By Dana Drugmand
Members of Congress recently introduced three new carbon pricing bills aimed at curbing planet-warming emissions. While the bills vary in their policy details, none explicitly absolve the fossil fuel industry of potential tort liability in climate lawsuits brought by municipalities, unlike another recent plan supported by the fossil fuel industry. One of the new proposals even expressly preserves the use of state law nuisance claims like the ones in these suits.
Last year, the industry declared its support for the Baker-Schultz Carbon Dividends Plan when it was introduced and included the controversial climate liability waiver. That plan also included rolling back Environmental Protection Agency regulations on climate pollution in return for a modest $40 fee per metric ton of carbon emissions.
The new bills propose varying carbon prices, different revenue distribution plans and stances on EPA regulations. The bill that expressly supports state-level action is the Climate Action Rebate Act of 2019, which strives to cut emissions 55 percent by 2030 with a goal of net zero emissions by 2050. Sponsored by Sens. Chris Coons (D-Del.) and Diane Feinstein (D-Calif.), with a House version brought by Rep. Jimmy Panetta (D-Calif.), the legislation starts the fee at $15 per metric ton of carbon-equivalent emissions, the lowest starting point of the new bills, but it has the steepest fee increase at $15 annually until emissions reach 10 percent of 2017 levels. The bill does not address EPA’s authority to regulate emissions, but it does include a provision stating, “nothing in this legislation preempts any state law or regulation.”
The two other new carbon pricing bills do not contain a provision clarifying that state law is not preempted, and they do propose to limit the Clean Air Act’s regulatory scope on carbon emissions. Both are bipartisan bills, sponsored by Rep. Francis Rooney (R-Fla.) and Rep. Dan Lipinski (D-Ill.).
The Raise Wages, Cut Carbon Act of 2019, introduced by Lipinski with Rooney as co-sponsor, would start the carbon fee at $40 per ton and increase it by 2.5 percent a year until emissions reach 20 percent of 2005 levels. Most of the revenue (84 percent) would be used to offset payroll taxes, with the remainder going to Social Security beneficiaries and funding low-income energy assistance and home weatherization programs. The bill prevents the EPA from enforcing regulations limiting emissions from fuels covered by the fee until at least 2030.
The Stemming Warming and Augmenting Pay (SWAP) Act, introduced by Rooney with Lipinski as cosponsor, starts the fee at $30 per ton and also reduces payroll taxes in addition to helping offset higher energy costs for low-income households and helping Social Security beneficiaries. The fee increases by 5 percent plus inflation each year. The bill also prohibits EPA from regulating greenhouse gas emissions from certain sources under the Clean Air Act, though the 12-year moratorium can be lifted if emission reduction targets are not met.
“The net effect of the bill is to shift the burden of taxation from working Americans to polluters—where it should be—all while harnessing capitalism, not regulatory bureaucracies, to direct the necessary emission reductions,” Jerry Taylor, president of the Niskanen Center, a libertarian think tank, said in a statement praising the SWAP Act.
The various bills’ restrictions on the EPA’s regulatory authority present an interesting issue for the oil companies being sued for climate damages, said David Bookbinder, Niskanen Center chief counsel who is also providing counsel for three communities in Colorado suing ExxonMobil and SunCor.
“The defendants are saying hold it, the Clean Air Act completely preempts state tort liability and so we belong in federal court,” Bookbinder told Climate Liability News. “Certainly the bills that don’t affect EPA authority at all would leave that argument intact. The ones that trim back EPA’s authority would greatly affect that argument. Although, the premise of their argument is that Congress is already addressing these things.” He said the fossil fuel company defendants would continue to argue that federal law preempts the tort claims should Congress pass a carbon fee.
“The defendants no doubt would say it doesn’t matter, if anything this is even a stronger indication that Congress has decided to address the problem,” he said. “On the other hand, some of these bills contain very explicit language saying that nothing in this act affects any state law including state common law remedies.
“That’s also what the Clean Air Act says, which is why no case has ever found the CAA ‘completely preempts.’”
In addition to the new Climate Action Rebate Act specifying no preemption of state law, another bill introduced earlier this year, the Energy Innovation and Carbon Dividend Act, also contains a “no preemption of state law” provision.
That leaves the door open to state common law nuisance claims against fossil fuel producers. “The language would not preempt state nuisance claims,” said Ann Carlson, co-director of the Emmett Institute on Climate Change and the Environment at UCLA School of Law.
“It’s very important to allow such suits to go forward because the damages communities have sustained and will continue to sustain from climate change are huge,” added Carlson, who has provided pro bono consulting for some of the California municipal plaintiffs in these lawsuits. “Preemption for liability would leave those communities, and their taxpayers, on the hook for all the costs.”
While many climate activists support a carbon fee as part of the strategy to combat climate change, studies suggest the current proposals come nowhere near matching the true cost of carbon emissions. A recent study by researchers at the University of Massachusetts concluded that a carbon tax would have to reach $200 a ton to change consumer behavior and to keep low-income consumers from disproportionately absorbing the costs.
Carlson said that a carbon tax may not be enough on its own and that preserving the federal government’s authority to enact other climate policies is important.
“The federal government could supplement a carbon tax with additional measures if a tax fails to deliver the necessary emissions reductions—for example, to control methane on public lands, or to reduce greenhouse gases from the transportation sector,” she said. “Sometimes, a carbon price is insufficient to achieve deep emissions reductions either because the price isn’t high enough or because the price signal doesn’t get through to the end user.”
Bookbinder added that a federal carbon tax would not eliminate the need for climate liability litigation so long as the tax revenue fails to compensate state and local governments for the costs of climate damage.
“A carbon tax does not address the adaptation needs in terms of how do state and local governments pay for these things,” he said. “The lawsuits are not premised on reducing emissions. They are about telling the industry that if you’re going to sell these products, then you have to pay for the damage.”