California cities and crazy climate change lawsuits - Do as I say, not as I do

California cities are learning the meaning of hypocrisy. They have sued Exxon and other energy companies for concealing the costs of climate change from investors and customers. But now these same cities have confessed to the markets that they have no idea whether the climate is changing and whether it will have any effect on their citizens.

During the last year, Oakland, San Francisco, and several other California cities and towns took to the courts to set their own policies on global warming, even though no activity within their borders could make the slightest dent in worldwide temperatures.

They filed lawsuits against Exxon and more than a dozen energy companies claiming that future rises in sea levels will literally erode property values.  They demand that the companies fork over millions to remedy this imminent economic calamity.

Put aside for the moment the absurdity of pinning sole responsibility for the effects of climate change on a handful of companies. Climate change is a worldwide phenomenon to which human activity for decades, if not centuries, has contributed.  Scholars continue to argue how much global temperatures will change in the future, which conduct is responsible, and whether reducing it is worth the costs in reduced economic growth. Californians have certainly not restrained themselves in the cause of climate control: they have a love affair with driving, especially Angelenos, many of whom seem to hate public transportation almost as much as they hate “big oil.”

Californians have certainly not restrained themselves in the cause of climate control: they have a love affair with driving, especially Angelenos, many of whom seem to hate public transportation almost as much as they hate “big oil.”

Also put aside for a moment the factual errors in the municipalities’ suits. Exxon, in particular, has acknowledged the link between fossil fuel use and climate change, supported the Paris climate agreement, and even backed a revenue-neutral carbon tax (which we did not). Yes, it is a fossil fuel company but far from concealing the truth, Exxon has been more than willing to adapt to changing climate awareness.

Can the lawsuits even show how much Exxon has individually contributed to changes in global temperature?  If San Francisco and Oakland are suing Exxon, why don’t they also sue every company in China and India?  The economic growth of these two developing giants no doubt has contributed far more to global warming than any American company or the United States in general.

Instead, consider the hypocrisy laid bare this week in an Exxon court filing.  It points out that many of the California towns and cities took the exact opposite position in their municipal bond offerings.  When borrowing money, they took pains to insulate themselves from liabilities stemming from climate change when offering bonds to investors.  Some said they had no way to predict accurately risk related to rising sea levels or climate change or simply failed to mention such risks.  Apparently, these cities and towns believe it is better to tell the truth to the markets in New York City than to judges and jurors in court.

For example, in its bond offering in 2017, Santa Cruz states, “Areas within the county may be subject to unpredictable climatic conditions, such as flood, droughts and destructive storms.” And yet, in its lawsuits against the energy companies, Santa Cruz declared with righteous certainty that there is a “…a 98% chance that the County experiences a devastating three-foot flood before the year 2050, and a 22% chance that such a flood occurs before 2030.”

In its 2017 bond offering, San Francisco acknowledged, “The City is unable to predict whether sea-level rise or other impacts of climate change or flooding from a major storm will occur, when they may occur, and if any such events occur, whether they will have a material adverse effect on the business operations or financial condition of the City and the local economy.” But in its lawsuit, the city declared, “Global warming-induced sea level rise is already causing flooding of low-lying areas of San Francisco…”

And this was even before smoking marijuana became legal in California.

These contradictions only underscore the highly political origin and motivation of the city lawsuits. The plaintiffs’ lawyers include Matthew Pawa, long regarded as an innovative and entrepreneurial strategist when it comes to using the court room as a substitute for the legislature to advance climate change orthodoxy. It is no coincidence that Hagens Berman Sobol Shapiro, a large plaintiffs firm based in Seattle, recently announced that it is expanding its environmental practice by acquiring the Pawa Law Group.  Municipalities likely welcome the chance to outsource the costs of litigation to firms working on a contingency basis. Rulings by environmentalist-friendly judges could mean a big pay day for all, giving new meaning to the “green” movement.

In a petition filed in Texas court early this week, Exxon lays out the conflict between what the cities have told judges and what they have told the bond markets. Exxon is asking the court to require government officials to answer questions under oath about those statements. The case could have broad implications for the bond markets, as investors could have legal grounds to challenge the local governments for similar inconsistencies.  In the end, the cities’ mismanagement will come home to roost in higher borrowing costs and, ultimately, higher taxes for their residents.