The former Department of Justice lawyer who led the watershed lawsuit against tobacco companies, says that the news out today about oil giant ExxonMobil knowing as early as 1981 about the threat posed by climate change could worsen the fossil fuel industry's liability picture.
Not only the media are buzzing over the revelation today that Exxon executives knew as early as 1981 of the significance of climate change and the dangers of carbon dioxide emissions, yet continued to fund scientists and a global misinformation campaign to sow doubt about whether global warming is real for another 27 years. Lawyers thinking of suing the industry for its role in warming the planet will certainly take note of what could be a potent new piece of evidence.
The admission came in an email by Leonard Bernstein, a chemical engineer who was Exxon’s in-house climate specialist.
The revelations in the Bernstein email had a familiar ring to former federal Department of Justice lawyer Sharon Eubanks. Eubanks led DOJ’s successful lawsuit against the tobacco companies under the Racketeer Influenced and Corrupt Organizations (RICO) laws that proved a fifty-year-long conspiracy by Big Tobacco to create doubt about smoking’s hazards.
Eubanks said the revelations in the Bernstein email could significantly worsen the fossil fuel industry’s liability picture:
“It starts to look like a much longer conspiracy. It’s like what we discovered with tobacco – the more you push back the date of knowledge of the harm, the more you delay any remediation, the more people are affected. So your liability can grow exponentially as the timeline gets longer.”
Image credit: Mike Mozart on Flickr
That question was actually asked by British Secretary of State for Energy and Climate Change Ed Davey last year, and its ramifications are extensively explored in a provocative report released today by the Center for International Environmental Law, a Washington, D.C. think tank.
According to CIEL, the answer to Davey’s question is a resounding “yes.”
The report makes a compelling case that the three big financial rating agencies – Moody’s, Fitch and Standard & Poor - that gave clean bills of health to the toxic financial products that caused the 2008 worldwide financial meltdown are giving similarly bad advice to investors by rating fossil fuel investments without acknowledging climate change-related risk.
Along the way, the report, called “(Mis) Calculated Risk and Climate Change: Are Ratings Agencies Repeating Credit Crisis Mistakes?,” stresses the potentially enormous legal liability for the agencies if their ratings understate the pitfalls of what are likely to be severe climate impacts on oil, gas, and particularly coal companies.
Coal is not only the leading contributor to atmospheric CO2 levels, it is the most financially dangerous investment. Coal prices have plummeted. Between 2010 and 2014, three coal plants were delayed or scrapped for every one built. After being dropped from Standard and Poor’s 500 Index in September, Peabody Energy, the world’s largest private sector coal firm, was dropped from Standard & Poor’s MidCap Index today because its market cap has plunged from $3.9 billion to just $700 million.
Other recent developments have made the idea of stranded fossil fuel assets far more tangible. These have included the G-20 conference asking for an investigation into $6 trillion in planned fossil fuel extraction investments, the wholesale divestment from coal by the Norwegian Pension Fund, and the International Monetary Fund’s repeated calls for an end to fossil fuel subsidies.
So far, the Big Three rating agencies have ignored all this – just as they, along with the rest of Wall Street, ignored both common sense and strong evidence that housing prices would not rise forever. The U.S. Financial Crisis Inquiry Commission, which probed the causes of the 2008 crash and worldwide depression, called the three rating firms “key enablers of the financial meltdown. The mortgage-related securities at the heart of the crisis could not have been marketed and sold without their seal of approval. Investors relied on them, often blindly. In some cases, they were obligated to use them, or regulatory capital standards that were hinged on them. This crisis could not have happened without the rating agencies.”
Now the agencies are again playing the role of the blind leading the blind, relying on the assumption that no steps will be taken to reduce fossil fuel reliance, and that a warming world won’t interfere with business as usual. CIEL writes:
“Many in the finance industry continue to rely on the current ≥4°C climate scenario (a “carbon bubble”), just as many relied on scenarios where housing prices did not decrease or stabilize. Indeed, the financial risks of a 2°C climate scenario loom large, just as the risks of sub-prime mortgages loomed over the financial industry prior to the credit crisis. Some analysts project that the fossil fuel industry could lose $28 trillion USD of revenue over the next two decades. Recently, the Bank of England’s Finance Policy Committee announced that it will investigate whether the carbon bubble could lead to a financial collapse.” [The 4-degree scenario is one in which no measures are taken to restrict warming to 2 degrees.]
Media Update - coverage of the report below:
Science Magazine - "Journals investigate climate skeptic author’s ties to fossil fuel firm as new allegations arise", by David Malakoff
Inside Climate News - "Willie Soon's Fossil Fuel-Funded Work Draws Ethics Review From Publisher", by David Hasemyer
Guardian - "Climate sceptic researcher investigated over funding from fossil fuel firms", by Suzanne Goldenberg
PLoS Public Library of Science - New Charges of Climate Skeptic's Undisclosed Ties to Energy Industry Highlight Journals' Role as Gatekeeper, by Liza Gross
Nature - Earth science wrestles with conflict-of-interest policies, by Jeff Tollefsen, June 24, 2015
Today we are releasing a report summarizing our communications with science journals over the past four months regarding Willie Soon's lack of disclosure of sources of financial support to those science journals and in Soon's research and commentary published in peer reviewed literature. The introduction and summary of findings are below.
View and download the full report, Willie Soon and Conflicted Climate Science, on DocumentCloud
Additionally, we have queried two prestigious journals where Willie Soon has published commentary and papers, while declaring no conflict of interest.
We sent the report to the National Academy of Sciences with a letter inquiring about a piece that Willie Soon published in the prestigious journal Proceedings of the National Academy of Sciences in May 2014. View letter to PNAS.
We sent a letter to Nature regarding a March 2015 paper Soon co-authored in Nature Geoscience. View letter to Nature.