Supreme Court's EPA ruling could push up climate "adaptation costs," Moody's says
The Supreme Court's recent ruling limiting the Environmental Protection Agency's ability to strictly regulate power-plant emissions could increase corporate risks related to climate change and undermining businesses' credit-worthiness, according to debt-rating agency Moody's Investor Service.
"For carbon-intensive sectors, a delayed transition raises the specter of more disruptive climate policies down the line," Moody's said in a Tuesday research note.
"The court decision is a major setback for the US administration's plan to reduce economy-wide net greenhouse gas emissions to zero by 2050 in order to meet Paris Agreement objectives," Moody's researchers said. Beyond that, however, the decision dings the creditworthiness of businesses that are likely to prolong their use of fossil fuels and suffer more climate impacts, Moody's found.
Damage from major weather and climate disasters has cost the U.S. almost $2 trillion during the last four decades, with the impact of such incidents escalating in recent years due to human-caused climate change. The Supreme Court's ruling means the U.S will struggle even more to meet Paris Agreement targets, causing long-term problems, the Moody's report found.
The ruling "raises the risks of a delayed and more disorderly transition to a low-carbon economy, with broad credit negative implications across sectors," the agency said.
Because the ruling will likely delay a transition away from fossil fuels, companies across multiple industries could eventually face "higher mitigation costs," it added.
Experts have warned that the Supreme Court ruling could also harm human health, as well as that of the environment. But corporations also face risks, with one study finding that U.S. businesses could lose $520 billion across 22 industries as the climate changes, due to impact such as damage to property, loss of coastal areas to rising waters and deaths from high temperatures.
While the Moody's report didn't detail specific forecasts for the financial impact of the Supreme Court's decision, it noted that the ruling "will have little immediate effect on the credit quality of U.S. regulated utilities." That's because the EPA case stems from former President Obama's Clean Power Plan, which was never officially implemented as it faced legal challenges and was rolled back under the Trump administration.
"As such, the ruling does not repeal or reinstate any regulations," Moody's noted. "However, without more aggressive federal regulations, the pace of the transition [away from fossil fuels] may not be sufficient to meet Paris Agreement targets."
