Op-Ed: Foreign imports shouldn't be exempt from climate disclosure regulations

AISI testified at the hearing, pointing out the proposed regulations’ considerable flaws and their adverse impact on steel and other American manufacturers. At a time of increasing global steel overcapacity and rampant unfair trade practices, California’s mandate exempting foreign manufacturers sets a dangerous precedent. This gives a free pass to higher emissions imports at the expense of cleaner American-made products, like steel.

Specifically, a business is covered by these regulations if it:  1) is a US-based company “doing business in California”, and 2) meets the relevant revenue thresholds – $1 billion for GHG emissions reporting, and $500 million for climate risk disclosure.

It all sounds simple, but the regulation’s reliance on “US-based” creates multiple, intractable problems. Other states, such as New York and Washington, are considering similar programs. These states should learn from California’s mistakes and develop proposals that require equivalent disclosure from domestic and foreign manufacturers that sell into their states.

American-made steel is the world’s cleanest steel and is made more efficiently and with a smaller carbon footprint than steel made by our foreign, often government-subsidized competitors. That would be revealed if both American and foreign steelmakers were obligated to reveal equivalent data under this program. They aren’t. Instead, the scheme enables foreign manufacturers to have a reduced regulatory burden and allows them to provide incomplete, unrepresentative data, if they provide any data at all.

There are five key reasons why AISI has urged that California reconsider its mandated climate disclosure policy, and which serve as guidance for other states as they develop their disclosure regimens:

1. The disclosure burdens inequitably harm the domestic industry

The American steel industry has long demonstrated a commitment to producing the world’s cleanest steel and has thoroughly disclosed information regarding its operations. Even still, domestic manufacturers face the risk of additional burdens and unclear regulations – all while their foreign competitors are allowed to evade most of these disclosure obligations.

2. Excluding foreign manufacturers paints an incomplete picture

The goals of California’s program are to improve transparency, inform consumer and investor decisions, and drive “bold action through sound climate policy” in support of the state’s climate neutrality goals. The simple fact of the matter is that the regulations will not meet these stated goals because they fail to account for foreign-made products entering into the California market. A state cannot claim transparency is improved or climate neutrality goals are being met simply by pretending foreign-made goods do not exist.

3. The proposed regulations provide an easy avenue for disclosure evasion

The proposed regulations reward foreign manufacturers who evade disclosure. A foreign manufacturer could sell a nearly endless amount of dirty, foreign-made steel into California through third-party vendors without triggering any disclosure requirements. American manufacturers, in contrast, face mandatory disclosure. The result would be that projects using American-made steel would have GHG emission and climate-related disclosures while those using foreign-made steel would appear cleaner simply due to their evasion of the regulations.

4.  The proposal incentivizes the use of foreign-made goods

Businesses respond to incentives, and this disclosure program incentivizes the use of foreign-made goods. For example, if a California builder uses American-made steel, it does so with an accurate accounting of the GHG emissions and climate risk associated with its products. But if that same builder uses foreign-made steel bought through a vendor, there is no GHG emissions or climate risk data to disclose. By purchasing foreign-made goods, the builder became “cleaner” simply by not buying the American-made product. That is absurd.

5. Without equivalent data, the purported goals cannot be achieved

Without requiring equivalent data from all large corporations selling into a state market, the gathered data cannot inform or support the state’s goal of carbon neutrality by 2045. As a result, the state’s benchmark will be artificially low, and the corresponding trends will be wholly unrepresentative of the true GHG emissions and climate-related financial risk associated with all companies doing business in California.

GHG emissions and climate-related risk disclosure are serious undertakings. American steelmakers do not shy away from publicly disclosing the GHG emissions and climate impacts associated with their operations. California’s laws often serve as models for other states and private markets. In this case, the state’s action should serve as a cautionary tale for others. Following California’s lead would mean preferencing foreign manufacturing, penalizing clean and innovative American steel production, all while producing incomplete, inaccurate climate data.  That’s not a regulatory approach any state should want to follow.

Editor’s note

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