If you believe your energy bills are high right now, just wait. Climate activists are embarking on a significant nationwide legal campaign that could increase the average household’s energy costs by nearly $1,500 annually, reaching about $15,000 over the next decade. The Supreme Court is currently reviewing a related case (Suncor Energy Inc. v. County Commissioners of Boulder County).
This campaign is primarily focused on three strategies: tort litigation, state “climate superfund” laws, and federal legislation. Each of these approaches places substantial financial burdens on upstream suppliers, which inevitably trickles down to households, impacting costs at the pump and on utility bills.
There are over 30 lawsuits insisting that energy companies pay for unproven effects on global climate change, with claims coming from 11 states, D.C., and numerous cities. Both New York and Vermont have enacted climate superfund laws that create liability, with New York’s capped at $75 billion, while Vermont’s has no cap.
A similar approach has been attempted by a dozen other states, while members of Congress have introduced the Polluters Pay Climate Fund Act, which aims to extract $1 trillion over a decade. Proponents argue that these measures will not affect family expenses, asserting that the costs are associated with past production consistent with shareholder payments. However, these claims don’t seem to hold up to scrutiny.
Ultimately, businesses will transfer their costs to consumers. It doesn’t matter if a government official claims these costs are from years gone by; it’s a reality that households will end up paying more. Companies will also have to consider future risks—costs that could surge if they face penalties for legal actions taken decades prior.
This added risk could deter the development of energy projects, especially those that take years to break even. For those that do go ahead, companies will likely raise prices to offset the potential penalties they might face.
And if costs are theoretically only passed to shareholders, let’s not forget that many of those shareholders are middle-class workers. Energy stocks are often part of pension funds or 401(k)s of professions like teaching, firefighting, and law enforcement.
Referring to the obligation for shareholders to pay means potentially draining retirement accounts to fund initiatives favored by climate advocates, such as carbon taxes. One lawyer involved in this climate litigation admitted that the intent is a type of indirect carbon tax, pushing companies to pass those expenses on to consumers through higher prices.
Our analysis estimates the total financial impact of these lawsuits and legislative efforts at about $194 billion each year. This translates to roughly 41 cents more per gallon of gasoline and about a 9% increase in electricity rates. It’s important to note that the hike in gas prices would account for nearly all the federal and state taxes that consumers currently pay.
The situation is particularly challenging, given that electricity rates have already surged by 7% last year and another 9% earlier this year. Many households are struggling, with one in six behind on energy payments and a quarter cutting back on essentials like food or medicine to manage costs.
Low-income families are particularly hard-hit, spending nearly four times their income on energy compared to others. The so-called carbon taxes advocated by climate groups could disproportionately affect these households. In a somewhat misleading move, New Jersey lawmakers have rebranded their proposed $50-billion assessment as the “Polluters Pay to Make New Jersey More Affordable Act.”
A nationwide carbon tax appears unlikely to garner sufficient congressional support because of the potential backlash from voters, but a retroactive assessment system pieced together through court outcomes could circumvent direct voter accountability.
This is why Maryland’s Supreme Court dismissed three of these lawsuits, pointing out that even with strict warnings, the impact on global emissions would be minimal.
However, it’s important to remember that lawfare isn’t solely about winning; the process itself serves as a form of punishment. Even if cases are dismissed, legal fees and associated costs still burden energy companies, leading to increased risk premiums that eventually affect consumer bills.
The more sensible approach would be to boost energy production to lower costs for consumers. Reliable power facilities need to maintain operations, and new ones should be developed to meet rising demands. The alternative? A hidden $1,500 annual burden on families that nobody consented to.
