Fix Climate Policy with Economics, Not Lawyers

By Jeremy Carl

Friday, May 31, 2019

Last week BP and Shell both pledged support for the Climate Leadership Council’s (CLC) proposal for a revenue-neutral “carbon fee and dividend” plan, under which extractors of carbon-based fuels would be charged a fee, and all of the money collected would be distributed to the public as a dividend. While conservatives have a wide variety of views on how, or even whether, to address climate policy, this initiative is perhaps the most genuinely bipartisan attempt so far to move forward on a famously contentious issue.

Under the CLC plan, the fee and dividend provisions would be combined with the repeal of a number of Obama-era regulatory policies, including the Clean Power Plan, that try to accomplish similar emissions-reduction goals, but in a less economically efficient manner. Its efficiency-focused approach has drawn the support of a significant number of Republicans, even some who are skeptical of the Left’s broader climate claims.

While I have not been involved with or taken a position on the CLC plan, I was privileged to spend the last decade directing the Task Force on Energy Policy at the Hoover Institution, chaired by two of the CLC plan’s initial co-authors, former U.S. secretary of state George Shultz and Ambassador Thomas Stephenson. I’ve also written extensively about the empirical effects of carbon pricing in my own scholarly work.

Shultz and Stephenson joined a distinguished group of GOP luminaries that includes former secretary of state James Baker, former Treasury secretary Hank Paulson, former Council of Economic Advisers head Martin Feldstein, and former Federal Reserve chair Alan Greenspan in creating the original CLC plan.

But while some critics have referred to the CLC as a Republican proposal, it was also endorsed by a number of prominent Democrats, including Larry Summers and Steve Chu, who served as Treasury secretary and energy secretary, respectively, under President Obama. It was also a rare proposal that won support from sources as diverse as major environmental NGOs (such as Conservation International) and industrial titans (such as Ford and GM). The plan’s core principles were endorsed by 27 Nobel Prize–winning economists and leading economic policymakers, including every living former chair of the Federal Reserve and 15 former chairs of the U.S. Council of Economic Advisers from both parties.

But instead of expressing happiness that some of the biggest oil producers were willing to accept a major concession to help lower emissions under a plan with almost unprecedented bipartisan support, many on the left have complained because the plan also limits climate-change-related litigation. An article in the liberal blog ThinkProgress called this provision the oil companies’ “present to themselves.” According to Daniel Zarillo, an aide to New York mayor Bill de Blasio, it’s a “transparent attempt by fossil fuel companies to avoid the liability for decades of deception and denial about the consequence of burning fossil fuels.” Tom Butt, the mayor of Richmond, Calif., called it a “Trojan Horse proposal that attempts to prevent cities, counties, states, or others from holding fossil fuel companies accountable for climate change-related damages they knowingly caused.”

None of these climate-change lawsuits have succeeded, and there’s no reason to think they will. They all require novel, if not frivolous, legal theories. Even far-left European Union courts have thrown out suits of this type.

Moreover, even if they were successful, most such suits would do little to limit emissions going forward. The lawsuits are based on the idea that oil companies intentionally concealed evidence of severe damages from climate change. Even if these highly contestable claims were true, pursuing them is simply not the most productive approach to actually moving Americans toward a politically durable climate-policy solution.

Further, contrary to the implicit claims of Butt, Zarillo, and others who share their views, there is no significant evidence that oil and gas companies’ public positions on climate science have driven substantial changes in oil and gas consumption. Simply put, we use oil because it allows us to do important things that are very difficult to do without it. The vast majority of climate activists still fly on airplanes, drive gasoline-powered cars, and use plastics and other materials made from petroleum. Pricing carbon could change incentives and promote alternatives, while retrospective lawsuits do nothing to alter present realities.

Furthermore, even if activists somehow managed to bankrupt every major oil company without shifting the fundamental incentives in the energy markets, new investors would simply purchase their assets and restart the cycle. So why is the Left so invested in these lawsuits?

Beyond financial self-interest, they have a deeper ideological motivation: using climate change not just as an environmental-policy issue, but as a way to right all their perceived societal wrongs. Their primary concerns are not creating good public policy but promoting a political theology that I have referred to as “The Church of Environmentalism.”

As Representative Barbara Lee (D., Calif.) said, “addressing climate change is not just an environmental issue, but also an imperative to achieve racial and economic justice.” Last year the Sierra Club’s magazine ran an article endorsing climate-change lawsuits against the oil companies as the first step in “climate change reparations,” which was only “the base minimum required for any accounting of a crime as insidious as the profit-driven alteration of Earth’s atmosphere.” The NRDC has also approvingly called climate lawsuits “reparations,” as have articles in most of the leading left-wing publications, such as The New Republic, The Nation, and Mother Jones. Not to be outdone, the popular socialist magazine Jacobin called for trying oil executives for “crimes against humanity.”

This political theology masquerading as public policy is at work in Representative Alexandria Ocasio-Cortez (D., N.Y.) and Senator Ed Markey’s (D., Mass.) Green New Deal. While conservatives poked fun at some radical environmentalist policies discussed in the draft legislative summary, the actual legislation has surprisingly little to do with the environment at all, stating:

It is the duty of the Federal Government to create a Green New Deal . . . to promote justice and equity by stopping current, preventing future, and repairing historic oppression of indigenous peoples, communities of color, migrant communities, deindustrialized communities, depopulated rural communities, the poor, low-income workers, women, the elderly, the unhoused, people with disabilities, and youth.

Looking at this broader political context, many on the right are, quite understandably, skeptical of the Left’s motives in pursuing their preferred climate policies. The Green New Deal and climate lawsuits are about punishing the Left’s enemies and funding left-wing social programs, while giving leftists a false sense of moral superiority. If climate change is the existential threat to humanity that the Left says it is, they are going to need to build a bipartisan consensus, not file frivolous lawsuits against energy companies, to address it.