California Climate Lawsuits on Life Support May 25

OK my headline is not the report from activists who are crowing because the judge asked for more discovery during the next sixty days. A closer look reveals both sides will have that burden.  A more balanced report comes from Kurtis Alexander in the SF Chronicle

Oil companies want SF, Oakland climate lawsuits dismissed  Excerpts with my bolds.

Five of the world’s largest oil producers urged a federal judge Thursday to dismiss lawsuits by San Francisco and Oakland that seek to hold the companies liable for climate change, arguing that the issue is one for Congress, not the courts.

San Francisco and Oakland are among a handful of communities nationwide, including New York City and King County, Wash., squaring off over global warming with the fossil fuel industry, and now the Trump administration. An attorney for the Department of Justice stood with industry lawyers in the federal courthouse in San Francisco, echoing their request that the cases be dropped.

The communities accuse the oil industry of knowingly selling products that emit damaging heat-trapping gases, and they’re suing for billions of dollars to address such problems as sea-level rise. The companies counter that greenhouse gas emissions are regulated under the Clean Air Act and remain the purview of lawmakers.

“Global warming is a serious issue, but it’s not one that can be solved by a lawsuit,” said attorney Ted Boutrous, who represents Chevron of San Ramon and also represented ExxonMobil, BP, Shell and ConocoPhillips on Thursday. “The plaintiffs are asking the courts to wade into the clear territory of Congress. To say the least, that’s a big ask.”

Boutrous not only argued that the nation’s environmental laws are the proper way to deal with industrial emissions, but also said that if a judge takes up the matter of fossil fuels, the court would be reaching too far into issues of national energy policy and national security, topics best handled by Washington.

After nearly three hours of arguments, U.S. District Judge William Alsup did not rule on whether the lawsuits would move forward. He asked both sides for more information. In addition, he authorized the cities to collect information from the out-of-state oil companies, which also argued that liability for California issues shouldn’t extend beyond the state’s border.

The San Francisco and Oakland cases are the furthest along of roughly a dozen similar legal efforts and they’re being closely watched across the nation. The suits have put global warming on unprecedented legal ground and have huge stakes for how the localities will cover the rising costs of climate change.

San Francisco alone estimates that $10 billion of public property and as much as $39 billion of private land are threatened by rising seas. The city wants money to repair its seawalls, control drainage, and relocate streets and infrastructure.

“It’s hard to know what’s going to happen with the suits,” said Sean Hecht, co-executive director of the Emmett Institute on Climate Change and the Environment at the UCLA School of Law. “We have not had a case like this that has gotten beyond the motion-to-dismiss phase.”

The attorneys for the oil companies sought to justify their pleas for dismissal with prior court cases. Many of the rulings they cited, including the 2011 decision in American Electric Power Co. vs. Connecticut, found that corporations can’t be sued for greenhouse gas emissions because Congress has laws, as well as the Environmental Protection Agency, to regulate pollutants.

San Francisco and Oakland, however, are making a slightly different legal case than the earlier suits. They’re going after the oil companies not for greenhouse gas emissions but for producing and promoting fossil fuels.

Attorneys for the cities said that putting fossil fuels on the market and encouraging their use, when the companies knew they were damaging, constitutes a “public nuisance” that is within the court’s jurisdiction.

“We’re going to prove that they understood that they were causing global warming and they took actions to harm us,” said Steve Berman, one of the attorneys representing the cities.

The cities have likened the actions of the oil industry to tobacco companies, which sought to cover up research into lung cancer and have been held responsible for the health damage caused by smoking.

While Alsup hasn’t ruled on whether the cases will proceed, he acknowledged in a March decision, which put the matter in federal court instead of state court, that the suits are different than previous emissions cases. He also held an unprecedented “tutorial” on climate science to better prepare the court for handling the cases.

But on Thursday, Alsup questioned whether it makes sense to sue the oil industry for a product most people want and need.

If we didn’t have fossil fuels, we would have lost that war (World War II) and every other war,” he told the courtroom. “Planes wouldn’t fly. Trains wouldn’t run. And we’d be back in the Stone Age.”

Alsup wrestled aloud with how to reconcile the benefits of fossil fuels with the damage they’re causing, and he wants both sides to provide additional information on the matter.

In a friend-of-the-court brief filed this month, the Justice Department argued that the importance of oil and gas is one of the reasons the issue is not one for the courts to address.

“Balancing the nation’s energy needs and economic interests against the risks posed by climate change should be left to the political branches of the federal government,” the federal attorneys wrote.

The attorneys also argued that if San Francisco and Oakland are successful in their suits, it would invite countless other legal challenges.

“If these cities may properly allege injuries from climate change, then so can every person on the planet,” they wrote. “Federal courts are poorly equipped to handle this multitude of cases and the associated complex scientific, economic, and technical issues.”

Most of the communities that have filed suits like San Francisco’s and Oakland’s are in California, including the cities of Richmond, Santa Cruz and Imperial Beach, and the counties of San Mateo, Marin and Santa Cruz. None have moved to trial. In most of the cases, judges are still deciding whether federal or state court is the appropriate venue.

The lawsuits come as the Trump administration has vowed to withdraw from the Paris climate agreement, an international pact aimed at reducing greenhouse gas emissions. President Trump has often downplayed the threat of climate change, even suggesting that the planet is not warming.

Good News! Skeptical Ontario.

Ontario provincial elections are June 7, and a recent poll illuminates how liberals intent on saving the planet have turned the electorate into single issue voters.  The story comes from Global News: Climate change is the issue of our times — unless you’re an Ontario voter

This site has several posts describing how the electrical system has been mangled by green ideologues, and they have no one but themselves to blame.
Link to play Global video:  https://globalnews.ca/video/embed/4232314/

The article is written by a hand-wringing climatist, upset that the social proofs are failing at voters’ wallets.

One of the signature policies of the incumbent Liberal Party is leadership on climate change. And, since most of us care about helping the world’s climate, this should be a winning issue for the Liberals.

Not in Ontario though. At least not now. That’s because the effects of the Liberal’s approach to dealing with carbon, including changes to hydro rates and carbon pricing, has helped to galvanize a potential winning coalition around Doug Ford and the PC Party.

For many voters this no longer about helping the climate, it’s about increasing taxes, affordability, and government mismanagement.

What’s also happened in this election is that the emphasis in the phrase “carbon tax” has moved from the “carbon” to the “tax.” And, since voters are more concerned about taxes than climate today, the cure for too many seems worse than the disease. This is especially the case for voters who are more pessimistic about the economy.

Evidence of how public views have aligned against the Liberal’s management of the climate issue emerges when you ask Ontarians if the carbon tax is just a tax grab: 72 per cent agree.

This includes 85 per cent of PC voters, 72 per cent of NDP voters, and even 54 per cent of Liberal voters.

Another 68 percent of Ontario voters also agree that a carbon tax is nothing but a pointless gesture that won’t help the earth’s climate.

When you add it up then, carbon pricing has become a political millstone around the neck of the Ontario Liberal Party in this election.

This won’t end with the Ontario election. That’s because the Trudeau Liberals, like the Wynne Liberals, have made carbon pricing a cornerstone issue for their mandate.

Based on what we’re now seeing, this issue could also represent an electoral liability for the federal Liberals in Ontario. And, the situation won’t be helped by a Premier Doug Ford who has vowed to fight the pending federal climate tax if he is elected on June 7.

Are people finally seeing the light?

Climate Proxy Fighting Season and First Result

Shell Shareholders Vote 94% Against Climate Target-Setting Resolution

On May 22, 2018 one of the first skirmishes went badly for climatists, though journals like the Guardian gave no such impression:
Shell investors revolt over pay and maintain pressure over climate change; Oil firm grilled over carbon emissions, but defeats motion calling for tougher targets.

The resolution (“2DS”) represents a new front in attempts to constrain oil majors since it seeks authority to set operational goals in reference to the Paris accord, normally the discretion of management. BTW this type of resolution requires 75% approval, and only got 6%.

Proxy advisors exercise great influence in these fights and are coming under increasing scrutiny and criticism for promoting causes against the financial interests of shareholders. In this case some may be taking notice that virtue signaling is not free of consequences. Independent European proxy advisory group ECGS recommended investors back the climate resolution, but major advisers Glass Lewis and ISS opposed it. The results show no major institutional investor (including Norwegian wealth fund) gave support.

Climate Activists storm the bastion of Exxon Mobil, here seen without their shareholder disguises.

The background and context for shareholder climate activism comes from Harvard Law School forum on Corporate Governance 2018 Proxy Season Preview  Excerpts with my bolds.

2017 was breakout year for climate change campaigns with three landmark majority votes asking Exxon Mobil, Occidental Petroleum, and PPL to report on how they plan to adjust their business models in line with the Paris Accord’s goal of limiting global warming to 2° Celsius (“2° scenario” or “2DS”).

The results reflect a sea change in the attitude and voting practices of several major asset managers—BlackRock, Vanguard Group and Fidelity Management & Research—which for the first time supported some of the climate change resolutions last year. Of the three, Fidelity made the greatest shift in its voting, backing every one of the 2DS resolutions it voted on, while BlackRock and Vanguard only endorsed the two at Exxon and Occidental.

Other institutional investors could follow suit, particularly as a result of pressure from their own shareholders and clients. Last year, Walden Asset Management withdrew proposals at BlackRock, Vanguard, and JPMorgan Chase after the firms agreed to review inconsistencies between their proxy voting records and their public stance on climate change. Walden and other filers have similar resolutions pending this year at Bank of New York Mellon and Cohen & Steers and withdrew a third at T. Rowe Price Group. Franklin Resources, which has received proxy voting review resolutions every year since 2014, wasn’t retargeted in 2018 because it improved its approach by voting for 24% of climate risk proposals in 2017, compared to 10% in 2016.

The proxy advisors have also amended their voting policies for 2018 to reflect their general support of resolutions to disclose climate-related risks. ISS’s policy now extends to proposals on how the company identifies, measures and manages such risks, in keeping with the recommendations of the TFCD, while Glass Lewis will largely back requests for climate change scenario analyses at companies in extractive or energy-intensive industries.

All of this has galvanized shareholder activists, who have filed a new round of 2DS proposals for 2018 with the expectation of generating a higher number of favorable votes or encouraging pro-action by companies. In addition to last year’s three majority vote companies, Duke Energy and Marathon Petroleum have produced or committed to producing climate impact reports, even though 2017 proposals received less than majority support. Several utilities targeted in 2018—CMS Energy, DTE Energy and WEC Energy Group—have also agreed to publish climate assessments.

Even so, not all company responses have satisfied investors. Exxon’s newly released report has already drawn criticism from proponents for concluding that aggressive climate policies pose little risk to its reserves because the demand for fossil fuels will remain strong for decades. Individual investor Steven Milloy went a step further by characterizing these reporting exercises as mere “greenwashing”  to improve companies’ public image. In a proposal at Exxon that was later withdrawn, he asserted that many voluntary activities and expenditures touted as protecting the climate are a waste of corporate assets that fail to yield any meaningful benefits to shareholders, public health, or the environment. As a case in point, two years after BP and Royal Dutch Shell shareholders overwhelmingly passed 2DS resolutions, the companies still disclose only minimal information on how they are mitigating climate risks, and they have yet to set greenhouse gas (GHG) reduction targets or markedly improved their investments in low-carbon technology.

Although 2DS will be the most-watched environmental category this year, other climate-related resolutions could generate significant support. As You Sow and Miller/Howard Investments have filed resolutions at nine oil and gas producers to report on their efforts to monitor and minimize methane leakage. Prior support on these proposals has been strong, averaging 31.7% in 2017, including two resolutions that received votes in the 40% range.

Aside from energy firms, proponents are targeting a broad range of industries with resolutions to set goals to reduce GHG emissions or increase renewable energy sourcing. In the past, these measures have averaged support in the 20% range, though several this year have already yielded commitments from AES, American Electric Power, and Western Union. A proposal variation favored by Jantz Management and Amalgamated Bank—to assess the feasibility of achieving net-zero GHG emissions by a specific date—continues to be excludable as ordinary business.

Resources:

Fund Managers Should Focus on Returns, Not Political Ideals RealClearMarkets

This trend, while relatively new, is alarming and it differs significantly from traditional activism. While traditional activist shareholders used the proxy proposal process to advance views that differed from management on what was best for the company, they never did anything that would undermine the reason for their investment, which was to maximize shareholder value. In contrast, the new wave of shareholder activists, have a fundamentally different goal; to exploit the proxy proposal process to drive wider societal change.

Pensioners Pay for Climate Activism

We all care about the environment and our own social causes, but an increased focus on issues that have no concrete connection to value has proven costly for the retirees who rely on their pension fund for their livelihood and the taxpayers that backfill their underperformance.

Now the nation’s largest passive-investment fund is moving toward implementing the same types of policies as the pension funds that happen to provide it billions of dollars in business each year, and millions of everyday investors could be affected. Anyone with an investment account should take note.

Climate Shell Game

Shell Resolution:  Shareholders support Shell to take leadership in the energy transition to a net-zero-emission energy system. Therefore, shareholders request Shell to set and publish targets for reducing greenhouse gas (GHG) emissions that are aligned with the goal of the Paris Climate Agreement to limit global warming to well below 2°C.

This shareholder resolution is intended to express shareholder support for a course towards a net-zero-emission energy system. The why of a course towards a net-zero-emission energy system is clear: increasing costs of the extraction of fossil fuels, decreasing costs of generating renewable energy, and the global political pledge to stop global warming. The how and the what are up to the management of Shell. It is up to them to set GHG emission reduction targets and to develop activities to attain these targets.

We the shareholders request that the company publish company-wide greenhouse gas (GHG) emission reduction targets according to the following 3 scopes:

Scope 1: direct emissions from the facilities under Shell’s operational control or the equity boundary,
Scope 2: indirect emissions from the facilities of others that provide electricity or heat and steam to Shell’s operations,
Scope 3: emissions that Shell estimates come from the use of Shell’s refinery products and natural gas products.

How Climate Law Relies on Paris

On the same day POTUS announced US withdrawal from Paris accord, a majority of Exxon Mobil shareholders approved a resolution asking management to assess the value of corporate assets considering a global move toward a low-carbon future. Here is the resolution, filed by the New York State Comptroller:

RESOLVED: Shareholders request that, beginning in 2018, ExxonMobil publish an annual assessment of the long-term portfolio impacts of technological advances and global climate change policies, at reasonable cost and omitting proprietary information. The assessment can be incorporated into existing reporting and should analyze the impacts on ExxonMobil’s oil and gas reserves and resources under a scenario in which reduction in demand results from carbon restrictions and related rules or commitments adopted by governments consistent with the globally agreed upon 2 degree target. This reporting should assess the resilience of the company’s full portfolio of reserves and resources through 2040 and beyond, and address the financial risks associated with such a scenario.

Regulatory Backfire

Update Nov. 22, 2018

With the Democrats taking control of the US House of Representatives, we can expect attempts to again “fight climate change” by means of counter productive regulations.  This post explains why such policies are ineffective and produce unintended consequences, with results worse than doing nothing.

Background:  Heisenberg Uncertainty

In the sub-atomic domain of quantum mechanics, Werner Heisenberg, a German physicist, determined that our observations have an effect on the behavior of quanta (quantum particles).

The Heisenberg uncertainty principle states that it is impossible to know simultaneously the exact position and momentum of a particle. That is, the more exactly the position is determined, the less known the momentum, and vice versa. This principle is not a statement about the limits of technology, but a fundamental limit on what can be known about a particle at any given moment. This uncertainty arises because the act of measuring affects the object being measured. The only way to measure the position of something is using light, but, on the sub-atomic scale, the interaction of the light with the object inevitably changes the object’s position and its direction of travel.

Now skip to the world of governance and the effects of regulation. A similar finding shows that the act of regulating produces reactive behavior and unintended consequences contrary to the desired outcomes.

An article at Financial Times explains about Energy Regulations Unintended Consequences  Excerpts below with my bolds.

Goodhart’s Law holds that “any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes”. Originally coined by the economist Charles Goodhart as a critique of the use of money supply measures to guide monetary policy, it has been adopted as a useful concept in many other fields. The general principle is that when any measure is used as a target for policy, it becomes unreliable. It is an observable phenomenon in healthcare, in financial regulation and, it seems, in energy efficiency standards.

When governments set efficiency regulations such as the US Corporate Average Fuel Economy standards for vehicles, they are often what is called “attribute-based”, meaning that the rules take other characteristics into consideration when determining compliance. The Cafe standards, for example, vary according to the “footprint” of the vehicle: the area enclosed by its wheels. In Japan, fuel economy standards are weight-based. Like all regulations, fuel economy standards create incentives to game the system, and where attributes are important, that can mean finding ways to exploit the variations in requirements. There have long been suspicions that the footprint-based Cafe standards would encourage manufacturers to make larger cars for the US market, but a paper this week from Koichiro Ito of the University of Chicago and James Sallee of the University of California Berkeley provided the strongest evidence yet that those fears are likely to be justified.

Mr Ito and Mr Sallee looked at Japan’s experience with weight-based fuel economy standards, which changed in 2009, and concluded that “the Japanese car market has experienced a notable increase in weight in response to attribute-based regulation”. In the US, the Cafe standards create a similar pressure, but expressed in terms of size rather than weight. Mr Ito suggested that in Ford’s decision to end almost all car production in North America to focus on SUVs and trucks, “policy plays a substantial role”. It is not just that manufacturers are focusing on larger models; specific models are also getting bigger. Ford’s move, Mr Ito wrote, should be seen as an “alarm bell” warning of the flaws in the Cafe system. He suggests an alternative framework with a uniform standard and tradeable credits, as a more effective and lower-cost option. With the Trump administration now reviewing fuel economy and emissions standards, and facing challenges from California and many other states, the vehicle manufacturers appear to be in a state of confusion. An elegant idea for preserving plans for improving fuel economy while reducing the cost of compliance could be very welcome.

The paper is The Economics of Attribute-Based Regulation: Theory and Evidence from Fuel-Economy Standards Koichiro Ito, James M. Sallee NBER Working Paper No. 20500.  The authors explain:

An attribute-based regulation is a regulation that aims to change one characteristic of a product related to the externality (the “targeted characteristic”), but which takes some other characteristic (the “secondary attribute”) into consideration when determining compliance. For example, Corporate Average Fuel Economy (CAFE) standards in the United States recently adopted attribute-basing. Figure 1 shows that the new policy mandates a fuel-economy target that is a downward-sloping function of vehicle “footprint”—the square area trapped by a rectangle drawn to connect the vehicle’s tires.  Under this schedule, firms that make larger vehicles are allowed to have lower fuel economy. This has the potential benefit of harmonizing marginal costs of regulatory compliance across firms, but it also creates a distortionary incentive for automakers to manipulate vehicle footprint.

Attribute-basing is used in a variety of important economic policies. Fuel-economy regulations are attribute-based in China, Europe, Japan and the United States, which are the world’s four largest car markets. Energy efficiency standards for appliances, which allow larger products to consume more energy, are attribute-based all over the world. Regulations such as the Clean Air Act, the Family Medical Leave Act, and the Affordable Care Act are attribute-based because they exempt some firms based on size. In all of these examples, attribute-basing is designed to provide a weaker regulation for products or firms that will find compliance more difficult.

Summary from Heritage Foundation study Fuel Economy Standards Are a Costly Mistake Excerpt with my bolds.

The CAFE standards are not only an extremely inefficient way to reduce carbon dioxide emission but will also have a variety of unintended consequences.

For example, the post-2010 standards apply lower mileage requirements to vehicles with larger footprints. Thus, Whitefoot and Skerlos argued that there is an incentive to increase the size of vehicles.

Data from the first few years under the new standard confirm that the average footprint, weight, and horsepower of cars and trucks have indeed all increased since 2008, even as carbon emissions fell, reflecting the distorted incentives.

Manufacturers have found work-arounds to thwart the intent of the regulations. For example, the standards raised the price of large cars, such as station wagons, relative to light trucks. As a result, automakers created a new type of light truck—the sport utility vehicle (SUV)—which was covered by the lower standard and had low gas mileage but met consumers’ needs. Other automakers have simply chosen to miss the thresholds and pay fines on a sliding scale.

Another well-known flaw in CAFE standards is the “rebound effect.” When consumers are forced to buy more fuel-efficient vehicles, the cost per mile falls (since their cars use less gas) and they drive more. This offsets part of the fuel economy gain and adds congestion and road repair costs. Similarly, the rising price of new vehicles causes consumers to delay upgrades, leaving older vehicles on the road longer.

In addition, the higher purchase price of cars under a stricter CAFE standard is likely to force millions of households out of the new-car market altogether. Many households face credit constraints when borrowing money to purchase a car. David Wagner, Paulina Nusinovich, and Esteban Plaza-Jennings used Bureau of Labor Statistics data and typical finance industry debt-service-to-income ratios and estimated that 3.1 million to 14.9 million households would not have enough credit to purchase a new car under the 2025 CAFE standards.[34] This impact would fall disproportionately on poorer households and force the use of older cars with higher maintenance costs and with fuel economy that is generally lower than that of new cars.

CAFE standards may also have redistributed corporate profits to foreign automakers and away from Ford, General Motors (GM), and Chrysler (the Big Three), because foreign-headquartered firms tend to specialize in vehicles that are favored under the new standards.[35] 

Conclusion

CAFE standards are costly, inefficient, and ineffective regulations. They severely limit consumers’ ability to make their own choices concerning safety, comfort, affordability, and efficiency. Originally based on the belief that consumers undervalued fuel economy, the standards have morphed into climate control mandates. Under any justification, regulation gives the desires of government regulators precedence over those of the Americans who actually pay for the cars. Since the regulators undervalue the well-being of American consumers, the policy outcomes are predictably harmful.

Update Nov. 22, 2018

With the Democrats taking control of the US House of Representatives, we we will likely see them attempting again to “fight climate change” by means of counterproductive regulations and rules.  This post explains why such policies are ineffective, create unintended consequences that can make matters worse than doing nothing.

Background:  Hiesenberg Uncertainty

In the sub-atomic domain of quantum mechanics, Werner Heisenberg, a German physicist, determined that our observations have an effect on the behavior of quanta (quantum particles).

The Heisenberg uncertainty principle states that it is impossible to know simultaneously the exact position and momentum of a particle. That is, the more exactly the position is determined, the less known the momentum, and vice versa. This principle is not a statement about the limits of technology, but a fundamental limit on what can be known about a particle at any given moment. This uncertainty arises because the act of measuring affects the object being measured. The only way to measure the position of something is using light, but, on the sub-atomic scale, the interaction of the light with the object inevitably changes the object’s position and its direction of travel.

Now skip to the world of governance and the effects of regulation. A similar finding shows that the act of regulating produces reactive behavior and unintended consequences contrary to the desired outcomes.

An article at Financial Times explains about Energy Regulations Unintended Consequences  Excerpts below with my bolds.

Goodhart’s Law holds that “any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes”. Originally coined by the economist Charles Goodhart as a critique of the use of money supply measures to guide monetary policy, it has been adopted as a useful concept in many other fields. The general principle is that when any measure is used as a target for policy, it becomes unreliable. It is an observable phenomenon in healthcare, in financial regulation and, it seems, in energy efficiency standards.

When governments set efficiency regulations such as the US Corporate Average Fuel Economy standards for vehicles, they are often what is called “attribute-based”, meaning that the rules take other characteristics into consideration when determining compliance. The Cafe standards, for example, vary according to the “footprint” of the vehicle: the area enclosed by its wheels. In Japan, fuel economy standards are weight-based. Like all regulations, fuel economy standards create incentives to game the system, and where attributes are important, that can mean finding ways to exploit the variations in requirements. There have long been suspicions that the footprint-based Cafe standards would encourage manufacturers to make larger cars for the US market, but a paper this week from Koichiro Ito of the University of Chicago and James Sallee of the University of California Berkeley provided the strongest evidence yet that those fears are likely to be justified.

Mr Ito and Mr Sallee looked at Japan’s experience with weight-based fuel economy standards, which changed in 2009, and concluded that “the Japanese car market has experienced a notable increase in weight in response to attribute-based regulation”. In the US, the Cafe standards create a similar pressure, but expressed in terms of size rather than weight. Mr Ito suggested that in Ford’s decision to end almost all car production in North America to focus on SUVs and trucks, “policy plays a substantial role”. It is not just that manufacturers are focusing on larger models; specific models are also getting bigger. Ford’s move, Mr Ito wrote, should be seen as an “alarm bell” warning of the flaws in the Cafe system. He suggests an alternative framework with a uniform standard and tradeable credits, as a more effective and lower-cost option. With the Trump administration now reviewing fuel economy and emissions standards, and facing challenges from California and many other states, the vehicle manufacturers appear to be in a state of confusion. An elegant idea for preserving plans for improving fuel economy while reducing the cost of compliance could be very welcome.

The paper is The Economics of Attribute-Based Regulation: Theory and Evidence from Fuel-Economy Standards Koichiro Ito, James M. Sallee NBER Working Paper No. 20500.  The authors explain:

An attribute-based regulation is a regulation that aims to change one characteristic of a product related to the externality (the “targeted characteristic”), but which takes some other characteristic (the “secondary attribute”) into consideration when determining compliance. For example, Corporate Average Fuel Economy (CAFE) standards in the United States recently adopted attribute-basing. Figure 1 shows that the new policy mandates a fuel-economy target that is a downward-sloping function of vehicle “footprint”—the square area trapped by a rectangle drawn to connect the vehicle’s tires.  Under this schedule, firms that make larger vehicles are allowed to have lower fuel economy. This has the potential benefit of harmonizing marginal costs of regulatory compliance across firms, but it also creates a distortionary incentive for automakers to manipulate vehicle footprint.

Attribute-basing is used in a variety of important economic policies. Fuel-economy regulations are attribute-based in China, Europe, Japan and the United States, which are the world’s four largest car markets. Energy efficiency standards for appliances, which allow larger products to consume more energy, are attribute-based all over the world. Regulations such as the Clean Air Act, the Family Medical Leave Act, and the Affordable Care Act are attribute-based because they exempt some firms based on size. In all of these examples, attribute-basing is designed to provide a weaker regulation for products or firms that will find compliance more difficult.

Summary from Heritage Foundation study Fuel Economy Standards Are a Costly Mistake Excerpt with my bolds.

The CAFE standards are not only an extremely inefficient way to reduce carbon dioxide emission but will also have a variety of unintended consequences.

For example, the post-2010 standards apply lower mileage requirements to vehicles with larger footprints. Thus, Whitefoot and Skerlos argued that there is an incentive to increase the size of vehicles.

Data from the first few years under the new standard confirm that the average footprint, weight, and horsepower of cars and trucks have indeed all increased since 2008, even as carbon emissions fell, reflecting the distorted incentives.

Manufacturers have found work-arounds to thwart the intent of the regulations. For example, the standards raised the price of large cars, such as station wagons, relative to light trucks. As a result, automakers created a new type of light truck—the sport utility vehicle (SUV)—which was covered by the lower standard and had low gas mileage but met consumers’ needs. Other automakers have simply chosen to miss the thresholds and pay fines on a sliding scale.

Another well-known flaw in CAFE standards is the “rebound effect.” When consumers are forced to buy more fuel-efficient vehicles, the cost per mile falls (since their cars use less gas) and they drive more. This offsets part of the fuel economy gain and adds congestion and road repair costs. Similarly, the rising price of new vehicles causes consumers to delay upgrades, leaving older vehicles on the road longer.

In addition, the higher purchase price of cars under a stricter CAFE standard is likely to force millions of households out of the new-car market altogether. Many households face credit constraints when borrowing money to purchase a car. David Wagner, Paulina Nusinovich, and Esteban Plaza-Jennings used Bureau of Labor Statistics data and typical finance industry debt-service-to-income ratios and estimated that 3.1 million to 14.9 million households would not have enough credit to purchase a new car under the 2025 CAFE standards.[34] This impact would fall disproportionately on poorer households and force the use of older cars with higher maintenance costs and with fuel economy that is generally lower than that of new cars.

CAFE standards may also have redistributed corporate profits to foreign automakers and away from Ford, General Motors (GM), and Chrysler (the Big Three), because foreign-headquartered firms tend to specialize in vehicles that are favored under the new standards.[35] 

Conclusion

CAFE standards are costly, inefficient, and ineffective regulations. They severely limit consumers’ ability to make their own choices concerning safety, comfort, affordability, and efficiency. Originally based on the belief that consumers undervalued fuel economy, the standards have morphed into climate control mandates. Under any justification, regulation gives the desires of government regulators precedence over those of the Americans who actually pay for the cars. Since the regulators undervalue the well-being of American consumers, the policy outcomes are predictably harmful.

On Coercive Climatism: Writings of Bruce Pardy

gettyimages-500971746Many people have heard of Jordan Peterson due to his battles against post modernism and progressive social justice warfare. Bruce Pardy is another outspoken Canadian professor, whose latest statement was posted at the National Post, H/T GWPF.

Let the Paris climate deal die. It was never good for anything, anyway
Opinion: Paris is a climate fairy tale. It has always been more about money and politics than the environment.  Excerpts below with my bolds.

Paris is more a movement than a legal framework. It imagines the world as a global community working in solidarity on a common problem, making sacrifices in the common good, reducing inequality and transcending the negative effects of market forces. In this fable, climate change is a catalyst for revolution. It is the monster created by capitalism that will turn on its creator and bring the market system to the end of its natural life. A new social order will emerge in which market value no longer determines economic decisions. Governments will exercise influence over economic behaviour by imposing “market-based mechanisms” such as carbon taxes and cap-and-trade systems. Enlightened leaders will direct energy use based upon social justice values and community needs. An international culture will unite peoples in a cause that transcends their national interests, giving way to the next stage of human society. Between the lines of the formal text, the Paris agreement reads like a socialist nightmare.

The regime attempts to establish an escalating global norm that requires continual updating, planning and negotiation. To adhere, governments are to supervise, regulate and tax the energy use and behaviour of their citizens (for example, the Trudeau government’s insistence that all provinces impose a carbon tax or the equivalent, to escalate over time.) Yet for all of the domestic action it legitimizes, Paris does not actually require it. Like the US$100-billion pledge, reduction targets are outside the formal Paris agreement. They are voluntary; neither binding nor enforceable. Other countries have condemned Trump’s withdrawal and reaffirmed their commitment to Paris but many of them, including Canada, are not on track to meet even their initial promises. Global emissions are rising again.

If human action is not causing the climate to change, Paris is irrelevant. If it is, then Paris is an obstacle to actual solutions. If there is a crisis, it will be solved when someone develops a low-carbon energy source as useful and cheap as fossil fuels. A transition will then occur without government interventions and international declarations. Until then, Paris will fix nothing. It serves interests that have little to do with atmospheric concentrations of greenhouse gases. Will America’s repudiation result in its eventual demise? One can hope.

Bruce Pardy belongs to the Faculty of Law, Queen’s College, Kingston, Ontario. This post will provide excerpts from several of Pardy’s writings to give readers access to his worldview and its usefulness making sense of current socio-political actions.

In 2009 Pardy wrote Climate Change Charades: False Environmental Pretences of Statist Energy Governance
The Abstract:
Climate change is a poor justification for energy statism, which consists of centralized government administration of energy supplies, sources, prices, generating facilities, production and conservation. Statist energy governance produces climate change charades: government actions taken in the name of climate change that bear little relationship to the nature of the problem. Such actions include incremental, unilateral steps to reduce domestic carbon emissions to arbitrary levels, and attempts to choose winners and losers in future technology, using public money to subsidize ineffective investments. These proffered solutions are counter-productive. Governments abdicate their responsibility to govern energy in a manner that is consistent with domestic legal norms and competitive markets, and make the development of environmental solutions less likely rather than more so.

Pardy also spoke out in support of Peterson and against the Canadian government legislation proscribing private speech between individuals. His article in National Post was Meet the new ‘human rights’ — where you are forced by law to use ‘reasonable’ pronouns

Human rights were conceived to liberate. They protected people from an oppressive state. Their purpose was to prevent arbitrary arrest and detention, torture, and censorship, by placing restraints on government. The state’s capacity to accommodate these “negative rights” was unlimited, since they required only that people be left alone.

If only arm twisting were prohbited beyond the ring.

But freedom from interference is so 20th century. Modern human rights entitle. We are in the middle of a culture war, and human rights have become a weapon to normalize social justice values and to delegitimize competing beliefs. These rights are applied against other people to limit their liberties.

Freedom of expression is a traditional, negative human right. When the state manages expression, it threatens to control what we think. Forced speech is the most extreme infringement of free speech. It puts words in the mouths of citizens and threatens to punish them if they do not comply. When speech is merely restricted, you can at least keep your thoughts to yourself. Compelled speech makes people say things with which they disagree.

Some senators expressed the view that forcing the use of non-gendered pronouns was reasonable because calling someone by their preferred pronoun is a reasonable thing to do. That position reflects a profound misunderstanding of the role of expression in a free society. The question is not whether required speech is “reasonable” speech. If a statute required people to say “hello,” “please” and “thank you,” that statute would be tyrannical, not because “hello,” “please” and “thank you” aren’t reasonable things to say, but because the state has dictated the content of private conversation.

Traditional negative human rights give people the freedom to portray themselves as they wish without fearing violence or retribution from others. Everyone can exercise such rights without limiting the rights of others. Not so the new human rights. Did you expect to decide your own words and attitudes? If so, human rights are not your friend.

These positions derive from bedrock reasoning by Pardy on the foundations of law and legitimacy. An insight into his thinking is his rebuttal of a critic The Only Legitimate Rule: A Reply to MacLean’s Critique of Ecolawgic Dalhousie Law Journal, Spring 2017

Ecosystem as One model of Society

An ecosystem is not a thing. It does not exist as a concrete entity. “Ecosystem” is a label for the dynamics that result when organisms interact with each other and their environment. Those dynamics occur in infinite variation, but always reflect the same logic:
Competition for scarce resources leads to natural selection, where those organisms better adapted to ecosystem conditions survive and reproduce, leading to evolutionary change. All participants are equally subject to their forces; systems do not play favourites.

In ecosystems, the use of the word “autonomy” does not mean legally enforced liberty but the reverse: no externally imposed rules govern behaviour. In ecosystems unmanaged by people, organisms can succeed or fail, live or die, as their genetically determined physiology and behaviour allow. Every life feeds on the death of others, whether animal or plant, and those better adapted to their circumstances survive to reproduce. Organisms can do anything that their genes dictate, and their success or failure is the consequence that fuels evolution.

When an antelope is chased by a lion and plunges into a river to escape, that action allows the antelope to survive and thus to reproduce. The offspring may carry a genetic disposition to run into water when chased by predators. There are no committees of either antelopes or humans deciding how antelopes will behave. Autonomy in ecosystems is not a human creation. It is not based upon human history or culture and is not a human preference.

Market as a Different Model of Society

A market is not a thing either. Nor is it a place. Markets, like ecosystems, do not exist as concrete entities. “Market” is a label for the dynamics that result when people exchange with each other. Bargains may be commercial in nature, where things are bought and sold, but they also occur in other facets of life. For example, in Ecolawgic I suggested that marriage is a kind of exchange that is made when people perceive themselves better off to enter into the bargain than not to.

As I said in Ecolawgic, “Laws and governments can make markets more stable and efficient, such as by enforcing contracts and creating a supply of money, but they create neither the activity of trading nor the market dynamics that the transactions create.”  A market is not a place or a legal structure but the dynamics of a collection of transactions. It does not exist before or independently of the transactions within it. The transactions make the market. Transactions are not created by governments but by the parties who enter into them.

People transact whether they are facilitated by governments or not. The evidence is everywhere. If it were not so, human beings would not have bartered long before there were governments to create money and enforce contracts. During Prohibition, no alcohol would have been produced and sold. Citizens of the Soviet Union would not have exchanged goods. Today there would be no drug trade, no black market and no smuggling. Cigarettes would not be used as currency inside jails. People would not date, hold garage sales or trade hockey cards. There would be no Bitcoin or barter. Try prohibiting people from transacting and see that they will transact anyway. They will do so because they perceive themselves as better off. Sometimes the benefit is concrete and sometimes it is ethereal. The perception of benefit is personal and subjective.

Ecosystems are Coercive, Markets are Voluntary

Ecosystems and markets share many features but they differ in one important respect. Violence plays an important role in ecosystems but is not a part of voluntary market exchange. Ecosystems are arenas for mortal combat. Lions eat antelopes if they can catch them. Nothing prevents taking a dead antelope from a lion except the lion’s response. There are no restrictions on survival strategies, and organisms do not respect the interests, habitats or lives of other organisms.

Markets, in contrast, proceed upon the judgment of the transacting parties that they are better off to trade than to fight. The hunter did not shoot the woodworker to get chairs, and the woodworker traded for meat instead of stealing it. They chose to trade because it made them better off than fighting. The reasons are their own. Perhaps they were friends, colleagues or allies. Perhaps they believed that harming other people is wrong. Perhaps they hoped to have an ongoing trading relationship. Perhaps fighting carried risks that were too high and they feared injury or retribution. Perhaps trading was less work than fighting.

For whatever reason, they chose to trade. This choice is not universal. People have traded throughout human history, but they have also fought. I do not maintain that trading is any more “natural” or inbred than fighting, but neither is it is less so. When people choose to fight, they are no longer part of a market. Markets are like ecosystems with the violence removed.  They are the kinder, gentler version of ecosystems.

There are only two models for legal governance and only one legitimate rule.

The logic is as follows:
1. In the wild, organisms compete for scarce resources. Those organisms better adapted to conditions survive and reproduce. Their interactions constitute ecosystems. No legal rules govern behaviour and might is right.
2. Human beings trade spontaneously. Parties enter into transactions when they perceive themselves as better off to trade than to fight. Their transactions constitute markets.
3. Moral values and policy goals are preferences whose inherent validity cannot be established. They are turtles all the way down. Therefore laws based upon those preferences lack legitimacy.
4. When governments use might to impose laws and policies that are illegitimate, they unintentionally imitate ecosystems, where might is right. Political constituencies use whatever means necessary to impose their preferences, and their opponents use whatever means necessary to resist. They are “autonomous” in the ecosystem sense: there are no inherently valid restrictions on behaviour. The result is a social order of division and conflict.
5. The alternative is to model human governance on the other system that exists independently of state preference: markets. If the model for human governance is markets, interactions between people are voluntary. People are “autonomous” in the market sense: they may pursue their own interests without coercion. Instead of imposing illegitimate rules and policies, the state uses force only to prohibit people from imposing force on each other. A plethora of sub-rules follow as corollaries of the rule against coercion: property, consent, criminal offences that punish violence and so on.
6. There is no third choice. Coercion is not right or wrong depending upon the goals being pursued since those goals are merely preferences. Their advocates cannot establish that their goals have inherent validity to those who do not agree. Therefore, giving priority to those objectives is to assert that might is right. If might is right, we are back to ecosystems, where any and all actions are legitimate.
7. If might is right, anything goes, and the model is ecosystems. If might is not right, force is prohibited, and the model is markets. Choose one and all else follows.

When I claim that a prohibition on force is the only legitimate rule, I mean the only substantive rule to govern relations between competent adults. No doubt the administration of a legal system, even a minimalist one, would require other kinds of laws to function. Constitutional rules, court administration, the conduct of elections and procedures to bring legal proceedings are a few of the other categories that would be necessary in order to give effect to the general rule.

No Property, No Market

But the existence of property rights must follow from a general rule prohibiting coercion. If it does not, the general rule is not what it purports to be. When people trade, they recognize the property interest held by the other party. It is that interest that they wish to obtain. When the woodworker trades chairs for the hunter’s meat, she trades “her” chairs for “his” meat. The trade would not occur without a mutual understanding of the possession that both hold over their respective stuff.

Sometimes those interests are recognized and protected by the law, which according to Bentham created the property. However, since markets arise even where no property is legally recognized, the notion of property must be prior to the law. Above I gave examples of markets that have arisen where no legal regime has protected property rights: prehistorical trade, alcohol sales during Prohibition, black markets in the Soviet Union, the modern day drug trade, smuggling of illicit goods, and the internal markets of prisons. Since trading occurs even in the absence of an approving legal regime, the notion of property must exist independently as well.

No Consent, No Market

Autonomy in the market sense means to be able to pursue your own interests and control your own choices without coercion. Consent is part and parcel of autonomy. Without the ability to consent, no trades can be made. Without trades, no markets exist. If one cannot consent to be touched, to give up property, to make bargains, to mate, to arm wrestle, to trade chairs for meat, to sell labour for money, and so on, then one is not autonomous.

If force is prohibited, then corollaries are laws that protect people from having force imposed upon them. Laws apply the force of the state to prevent or punish the application of force. A criminal law that prohibits assault is an extension of the general rule. A tax to finance the police department is legitimate if its purpose is to investigate and prosecute violent crimes. Traffic laws prevent people from running each other over.  Civil liability compensates for physical injuries caused by the force of others.

Illegitimate Laws, No Market

Illegitimate laws use state coercion to seek other ends such as enforcing moral standards, pursuing social goals or saving people from themselves. A criminal law that prohibits the use of drugs uses state force to prevent an activity in which there is no coercion. A tax to fund the armed forces to protect the peace may be legitimate, but one to take wealth from Peter to give to Paul is not. The legal regimes of modern administrative states consist largely of instrumentalist laws and policies that are inconsistent with the general rule, including tax laws, economic development programs, bankruptcy, patent regimes, mandatory government-run pension plans and MacLean’s version of environmental regulation, in which each decision turns on a political determination of the values to be applied.

It is either ecosystems or markets. Either might is right or it is not. If it is, then human society is subject to the law of the jungle where people are at liberty to fight like animals if they choose to do so. If it is not, then human society is a marketplace where people may enter into transactions voluntarily and the state may justifiably use force only to prevent or punish the application of force.

There is no third choice. Some might insist that coercion is not categorically wrong but that it can be right or wrong depending upon the other goals to be pursued. Those goals are merely preferences. They are turtles all the way down. I do not maintain that other rules will not be passed and enforced using the established machinery of government but only that they have no claim to legitimacy, any more than other rules that might have been chosen instead. If force is used to pursue those preferences, why would others not use force to resist? Such a choice results in a free-for-all. If state force is right only because it cannot be resisted, that means that might is right. The administrative welfare state prevails not because it is justified morally or socially but because it has managed to secure a monopoly on violence. The imposition of government preferences is an invitation to those opposed to an arbitrary policy agenda to take up force against it.

Summary

In  a way, Pardy is warning us not to take for granted the free market social democracies to which we were accustomed.  Post modern progressive social justice warriors have decided that society is essentially an endless power struggle, that one group’s rights are gained only at the expense of another group.  In other words, it’s a dog-eat-dog, might makes right ecosystem.  Pardy says there is another way, which has been the basis for the rise of civilization, but can be reversed by governance that destroys the free market of ideas and efforts by imposing values favored by the rich and powerful.

Footnote about Turtles.  Pardy explains the metaphor:

In Rapanos v. United States, Justice Antonin Scalia offered a version of the traditional tale of how the Earth is carried on the backs of animals. In this version of the story, an Eastern guru affirms that the earth is supported on the back of a tiger.  When asked what supports the tiger, he says it stands upon an elephant; and when asked what supports the elephant he says it is a giant turtle.  When asked, finally, what supports the giant turtle, he is briefly taken aback, but quickly replies “Ah, after that it is turtles all the way down.”

Carbon Tax Hypocrisy, BC for example

BC Carbon Tax had little effect on emissions.

The Carbon Tax experiment in British Columbia is summarized by Kris Sims, the B.C. director of the Canadian Taxpayers Federation.  He writes in the Financial Post
B.C. tricked Canadian politicians into believing its carbon tax policy works. It doesn’t.  Excerpts below in italics with my bolds.

While Prime Minister Justin Trudeau’s government gets set to force a federal carbon tax on all of Canada’s provinces and territories, taxpayers across the country deserve to know what happened in the country’s carbon-tax test case, British Columbia.

The Trojan horse of the carbon tax was wheeled into the B.C. public square in 2008 with the government’s promise that it would somehow cost average people nothing and would be “revenue neutral.” But, that turned out to be a cautionary tale for the ages.

Revenue Neutral? Hah.

For years, the carbon-tax cheerleaders continued to laud the fee that’s been tacked on to carbon-emitting goods and services, urging the rest of the country to follow suit. It was touted as a magical formula that would somehow protect the environment and lower taxes all at once. Visions of hydrogen-powered buses and solar cars danced in the heads of the green bean counters. “Revenue neutral” they all sang.

Before the charade was abandoned entirely, this is what “revenue neutral” meant for the B.C. carbon tax: In 2016–17 the provincial government raked in $1.2 billion in the carbon tax from taxpayers. The amount is listed on page 68 in the budget document as a frame entitled: “Revenue Neutral Carbon Tax Plan.” Then, the government scraped together 17 sundry tax credits and stuffed them into the carbon-tax frame, making the tax sum balance out to zero. Abracadabra: “revenue neutral.” That’s all it meant.

It was a crass puppet show. Every provincial and federal budget includes tax credits for things like home renovations, children’s fitness programs, film incentives, and business training tax credits. In B.C., however, there is an uncommon carbon tax taken from people, so these very common credits were just repackaged to make the tax appear neutral on paper. As a senior B.C. government official admitted during last year’s budget lockup, “this was always just an accounting exercise.”

Raising the Cost of Living

The carbon tax is not an accounting exercise for B.C. families. It’s an expensive reality for any Canadian subjected to it.

Under the federal formula at $35 per tonne, the carbon tax costs a lot of money at the gas station, approximately 8.55 cents per litre of gasoline with the GST tacked onto it, and 10.06 cents per litre for diesel with the GST. To fill up an average Toyota Camry with a 70-litre fuel tank costs $6 in carbon tax. A Dodge Ram pick-up truck costs more than $10 in carbon tax and a Ford Super Duty Diesel costs more than $17 per fill up. For tractor-trailer trucks, it costs $45 in carbon taxes to fill up just one of those cylinder tanks with diesel. Canadians bought more than 40 billion litres of gasoline and more than 16 billion litres of diesel fuel in 2016. Multiply that volume by the carbon tax per litre and the government haul is crystal clear.

(Note: My spreadsheet shows 5 Billion dollars in tax for 2016, had those rates been in effect across Canada.  In the years 2008 to 2014, BC alone took in 5 Billion $ in carbon tax revenues.  At the current (since 2012) $30/ton rate, BC carbon tax revenues are projected to be $1.2 Billion per year.)

BC Emissions Higher Than Ever

It gets worse, though, because even with the carbon tax costing Canadians billions of dollars, it’s still not reducing emissions, according to environmentalists leading the carbon-tax charge. In January, the Sierra Club reported on the B.C. experiment: “emissions were higher in 2015 than in 2010 and have risen in four of the last five years. B.C.’s latest emissions data mark years of failure to reduce emissions by more than a token amount.” If taking billions of dollars away from Canadians doesn’t reduce emissions, then, what is the point of this forced carbon tax?

Carbon Tax Not Stopping Emissions? Raise the Ante.

When the forced federal carbon tax is set at $50 per tonne in 2022, that means that gasoline will have a carbon tax of 11.63 cents per litre. Will that be enough? Not according to the Environment Canada bureaucrats who told Environment Minister Catherine McKenna that the country needs a carbon tax of $100 per tonne by 2020 and a tax of $300 per tonne by 2050 to meet the government’s promises under the Paris climate agreement. That would be 23 cents per litre on gas in 2020 and then 70 cents per litre by 2050 — about $50 extra in today’s money to fill up the family sedan.

A Tax Against Life As We Know It

People need to use oil and gas. The carbon tax doesn’t make people “reduce their use” of this modern lifeblood, it just costs them a lot of money while not stopping the emissions. Our economy and our modern way of life depend on oil and gas. We use them to run our power stations, till our soil, plant our food, mine our minerals, mill our wood, heat our greenhouses, manufacture all of our goods and haul those goods and food to market.

We use oil and gas products to travel to school, work and the beach. Planes, automobiles and transit buses all use oil and gas, and they were manufactured and shipped to us using oil and gas. All of these actions of everyday life depend upon the miracle of hydrocarbons, so, the carbon tax is a tax on everything.

Carbon taxes don’t just make gasoline more expensive, they make life much more expensive.

Can Justice Be Blind, But Not Illiterate?

Previous posts have discussed how the Judiciary seems unprepared for the mounting caseload of climate legal actions. Some background links are at the end, but this post is an update on two important court proceedings, thanks to Manhattan Contrarian Francis Menton. The essay is Complete Polarization In The World Of Politics: Climate Change Edition Excerpts in italics below with my bolds.

Menton provides examples of political polarization regarding climate, the first two being:

  • The polls showing Republicans and Democrats holding widely different opinions on climate concerns;
  • The recent confirmation battle over James Bridenstine, nominated to lead NASA, including GISS headed by climate alarmist Gavin Schmidt.

Then Menton gets into the contrary behavior of court decisions, two recent examples being:

  • Ruling involving Exxon’s countersuits against criminal investigations by several State Attorneys General;
  • Ruling involving Exxon’s legal claims against lawsuits from California cities.

And then we have the courts. You know — the places where the lady holding the scales of justice wears a blindfold to indicate that she won’t even peak to see whether politics would dictate a preferred result here. If you believe that, consider two recent results from two different courts.

As background, you probably are aware that the major oil companies, and most notably Exxon Mobil, have come under siege recently from government lawyers in deep blue jurisdictions, including the Attorneys General of New York (Schneiderman) and Massachusetts (Healey) and certain County and City Attorneys in California. In 2015 Schneiderman and Healey initiated what they claim to be “criminal” investigations, although three years in no charges have been filed (and no plausible potential charges have even been suggested). The Counties and Cities in California have brought civil lawsuits, sounding in common law “nuisance,” claiming potentially billions of dollars in damages from what they assert will be rising sea levels caused by climate change.

1. Exxon versus Attorneys General of New York and Massachusetts

In June 2016, Exxon tried a counterstrike by filing a lawsuit in federal court in Dallas, Texas seeking discovery against Schneiderman and Healey as to what it claimed was the political motives behind the supposed criminal investigation. Exxon supported its complaint with a litany detailing meetings between and among the AGs and climate activists, where the activists urged the AGs to use their powers to investigate oil companies. The Dallas judge (Kinkeade) initially issued an opinion containing some statements favorable to Exxon’s position, but then in March 2017 Judge Kinkeade transferred the case to the Southern District of New York. Transferring a case from one state to another is something that federal judges can do within the federal court system. Upon transfer, Exxon’s case came before Obama-appointee Valerie Caproni. On March 29 this year, Judge Caproni dismissed the case with an opinion that was highly critical of Exxon’s gambit. Key quote:

Exxon’s allegations that the AGs are pursuing bad faith investigations in order to violate Exxon’s constitutional rights are implausible and therefore must be dismissed for failure to state a claim.

From Judge Caponi’s Order (full text here) with my bolds.

Exxon contends the investigations are being conducted to retaliate against Exxon for its views on climate change and thus violate Exxon’s constitutional rights. The relief requested by Exxon in this case is extraordinary: Exxon has asked two federal courts—first in Texas, now in New York—to stop state officials from conducting duly-authorized investigations into potential fraud.

It has done so on the basis of extremely thin allegations and speculative inferences. The factual allegations against the AGs boil down to statements made at a single press conference and a collection of meetings with climate-change activists. Some statements made at the press conference were perhaps hyperbolic, but nothing that was said can fairly be read to constitute declaration of a political vendetta against Exxon.

2. Exxon versus California Cities and Counties

Meanwhile, in January of this year, Exxon initiated a similar gambit with regard to the California nuisance lawsuits. This time it brought its claim in the District Court of Tarrant County, Texas (Fort Worth) — that is, a state court, rather than a federal court. Like the previous case against Schneiderman and Healey, this complaint again seeks discovery against government lawyers responsible for the claims against the company; and also like the previous case, this one goes through the litany of efforts by activist environmental lawyers to induce the government agencies to use their powers to go after the oil companies. The new case also added a series of allegations from bond prospectuses of the California cities and counties seemingly in direct contradiction of their assertions in their complaints of imminent destructive sea level rise.

In this new Texas case, the California cities and counties did not “remove” to federal court (I don’t know why not), but rather moved to dismiss for lack of jurisdiction over them. The Fort Worth judge, Wallace, denied those motions in “Findings of Fact and Conclusions of Law” dated April 25. It’s fair to say that Judge Wallace’s conclusions are about the opposite of those of Judge Caproni on mostly the same allegations.

From the text of Judge Wallace Findings of Fact and Conclusions of Law  with my bolds.

ExxonMobil’s potential claims arise from an alleged conspiracy by California municipalities to suppress Texas-based speech and associational activities on climate policy that are out-of-step with the prevailing views of California public officials. According to ExxonMobil’s petition, the California municipalities alleged facts in their lawsuits against the Texas energy sector that are contradicted by contemporaneous disclosures to municipal bond investors. ExxonMobil seeks pre-suit discovery on whether the lawsuits were brought in bad faith as a pretext to suppress Texas-based speech and associational activities by members of Texas’s energy sector.

Findings of Fact
Pawa and Others Develop a Climate Change Strategy
State Attorneys General Adopt the Climate Change Strategy
State Attorneys General Conceal Ties to Pawa
State Attorneys General Target Texas-based Speech, Activities, and Property

Conclusions of Law
56. Texas has a substantial state interest in adjudicating claims concerning constitutional torts committed in Texas against Texas residents.

57.ExxonMobil has an inherent interest in obtaining convenient and effective relief by litigating its potential claims in Texas.

58.Exercising jurisdiction in this potential action would comport with the interstate judicial system’s interest in obtaining the most efficient resolution of controversies because ExxonMobil’s anticipated action encompasses claims and parties that are not part of the Potential Defendants’ California nuisance suits and ExxonMobil has objected to the exercise of personal jurisdiction in those suits.

59. Exercising jurisdiction in this potential action would support the shared interest of the several states in furthering substantive social policies because ExxonMobil’s anticipated action concerns a conspiracy to suppress and chill speech and associational activities of the Texas energy sector. Texas has an inherent interest in exercising jurisdiction over actions that concern the infringement of constitutional rights within its borders.

Menton Concludes: The issues for decision before the two judges were not completely congruent, but it’s fair to say that they viewed very similar matters from a completely opposite perspective based on the polarized political situation.

Anyway, I can’t wait for the California government lawyers and the environmental activists to get deposed by Exxon in their Texas case.

Background:

Judiciary Climate Confusion

Critical Climate Intelligence for Jurists (and others)

Is Global Warming a Necessity Defense?

On April 23, the Minnesota valve turners gained permission from the state appellate court to claim their admittedly illegal actions were necessary in light of global warming from pipeline fuels.  But there are still several slips between this cup and their lips.  In the report below from Minnesota Star Tribune there are several points of interest:

First, the ruling did not support defendants’ claims, only that the prosecution did not prove that allowing the defense would damage the trial process.

Second, prosecutors may appeal this ruling to the Supreme court.

Third, the district court judge who will preside over the trial says there is a high standard for that defense to succeed.

Fourth, as the dissenting appellate justice said: “This case is about whether respondents have committed the crimes of damage to property and trespass. It is not about global warming.”

A three-judge appeals panel ruled 2-1 Monday that the prosecutor has failed to show that allowing the necessity defense will have a “critical impact” on the outcome of the protesters’ trials. The decision was labeled “unpublished,” which means it sets no binding precedent for other cases.

The appellate court allowed the so-called “necessity” defense to go forward. In a pretrial hearing in District Court, the protesters testified about their “individual perceptions of the necessity of their actions in preventing environmental harm caused by the use of fossil fuels, particularly the tar sands oil carried by the pipeline with which they interfered.”

The state objected to the defense, and the appeals court, on a 2-1 vote, has now dismissed that objection. The state can ask the Supreme Court to take up the issue.

The Court of Appeals didn’t rule on whether the defendants’ actions were necessary but said the state failed to show that allowing the defense would significantly reduce the likelihood of a successful prosecution. The court said state law doesn’t allow objections to the necessity defense before trial.

In a pretrial ruling, Clearwater County District Judge Robert Tiffany allowed the defense but said the necessity evidence must be “focused, direct, and presented in a noncumulative manner.” The state argued that the necessity defense would “unnecessarily confuse the jury.”

The defendants have said they intend to call expert witnesses to testify about global warming and their belief the federal government’s response has been ineffective.

Connolly’s dissent cited a 1971 state court ruling that said the necessity defense “applies only in emergency situations where the peril is instant, overwhelming, and leaves no alternative but the conduct in question.” The defendants in this case cannot meet that requirement, Connolly wrote.

Footnote: In a previous valve turner trial, the judge refused to have testimony from witnesses such as James Hansen unless they could testify regarding defendants’ state of mind.  In other words, that judge was willing to consider global warming as a plea of temporary insanity.

Pensioners Pay for Climate Activism

The Perpetrators: Huge Fund Managers like BlackRock and Vanguard apply Proxy Power against companies in their portfolios.

Reports such as these have been appearing in the media:

BlackRock Wields Its $6 Trillion Club to Combat Climate Risks

Big investors press major companies to step up climate action

‘Money talks’: A $1.2 trillion fund manager is about to pull investment from companies that won’t act on climate change

BlackRock’s Message: Contribute to Society, or Risk Losing Our Support

The irresponsible behavior by these perps is explained by Tim Doyle at Crain’s newsletter: BlackRock mustn’t mimic underperforming NYC pension funds. Excerpts below with my bolds

Financial firms and fund managers must focus on returns, not political and social causes

Earlier this year, BlackRock CEO Larry Fink released his annual letter to CEOs, in which he called for a greater focus on “societal impacts” by the companies in which BlackRock invests. The lengthy letter went into considerable detail to explain the firm’s position, but failed to specify how this initiative will be carried out and what it means for the millions of hardworking Americans investing in BlackRock’s passive index funds.

But what is really behind this call to action? And why are passive-fund managers becoming active?

BlackRock’s newfound focus comes at a time when pension funds—such as the New York City Employment Retirement Systems and California Public Employees Retirement System (CalPERS)—are taking an increasingly aggressive position toward investments that align with social and political agendas, with returns often taking a backseat.

In New York today, the city’s contribution to its pension funds were $9.3 billion in fiscal 2017, up from $1.4 billion in 2002. The city’s budget will soon allocate more spending on pension costs than on social services (excluding education), while the funds are estimated to be at least $65 billion in the red, with a weighted average funded ratio of only 62%, or 10% below the national average. These are alarming figures.

Ironically, as the pension system struggles to meet its obligations, city Comptroller Scott Stringer is ramping up the funds’ focus on matters that on their face have little to do with performance and much more to do with public relations, submitting 92 separate shareholder proposals to 88 different companies in fiscal year 2017, the majority focused on giving large passive funds and pensions special status to elect directors and on social and environmental issues.

Stringer even stated in his inaugural address that he wants to “remake the office of comptroller into a think tank for innovation and ideas” and recently came out in support of fossil-fuel divestment at the city’s pension funds—another politically motivated move that could cost taxpayers billions.

The same can be seen at the nation’s largest public pension fund. CalPERS has increased its environmental and social investing and activism while converting a $3 billion pension surplus in 2007 to a $138 billion deficit today. CalPERS leaders have also taken an increasingly active public role, using the fund’s environmental and social platform to push a larger agenda on the world stage, all while struggling to meet its obligations.

Despite poor returns, these funds carry a large influence on companies, like BlackRock, that manage trillions in pension fund money, pressuring them to also take an aggressive stance on these issues. CalPERS, for instance, has paid BlackRock millions of dollars in fees and is negotiating with the company over management of the fund’s $26 billion private-equity program. BlackRock also voted in support of a CalPERS-sponsored climate-related proposal for the first time in 2017.

These are no small matters for a company that manages roughly $6 trillion in assets, the large majority of which are passive investments meant to track an index for steady value creation, not to act as active managers to push political and societal agendas unrelated to returns.

Since BlackRock’s announcement, its CEO has made a number of public appearances but has yet to reassure those who have placed trust in his firm’s passive-investment vehicles. After all, passive investors are looking to make gains based on the market, not pick winners and losers based on the social and political influences of mismanaged pension funds. Instead, the firm’s inability to share concrete details about the path forward creates more confusion for investors, who are worried what this new focus on “social impact” will mean for their retirement funds.

We all care about the environment and our own social causes, but an increased focus on issues that have no concrete connection to value has proven costly for the retirees who rely on their pension fund for their livelihood and the taxpayers that backfill their underperformance.

Now the nation’s largest passive-investment fund is moving toward implementing the same types of policies as the pension funds that happen to provide it billions of dollars in business each year, and millions of everyday investors could be affected. Anyone with an investment account should take note.

Tim Doyle is vice president of policy and general counsel at the American Council for Capital Formation.

Alberta Set to Imitate Ontario’s Electrical Mess

Albertans pay around five cents a kilowatt hour — compared to the up to 18 cents Ontarians experienced, but for how long?Postmedia News

Kevin Libin writes in Financial Post: Alberta’s now copying Ontario’s disastrous electricity policies. What could go wrong?  Get ready, Albertans, a new report reveals that all the thrills and spills that follow when politicians start meddling in a boring, but well-functioning electricity market are coming your way.  Excerpts in italics below with my bolds.

A report released Thursday by the University of Calgary’s School of Public Policy gives a sneak peek of how the Alberta script could play out. It begins once again with a “progressive” government convinced that its legacy lies in climate activism, out to redesign an electricity grid from something meant to provide affordable, reliable power into a showpiece of uncompetitive solar and wind power. And like Ontario, the Alberta NDP is determined to turn its provincial electricity grid into not just a green project that ignores economics, but an affirmative-action diversity project that sets aside certain renewable deals for producers owned by First Nations.

Alberta Premier Rachel Notley’s plan, like McGuinty’s, is to phase out all of Alberta’s cheap, abundant but terribly uncool coal-fired power (by 2030, in Alberta’s case) and force onto the grid instead large amounts of unreliable, expensive solar and wind power. Albertans have been so preoccupied fighting through a barrage of energy woes since Notley’s NDP was elected — the oil-price crash, government-imposed carbon taxes and emission caps, blocked and cancelled pipelines and the Trudeau government’s wholesale politicization of energy regulation — that they probably haven’t realized yet how vast an overhaul Notley was talking about when she began revealing this plan in 2015. But the report’s author, Brian Livingston, an engineer and lawyer with deep experience in the energy business in Alberta, runs through the shocking numbers: As of last year, Alberta’s grid had a capacity of roughly 17,000 megawatts, but the envisioned grid of 2032 will require nearly 13,000 megawatts that do not currently exist. Think of it as rebuilding 75 per cent of Alberta’s current grid in less than 15 years. Hey, what could go wrong?

Alberta Electricity System Operator is planning for so much wind power that the province will blow past Ontario, a province three times its size. Postmedia News

And if Ontarians thought their government was obsessed with green power, Livingston notes that the Alberta Electricity System Operator is planning for so much wind power that the province will blow past Ontario, a province three times its size, with 5,000 megawatts of wind compared to Ontario’s 4,213 megawatts, and nearly twice as much solar power, 700 megawatts, compared to Ontario’s 380 megawatts.

Learning from McGuinty’s mistake, the Alberta NDP is smart enough to ensure the extra cost of all this uneconomic power won’t show up printed in black and white on consumers’ power bills, likely hoping that spares them the political fallout that now threatens the Ontario Liberals. Rather than ratepayers shouldering the pain, it will be taxpayers — largely the same people — who pay most for any additional costs through added deficits and debts, at least for the next few years. That’s because Notley has ordered a temporary cap on household electricity rates of 6.8 cents per kilowatt hour (which is still significantly higher than the current rate). When wholesale rates rise higher than that, the government will use carbon-tax revenues to pay the difference. But businesses pay full freight from the get go.

Hiding from the real costs of using energy is a curious move for a government that gives away energy-efficient light bulbs and other products designed to conserve while imposing carbon taxes to try suppressing energy use. It’s also a costly move. Estimates from the C. D. Howe Institute estimate it will cost Alberta taxpayers up to $50 million this year alone; a recent report from electricity consultants at EDC Associates estimates that by 2021, the extra costs moved off electric bills and onto tax bills will total $700 million. That’s when the price cap expires and costs could start showing up on power bills, instead.

Of course, Ontario has proven that it’s easy to underestimate how expensive these political experiments can get, but the Alberta redesign is already getting pricey. First, Notley accidentally stuck Alberta consumers with nearly $2 billion in extra surcharges when she rewrote carbon policies without realizing that gave producers the right to cancel unprofitable contracts. Her plan also requires the government to create a new “capacity” payment system for electricity producers, who will able to charge substantial sums even if they don’t produce a single watt. Livingston shows that many producers can earn almost as much just for offering capacity to the grid as they do for producing. Meanwhile, since solar power is perennially and embarrassingly uncompetitive economically, even with expensive wind power, the government plans to let solar providers sell electricity at premium rates to government facilities, with taxpayers covering that cost, too, just as they’ll cover the cost of overpriced wind power, which doesn’t approach the affordability of fossil fuels.

In his report, Livingston drily notes that the way Albertans think of the future of their electricity system could probably be summed up as: “Whatever we do here in Alberta, please let us not do it like they did it in Ontario.” They have reason to fear, since Livingston shows Ontario households have faced rates as much as four times higher than those in Alberta. Even if it doesn’t look exactly like the way they did things in Ontario, that doesn’t mean it still can’t go very wrong. Whenever progressive politics infests the electrical grid, people always pay for it in the end.

Background:  Climate Policies: Real Economic Damage Fighting Imaginary Problem