Monday, November 09, 2015

Did Exxon Mobil Lie About Climate Change?

The energy giant Exxon Mobil is being investigated by New York State's attorney general, according to a report last week in the New York Times.  The issue appears to be whether Exxon properly stated the risks of climate change to its future business in light of its own internal scientific climate research.  Critics of the company say it has engaged in deception similar to what tobacco companies did in the 1960s and 1970s, when cigarette makers funded research that cast doubt on the health dangers of tobacco use even as they knew the grim truth and concealed it.  For its part, Exxon's spokesman Kenneth P. Cohen said, "We unequivocally reject the allegations that Exxon Mobil has suppressed climate change research." 

Under a law called the Martin Act, the New York attorney general is charged with the investigation of financial fraud, and can issue subpoenas for records and documents relating to such an investigation.  Exxon got a subpoena along these lines last week, and is in the process of responding to it. 

Let's step back a moment and examine the question of how this case relates to the well-known practices of tobacco companies that attacked the credibility of research that showed smoking and chewing their products was hazardous to one's health.

The history of how Big Tobacco muddied the research waters is pretty clear.  After the tobacco firms fought what became a rear-guard action against the mounting evidence that smoking kills, both state and U. S. federal attorneys general sued large companies such as R. J. Reynolds beginning in the 1990s, claiming that they deceived consumers about the dangers of smoking even as the company's own internal research revealed the hazards involved.  These successful suits cost the companies billions of dollars in fines and continuing payments into state-controlled public-health funds. 

One of my high-school teachers loved questions that began, "Compare and contrast. . ." so let's do that here.  What are the comparisons and the contrasts between what Big Tobacco did, and what Big Oil is supposedly doing?

First, the comparison for similarities.  Exxon may have funded some researchers at times who opposed the general scientific consensus about climate change.  This consensus has itself been somewhat of a moving target as more data, more sophisticated computer models, and a better understanding of climatology in general have contributed to knowledge of the problem.   So for Exxon to be liable in the way that, say, R. J. Reynolds was liable, someone would have to show that (a) Exxon was publicly saying climate change isn't going to bother us, and (b) Exxon privately knew pretty much the opposite. 

There is also the question of harm.  It's pretty easy for a lawyer to argue that his late client died from smoking, which the client might have ceased and desisted from doing had he not been lied to by the maker of his cigarettes.  If some of the more dire forecasts of the climate-change prophets come to pass, we will also have widespread death and destruction from it too.  And to the extent that companies like Exxon were responsible for it, they could conceivably be held liable in some way.

Now for the contrasts.  Apparently the worst thing that the New York attorney general thinks Exxon has done is not murder or criminal negligence, but financial fraud.  Fraud generally involves the premeditated intent to trick or deceive someone to your own advantage.  The idea here seems to be that if (and that is a big "if") laws are passed or other factors intervene to make it harder for Exxon to profit from fossil fuels because of climate change, and Exxon knew this was likely to happen, and Exxon told its investors otherwise, then they have tricked their investors. 

Whatever you want to call this alleged action, it's a far cry from what blatant deceivers like Bernie Madoff did.  Madoff, you may recall, ran a Ponzi scheme and kept one set of books for public consumption and another set for his secret fraudulent operations.  While some European countries have begun to restrict fossil-fuel use in various ways—high fossil-fuel taxes, for example—their reasons for doing so often go beyond the threat of climate change.  And in the U. S., to the frustration of environmentalists, very few meaningful climate-change-inspired restrictions have been placed so far on the consumption of oil, gas, and coal.  This may change in the future, but it's hard to sue somebody for something that hasn't happened yet.  Oil prices have recently tanked (so to speak), but the reasons have little or nothing to do with climate-change laws and a lot more to do with higher domestic production and international politics. 

Another question is whether an engineering-intensive firm that operates legally to fulfill a widespread public need, as energy companies do, can be held liable for the free consumption decisions of millions of its customers.  Again, we come to the question of who has been harmed.  While lying is bad, if we find out that Exxon made some forecasts of future climate change that turn out to be wrong, that's not exactly the same as lying.  Overall, this investigation seems to be based on speculation about future harms more than it is a realistic assessment of how investors have been harmed up to now.  And such a thing will be hard to put across to a reasonable jury, assuming the case gets that far.

Of course, this may be the beginnings of what some might view as a government shakedown.  Rather than face the prospect of spending years or decades in court, Exxon may choose to settle out of court by paying fines or changing its way of business to make the New York attorney general happy.  Such proceedings always smack of blackmail to a greater or lesser degree, although sometimes they are the least bad alternative if a genuine wrong has occurred.

But to find out if that is the case, we'll just have to wait.  Wait to see what the attorney general of New York does next; wait to see if states and countries pass much more restrictive legislation inspired by climate change; and wait to see how much hotter it gets.  It may be a long wait for any or all of these things, so stay tuned.

Sources:  The New York Times article "Exxon Mobil Investigated for Possible Climate Change Lies by New York Attorney General" appeared on Nov. 6, 2015 at  I also referred to the Wikipedia article "Tobacco politics."  I blogged on a related matter pertaining to climate change and university-funded research in "A Chunk of (Climate) Change", posted on Mar. 2, 2015.

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