Walters: California consumers will pay if their lawmakers penalize oil companies

A theory that oil companies should be held legally responsible for the effects of climate change has been circulating among California’s left-leaning organizations and their political allies for several years.

The movement is gaining new vigor since deadly wildfires swept through Los Angeles County this year and it’s taking two forms — lawsuits and legislation.

As a recent CalMatters article notes, “Across the country, states, cities, tribes and environmental groups have filed dozens of lawsuits against oil companies alleging that they misled the public about the dangers of their products. These cases share a core argument: Oil companies knew fossil fuels were driving climate change and lied about it.”

However, as Michael Gerrard, an environmental law expert at Columbia Law School told CalMatters reporter Alejandro Lazo, “There are a lot of lawsuits pending, but so far, not a single court in the world has held fossil fuel companies financially responsible for greenhouse gas emissions.”

Meanwhile, there are a couple of bills in the state Legislature that, if enacted, would open the door to hitting oil companies in the pocketbook.

Sen. Scott Wiener, a San Francisco Democrat, introduced Senate Bill 222 in January as the wildfires were still raging. It would give homeowners and insurance companies the ability to sue oil companies for fire damages on the theory that their products created conditions for destructive blazes.

However, the bill was sidelined during its initial hearing in the Senate Judiciary Committee, garnering just five votes.

The second measure, SB 684, would create a Polluters Pay Superfund Program and empower a state agency to determine how much atmospheric damage has been caused by petroleum between 1990 and 2045 and impose the cost on oil companies.

Carried by Sen. Caroline Menjivar, a Democrat from Van Nuys, the bill is pending in the Judiciary Committee.

The underlying assumption of both the lawsuits and the legislation is that the oil companies would be forced to acknowledge their contributions to climate change and pay billions of dollars as compensation and punishment.

The theory, however, has an aspect that advocates never mention — that corporations can pass on those costs to customers in the form of higher prices.

By happenstance, California already has a mini-version of the polluter-pays movement called cap-and-trade, and it proves the point that consumers eventually shoulder the financial burden.

Since 2012, California’s Air Resources Board has been setting limits on how much greenhouse gases can be emitted by certain industries and auctioning off “emission allowances,” raising billions of dollars each year.

By paying for emissions, it’s believed, corporations have an incentive to reduce them. Whether that’s true is still an open question and one reason for doubt is their ability to shift the burden to consumers.

The Legislative Analyst’s Office, which advises the Legislature on financial matters, released a report on the cap-and-trade system this week.

Among other things, the report confirms that California motorists are already paying quite a bit more for fuel because of cap-and-trade.

It pegs the current effect at 23 cents a gallon, and if emission auction prices rise to their upper limit, “cap-and-trade would contribute roughly 74 cents per gallon to gasoline prices…”

The LAO report estimates that at the higher level, “the average household would pay about $700 per year as a result of the program,” adding, “such higher costs would be particularly burdensome for lower-income households, as they tend to spend a relatively high share of their incomes on transportation fuels compared to wealthier households.”

So there you have it.

Whatever California does to reduce its carbon footprint to zero will be expensive and California consumers will face even higher costs of living, in the same way President Donald Trump’s tariffs impact prices. We shouldn’t pretend otherwise, as advocates for carbon reduction tend to.

Dan Walters is a CalMatters columnist.