For Manchin, the Real Climate Change Has Just Begun

COMMENTARY Environment

For Manchin, the Real Climate Change Has Just Begun

Mar 17th, 2021 6 min read
COMMENTARY BY
Norbert J. Michel, Ph.D.

Director, Center for Data Analysis

Norbert Michel studies and writes about financial markets and monetary policy, including the reform of Fannie Mae and Freddie Mac.
Sen. Joe Manchin (D-WV), pictured here on February 24, 2021, has pledged to “always stand up for energy policies that are good for West Virginia jobs.” Leigh Vogel-Pool / Getty Images

Key Takeaways

Gensler was very open about wanting the SEC to force public companies to report more on climate risks, and Chopra was only a tad murkier.

Manchin’s vote on Chopra will test his bipartisanship because all of the Republicans on the Banking committee opposed his nomination.

Forcing financial firms to account for climate risks to satisfy federal rules is sheer lunacy.

As the ultimate swing voter, Sen. Joe Manchin (D-WV) will surely be under a microscope for the next two years. He’s in the unenviable situation of having to placate his liberal colleagues in Congress and his more conservative-leaning constituents from West Virginia.

Given the Democrats’ recent push to tie virtually everything to climate change, the fact that Manchin is the Chairman of the Senate Energy and Natural Resources Committee makes things a little trickier. He has pledged to “always stand up for energy policies that are good for West Virginia jobs, America’s security and our way of life,” so it will be interesting to see how he balances Democrats’ climate efforts against West Virginia jobs.

Manchin is probably thrilled, though, that he no longer sits on the Senate Banking Committee. Thanks to the Democrats, the Banking committee is set to hold a new hearing on climate risks to the financial system, an issue that does not bode well for West Virginia jobs.

Regardless, Manchin will soon have to vote on Biden nominees Gary Gensler (for chairman of the Securities and Exchange Commission) and Rohit Chopra (for the Director of the Consumer Financial Protection Bureau).

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At their senate hearings, both Gensler and Chopra were transparent about their views on climate change and financial regulation. Gensler was very open about wanting the SEC to force public companies to report more on climate risks, and Chopra was only a tad murkier.

Given Chopra’s record as a commissioner on the Federal Trade Commission, his stance is hardly a surprise. His statement in December, for instance, noted that “the FTC can and must continue to build upon today’s action by using all of its legal authorities to combat practices that harm consumers, distort competition, and undermine national goals on energy independence and climate change.”

Apparently, the Democrats want every agency in the federal government to add climate change to its mission. Even if that does not happen, there is no reason to doubt that Chopra will define “consumer protection” as broadly as possible if confirmed to lead the CFPB, just as he did while serving the FTC.

Manchin’s vote on Chopra will test his bipartisanship because all of the Republicans on the Banking committee opposed his nomination. Due to the tie committee vote, Chopra’s nomination cannot head to the Senate floor without a separate vote to discharge it from committee. This added hurdle could sink Chopra, an acolyte of Sen. Elizabeth Warren (D-Mass.).

At the hearing, ranking member Pat Toomey (R-Penn.) voiced his concern that, based on Chopra’s record, “he would return the CFPB to the hyperactive, sometimes lawbreaking, anti-business, unaccountable agency it was under the Obama administration.”

One problem was that, in 2016, Chopra criticized lawmakers pushing to curb the Bureau’s independence as “shilling for predatory lenders.” Perhaps worse, in 2018, Chopra co-authored a report for the Roosevelt Institute that calls for a new “Public Integrity Protection Agency,” headed by a director that can only be removed in “proceedings similar to that of a federal judge.” That provision would be even more restrictive—and unaccountable to the public—than the one that the Supreme Court recently struck down for the CFPB director.

The report also calls for greater discussion about ways to “increase government’s accountability to the public interest, rather than to special interests.” That might seem like a beautiful aspiration, but there is no objective way to distinguish public interests from special interests. And, of course, Chopra also wants taxpayers to fund “public interest advocacy groups.”

That’s what makes things like czars so dangerous to individual liberty and political freedom. It is the perfect example of why the American founders designed a system based on limited government that can protect people from their own mob mentality.

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Chopra’s views are downright scary, especially given the Biden administration’s broader efforts to force financial firms to account for climate risks. To go along with Treasury secretary Yellen’s new “Climate Czar,” the Biden administration has resurrected the Obama-era social cost of carbon, a metric intended to quantify the economic impact of climate change.

As my colleague Kevin Dayaratna has demonstrated, however, “the social cost of carbon is the most useless number you’ve never heard of.” As Dayaratna explains,

Although the social cost of carbon is based on an interesting class of statistical models, no matter what estimate the Biden administration provides, the assumptions used to generate it can almost surely be manipulated to give lawmakers virtually any other (even negative) estimate of the social cost of carbon, thereby predicting anything, ranging from little warming and continued prosperity to catastrophic warming and immense disaster.

Given the state of both climate models and financial forecasting methods, forcing financial firms to account for climate risks to satisfy federal rules is sheer lunacy. It is sure to inject massive amounts of uncertainty in financial markets with no discernible benefit toward stopping climate change.

Given the science, it is difficult to escape the conclusion that this effort is really about nothing more than extracting rents from the fossil fuel industry. While that’s a great deal for Capitol Hill lawyers and lobbyists, it’s not so great for the workers in West Virginia.

It will be very interesting to see whether Sen. Manchin believes this approach is in the public interest.

This piece originally appeared in Forbes https://www.forbes.com/sites/norbertmichel/2021/03/15/for-manchin-the-real-climate-change-has-just-begun/?sh=39614c6d24c8