Why are climate battles being waged at the state level?

There are 30 active lawsuits against large oil companies that have been brought by various states and cities since 2017, including California, Minnesota and Washington, D.C. The plaintiffs — and their attorneys — are aiming for huge paydays that supposedly will compensate for the claimed damages these companies have allegedly caused, by “deceiving” the public about the “dangers” of fossil fuels and carbon emissions for the last 50 years. Plaintiffs are also suing over anticipated damages that fossil fuels will allegedly cause in the foreseeable future.

In state courts, plaintiffs have argued that this alleged deception, which includes “suppressing” low-carbon alternatives to fossil fuels and lobbying efforts to oppose regulating greenhouse gas emissions, violated numerous state and local laws.

Not only do these cases lack merit, but the application of individual and differing state laws is entirely illogical.

To take one example, in 2020, Honolulu filed a case against more than a dozen energy companies, as well as several trade associations, alleging that it has suffered all manner of damages attributable to climate change and will continue to do so. Although the cases filed have so far only asked for monetary damages, some attorneys have argued that energy companies could, and, indeed, should, be charged with “every type of homicide short of first-degree murder.”

Not surprisingly, plaintiffs in these cases are not overtly demanding bans on the production, sale and use of fossil fuels, even if that is the logical conclusion of their claims of past and future damages.

There are two reasons why these lawsuits do not insist on banning fossil fuels. First, even after decades of subsidies for renewable energy, fossil fuels still supply 80 percent of U.S. energy. Worldwide, the production and consumption of fossil fuels continue to increase. Eliminating fossil fuels in the U.S. would end modern life as we know it, a fact that plaintiffs’ attorneys surely understand.

Second, forcing oil companies to cease operating would cut off the monetary damages spigot; their model, the tobacco settlement, obligates manufacturers to pay damages forever.

Greenhouse gases aren’t confined by borders. Nor do individual molecules come with signs identifying where they came from, as even the plaintiffs acknowledge. Consequently, it’s impossible to determine emissions sources. That is one reason why defendants argue these cases should not be resolved under individual state laws. The plaintiffs are suing over alleged conduct that has taken place beyond state borders.

The Honolulu case is especially relevant because, last October, the Hawaii Supreme Court agreed with the plaintiffs that the case could be tried in state court under Hawaii’s state laws. The defendants appealed and the issue is now before the U.S. Supreme Court to review whether federal or state laws should apply to these claims. If it upholds the Hawaii court’s ruling, then the Honolulu lawsuit, along with dozens of others, will proceed and be tried in state courts under each state’s laws.

The Commerce Clause of the U.S. Constitution limits the ability of individual states to regulate interstate commerce. Hawaii, for example, has two oil refineries, which import 100 percent of the crude oil they refine. (Oddly, PAR Pacific, the parent company of PAR Hawaii, which owns and operates those refineries, is not a defendant in the Honolulu lawsuit, even though one of the refineries is located on the island of Oahu.) For example, under the Commerce Clause, Hawaii cannot ban crude oil and refined product imports. Similarly, states cannot impose their own air quality standards on power plants and major industrial facilities. Instead, air quality standards are set under the federal Clean Air Act.

This federal-state dichotomy raises an important but less discussed aspect of hearing these cases in state courts guided by state laws: the economic inefficiency of applying different state laws to a global issue. Subjecting oil companies to the whims of different individual state laws would affect markets beyond those states’ borders. One can even imagine a situation where fossil fuel companies could not simultaneously comply with conflicting remedies should these lawsuits succeed and, therefore, cease operating.

California Gov. Gavin Newsom (D), for example, wants to require oil refineries to maintain larger inventories of gasoline to prevent price spikes, claiming that oil companies intentionally limit inventories to raise prices and increase their profits. Although the governor’s claim is meritless, an oil company forced to limit gasoline production and sales because of Hawaiian law could conflict with a California requirement to increase inventories and prevent shortages.

Litigation is an inefficient approach to developing sound policies. Ultimately, these lawsuits are frivolous for several reasons: attributing specific events, including hurricanes and wildfires, to climate change, is statistical chicanery, and presuming (without evidence) that energy companies suppressed fossil fuel substitutes that were developed decades ago is economic nonsense. Litigation based on individual state laws will only exacerbate economic inefficiency and impose far greater costs on U.S. consumers than any benefits from reduced fossil fuel consumption.

Jonathan Lesser is the president of Continental Economics, a senior fellow with the National Center for Energy Analytics, and a senior fellow with the Discovery Institute. The opinions expressed are those of the author alone.