Law & the Courts

Litigation against Fossil Producers Is Litigation against Energy Consumers and Voters

Cars pass a BP gas station in Arlington, Va., in 2010. (Kevin Lamarque/Reuters)
The litigation against producers of fossil fuels carries with it a real potential crisis of our democratic institutions.

Supply and demand form the oldest and most powerful framework we have for analyzing price shifts for goods and services. Increase the cost of supplying a given good, and — presto! — its price will rise, imposing economic costs not only upon the producers but emphatically upon the consumers of the good.

Which brings us to the ongoing litigation game against producers of fossil fuels, in general an effort to blame them for the purported local adverse effects of anthropogenic climate change. In May, the Supreme Court ruled 7–1 in BP PLC v. Mayor and City Council of Baltimore that federal appellate courts have the jurisdiction to examine all of the arguments made by litigants on whether such lawsuits belong in federal or state courts. The plaintiff cities and states usually prefer state courts as the venues, as they are seen as more likely to rule against the defendant fossil-fuel producers, in substantial part because the Supreme Court ruled in 2011, in an 8–0 decision (American Electric Power v. Connecticut) written by Justice Ginsburg, that “it is primarily the office of Congress, not the federal courts, to prescribe national policy in areas of special federal interest.”

So back to the lower courts we go for determinations of whether a state or federal court is the appropriate venue for a given lawsuit, with appeals becoming a certainty after such rulings are handed down. But in the larger context, this litigation game is based upon a premise that is false: that it is fossil-fuel producers who should be held responsible for the (highly uncertain) effects of increasing atmospheric concentrations of greenhouse gases (GHG).

Why do they produce fossil fuels? It is not for the fun of it. Instead — obviously — they do so because there is a huge consumer market for reliable, affordable energy complementary with capital assets that produce a stream of goods and services satisfying consumer preferences efficiently.

In other words, consumer demands — including enormous consumption (Table 2.8) of fossil fuels by government — are the raison d’être of any industry, whether producing final goods and services or intermediate inputs. This is so obvious that it is natural to ask why the ubiquitous reporting on climate litigation largely fails to note that while the litigation is directed at the fossil-fuel producers, it is consumers — ordinary people — who ultimately will bear the adverse effects of a reduction in energy supplies, from the increased costs that will emerge virtually across the entire economy to fewer technological advances.

So why have the plaintiffs failed to name as defendants every industry in the economy that uses fossil fuels? Should the plaintiffs not sue consumers of fossil fuels for the purported “harm” that their consumption preferences engender? That too is obvious: The litigation attack on fossil-fuel producers is a blatant effort to circumvent the democratic process — the consent of the governed — that under the institutions of a constitutional republic is the proper venue for the determination of public policies, that is, the resolution of the painful tradeoffs that policy choices cannot avoid.

The use of litigation rather than political debate and persuasion thus is an implicit but obvious admission that it is consumers — voters — who will pay the price for the future reductions in energy supplies that are certain to result. My conservative estimate of the direct costs of only the electricity portion of a net-zero U.S. energy policy is about $500 billion per year, or about $4,000 annually per U.S. household.

Or consider the estimates of the “social cost of carbon” — the purported costs of greenhouse-gas emissions not reflected in market prices — to be revised by the Biden administration later this year. For now, we have an interim estimate of, very roughly, $300 per ton (a number that is fatally flawed). Annual U.S. GHG emissions are about 6.6 billion tons, the “social cost” of which, accordingly, will be asserted to be $2 trillion per year, or perhaps much more if the forthcoming revision yields a larger number. Agriculture and cement production and all of the other major sources of GHG emissions use fossil fuels; accordingly, the plaintiffs will be happy to blame fossil-fuel producers for all that “damage” despite the fact that agriculture and cement production and a myriad other processes emit far more GHG than those attributable narrowly to the use of fossil fuels. (For example: the limestone calcination process during cement production and fertilization processes in agriculture.) Assigning “blame” to the producers of fossil fuels rather than the users is an obvious gambit to make the litigation game manageable; they cannot sue everyone. That said, however logically absurd it may be, is it really so obvious that no judges anywhere will approve this legal shakedown?

Or consider the GHG taxes proposed by the Intergovernmental Panel on Climate Change in its 2018 report (page 2-78):

estimates [of a carbon tax] for a Below-1.5°C pathway range from 135–5500 USD [per] tCO2-eq in 2030, 245–13000 USD [per] tCO2-eq in 2050, 420–17500 USD [per] tCO2-eq in 2070 and 690–27000 USD [per] tCO2-eq in 2100.

The midpoint of the range for 2030 is almost $3,300 per ton in 2020 dollars. That works out to a tax of about $28 per gallon of gasoline. (Combustion of a gallon of gasoline/ethanol 10 percent blend emits about 18.9 pounds of CO2.) Does anyone want to argue that such policies will fail to inflict massive costs on consumers?

Or consider a much simpler approach: Assume demand conditions consistent with the findings reported in the peer-reviewed literature, and energy supplies reduced over time by 30 percent because of litigation. That would yield increases in energy prices — borne by consumers — of 40-50 percent. Can anyone find that sort of outcome plausible politically?

Litigation is the preferred vehicle for attacking fossil fuels precisely because consumers allowed to express their preferences in democratic processes will never allow themselves to be burdened with such massive costs. Whatever one believes about the climate “crisis,” the litigation against producers of fossil fuels carries with it a real potential crisis of our democratic institutions.

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