Project Report:
Internalizing the Costs and Risks of Fossil Fuel Infrastructure
- Investigates the causes of economic imbalances.
- Investigates causes tending to destroy or impair the free-market system.
- Explores and develops market-based solutions.


CSE received support from the Alex C. Walker Foundation to make use of policy opportunities to demonstrate the genuine economic benefits of internalizing the costs of pollution in three settings: climate risk bonds (CRBs), stormwater management in Maryland, and oil and gas discharges in Cook Inlet. After an initial review of strategic opportunities we determined that the climate risk bond work was, by far, the most important and potentially impactful focus of this work. In particular, political momentum at the international (Paris accords), national (fights over Arctic drilling), state (dismay with the many externalized costs of fracking and extraction), and local levels (catastrophic accidents and spills) has created a number of opportunities to advance our work to internalize the social costs of both new and existing fossil fuel infrastructure in decision-making processes and thereby help remedy perhaps the world's most important market failure.


CSE’s work on CRBs is advancing a market-based solution for internalizing the costs of GHG pollution throughout the product life cycle of coal, oil and natural gas. The concept is simple - before issuing new permits to authorize extraction of oil, gas, or coal, relevant federal, state or local governments would require companies to post a climate risk bond to help offset economic damages expected from climate change disasters and to help fund adaptation measures such as moving infrastructure out of floodplains.

CRBs can also be extended to help offset the ancillary costs associated with fossil fuel extraction, transportation, and combustion. These include costs associated with fracking-related earthquake activity, catastrophic explosions of hazardous “bomb” trains carrying oil, natural gas, or propane or the many public health issues that arise in airsheds contaminated by coal-fired plants. In 2015 and 2016, our work has unfolded in close alignment with the specific project activities set forth in our original proposal. In particular:

a. Preparing a revised version of the CRB concept paper extending the analysis to cover risks associated with the fossil fuel product life cycle (early fall). The existing report focuses on climate change related costs, but the ancillary costs noted above will likely be the point of entry to garner buy-in from priority states and localities. Work completed to date:

-We prepared and distributed an updated version of the CRB concept paper as a short, but comprehensive Summary for Policy Makers (attached). The Summary describes two major categories of CRBs applicable to both new and existing fossil fuel infrastructure: risks associated with fossil fuel extraction, transport, and storage, and risks associated with climate change. For the former class of risk, the Summary recommends several financial assurance mechanisms to address the need for shielding public agencies from the potential costs associated with explosions, leaks, spills, and abandoned infrastructure. For the latter, the Summary recommends establishment of climate risk trust funds capitalized by surcharges on all fossil fuel transactions in a given economic region.

b. Working with partners including Institute for Policy Studies, EarthWorks, Center for Biological Diversity and community organizations to flesh out the legal and technical details of CRBs as applied in three to five priority settings at the state and local level. California, Oregon, Colorado, Texas and Oklahoma represent the most likely target states at this time. Work completed to date:

-In partnership with Janet Hager, an attorney, and others working as interns with the Center for Biological Diversity, CSE produced a legal memorandum (attached) describing several types of existing financial assurance programs for surface mining and oil and gas leasing that could serve as models for implementing the CRB concept. Oklahoma and California were selected as priority states for this research.
-Again in partnership with Center for Biological Diversity, CSE produced a second legal memorandum (attached) discussing a key potential roadblock to the CRB concept at the local level: state preemption of local regulation. The memo focused on oil and gas regulation at the state level in Texas and Colorado and at the local level in Denton TX, Boulder County CO, and the City of Boulder. The upshot is that while preemption is indeed a significant issue, it can nonetheless be overcome by fine-tuning the bonding requirements to specific local interests not contemplated or barred by state legislatures.
-Given emerging opportunities both at the state and local level in Oregon, CSE, again in conjunction with Janet Hager produced a third legal memorandum evaluating the potential for local bonding requirements for fossil fuel activities in Oregon (attached). The key conclusion is that given Oregon’s existing regulatory framework, there are few if any barriers to CRBs more stringent than what exists at the state level.

c. Developing model regulatory language for use by state and local decision makers to operationalize CRBs (as leaders express interest). Work completed to date:

-In the course of our CRB research, a unique opportunity arose to participate in Portland, Oregon’s policies on fossil fuel infrastructure. In particular, last April, the City adopted an updated version of its Climate Action Plan that required the city to develop a policy on fossil fuel exports. However, under the leadership of Mayor Charlie Hales, this issue quickly was expanded to address issues associated with all new and existing (oil trains in particular) fossil fuel infrastructure. CSE retained attorney Nick Caleb as our representative on the City’s advisory group informing the new fossil fuel policies.
-With assistance and input from several partners, Nick took the lead in drafting a comprehensive memo to the Mayor and City staff outlining all of the options for regulating fossil fuel infrastructure (attached). Importantly, the memo underscores that the legal basis for regulation is rooted in all of the risk factors discussed in the context of our CRB work. The two general forms of CRBs were discussed in depth on pages 8 – 11 of the memo.
-Eventually, the City incorporated the concepts raised by the memo into two resolutions that now provide model language for other cities (attached). The first resolution opposes all project proposals that would increase the amount of crude oil being transported by rail through the City of Portland and the City of Vancouver, Washington. The second resolution opposes expansion of infrastructure whose primary purpose is transporting or storing fossil fuels in or through Portland or its adjacent waterways. While the resolutions go far beyond the bonding approach, they nonetheless use most of the justifications for bonding (i.e. risks to human health, property, the environment and city finances) CSE presented as part of the advisory committee process. Thus, these resolutions are a big win for our overall program goal of incorporating a wide range of economic risks into fossil fuel infrastructure decisions.

d. Presenting the CRB concept to decision makers as strategic opportunities arise (as needed). Work completed to date:

-CSE developed a webinar presentation to provide more detail on the CRB concept to interested partners and decision makers (attached) and presented this to partners in Texas, Oklahoma, and California.
-Expert testimony on Portland’s fossil fuel policies was provided by Dr. JohnTalberth and Nick Caleb, our consulting attorney. CRBs and their underlying concepts were critical in the deliberations of the two resolutions adopted by the City Council.
-Under the leadership of Climate and Energy Program Director Daphne Wysham, CSE then set its sights on exporting Portland’s approach to other cities. Shortly after the Portland resolution was passed on November 12, 2015, Daphne launched a resolution which was posted on the following website:

The resolution, crafted with input from climate leaders, including Bill McKibben, co-founder of, was endorsed by a wide array of national groups, from Sierra Club and Greenpeace to The Hip Hop Caucus and the Indigenous Environmental Network. Then we called on elected officials to endorse the Portland resolution and pledge to put similar resolutions in place in their jurisdictions. We set a deadline of Dec. 11, 2015 for endorsements, the date the West Coast mayors of Los Angeles, San Francisco, Eugene, and Seattle were meeting with Portland, OR, Mayor Hales to discuss climate change. We hoped these mayors, with sufficient momentum from other signatories, would join us in calling for no new fossil fuel infrastructure. We did succeed in getting Eugene Mayor Kitty Piercy to endorse, and, in collaboration with Credo Mobil, West Coast organizers from, Forest Ethics, Climate Solutions and others, we did manage to get 30 elected officials and over 10 mayors to endorse the Portland resolution by Dec. 11, 2015, and pledge to take similar actions in their jurisdictions. The two most noteworthy endorsements came from Mayor Tom Butt of Richmond, CA, home to the sprawling Chevron refinery and Lancaster, CA, Mayor Rex Parris who is the lead attorney in the class action lawsuit filed against the major methane leak case in Porter Ranch, CA. Bill McKibben provided a videotaped statement for our press conference. All of these jurisdictions are now ripe for proposing the kinds of policies we will be putting in place in Portland in the coming year.

e. Presenting the CRB concept to potential long term funding allies, including the Rockefeller Brothers Fund, Glaser Progress Foundation, Wallace Global Fund and Education Foundation of America (throughout grant cycle).

-In October, Daphne Wysham met with a variety of funders, including Wallace Global Fund and Solidaire Fund. Both solicited proposals which are now under consideration by both foundations for support. Our plan is to submit additional proposals to other foundations once a core level of support has been provided for this work in Portland.


A major cause of economic imbalance is the failure of decision makers to account for the externalized costs of pollution and, conversely, the economic benefits of reducing that pollution when making public policy or investing public funds. With generous support from the Walker Foundation in 2015 and 2016, CSE took advantage of an unexpected strategic opportunity to integrate a wide range of economic risks of new and existing fossil fuel infrastructure into policies adopted by the Portland City Council and now of interest in at least 10 other jurisdictions. We documented and testified about these externalized economic risks all along the fossil fuel product lifestyle from extraction to consumption and ultimately, to abandoned infrastructure. The focus on economic and public health risks is the single most important reason why our work on CRBs is now flourishing.


In 2013 CSE introduced the concept of climate risk bonds (CRBs) as a mechanism that can be used by federal, state, and local governments to internalize the enormous financial risks they face as climate change unfolds. In 2015 and 2016 we extended our CRB work to address all GHG pollution risks throughout the product life cycle of coal, oil and natural gas. These risks include those associated with catastrophic well blowouts, derailed oil trains, toxic emissions to nearby communities, water pollution as well as risks associated with floods, droughts, and wildfires as the climate signal strengthens. This work has paid off well in Portland, Oregon, and now is presenting significant new opportunities to expand our successes to 10 other cities. Of course, all nations, states, and cities that combust and/or facilitate the transport of significant quantities of fossil fuels face these same risks and so the CRB concept is one that has global significance.

Information Dissemination

The results and findings associated with our CRB work have already been widely disseminated to elected officials, non-governmental organizations, labor leaders, and others who are alarmed at the economic risks posed by fossil fuel infrastructure and are searching for policy options to internalize these risks. Decision makers in Texas, Oklahoma, California, Colorado and Oregon are among those now familiar with the CRB concept.

The key strategies for dissemination thus far have been our webinar series, targeted e-mail distribution, and media. Media attention to what has unfolded in Portland has been exceptional, and has played a large role in securing expressions of interest from other jurisdictions.

The Climate Risk Bond project page will be updated with all the referenced files and work descriptions soon. In the interim, much of the work can be accessed via our Climate and Energy Program page at: as well as on our media page at:

Project Link

Amount Approved
$30,000.00 on 6/5/2015 (Check sent: 7/13/2015)

Vigil for victims of the oil train explosion in Lac-Megantic. The explosion killed 47 and destroyed half the town. Most of the remaining buildings were subsequently torn down due to oil contamination. Newspaper reports described a blast radius of over half a mile.

Vigil for victims of oil train explosion in Lac-Megantic

1016 Madison Street
Port Townsend, WA 98368

(510) 384-5724
(703) 667-0208
(360) 344-2080


Dr. John Talberth
President and Senior Economist, Center for Sustainable Economy

Posted 3/30/2015 4:56 PM
Updated   1/15/2016 3:12 PM

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