Probably not the best way to regulate the environment
Posted by Rich Sweeney on September 24, 2007
The NYTimes reports that new New York AG Andrew Coumo is using securities laws to subpoena documents from 5 energy companies. Corporate subpoenas are nothing new, especially in New York. What is new is the rationale. Whereas Spitzer used to at least harass companies in the general vain of SOX, Coumo is now using his powers to protect shareholders as justification for investigating energy companies’ purported plans to build coal-fired generators in the future. His letter to the companies questions whether or not their investors are adequately informed about the “financial liabilities of carbon dioxide emissions”.
Now I don’t know all the details of the case but that sounds pretty dubious to me. In a post-Inconvenient Truth world, investors in energy are probably better informed about the regulatory risk their investments face than any other industry I can think of. At this point, any potential liabilities from emitting carbon should already be incorporated into both the price of the stock and the decision to build more coal plants. For all we know, investors could be betting on the success of carbon capture and sequestration (CCS), and it is precisely in situations like this, when there is great complexity and uncertainty, that we need to let the market do its job. If politicians want to reduce carbon emissions they should do so explicitly and transparently by directly linking the decision to emit with the cost of emission. Harassing companies through back-door subpoenas, especially when the root of the problem lies with Washington’s unwillingness to enact a meaningful carbon policy, is both inefficient and disingenuous.