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If you think your energy bills are high now, just wait until the climate activists get their way. They’ve launched a massive, nationwide campaign of lawfare which, if successful, would raise the average household’s annual energy bill by almost $1,500 per year and nearly $15,000 over a decade. The Supreme Court is currently hearing one such case (Suncor Energy Inc. v. County Commissioners of Boulder County).
The campaign essentially has three avenues of attack: tort litigation, state “climate superfund” statutes and federal legislation. Each category represents enormous charges on upstream suppliers which, of course, will then move downstream to households at the pump and the meter.
Over 30 lawsuits demand that energy companies pay for unproven impacts on global climate change, with filings by 11 states, D.C., and dozens of cities. New York and Vermont simply legislated this liability into existence through climate superfund laws — the former capped at $75 billion with the latter leaving liabilities uncapped.
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A dozen other states have tried similar penalties, as have members of Congress with the so-called Polluters Pay Climate Fund Act, which would confiscate $1 trillion over 10 years. Supporters insist none of this will hit families’ wallets, that assessments target past production and that shareholders will pay for it. Those claims don’t stand up to the facts.
A natural gas plant flares in Wyoming. (Marli Miller/Getty Images)
Businesses must pass costs to consumers, and that’s exactly what will happen here, regardless of whether some government bureaucrat decrees specific costs to be from yesteryear. Those same firms must also price future risk, which would increase dramatically if business could be retroactively punished for legal activity 30 years ago.
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For many power plants and energy infrastructure projects, which take decades to pay off and recoup initial investments, this additional risk means such projects may never even be undertaken. For those that do move forward, firms must charge consumers higher prices to counter the additional risk of fickle government potentially imposing massive fines.
And even if costs were confined to shareholders, as opposed to ratepayers or drivers filling up their tanks, those shareholders are still middle-class Americans. Energy stocks are held in pension funds and 401(k)s of blue-collar workers like teachers, pipefitters, firefighters, electricians and police officers.
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“Making shareholders pay” means raiding retirement accounts to finance the pet projects of climate activists, like carbon taxes. In fact, one of the lawyers who helped launch this climate lawfare crusade, David Bookbinder, even admitted that the desired outcome is an indirect carbon tax, with companies passing costs to consumers in the form of higher prices.
Our analysis agrees, putting the tab for all these lawsuits and legislative efforts at roughly $194 billion annually. For context, that’s an average of about 41 cents on a gallon of gasoline and 1.5 cents per kilowatt-hour, or a 9% jump in your electricity rate, while 41 cents per gallon is about four-fifths of all the federal and state gas taxes consumers already pay.
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The timing couldn’t be worse with electricity prices already up 7% last year and 9% again early this year. One in six households is behind on their energy bills, and one in four has cut spending on food or medicine to pay for them.
And since low-income families spend nearly four times the share of their income on energy as everyone else, the pseudo-carbon taxes of climate activists would be highly regressive. Perhaps to hide this fact, New Jersey legislators renamed their $50-billion assessment to the proposed “Polluters Pay to Make New Jersey More Affordable Act.”
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But a nationwide carbon tax is unlikely to pass because Congress could be held accountable by voters for such an unpopular and costly measure. Conversely, a carbon tax cobbled together from court verdicts and retroactive assessments is an unconstitutional way to short-circuit voters’ ultimate veto.
Businesses must pass costs to consumers, and that’s exactly what will happen here, regardless of whether some government bureaucrat decrees specific costs to be from yesteryear.
That’s why Maryland’s Supreme Court threw out three of these suits early this year, observing that even precautions like perfect warning labels would’ve been a drop in the bucket of global emissions.
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But lawfare isn’t only about winning because the process is the punishment. Dismissals don’t absolve legal fees and other costs. Risk premiums rise in the face of lawfare, even when energy companies consistently win, and the associated costs eventually reach customers’ bills.
The better path is to produce more energy, not less, and thereby lower costs for consumers. Reliable power plants need to keep running and new ones should be added to fuel growing demand. The alternative from the other side is a $1,500 annual tax on households that no one voted for.
E.J. Antoni, Ph.D., is Chief Economist and the Richard F. Aster fellow at the Heritage Foundation and a senior fellow at Unleash Prosperity.
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