Economists: Suing energy companies for concealing climate change would correct market, help society
More than 40 years ago, internal research at Exxon led the company’s scientists to predict that burning fossil fuels would warm the environment in a way that would have “dramatic environmental effects before the year 2050,” internal company memos said.
But after the energy company’s executives decided that public knowledge of the research might crimp profits, they decided to suppress that knowledge. Instead, Exxon spent $30 million to raise doubts in the public mind that burning fossil fuels produces gasses that warm the planet.
In other words, they and other companies were spending big to cast doubt on what Exxon’s own scientists had concluded. The campaign was so effective that it wasn’t until the last decade that most journalists felt comfortable positing human-caused climate change as a fact — even though the great majority of climate studies were saying so then and almost all are now.
In a survey of Ohio economists that was released this week, a majority said trying to make the companies pay for their coverup would be good for society and the marketplace.
Now that the effects of climate change are getting really bad, some governmental entities are suing the big oil and gas producers, arguing that they knew burning their products was harmful, but chose to cover it up, and even promote disinformation to the contrary. Earlier this week, California Attorney General Rob Bonta sued Exxon Mobil, Shell, Chevron, ConocoPhillips, BP and the American Petroleum Institute, accusing them of just such conduct.
“Oil and gas companies have privately known the truth for decades — that the burning of fossil fuels leads to climate change — but have fed us lies and mistruths to further their record-breaking profits at the expense of our environment,” Bonta said in a statement. “Enough is enough.”
In a survey of a panel of Ohio economists conducted by Columbus-based Scioto Analysis, a majority agreed that Ohio might benefit from similar litigation — although a number of others said they were uncertain.
Economists’ agreement was strongest that “Cities in Ohio should sue oil and gas companies to pay damages for concealing the effects of climate change to correct for a past market failure.” Ten of those surveyed agreed with that statement, three disagreed and four were uncertain.
“In theory it is worth a try,” Jonathan Andreas of Bluffton University wrote in the comments section of the survey. “I disagree with the logic of the statement because I think past market failures are a sunk cost and we cannot correct past mistakes, but this could help avoid future mistakes. I don’t know that this is the best way, but at least it should help prevent the fossil fuel companies from continuing spending money on their disinformation campaign which has convinced millions of Americans that global warming is fake news.”
Glenn Dutcher of Ohio University said he was uncertain because suing might not be the best way to correct the market.
“I shy away from ‘should’ because there may be other mechanisms that would achieve some policy goal more efficiently,” he wrote.
When asked whether they agreed that suing the energy companies “would increase social welfare,” the economists were less certain. Nine agreed, one disagreed and six were uncertain.
Andreas commented that he agreed suing would promote social welfare, but how much would depend on how much money it would bring to Ohio from elsewhere.
“Although the state is a net natural gas exporter and exports a lot of refining services, we are a big importer of other fossil fuels so it might primarily transfer money to Ohio from out of state a bit like optimal tariff theory predicts,” he wrote.
But Paul Holmes of Ashland University said there were too many variables to be certain if suing energy giants would help Ohioans.
“I think this is really complicated,” he wrote. “At first glance I’d say ‘no’ since such lawsuits wouldn’t create new resources, just shift them around. But if it meant oil and gas companies changed their behavior in a pro-social way, then (almost tautologically) this would increase social welfare. Clearly this is not the BEST way to achieve behavioral change; the oil and gas companies’ argument that this would be better dealt with by federal policy is correct, except for the fact that federal policies are jammed up by politics, so maybe this is second-best? I’m not sure.”