Issue Brief: States and Local Government Lawsuits Targeting Energy Manufacturers Could Backfire on Taxpayers
The climate litigation campaign against America’s energy producers was born out of an effort by a handful of political advocacy groups to use the courts in their desire to reduce the production, sale and use of certain types of energy products. Local governments that have signed up to be plaintiffs in these lawsuits, however, have said their goal is not to drive energy policy at all, but to find ways to pay for their local climate mitigation and adaptation projects.
An issue brief from The National Taxpayers Union Foundation found that much of the money that federal lawmakers have made available for these purposes has not been allocated or spent. Only $9.2 billion of the $41.8 billion from the bipartisan Infrastructure Investment and Jobs Act (IIJA) dedicated to environmental resilience and mitigation has been obligated and only $223 million has been spent. The issue brief also notes that additional funds beyond the IIJA are available via federal programs.
Demian Brady, NTUF’s Vice President of Research, said the NTUF issue brief shows that “tapping into these funds would be a better way of addressing the problems that ostensibly lead to the lawsuits against energy manufacturers.”
The issue brief also points out that the mitigation funds that are already set aside, in addition to being available sooner, would have far fewer transaction costs than proceeds from lawsuits. Even if these lawsuits are successful, a significant portion—up to 25 percent—of any revenue generated from the lawsuits will go to private attorneys under the contingency fee agreements. By contrast, the transaction costs of federal grant programs are low.
Here are a few additional highlights from the NTUF issue brief:
- “The primary aim of these lawsuits is to impose significant fines on energy producers to pay for climate change mitigation projects. For example, Hawaii is planning to direct the proceeds for ‘building seawalls and raising buildings to buying flood-prone properties and restoring beaches and dunes.’”
- “However, a considerable portion of the fines would end up as contingency fees lining the pockets of lawyers rather than providing funding for environmental mitigation efforts. Meanwhile, as the lawsuits drag on, a large pot of federal funding explicitly set-aside for states and localities to use for mitigation and resilience efforts around the country remains unspent.”
- “While sound grant administration demands award and oversight processes that can take time, this does not seem to be the sole reason behind such a long obligation period. Tapping into these funds would be a better way of addressing the problems that ostensibly lead to the lawsuits against energy manufacturers.”
- “In conclusion, the ongoing legal battles between state and local governments and energy-producing companies, though ostensibly aimed at addressing climate change, threaten dire consequences for taxpayers and the economy at large.”