Fossil fuel interests supporting carbon taxes?
Watch for the wolf in sheep’s clothing
Talk, even actual consideration, of carbon taxes has gained currency, aided along in part by the attention paid to Green New Deals sprouting up in different landscapes. Most would agree that a carbon tax is a sensible, well-established means of moving people away from reliance on fossil fuels, by making it more expensive. Most would also agree that a carbon tax is not the only, and not always the most useful, carbon pricing mechanism. Depending on how it is structured it can be regressive, hurting the poor and vulnerable, who would have to pay higher prices for their heat and other energy needs. As usual, the rich can take care of themselves.
But carbon taxes can be a crucial step in reducing dependence on fossil fuels. So no wonder people are surprised, even shocked, to hear certain fossil fuel interests, including major oil companies like ExxonMobil, actually agreeing to, and even pushing for, the imposition of carbon taxes on their assets – coal, oil, gas.
But be very wary of such support for carbon taxes from the rich fossil fuelistas. They may be the proverbial wolf in sheep’s clothing.
Their support for carbon taxes is often contingent on getting a law that provides protection for the fossil fuel companies against any lawsuit that claims they might be liable for climate change impacts. Such claims are not empty threats as we see a host of lawsuits against the oil companies alleging their products — coal, oil, gas — have caused some of the worst adverse effects from climate change.
Here is the danger of any such proposed trade-off. A law that imposes carbon taxes, and at the same time liability protections for the fossil fuel companies, can be passed with modest carbon taxes to start, with the promise to increase the tax in succeeding years, while the liability exemption is permanent. Then, lo and behold, a few years later, with a more favorable legislature or authoritarian leader, the carbon tax remains low or is repealed, while the liability protection remains.
Before you think that might be an unlikely scenario, look more closely.
A similar deal was struck in passage of the US Superfund law, known formally as the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The Superfund law provides for strict and joint liability for anyone who disposed of “hazardous substances” into the environment. It also provides broad Federal authority to respond directly to releases or threatened releases of “hazardous substances” that may endanger public health or the environment. To pay for these “response” actions, CERCLA created a “superfund” to provide the financial resources for the federal government to identify hazardous waste sites and clean them up with the public funds and then pursue all the responsible parties for reimbursement of the costs of the cleanup. First the site gets cleaned up, then the responsible parties are pursed for paying the costs.
Money for the “superfund” was provided by general appropriations, costs recovered from responsible parties, penalties, and, significantly, from environmental excise taxes on products falling into three general categories– petroleum, petrochemicals and inorganic chemicals.
At the same time, an exception to liability is provided by the “petroleum exclusion” under CERCLA, which holds that “petroleum” is not a hazardous substance, the term on which CERCLA liability hangs. Since CERCLA was passed in December 1980, before Reagan assumed the presidency in January 1981, it was rushed through and the legislative history is notoriously thin and unclear. But for whatever reason, or politicking, the petroleum companies got a pass on liability but had to pay their share of the excise tax to support the superfund.
Then in 1995, with the Gingrich-led Republican Congress, the tax on the chemical and petroleum industries was allowed to expire, but the protections against liability remained in place. So all the affected companies walked away from paying for any “superfund” excise tax and the petroleum industry retreated into its statutory liability exception.
Eventually the superfund dried up and cleanups were funded only from recovery of federal costs from other companies and some general appropriations. As a result, further cleanups of hazardous substance sites have been hampered.
You can rest assured that the petroleum and other fossil fuel companies will not forget nor will they ignore the deal they pulled off in the CERCLA legislation when it comes time to structure a so-called climate carbon tax bill, with liability exemptions.
The Aesop fable about the wolf in sheep clothing, who ate a number of sheep through this dissemblance, ended with the shepherd taking a fancy for mutton broth one night. He came out with a knife and killed the first sheep he came across, which happened to be the wolf in sheepskin.
Is there some analogous ending for the fossil fuel interests who try to disguise their hunger for a liability exemption by dressing it up as a carbon tax?
We shall see.
E.A. Cruden, “Oil companies slipped a present to themselves into this carbon tax plan: Fossil fuel corporations would be shielded from climate lawsuits under a proposal several are supporting,” Think Progress (20 May 2019). bit.ly/2IM5HOu
United States Environmental Protection Agency (EPA), Superfund Regulations. bit.ly/2MSWoBJ
Carol F. Barry, “CERCLA’s Petroleum Exclusion: Whose Burden Is It Anyway?” Environmental Law Reporter ( 26 ELR 10479 – 1996). https://bit.ly/2x85M9D
Aesop, The Wolf in Sheep’s Clothing. bit.ly/2RkxgCu