According to Moody's Investor Service, the Supreme Court's recent decision to limit the Environmental Protection Agency's ability strictly regulate power-plant emissions could increase corporate climate risks and undermine businesses' creditworthiness.
Moody's stated in a Tuesday research note that a delayed transition could lead to more disruptive climate policies for carbon-intensive sectors.
According to Moody's researchers, "The court ruling is a significant setback for the US government's plan to decrease economy-wide net greenhouse gases emissions to zero by 2020 in order to meet Paris Agreement goals." Moody's discovered that the decision does not affect the creditworthiness or creditworthiness businesses that will continue to use fossil fuels, and have more climate-related impacts.
The U.S. has suffered nearly $2 trillion in climate and major weather disasters over the past four decades. This is despite the fact that the effects of these incidents have been increasing due to climate change. According to the Moody's report, the Supreme Court's decision means that the U.S. will have to work harder to achieve the Paris Agreement targets. This will cause long-term problems.
According to the agency, the ruling "raises risks of a delayed or more disorderly transition into a low-carbon economy with broad credit negative consequences across sectors."
It was stated that the ruling could delay a transition away fossil fuels and companies from multiple industries could face "higher mitigation cost" in the future.
Experts warn that the Supreme Court decision could have a negative impact on human health and the environment. However, corporations face risk as well. One study found that U.S. companies could lose $520 million across 22 industries as a result of climate change. This is due to impacts such as property damage, loss of coastal areas, rising waters, and death from high temperatures.
Although Moody's didn't provide specific forecasts on the financial impacts of the Supreme Court's decision's outcome, the report noted that it "will have no immediate effect on credit quality of U.S.-regulated utilities." The reason is that the EPA case stems out of the Clean Power Plan by former President Obama, which was not officially implemented due to legal challenges. It was rescinded under the Trump administration.
Moody's stated that the ruling did not repeal or restore any regulations. "However without more aggressive federal regulation, the pace of transition [away fossil fuels] may not meet Paris Agreement targets.