Climate alarmism, or at least the desire to appease alarmists for political benefit, fuels much of the federal regulatory agenda in both Canada and the United States. There are, as American examples, President Biden cancelling federal permits for the Keystone XL pipeline and the goings-on this year at the U.S. Securities and Exchange Commission where the chairman (appointed by Biden) made climate disclosures a top priority.

Mandating climate disclosures is premised on the idea that financial markets fail to properly account for climate change risks; thus, the government should force companies to disclose such risks and how they plan to mitigate them. This idea, however, that private investors need advice from the federal government on how to invest and what they should demand companies disclose, is dubious to say the least.

Nevertheless, in Canada too, the federal government has shown significant enthusiasm for mandating climate disclosures. Last year, a loan program to help large employers survive the COVID lockdowns required recipient companies “to publish annual climate-related financial disclosure reports, including how their future operations will support environmental sustainability and national climate goals.”

With the more than $100 billion expropriated from Canadian taxpayers to fund federal climate spending since 2015 apparently insufficient, the Trudeau government is bent on conscripting private capital through regulation as well to bolster its ammunition in the climate wars. The goal, it should be clear, has nothing to do with improving financial markets and everything to do with raising public alarm about climate change.

Indeed, if the goal is to improve investment decisions through corporate risk disclosure mandates, it’s odd that Ottawa would elevate climate change above any number of greater risks—the possibilities of world war, riots and political unrest, cyberattacks, epidemics and so on. We could also add to the list of risks greater than climate change itself, the risk of activist politicians imposing economically destructive policies to deal with climate change.

Both Joe Biden and Justin Trudeau are committed to emissions targets with the goal of limiting global warming to 1.5 degrees Celsius, but as economists Robert P. Murphy and Ross McKitrick reported in a recent Fraser Institute paper, this goal comes with significant economic costs and “did not arise from the economics literature or from formal cost-benefit analysis.”

The United Nations’ Intergovernmental Panel on Climate Change (IPCC) admitted in its 2018 report, Murphy and McKitrick note, that policies for achieving the 1.5 degrees target would only be justified if the environmental damages of carbon emissions in 2030 ranges from $135 to $5,500 per tonne—or about 2 to 89 times what the U.S. Environmental Protection Agency (EPA) estimated earlier this year.

Murphy and McKitrick also cited the work of economist William Nordhaus, who was awarded the Nobel prize for his work analyzing the long-term economic effects of climate change and climate policies. According to Nordhaus’s 2016 modelling work, achieving the 1.5 degree target would probably be so economically destructive that people would be better off if governments did nothing about climate change.

If governments are really convinced that companies should be forced to make disclosures on the financial risks of climate change, it would make more sense to have the companies disclose how they plan to deal with the risks posed by economically destructive federal climate policies than the risks posed by climate change itself. The former, after all, is likely a greater financial risk to most companies than the latter.