California’s climate lawsuits threaten to raise energy prices and harm consumers
The recent Supreme Court ruling in West Virginia v. EPA reinforced the commonsense notion that it is the responsibility of our elected representatives, not the courts, to establish our nation’s global climate change policies. If only the states and localities suing the global energy companies, many of which are here in California, took heed.
To date, more than two dozen states and localities are suing energy companies for their alleged role in contributing to global climate change. Whether these suits have legal merit is questionable; what is indisputable is the severe negative impact these suits would have on the economy should the plaintiffs be successful.
If the plaintiffs are victorious, then oil and gas prices would increase for several reasons. First, with judgments likely to be in the billions of dollars, some of these litigation costs would be passed along to consumers, putting upward pressure on gas prices.
Second, huge judgments will reduce investments in new as well as existing production assets, thus reducing the supply of oil. The recent supply shortages that drove oil prices well above $100 per barrel exemplify what happens to oil and gas prices when supply is constrained.
Third, the lawsuits send a clear signal to potential energy producers that investing in oil exploration or infrastructure is a very risky prospect. Companies will be more reluctant to invest in new or existing production assets, including natural gas production, which was once hailed as a beneficial, low emission source. This would further constrain oil supply with even larger expected impacts on price.
The negative impacts from significant spikes in oil prices are well documented. Back in 2008, with oil prices spiking to a mere $80 a barrel, the Federal Reserve Bank of San Francisco (FRBSF) explained the consequences. Summarizing the effects, rising oil prices squeeze families’ budgets, erode our ability to afford the things we need or want, increase costs for businesses, reduce production, increase unemployment, and raise costs throughout the economy.
While these impacts will be felt nationally, California bears an undue responsibility for creating them. Of the two dozen states and localities suing the energy companies, seven localities are here in California – Imperial Beach in Southern California as well as San Mateo, Marin, Santa Cruz, Richmond, Oakland, and San Francisco elsewhere in the state.
Worse, if the plaintiffs have their way, California state courts will decide whether citizens across the nation are going to pay higher oil and gas prices and bear the large economic consequences that will undoubtedly arise.
While some Californians may be willing to bear the large economic costs in the name of global climate change, California’s state courts should not be establishing the nation’s energy policies. After all, imagine the consternation many Californians would feel if it were state courts in Texas or Florida that were deciding what the nation’s energy policy should be.
It is precisely this tension that the issues should not be decided in any court. It should be decided by the people’s representatives in Congress.
The legal complaints filed by the municipalities in California are part of a cottage industry of trial lawyers and environmental groups who are coordinating to file lawsuits across the U.S. If successful, these lawsuits will perpetuate high energy prices, elevate judges to set climate policy (an area far outside of their proper role), and undermine our nation’s future energy needs.
Wayne Winegarden is a senior fellow in business and economics at the Pacific Research Institute.