After World War II, Winston Churchill proclaimed, “Never a let a good crisis go to waste.” Many politicians in the U.S. adopted some form of that statement and even more regularly employ this practice to promote their own agendas.
Then it should come as no surprise that the Biden administration is using the recent fires in the west and flooding in the south and east to highlight their climate-change agenda and propose additional requirements for businesses. The National Oceanic and Atmospheric Administration (NOAA) on September 9 reported that five states had their hottest summers on record, with another 16 states seeing these past months rate in their top-five warmest summers on record. Speaking of records, in that same announcement the NOAA said that the average temperature during the summer for the contiguous U.S. was 2.6 degrees above average and technically exceeded the record heat of the 1936 Dust Bowl Summer. The difference was 0.01 degrees, but that’s enough to scream from the glacier tops by Washington math.
Using this narrative as the backdrop, high-profile members of the Biden team, including the President himself, have begun to hint at some of the regulations they would like to see imposed on industry and citizens. While the EPA continues to work on greenhouse-gas (GHG) emissions rules, lowering the particulate-matter threshold and releasing new guidance on smelters, other federal agencies are now in on the action as well.
The Department of Defense – dating back to the George W. Bush administration – began exploring the impact of a changing climate on their operations, their needs and their long-term procurement strategies. Now Washington has moved much further with President Biden telling his cabinet members to take a “whole of government” approach to climate change.
This will involve the electrification of government vehicles and other steps to help reduce the environ-mental footprint of agency actions in the U.S. and abroad. The latest efforts focus on private businesses, however, and not just in the form of regulating emissions.
The U.S. Treasury Department on August 31 issued a call for public input into how climate change impacts financial markets and the insurance sector. The goal of the comment period is to gather more information to help government regulators better understand how climate change could potentially de-stabilize the markets, including commodities, stocks and housing. This could lead to action by the government to help prevent those possible disruptions or impose safeguards on private businesses using both supply-chain and environmental resiliency as justification.
What will this mean for manufacturers? Can insurance companies treat one region differently than an-other? Will they raise rates or discriminate against high-energy-consuming industries, such as manufacturers? How do you determine which companies or industries are highest risk, and is there a cap on premiums and payouts? It is not a stretch to imagine a federal contractor or publicly traded OEM requiring their supply chain to carry climate-change insurance to secure their business or disclose their climate footprint. In fact, those plans are already in motion.
On May 20, President Biden signed an Executive Order examining company disclosures and calling on major federal government suppliers to begin releasing information related to their GHG emissions and financial risks related to climate change. The Executive Order focuses on financial institutions to ensure they prepare for market disruptions. In that instance, Treasury is in the process of requesting more information from the public on how to best measure climate-change risks and how to factor in disclosures and guardrails to prevent adverse financial effects of climate change.
In a speech September 9 before the City Club of Cleveland, Secretary of Commerce Gina Raimondo, a former Governor of Rhode Island, told the business community they must live up to their public commitments and be serious about tackling climate change. While the Secretary urged companies to support investments in clean energy in the upcoming Democrat-only reconciliation bill, the business community remains roundly opposed to many of the tax increases and other provisions included in that bill.
Not to be outdone by their counterparts at Treasury, Commerce and EPA, the Department of Energy on September 8 said it wants to increase the use of solar energy in the U.S. from the 4% rate today to 40% by 2035.
To install all those solar panels, the White House and Democrats in the U.S. House of Representatives want to include language in their reconciliation budget bill to create a Civilian Climate Corps. Supporters of this effort claim it would create hundreds of thousands of jobs for young adults installing solar panels, building trails and planting trees, among other environmental initiatives. Paid at least $15 per hour, the White House proposed $10 billion for this initiative, further demonstrating they are all in on the whole-of-government approach to further involving Washington regulators in local and private-sector activities.
Businesses – especially manufacturers that use a considerable amount of energy in their production, emit certain levels of emissions or critically build a product used by customers who both consume and emit – should take notice. In the latter years of the Clinton administration, environmental issues began to attract significantly more public attention. Continuing into the W. Bush years and certainly through the terms of Presidents Obama and Trump, the EPA played a central role in the debate between businesses and environmental groups.
Now the Biden administration has significantly expanded the playing field to include virtually every federal agency. This means he is bringing even more regulators to the rulemaking table. Now, more than ever, you will want to make sure your industry has a seat at that table … rather than be on the menu.
Omar S. Nashashibi
Founding Partner
The Franklin Partnership, LLC.; 202-715-1264
omar@franklinpartnership.com
