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Exxon gas pump

“If the climate is going to change, then so will our policies,” the U.S. Securities and Exchange Commission said in issuing updated disclosure guidance Wednesday, albeit with more tact and verbiage.


The S.E.C. currently requires public companies to spill the beans about changes that could affect their stock prices—acquisitions, layoffs, factory closings, and so on—but Wednesday’s decision is the first that asks companies to specifically comment on climate change.

Unfortunately, investors may gain little information from the new disclosures, said Kathleen Hagerty, senior associate dean and professor of finance. Companies could weasel their way out of substantive statements by citing the uncertainties surrounding climate change—legislation, international agreements, and even physical effects. “It’s possible some completely non-informative boilerplate could be developed” to respond to the new guidance, Hagerty said.

Even if the S.E.C. frowns upon such general statements, companies may still be able to cherry pick which impacts to report.

Hagerty suspects investor and environmental groups—which have petitioned the S.E.C. since 2007—lobbied for the change to call attention to the issue. Though investors may gain little, the new guidance “does raise people’s consciousness,” Hagerty said. “That might be worth it.”

Photo by clairegren.

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carbon dioxide courtesy of Kristian Vinkenes

Climate change news has been recently dominated by the rift between developed and developing nations over the amount of money the former should give the latter to move to a low carbon economy. Yet this issue, while vitally important, is not all that’s at stake. Beyond climate friendly funding lie the questions of how the goals will be reached and what will happen if a country snubs its nose at the rest. (more…)

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G77 EmissionsWith all the hubbub surrounding the climate talks in Copenhagen this week, it’s easy to forget many of the basic facts surrounding the debate.  Developing nations are heavily involved in this round, something that sets this Conference of the Parties apart from previous ones, and their participation has raised a significant question. To what extent should developed countries assist developing nations in reducing emissions without harming economic growth? While a few maps may not help the diplomats in Copenhagen forge a consensus, they can help the rest of us understand what lies at the heart of the debate.

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Setting limits on greenhouse gases is fraught with difficulty—each country has their own horse in the race, their own interests at stake. Agreeing to an emissions cap would seem to be the first obstacle delaying international climate policy. If the issue were settled, countries could move on to debate mechanisms, penalties, and assistance programs. But even before emissions caps can be set, another technicality stands in the way—the year on which emissions targets should be based.

The internationally accepted baseline year is 1990. The year has been nearly ubiquitous in climate change negotiations and the scientific literature. But fast forward fifteen years and another baseline year has emerged—2005. Didn’t we already agree to a target year?

It turns out that 1990 emissions levels have become increasingly difficult to reach in those fifteen years. In that time, global greenhouse gas emissions increased 28 percent (pdf), and U.S. emissions increased 16 percent. Larger sounding but more politically convenient targets are easier to obtain using 2005 levels. So President Obama’s proposed 17 percent reduction below 2005 levels by 2020 only amounts to a cut of 3.7 percent below 1990 levels. By contrast, the European Union has put a 20 percent cut below 1990 levels by 2020 on the table, which it would raise another 10 percent if an international agreement could be reached. To match that, U.S. would have to drop emissions 31 percent below 1990 levels and add another 9 percent in the face of international consensus.

That the U.S. is proposing cuts in emissions at all is a step toward reaching an international agreement. But the continued use of 2005 as a baseline only muddies the waters, making proposed emissions targets difficult to compare.

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Climate change treaty has become the pariah of international politics. An international agreement to limit greenhouse gas emissions has been elusive at best, supported by some, ignored by others, and outright scorned by a few. The United Nations Climate Change Conference opening in Copenhagen next week is the fifteenth time the parties of the U.N. Framework Convention on Climate Change have met. The UNFCC grew out of the 1992 Earth Summit in Rio de Janeiro as a nonbinding agreement to limit carbon emissions. Frustratingly little has been accomplished in those fifteen meetings outside of the Kyoto Protocol, which in and of itself has been less than effective.

Few expect anything substantial to emerge from the Copenhagen meeting—world leaders scrapped any chance of reaching a binding agreement at the Asia-Pacific Economic Cooperation meeting in Singapore last month.Rather, Copenhagen will become a stage where old ideas will be rehashed and new ideas will be assessed. Emissions caps are sure to be a hot topic, but also at the forefront will be programs to assist developing nations leapfrog carbon-heavy economic transformations.

As the Copenhagen meeting comes and passes, Expertly Wrapped will be exploring emissions trading, carbon taxes, emissions caps, and other environmental, economic, and policy-oriented issues that surround climate change and international efforts to deal with it. We will report on relevant Kellogg faculty research and views, dig deeper into news items as they arise, and contribute our own expertise on the topic. Look for our coverage in “Clearing the Air,” a series of special reports.

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