Lessons From The Oakland/San Francisco Dismissal

Commentary, Environment, Wendell Cox

Federal District Court Judge William Alsup dismissed the “global warming” lawsuits of the cities of Oakland and San Francisco against large oil and gas companies, In so doing, the Judge provided important lessons in history, logic and public policy.

The cities had sought compensation for present and future sea level rise they attributed to the actions of defendants Chevron, Exxon Mobil, British Petroleum, Royal Dutch Shell, and ConocoPhillips, all among the largest investor owned companies in the industry. The suit did not target the similarly large state-owned oil companies such as Saudi Arabia’s Aramco, China’s Sinopec and PetroChina, Kuwait Petroleum, and Mexico’s Pemex which are among the most powerful in the industry.

The Costs and Benefits of Fossil Fuels

Judge Alsup ruled that cost-benefit analysis was necessary. Nearly a decade ago, I wrote a New Geography piece on “cowboy greenhouse gas emission policies” that get in the way of policies that could work, but did not anticipate the piecemeal cowboy legal actions of individual jurisdictions.

He cited a precedent, in which the U. S. Supreme Court “cautioned that policy questions concerning global warming require an “informed assessment of competing interests” and that “[a]long with the environmental benefit potentially achievable, our Nation’s energy needs and the possibility of economic disruption must weigh in the balance.” These points have been made evident in a recent report on the impact of climate change recently released.

The Judge noted that:

The scope of plaintiffs’ theory is breathtaking. It would reach the sale of fossil fuels anywhere in the world, including all past and otherwise lawful sales, where the seller knew that the combustion of fossil fuels contributed to the phenomenon of global warming.

Jurisdictions around the world could follow suit, with the result being substantially higher costs of production. This could significantly reduce economic growth rates and would especially hurt low income residents who are by far the most sensitive to such price increases.

Based upon the historical record, Judge Alsup’s view is that there have been important net benefits to society from fossil fuels:

“With respect to balancing the social utility against the gravity of the anticipated harm, it is true that carbon dioxide released from fossil fuels has caused (and will continue to cause) global warming. But against that negative, we must weigh this positive: our industrial revolution and the development of our modern world has literally been fueled by oil and coal. Without those fuels, virtually all of our monumental progress would have been impossible. All of us have benefitted.”

Despite all the sometimes overhyped talk about renewable substitutes for fossil fuels, it is clear that fossil fuels are still necessary to maintaining and growing the economy, Alsup says that:

In our industrialized and modern society, we needed (and still need) oil and gas to fuel power plants, vehicles, planes, trains, ships, equipment, homes and factories. Our industrial revolution and our modern nation, to repeat, have been fueled by fossil fuels.

Who is Responsible for the Externalities of Fossil Fuels?

Judge Alsup also raises the important logical question of responsibility. Who should shoulder the cost of any externalities? Judge Alsup places the responsibility for use of fossil fuels where it belongs, with those who use them. Perhaps it would have made more sense for Oakland and San Francisco to sue everyone, including their own citizens, since virtually everyone contributes to fossil fuel emissions.

The harm alleged by our plaintiffs remains a harm caused by fossil fuel emissions, not the mere extraction or even sale of fossil fuels.

Of course, the emissions are caused by the users of fossil fuels, none of whom is forced to use them. That may be an impractical course, but it is surely available to any who would apply monkish dedication to the subject.

Having reaped the benefit of that historic progress, would it really be fair to now ignore our own responsibility in the use of fossil fuels and place the blame for global warming on those who supplied what we demanded? Is it really fair, in light of those benefits, to say that the sale of fossil fuels was unreasonable?

Fossil Fuels Made the Modern World Possible

Indeed, if political leadership at the beginning of the industrial revolution had been similar to that of the cities of San Francisco and Oakland, there likely would never have been one. That would have been tragic. The billions of people lifted out of poverty would still be poor in all likelihood.

This is evident by the work of economists Diedre McCloskey at the University of Illinois, Chicago and Robert Gordon at Northwestern University. In 1800, most of the population of the world, including the currently most affluent nations of Western Europe, Canada, the United States and Japan was in poverty. Fossil fuels were critical in making possible the affluence that emerged on an unprecedented scale. It seems unlikely that there are many households prepared to accept the radically lower standards of living necessary by “swearing off” fossil fuels. Moreover, most would agree that throughout the affluent countries, poverty should be reduced.

China, which as late as 1980 was among the poorest per capita nations in the world, has made unprecedented economic progress since that time. This has included lifting hundreds of millions of people out of poverty. It was made possible by fossil fuels, and especially the use of coal, which fueled much of the economic growth. Similarly, there seems no rush on the part of the Chinese to restore that economic conditions of forty years ago. Despite the huge reduction of poverty in China, there is still a need for more reductions (see photograph above of a low-income area of Shanghai, with a nearby expensive apartment building in the background).

The world economy, including that of China could be substantially weakened by the precedents that Oakland and San Francisco sought to establish. Moreover, poverty would be increased and middle-income households would be left worse off.

The Self Evident Net Benefits of Fossil Fuels

Beyond the judge’s opinion, the reality is that fossil fuels provide substantial enough net benefits to billions of people who might not be willing to accept the substantially lower quality of life. This is the ultimate and self-evident test. These users have not been duped by the oil and gas companies into using fossil fuels; they use them to improve their own lives.

And these billions include the city council members of both San Francisco and Oakland, as well as just about everyone else in the United States, Europe, Japan — and every other countries as well.

Judge Alsup’s opinion is refreshing and should be the basis for future discussions on looking for ways of mitigating environmental consequences without undermining prosperity, particularly for those who do not yet fully enjoy it.