- Investigates the causes of economic imbalances.
- Investigates causes tending to destroy or impair the free-market system.
- Explores and develops market-based solutions.
With funding from the Walker Foundation, CSE will build out our successful Fossil Fuel Risk Bond (FFRB) work by monitoring progress of jurisdictions that have already embraced the program, providing expert support to these jurisdictions, and working closely with state and national level partners to get FFRB programs adopted at the national level and in key states and counties. The fossil fuel risk bond policy, incubated at CSE, provides a tool for state and local governments to begin to hold the fossil fuel industry accountable for the costs of its toxic infrastructure and climate change. FFRB programs have two basic strategies for doing this: (1) financial assurance mechanisms to hold individual owners of fossil fuel infrastructure accountable for the costs of accidents, spills, catastrophic explosions and abandonment of facilities, and (2) surcharge-based fossil fuel risk trust funds to provide badly needed funding for climate adaptation, mitigation, and climate disaster response.
Who will pay for cleaning up these sites and restoring the land? A federal fossil fuel risk bond program would place this responsibility firmly on the back of polluters.
This is a six-month status update on CSE’s implementation of its Fossil Fuel Risk Bond Program in 2021. To date, the focus of CSEs work has been on a federal FFRB bill, statewide bills in Illinois and Washington, local implementation of resolutions we helped pass in Multnomah County, Oregon, and King County Washington, a peer-reviewed journal article and a white paper on the necessity of adequate financial assurances for oil refineries as these facilities become obsolete. All of this work can be organized under three overriding outcomes:
Decision makers in Multnomah County, King County Washington, and at the state level in Washington move quickly to implement the fossil fuel risk bond policies initiated in 2020. CSE provides key legal and economic expertise to help ensure this result.
-The Multnomah County process is on track. Last summer, the County issued its first report related to implementation of the FFRB program – a risk assessment of fossil fuel infrastructure at the Critical Energy Hub, which services the entire state of Oregon. CSE provided technical comments on the risk assessment as well as input into the second report, which is an economic damage assessment of a worst-case scenario earthquake and oil spill disaster.
-In mid-December, the County issued the economic damage assessment, and it is currently under review by CSE and other partners. While we have some concerns about the limited scope of the analysis, in general, it provides a bleak picture of enormous economic damages to people, habitats, and economic activity and thus can serve as the basis for new bonding/financial assurance rules, as CSE is seeking.
-In King County, Washington, a research team has been assembled and a scope of work has been agreed upon, with CSE’s input. A draft phase I risk assessment is due out in mid-January, 2022. Apparently, King County has keyed in on the risks associated with gas pipelines and distribution stations, so this may end up being the most important
Community support for fossil fuel risk bond programs continues to grow. CSE's outreach and organizing activities help generate letters of support, testimony, and on-the-ground information about the urgency and benefits of implementing the programs as quickly as possible.
-CSE helped a coalition in Portland and Multnomah County comment on the draft seismic risk analysis by providing our comments as a template. We focused on loss of life and injury, climate change impacts, environmental justice, abandonment risk and damage to the Columbia River and its estuaries. Our goal was to shore up the risk assessment to be as comprehensive as possible.
-In Congress, and thanks to the various outreach and organizing efforts we had in place over the past few years, we now have a draft federal fossil fuel risk bond bill, thanks to Congressman Jamie Raskin’s office. The bill would direct the Secretary of Commerce to promulgate regulations requiring financial assurances for all fossil fuel infrastructure owners to safeguard taxpayers against the cost of accidents and abandonment and collect a fee from all fossil fuel infrastructure owners to offset the costs of climate adaptation.
CSE publishes research and high-quality information about the economic and financial risks of fossil fuel infrastructure and how fossil fuel risk bond programs can help states, counties, and cities shift those risks off the backs of taxpayers and onto the owners of fossil fuel infrastructure.
-CSE is preparing a ‘how to’ guide for local decisions makers for establishing fossil fuel risk bond programs in their jurisdictions. We are incorporating experiences from Multnomah County and King County to supplement the article as real-time case studies.
-CSE is working on an issue brief focused on oil refineries and how fossil fuel risk bonds can help make up for the woefully inadequate financial assurances now in place and expedite the decommissioning and restoration of obsolete refineries as the transition to renewable energy accelerates.
The economic rationale behind fossil fuel risk bond programs is simple. Every year, the fossil fuel industry externalizes trillions of dollars in economic damages onto the backs of taxpayers. These costs manifest in the form of climate disasters, fossil fuel infrastructure disasters, and the costs of interventions needed to both mitigate and adapt to climate change. According to the UN’s most recent analyses, the cost of achieving climate stability has been priced out between $1.6 trillion and $3.8 trillion per year and is rising every year we delay bold climate action. Lord Stern famously said that this represents the greatest market failure that the world has seen. Fossil fuel risk bond programs are one policy tool governments at every level can use to correct this market failure and force the fossil fuel industry to internalize the gargantuan costs it is passing on to the rest of the world.
Over the past two years, CSE scored major national, regional and local victories. The City of Portland, Multnomah County, and King County WA all began implementation of the fossil fuel risk bond concept. Inspired by these successes, members of the Washington State Legislature are now drafting legislation to scale this program up to the state level. The same is happening now in Illinois. Members of Congress have also taken interest in this policy and are now being invited to review and co-sponsor the Raskin FFRB draft. Both the Sanders and Warren presidential campaigns added FFRB policies to their campaign platforms and are now in a position to encourage the Biden Administration to embrace the FFRB concept. All these successes are a clear indication that the concept is no longer just a good policy idea, but a reality quickly gaining traction on the ground. The scope of CSE’s activities in 2021 has included work in all of these places.
Results and findings from our ‘how to’ guide will be published in the journal Solutions, and disseminated broadly to state and local decision makers we’ve encountered over the past few years who are interested in getting fossil fuel risk bond programs up and running. We will also post blogs on our website, and use Facebook and Twitter to disseminate the results and findings to our membership and partners. The Walker Foundation website will also be a resource for folks interested in reviewing the CSE’s work on fossil fuel risk bond programs and how it has progressed over the past several years.
(Check sent: 6/11/2021)