A Climate Plan Even Exxon Could Love

As lawsuits seeking climate damages from fossil fuel giants ramp up, a new carbon-pricing plan looks to protect them.

A few years ago, putting a price on carbon was a non-starter for Republicans, but things have changed. Now there are multiple bipartisan proposals to do just that ― but only one has the backing of both automotive and fossil fuel companies, and it could put in place a permanent loophole eliminating any responsibility for their role in delaying action on climate.

In mid-May, the House held its first Ways & Means Committee hearing on climate change in a dozen years. The hearing discussed a carbon fee and dividend plan from the Climate Leadership Council, one developed by two former Republican Secretaries of State, James Baker and George Shultz, and endorsed by a broad coalition that includes former Obama Department of Energy head Steven Chu, the late physicist Stephen Hawking, former Federal Reserve chair Ben Bernanke, ExxonMobil, Conoco Philips, Shell, Ford and GM.

CLC founder Ted Halstead was the only witness at the hearing associated with any particular carbon pricing plan (although the Baker-Shultz plan has not yet been formally introduced as a bill) and touted its four “unseverable” pillars: an initial $40 per ton fee on carbon emissions that will rise over time, a carbon dividend that pays citizens back to offset the rising costs of goods, border carbon adjustments and other trade remedies, and a phase-out of most federal greenhouse gas regulations already in place, particularly the Obama-era Clean Power Plan.

The plan also stipulates that “no party should be liable for damages from past emissions that were legal at the time.” Herein lies the rub for a lot of people who care about climate change.

While the first three pillars are fairly standard as carbon tax proposals go, the liability waiver is unique to the CLC proposal, and it comes just as efforts to litigate on climate change appear to be bearing fruit. The Trump administration has yet to win a single case in federal court defending a delay or rollback of climate regulations, according to a new analysis from Columbia University’s Sabin Center on Climate Change Law. And in January, the Supreme Court declined Exxon Mobil’s bid to block the Massachusetts attorney general’s request of internal company documents.

“The plan also stipulates that 'no party should be liable for damages from past emissions that were legal at the time.'”

Creating the sort of liability exemption laid out in the CLC proposal is rare, said longtime consumer advocate and attorney Pamela Gilbert, though industries are constantly lobbying for them. The only industries that currently have this sort of legal protection at the federal level are gun manufacturers and nuclear energy.

“It’s always the very most dangerous products or industries, which makes you think maybe this isn’t so wise,” said Gilbert, a former executive director of the Consumer Product Safety Commission and current partner at the law firm Cuneo Gilbert & LaDuca. “Is the idea that we wouldn’t be able to have these products without this legal immunity, because of the harm they cause? Then maybe we need to rethink that.”

There are currently 17 different climate liability cases underway, brought by cities, counties, states and other industries in an attempt to hold fossil fuel companies financially responsible for their portion of the bill on climate change adaptation. So it makes sense that oil companies would trade a carbon fee, which they have traditionally fought, for a pass on litigation. Just last year, the U.S. oil industry spent some $30 million in Washington state to defeat a carbon tax. Shifting that opposition to support seems to have required permanent legal immunity on climate change.

And then there are the fraud allegations against ExxonMobil. The state of New York brought a suit against ExxonMobil earlier this year which alleges that the company hid the financial risks of climate change from its shareholders. The Massachusetts attorney general’s office is also continuing a fraud probe of the oil giant. Yet another case, also in Massachusetts, alleges that Exxon has not appropriately managed the risk of climate change to a seaside terminal in Everett, Massachusetts. That case just made it past the motion to dismiss, putting Exxon in the position of either having to prove that it has managed for climate risk or acknowledge that it has not; neither is a particularly good argument for them to have to make, and likely means the company will have to turn over internal climate documents to make its case.

CLC Senior Vice President Greg Bertelsen said the proposal isn’t final yet and details are still being fleshed out. They expect to release a final proposal this fall and then an as-yet-unnamed lawmaker will introduce it as a bill later this year. But Bertelsen said he expects that bill will include the liability waiver.

“It’s always the very most dangerous products or industries, which makes you think maybe this isn’t so wise.”

- longtime consumer advocate and attorney Pamela Gilbert

“We envision a provision which, in the context of a robust and rising national carbon price that considerably exceeds the U.S. Paris target, Congress would reaffirm that companies are not liable for historic emissions that were legal at the time,” he said.

That would be a key difference between the Baker-Shultz plan and other carbon fee and dividend plans, which offer regulatory relief but not legal immunity.

“We don’t expect this to be part of the Energy Innovation Act,” Flannery Winchester, with the Citizens Climate Lobby, said. The CCL is a nonprofit whose carbon fee-and-dividend plan has been introduced by a bipartisan group headed up by Reps. Ted Deutch (D-Fla.) and Francis Rooney (R-Fla.). “That’s something our volunteers would be incredibly upset about. It would feel like a blow if something like that were to make its way in.”

Gilbert said the key issue with liability waivers is that government regulations generally fall far short of protecting the public. In fact, “it’s generally legal cases that push the regulation farther,” she said. “You need both the courts and regulation.” Take away the courts and you’re left with weak regulations, standards that never improve, underfunded enforcement and impacts that companies are free to pass on to taxpayers.

In the case of climate liability, taxpayers and local governments are currently shouldering the cost of climate change adaptation ― everything from seawalls to major infrastructure projects like building new roads, in an effort to adapt to sea level rise and prepare for an increase in both the volume and intensity of natural disasters exacerbated by climate change. These costs are only increasing, and cash-strapped local governments are hoping to share the responsibility for them with some of the industries that contributed to the problem, fought to stall regulation that would have mitigated impacts, and profited while doing so.

One of the cities filing suit last year was Richmond, California, which is still awaiting a decision in the 9th Circuit Court of Appeals. Richmond Mayor Tom Butt said in a statement that access to the courts is “fundamental to our system of democratic governance,” and “ensures that even the most powerful corporations are subject to checks and balances.” Butt joined five other California plaintiffs last year in a letter to Democratic California Sens. Kamala Harris and Diane Feinstein warning against carbon legislation that includes immunity against litigation.

CLC argues that such immunity is necessary to get a reasonably high price on carbon. Their $40 a ton figure is certainly higher than the proposal from Reps. Deutch and Rooney that starts at $15 a ton, but that bill has the price increasing $10 per year until it hits a point where emissions are not increasing past 2016 levels; the CLC price is lower than a plan from Democratic Sens. Sheldon Whitehouse (R.I.), Brian Schatz (Hawaii), Martin Heinrich (N.M.), and Kirstin Gillibrand (N.Y.) that starts at $52/ton.

But Gilbert said this is a false bind, pointing to the tobacco industry’s attempts to curb suits in exchange for Food and Drug Administration regulations in a 1997 bill as an example of why these sorts of trade-offs are not necessary.

“That bill never passed, and years later legislation did pass without that liability limitation,” she said. “Sometimes people will say you’ll never get federal regulation so you have to give up the lawsuits, but that’s just not true.”

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