What happens in Europe does not stay here

But US climate policies will never be as perverse as those enacted by the European Union.

Consider the EU’s Corporate Sustainability Due Diligence Directive, the pleasure that promises to enforce “sustainable and responsible corporate behavior for a just transition to a sustainable economy.”

What the EU is really trying to do with this directive is push companies to achieve things that the EU itself cannot:

“The core elements of this duty are to identify and address potential and actual adverse human rights and environmental impacts in the company’s own operations, its subsidiaries and, when related to its value chains, those of its In addition, the Directive establishes the obligation for large companies to adopt and implement, with best efforts, a transition plan for the mitigation of climate change aligned with the objective of climate neutrality by to 2050 of the Paris Agreement, as well as intermediate objectives in the framework of Climate Europe.

Translation: Companies will need to estimate, report and mitigate the future climate impacts of their own operations, those of their subsidiaries and those of their business partners as components of their “value chains,” a term that is not has defined

The EU says the directive will apply to around 6,000 EU and 900 non-EU companies. These numbers are too low due to subsidiaries and “supply chain” components. A better estimate is that about 10,000 foreign companies will be directly required to comply, at least a third of which are likely to be American companies, and that’s not counting the thousands of companies that will have to comply to continue. to serve the companies that are directly forced to comply. In short, virtually any large multinational or any company that does business with a large multinational will have to follow the directive line.

And when American companies are forced to comply, the American economy will be adversely affected. Firm structures will have to change radically, the productivity of capital assets and labor, and thus wages, will fall, and the allocation of capital investments will be distorted toward lower efficiency outcomes. that bigger

This is obviously intentional: the EU bureaucrats and their ideological leadership must know that the climate directive will significantly reduce the competitiveness of European companies, and an obvious way to avoid the consequent destruction of the European business sector is to force the same system to the maximum of the international business sector as possible.

The EU’s corporate climate disclosure mandate imposes compliance burdens on US companies operating internationally that are so costly and unworkable that divestments would, in many cases, be a more attractive alternative than compliance, even though the enormous costs of compliance would depress the prices that could be imposed for the EU. The assets of American companies will be divested. Even the Intergovernmental Panel on Climate Change highlights huge uncertainties regarding the future effects of greenhouse gas emissions. That US multinationals be forced to conduct this analysis across all of their global supply chains, requiring applications of hundreds of climate models, producing thousands of pages of predicted “impacts”, with dozens of thousands of pages of supporting analysis, it’s absurd.

What is very real is the monster of litigation that this directive would unleash. Did a company use the right climate model? Were the assumed parameters correct? What ranges of estimates should be reported? For plaintiff lawyers, the answers are “no,” “no,” and “whichever is more alarmist.”

The range of possible climate predictions is enormous; accordingly, any prediction may be characterized as “false” or “misleading” or in conflict with such disclosures made under the laws in force in other jurisdictions. Can anyone doubt that any major storm will be followed by a lawsuit for lack of warning? ad infinitum

The climate disclosure rules are part of a broader trend in which international organizations are trying to dictate policies that undermine Congress’s powers to enact legislation and the authority of the US executive branch to enforce that body of law. As much as the EU directive is applauded by America’s ideological opponents of fossil fuels, the rule is fundamentally a direct assault on American sovereignty and, more generally, on the principle that American governance it is based on the consent of the governed.

Both Congress and the executive branch must affirm these fundamental principles. Foreign efforts to compel US companies to comply with foreign regulations must be met with our own compliance requirements for US economic policies as reflected in domestic law.

A recent letter from Rep. Andy Barr (R-KY), Sen. Bill Hagerty (R-TN) and more than 60 other members of Congress to Treasury Secretary Janet Yellen asks that she “and (her) colleagues leagues of the relevant federal body The agencies … are actively and publicly engaged with their counterparts in Brussels and the capitals of the EU member states to delay the implementation of (the EU rule) and work with the new European Parliament to repeal or substantially modify the directive.

Additionally, the Biden administration could invoke Section 301 of the Trade Act of 1974, which allows the imposition of trade sanctions on foreign governments that enact “unjustifiable” or “unreasonable” laws. These actions will attract the attention of the EU.

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As for the new statutory law: Congress should force the issue by enacting legislation barring US companies from complying with the EU directive until intergovernmental negotiations reach a treaty that receives Senate ratification.

Given how much damage the EU’s climate disclosure rules will do to the US business sector, even a Biden administration (or a future Kamala Harris) would be hard-pressed to oppose such measures.

Benjamin Zycher is a senior fellow at the American Enterprise Institute.