Administration, and NASA — have simply not been granted authority by Congress to become climate regulators. Any rule that is beyond the statutory authority granted to the agencies by Congress is void. And it is more likely than ever that a court would make such a finding in light of the Supreme Court’s recent decision in Loper Bright Enterprises v. Raimondo, which ended Chevron deference and limited agencies’ ability to expand their own power.

This new proposed rule is just the latest example of the Biden-Harris administration using climate change as an excuse to expand the power of the federal government.

Requiring federal contractors to spend billions of dollars on lawyers, accountants, and climate consultants to file reports with the federal government would have literally no impact on the climate. It would, however, have a substantial impact on federal spending, the deficit, and our economic future.