Political lobbying in the US that helped block the progress of proposed climate regulation a decade ago led to a social cost of $60bn, according to a new study.
The pair say their work reveals the power firms can have in curtailing government action on climate change, in the face of “overwhelming evidence” that its social benefits outweigh the costs, which range from reduced farming yields to lower GDP.
Crucially, they found that the various fossil-fuel and transport companies expecting to emerge as “losers” after the bill were more effective lobbyists than those expecting gains.
The authors say their results, published in Nature Climate Change, support the conclusion that lobbying is partly responsible for the scarcity of climate regulations being enacted around the world.
However, they tell Carbon Brief that there is still hope for those seeking to develop effective new climate policies:
“Our bottom line is: climate policy emerges from a political process. We’ve shown that this political process can undermine the chances of passing climate policy. But we’ve also shown that careful design of climate policy can help make it more politically robust to opposition.”
The Waxman-Markey bill, described by the study’s authors as “the most prominent and promising US climate regulation so far”, did not make it past the Senate in 2010, meaning it never passed into law.
However, having passed the House of Representatives in summer 2009, it remains the closest the nation has ever come to implementing wide-ranging climate legislation.
Formally known as the American Clean Energy and Security Act 2009, the bill proposed a 17% cut in US emissions by 2020 – and then 80% by 2050 – based on 2005 levels. It was named after the two Democrat representatives who wrote it, Henry Waxman and Edward Markey.
A key element of Waxman-Markey was its cap-and-trade scheme, which would have limited the amount of greenhouse gases produced nationally while creating a fixed number of tradable emission permits for industry nationwide. Other measures included a renewable energy standard and legislation for energy efficiency and grid modernisation.
The bill was the culmination of several attempts stretching back to 2003 to pass cap-and-trade legislation limiting the US economy’s emissions. As none of these efforts were successful, president Barack Obama instead relied on the executive powers of the US Environmental Protection Agency to tackle greenhouse gas emissions, specifically its power to regulate “any pollutant” that “endangers public health or welfare”.
Media reports around the time Waxman-Markey was making its way through the US government made it clear that lobbyists were thought to be hindering its progress.
However, the authors of the new paper note that despite such reporting it is difficult to appreciate the extent of political lobbying and its impact on the final outcome. According to them, lobbying often goes unrecorded and, even when it is, it can prove difficult to quantify which groups stand to gain and lose – and to what extent.
For Waxman–Markey, they made use of the “comprehensive US congressional lobbying record” to piece together a full picture of the situation at the time.
According to their paper, the bill accounted for around 14% of all recorded lobbying expenditures at the time – more spending on lobbying than for any other policy between 2000 and 2016.
A separate study conducted by Dr Robert Brulle of Drexel University in 2018 found that over this period, climate issues took up roughly 4% of all lobbying spend, amounting to over £2bn. He concluded that fossil-fuel, transport and utility companies dominated this activity, with expenditures that “dwarfed” those of environmental groups and renewable energy corporations.
Winners and losers
To understand different lobbyists’ motivations, the researchers first had to work out how Waxman-Markey would have affected companies had it passed into law.
They took data on prices from a prediction market tied to the bill while it was being considered by government and combined it with stock prices for firms involved in lobbying. In a joint email, Meng and Rode explain how this works to Carbon Brief:
“A prediction market is essentially a betting market where participants bet on the likelihood of some event happening. Think of it like a sports betting market (in other words, will Liverpool win the Champions League final?), but you can do that for any event…The power of a prediction market is that, under some standard economic assumptions, the price of a bet of that market at any point in time reflects the market-held belief that the event will happen.”
Their “innovation”, the pair explain, was to combine this information with the stock market prices of publicly listed firms that lobbied on the bill. They were then able to estimate how the values of publicly listed firms were expected to change if the policy had passed.
One benefit of this approach was that it allowed them to establish, in what they describe as a “hands-off”, objective manner, who the “winners” and “losers” were in the face of climate regulations. This allowed the researchers to bypass both their own preconceptions, as well as any statements made by the firms themselves which, as the pair point out, may not be reliable.
The team found a statistically significant relationship [see graph below] between how much a firm spent on Waxman-Markey lobbying and how much the bill was expected to change its stock value.
To then understand how these activities affected the final outcome, they built a model that incorporated a game-theory approach to lobbying – where firms try to influence policy for their own benefit – and a standard model of how firms behave under a cap-and-trade policy.
This model revealed that oppositional lobbying – that is to say activities by companies that stood to lose out – was the most effective. This implies the input of “loser” firms, which include Boeing, Marathon Oil, Walmart and Ford, had more influence that “winners”, despite spending comparable sums on lobbying. From this conclusion, the researchers estimated that the sum of all lobbying decreased the probability of the bill being enacted by 13%.
While their work does not resolve the issue of why this disparity between winners and losers exists, the pair tell Carbon Brief they have some ideas:
“The asymmetric effectiveness could be due to differential abilities of firms to collectively organise, gather information on policy consequences and to lobby on other, related issues. While all these explanations are consistent with our findings, data limitations prevent us from examining which one is most relevant for the Waxman-Markey bill.”
To pin down the financial impact of lobbying, the researchers built on previous research that placed a $467bn (in 2018 US dollars) price tag on the global social cost of the failed Waxman-Markey bill. This was based on forecasts of greenhouse gas emissions that would have been avoided had it come into force.
The cost of these emissions for the world as a whole are well established, as they explain to Carbon Brief:
“A large body of research has demonstrated the costs of unmitigated climate change in myriad contexts, including decreased agricultural yields, increased conflict, increased mortality and morbidity, decreased labor supply, and lower gross domestic product. Failure to enact Waxman-Markey is expected to have had adverse consequence in all these areas by allowing for higher greenhouse gas emissions and thus higher climate damages.”
Since they found that lobbying increased the likelihood of the bill not passing by 13%, they assigned this share of the total cost to lobbying efforts. This gave them their final figure of $60bn.
Given the current state of climate policy in the US, Meng and Rode conclude by suggesting how this knowledge could be used to build a new strategy that is more likely to be successful.
They took their model and used it to gauge the impact of providing more free credits under the cap-and-trade system to companies – and particularly those that lobbied against the new bill. As this would lead to greater gains or reduced losses, they found it could effectively reduce the amount of anti-bill lobbying and make it more likely to succeed.
While they note such actions could prove unpopular and have unintended political consequences, they suggest this information could nevertheless be incorporated into future policy-making. They tell Carbon Brief:
“Our new point is that if the very likelihood of having climate policy enacted in the first place may be jeopardised by political influences (via lobbying), why not try to use this revenue to neutralise some of the political opposition in a targeted way.”
Meng, K.C. and Rode, A. (2019) The social cost of lobbying over climate policy, Nature Climate Change, www.nature.com/articles/s41558-019-0489-6
In show of demand for climate action, Green Parties surge in EU elections. Common Dreams: “Underscoring the growing demand for bold climate action that has found expression in global youth-led strikes, marches, and civil disobedience over the past year, Green parties across Europe had their strongest-ever EU parliamentary election performance after running on a platform of transformative environmental change. As The Guardian reported, the ‘Greens’ surge was strongest in Germany, where Die Grünen finished second behind Angela Merkel’s center-right CDU with almost 21 percent of the vote, according to provisional estimates—nearly double their 2014 total.’ Projections Sunday indicated that, overall, Greens secured 71 seats in the European Parliament—up from 52 seats five years ago. According to exit polling, the Greens’ surge was bolstered by strong support from young voters.”
A record 71 greens have been elected to the European Parliament, the Guardian reports, saying this “gives them every chance of becoming kingmakers in a newly fragmented parliament”. Europe’s greens made gains across the continent, reports the Independent, which along with several other outlets calls the shift a “green wave”. Writing in the Spectator’s “coffee house” blog, editor Fraser Nelson also calls it a “green wave” and says the group may be “kingmakers” in the new European parliament. Pointing to the UK commentariat’s focus on Brexit and populism, Nelson writes: “This is a Europe-wide trend, reflected in the UK. It challenges the idea of voters taking their allotted space in a left vs right, or even globalist vs nationalist spectrum. In recent years, we have seen this time and time again: the political class thinks the election is about one question, and a huge group of voters use it to answer another question.” The greens finished second in Germany, the Times reports, saying the party was the “chief disrupter” of the country’s historical two-party politics. Green parties finished third in France and fourth in the UK, adds Reuters. This put the party ahead of the ruling Conservatives in the UK, notes the Guardian. Greens also came second in Finland, while they trebled their vote in Ireland, notes BusinessGreen, under the headline: “European elections: Green wave sweeps Europe.” The leaders of Europe’s greens say they will use their newfound leverage to push for urgent climate action and other priorities, says the Guardian. They will “demand significant policy concessions” before joining any alliance in the newly formed European parliament, reports Forbes, which says priorities can be expected to include strengthened EU climate goals for 2030 and 2050. The strong showing for Europe’s greens “could boost climate action” from the bloc, reports the Associated Press. In Quartz, Akshat Rathi writes: “If there was one cause that won [the elections] without a doubt, it was the climate crisis.” An editorial in the Irish edition of the Sunday Times reflects on the strong showing for the country’s greens in the elections, under the headline: “Green voters might see red when they face carbon taxes.” The paper says Europe’s greens will have a “significant influence” in the new European parliament. It adds that carbon taxes and other measures “will make casual Green voters see red”. DeSmog UK profiles the “climate science deniers” from the UK’s Brexit Party, that have been elected to the European parliament, including party leader and returning MEP Nigel Farage.
Britain is setting new records for going without coal-powered energy. In the latest milestone, it has gone for more than eight days without using coal to generate electricity – the longest such period since 1882.
The coal-free run comes just two years after the National Grid first ran without coal power for 24 hours.
Phasing out the heavily polluting fuel is a key step in the transition towards a net-zero carbon economy and essential to averting catastrophic climate change.
The government last year unveiled its plan to shut down all remaining coal plants by 2025, a move that was welcomed by environmental groups.
The rapid collapse of coal power in Britain has in part been predicated on the introduction of a “carbon price floor” in 2013, which slashed the fuel’s profitability.
Although a significant share of coal-powered energy has been replaced by renewable sources such as solar and wind power, the largest power source in Britain remains natural gas, a carbon-emitting fossil fuel.
Within the European Union, between 2000 and 2018 the share of electricity generated by coal dropped in all member states except the Netherlands, and renewable energy sources increased their share everywhere except in Latvia.
However, heavily coal-dependent economies in central Europe have been slow to phase out the dirty fuel. Germany, for instance, has delayed shutting down all coal plants until 2038 and is set to miss its goal of cutting 40% of greenhouse gas emissions by 2020.
Sweden had the lowest share of electricity generated by fossil fuels in 2018, instead using a mix of renewables and nuclear energy, which is classed as a low-carbon power source.