Biden analyzes financial rules to deprive oil of capital and change the country’s climate

Biden analyzes financial rules to deprive oil of capital and change the country’s climate

On HoustonChronicle.com: Biden eyes Gulf for offshore wind development Companies now report emissions through a variety of voluntary protocols — with varying standards — that allow companies to present themselves as cleaner than they are, a practice known as “greenwashing.” Investors maintain that the lack of reporting standards such hinders their ability to determine how well positioned companies are for a low-carbon future. Were the SEC to require uniform data on climate exposure — the same way they do on profits and cash flow — investors would likely move money from companies with the largest carbon footprints, experts said.

The process is still in the early stages. Furthest along is the SEC, which is still collecting comments on how greenhouse gas emissions are reported. “The SEC is where the money that goes into the ground gets regulated, so it’s a big deal for them to get into the climate game, not to mention all these other financial regulators moving at the same time” said Kevin Book, managing director at the research firm ClearView Energy Partners. “Nobody who assesses the health of these (publicly traded) entities will be able to say (emissions) don’t matter anymore.”

The agency has not said what action it might take, but the examination signals an attempt to establish uniform reporting standards that would allow investors to make apples to apples comparisons between not only companies but entire industries, experts said. The strategy threatens to accelerate the shift of investment away from the oil and gas companies that dominate the Houston and Texas economies, depriving them of the capital they need to launch drilling projects, expand and hire workers, analysts and policy experts said. It would only add pressure on an industry that has fallen out favor with investors after years of high costs and low returns and uncertainty over its future in a low-carbon world.

After oil prices crashed in late 2014, capital spending in the oil and gas sector abruptly fell — hitting a 13-year low in 2020. Prices have risen recently as governments lift COVID-19 restrictions, raising the prospect of a revival of the shale drilling boom in West Texas and other locales. But the Biden administration’s efforts to rewrite financial regulations stand to make it more difficult for companies to obtain financing from Wall Street investors that have grown weary of the oil and gas sector over the past decade. Weary on Wall Street

“If you have asset managers and financial institutions all with net zero targets and at some point those things all become real,” said Ben Cahill, a fellow at the Center for Strategic and International Studies, a think tank in Washington “There is a risk of decapitalizing the (oil) industry just as you have industry starting to grow again, at a time the industry has been underinvesting for years.” For the oil and gas industry, this could be particularly problematic, with as yet no viable way to capture the huge volumes of emissions that come out of vehicles’ tailpipes.

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