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Exxon’s poker-face: a probe into the oil giant’s deck raises questions about its climate change research, denial and actions

By Meric Sar

An ongoing investigation by the New York Attorney General into whether one of the world’s largest oil-producers misled markets about the risks posed by climate change may prove to be a groundbreaking and watershed moment. As other state and federal authorities are expected to pursue similar actions, it is becoming increasingly clear that the fossil fuel industry is facing a bolder regulatory environment, especially with regard to the integrity of the industry’s marketing and research practices. This trend is particularly meaningful when reviewed in tandem with the Obama Administration’s achievements in steering America and the world towards renewable energy, sustainability and energy independence.


The investigation began with a subpoena issued by Eric Schneiderman, New York Attorney General, to Exxon in early November 2015, requesting a massive discovery of Exxon’s corporate records going as far back as 1970s. The Attorney General is seeking to understand if Exxon breached New York State’s Martin Act by misleading the market and greater public about climate change.

For the prosecutor, a case could be built if enough evidence exists to prove that Exxon actually knew – or reasonably should have known – that climate change is real, but failed to properly disclose this information and its potential implications on the company’s business outlook. Since the risks associated with climate change would potentially hurt Exxon’s stock prices, Exxon may also be accused of causing market-price distortion by concealing this “inconvenient truth” and even orchestrating efforts to re-frame the public opinion, to the extent of substantially influencing “independent” scientific research on global warming.

Several investigative reports by Inside Climate News and the Los Angeles Times spurred Schneiderman’s investigation. These reports allegedly document that in 1970s, when global warming began attracting scientific attention, Exxon “assembled a brain trust [that deepened] the company’s understanding” of climate change. According to the reports, in the late 1980s, the company went into a policy change and adopted a strategy of “climate denial,” manufacturing “doubt about…global warming,” despite the potential research information available to the company that proves otherwise. For years, as a commercial company, Exxon has downplayed the possible effects of climate change-related regulations in public reports to investors by referring to the issue as “uncertain,” “difficult,” or “not possible” to reasonably predict.


According to some, lying is an ordinary American pastime, especially in politics, and this investigation represents a cynical and heavy-handed government action to curb free speech in the climate change debate. Yet, Exxon is not an ordinary citizen with a big mouth. Energy companies are savvy Washington juggernauts, and have been historically instrumental in shaping the policy debate and scientific discourse surrounding our understanding of climate change. Today, under a series of laws and court rulings, including the much-debated Citizens United case, corporations enjoy extensive free speech rights, which has been criticized by some as too broad and counter-intuitive to democracy. However, the exercise of political speech by a commercial enterprise can conflict with its other duties towards the market.

Under the U.S. Constitution, even dishonest or misleading political speech is generally accepted to be free, and punishment of people (or corporations) for expressing merely political speech is unconstitutional. However, restriction of free speech is common on various state and federal law grounds, especially in relation to securities fraud. In New York, the Martin Act gives state prosecutors broad powers to prosecute financial fraud, and sets a lower threshold to prove direct harm and causation in comparison to federal laws. The U.S. Securities and Exchange Commission (“SEC”) regulates and prohibits even truthful speech by companies in many situations. A duty of truthfulness about material business information for publicly traded companies is essential to balance the asymmetrical power of influence that the corporations are enjoying in shaping the U.S. politics, especially in the aftermath of the Citizens United.


The Martin Act is an almost century-old New York state enforcement statute that predates the SEC. Originally, the law only conferred the power to pursue civil suits but was later amended to allow for criminal prosecutions. The Act gives broad powers to state prosecutors in issuing remedial measures to maintain the integrity of the markets. It has been used to stop Ponzi schemes, mortgage fraud and Wall Street abuses in the past. Hence, using it with respect to climate change may play a crucial role in bridging the shortcomings of federal authorities due to the legal constraints on their powers.

In his subpoena to Exxon, Schneiderman is seeking a myriad of documents related to Exxon’s internal research on the causes and effects of climate change, and how this information was used in business decisions, projects, analysis and communications with trade groups. Experts think the issue of what counts as a “material” information will be the decisive factor in the case. Not all undisclosed research is material information that needs to be disclosed to the public if the resulting information is obvious or otherwise generally available to the knowledge of investors. This, of course, entails another question: whether Exxon or other similarly situated energy companies are in a unique position, holding certain information that is not available to the rest of the world on the issue of climate change.

Exxon embraced the need to curb greenhouse gases in 2006, following the company’s change in its chairman and CEO. Since 2009, the Texas-based company has advocated for a revenue-neutral carbon tax as the fairest way to cap harmful emissions. According to the General Counsel of Exxon, the “[company] scientists have been involved in climate research and related policy analysis for more than 30 years, yielding more than 50 papers in peer-reviewed publications.” Its scientists have participated in the United Nations Intergovernmental Panel on Climate Change since its inception and were involved in the National Academy of Sciences review of the third U.S. National Climate Assessment Report.

Despite the rosy picture Exxon tries to paint, many environmental organization take issue with Exxon’s climate denial activities. In a 2007 report, the Union of Concerned Scientists accused the company of financing “a sophisticated disinformation campaign…to deceive the public” about global warming. The report argues that Exxon Mobil gave $16 million to 43 groups that preached climate change skepticism from 1998 to 2005. If Exxon knowingly lied or downplayed the risks of climate change to the public or investors, as the 2007 report argues, they may have broken the law.


The current probe comes after the New York Attorney General Schneidermann reached a settlement with the largest U.S. coal mining company, Peabody Energy, after the company was accused of misleading investors about the financial risks of climate change. In the settlement, Peabody agreed to include more comprehensive disclosures in its disclosures to the market about the potential costs of climate-related regulations. Settlements such as this – although do not represent a binding judicial authority – reflect a growing consensus and a pattern of self-correcting behavior among the high echelons of the American economy, which is gearing up for a sustainable energy future.

A discussion on the causal link between climate change and the fossil fuel industry often slips away from having its day in the courtroom. A judicial inquiry into the truth of global climate change as a fact has been thus far too elusive for the courts to handle despite widespread consensus among the scientific community about the anthropogenic climate change. The magnitude of the phenomenon defies a conclusive study, and the divisive nature of the surrounding public debate moves the courts to defer to a regulatory culture that has been traditionally protective of the global interests of U.S. and global energy conglomerates – an industry that has been a historical stalwart of the U.S. economy. Whether this investigation ends in a trial or not, big changes may be on the horizon.

Meric Sar is a Staff Writer for Rights Wire.

The views expressed in this post remain those of the individual author and are not reflective of the official position of the Leitner Center for International Law and Justice, Fordham Law School, Fordham University or any other organization.

Photo Credit: Mike Mozart/Creative Commons

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Climate change divestment, the moral crusade

By Jennifer Li

Like a bad Nelly song, the temperature keeps rising. In the Northern Hemisphere, the previous 30 years was likely the warmest period out of the last 1,400 years. Between 1880 and 2012, global temperatures increased approximately 0.85 degrees Celsius – not an insignificant increase when considering that just the slightest temperature change can produce calamitous results. The post-industrial temperature increase of 1.5 degrees Celsius in total threatens food and water security, particularly for populations along the coastal communities and their livelihoods.

During the much-maligned 2009 UN climate summit in Copenhagen, governments signed a nonbinding agreement pledging to keep temperatures from rising above 2 degrees Celsius (3.6 degrees Fahrenheit), a target that was informed more by political motivations than scientific data. The focal point of much of the criticism of Copenhagen was its failure to produce binding commitments from governments. Without stringent mitigation measures to accompany political lip service, average temperatures may increase 4 degrees Celsius by century’s end. The World Bank has warned in a report that a 4 degrees warmer world will be “marked by extreme heat waves, declining global food stocks, loss of ecosystems and biodiversity, and life-threatening sea level rise.” Four degrees could translate to global sea level rises of up to two meters, drowning Tuvalu and the Maldives, and inundating coastal areas from California to the Northeastern U.S. “There is also no certainty that adaptation to a 4 degree Celsius world is possible,” the same report cautioned. We are all 4 degrees from crossing the Rubicon.

Current fossil fuel reserves in the world are at least three times greater than the maximum amount that can be burned while keeping global average temperature increase below the 2 degrees Celsius aspirational limit settled upon by world governments. While these reserves are potentially worth trillions of dollars, investment in them contributes to the creation of a carbon bubble, a term that refers to the over-valuation of companies like Exxon, Lukoil, and other fossil fuel energy producers who would not be able to fully tap into their reserves if we are to avoid climate catastrophe. By some estimates, at least two thirds of current fossil fuel assets must remain untapped to curtail climate change and keep temperatures below the 2 degrees Celsius limit.

In the last several years, sovereign wealth funds, religious organizations, charitable foundations, universities and other institutions have pledged to divest from fossil fuels. Divestment – removing financial support from different issues by shedding stocks, bonds, investment funds – is not a new strategy. Previously, divestment campaigns have targeted issues such as landmines, tobacco advertising, sweatshop labor and, most famously, apartheid in South Africa. The South Africa divestment campaign in the 1970s and 80s has been hailed as a model for success, as it was bookended by the dismantling of the apartheid system. The real impact of divestment under the South Africa paradigm, however, remains unclear, as studies have indicated that public market valuations in fact remained unaffected. “The sanctions may have been effective in raising the public moral standards or public awareness of South African repression, but it appears that financial markets managed to avoid the brunt of the sanctions,” concluded a 1999 study published by the University of Chicago Journal of Business.

The current fossil fuel divestment movement relies on a similar tactic of moral persuasion. Spearheaded since 2012 by 350.org, the divestment campaign is premised on the idea that public interest institutions cannot possibly serve the needs of its constituents while simultaneously feeding the business model of fossil fuel companies whose financial profits derive from climate destabilization. As Naomi Klein explained in her recent book, This Changes Everything, “[Y]oung people have a special moral authority in making this argument to their school administrators: these are the institutions entrusted to prepare them for the future; so it is the height of hypocrisy for those same institutions to profit from an industry that has declared war on the future at the most elemental level.” Indeed, some of the most vigorous divestment movements have been led by students on hundreds of university campuses worldwide, including at Stanford, which committed to divest from coal companies in May 2014. This past March, the UN joined the clarion call for divestment, and the Guardian launched its own divestment campaign, “Keep it in the ground,” which combines hard-hitting journalism on climate change with calls urging large institutions like the Gates Foundation and Wellcome Trust to jump onboard.

Critics have rightly and pragmatically pointed out that divestment alone is hardly a sufficient financial incentive to shape the energy sector’s behavior. Just as other buyers stepped in to pick up the pieces when funds were pressured to sell off the stock of companies active in South Africa, so, too, will other investors rapidly take the place of the Stanfords of the world and absorb the loss if and when they sever financial interests from fossil fuel companies. Further, despite the focus on the cessation of direct investments, many institutions invest indirectly through managers. Stanford’s divestment pledge has committed only to cease direct investments in coal companies, which says nothing of its plans to discontinue any indirect investments in coal, or any direct or indirect investment in oil and gas companies, for that matter. And despite perhaps a signaling effect, the actual impact on portfolios is low.

However, the objective is not – and should not be – to bankrupt fossil fuel companies, and the energy sector needs to play a critical role in any viable climate strategy. Rather, proponents argue, as with previous divestment campaigns, the primary objective here is the indirect impact of divestment: stigmatization and public shaming. Just as international opposition contributed to the decline of apartheid, increased visibility and public pressure may amplify calls for cleaner energy solutions. In a 2013 report published by the University of Oxford, Ben Caldecott wrote that “the outcome of the stigmatization process, which the fossil fuel divestment campaign has now triggered, poses the most far-reaching threat to fossil fuel companies and the vast energy value chain. Any direct impacts pale in comparison.”

Jennifer Li is a Staff Writer for Rights Wire.

The views expressed in this post remain those of the individual author and are not reflective of the official position of the Leitner Center for International Law and Justice, Fordham Law School, Fordham University or any other organization.

Photo credit: maisa_nyc/Creative Commons

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The human rights of climate change: a report back from the symposium “On Thin Ice: Climate Change Action From an International Human Rights Perspective”

By Jennifer Li2015 ILJ symposium 11x17

As temperatures outside hovered around the zero mark on a recent Friday last month, the Fordham International Law Journal held its annual symposium, this year titled “On Thin Ice: Climate Change Action From an International Human Rights Perspective” (no correlation asserted here). The symposium, sponsored by the American Bar Association’s Section on Energy, Environment and Resources, convened academics, practitioners and distinguished guests from around the world to discuss legal issues of climate change. The discussion, however, was not confined to the boilerplate rhetoric – greenhouse gases, carbon footprints, fossil fuel emissions and so forth – but rather homed in on the consequences of climate change from a human rights law perspective. A question posed in subtext might have been, “What is the extant legal framework to address the linkages between climate change and human rights, and how is that framework changing?”

That climate change exists is no longer a matter for equivocation. However, as industries and nations argue over the effects of global surface temperature increases – whether at an average of 1°C or 4°C – countries of the Global South are experiencing the brunt of the impact. As Margaux Hall and David Weiss have explained, “Analyzing climate change through a human rights lens is … appropriate because, in the worst-case scenario, climate change spells human catastrophe – rising seas, the spread of disease, and ecosystem collapse – particularly for the most vulnerable persons in the global community. Human rights analyses can frame proactive strategies to try to preempt human harm as well as to respond to such catastrophic events ex post.”

Indeed, the effects of climate change on human rights are substantial and implicate a variety of legal instruments. Food and water shortages, disease and home and community displacement are just some of the human costs of climate change. This potential loss of life, dignity, personhood and self-determination is proscribed under the Universal Declaration of Human Rights, the UN Charter, and the International Covenant on Civil and Political Rights, among other instruments. While states are obligated to fulfill these rights, accountability has been challenging in practice. The most comprehensive international agreement on climate change is the two-decade old United Nations Framework Convention on Climate Change (UNFCCC), adopted at the Earth Summit in Rio de Janeiro in 1992 and entered into force in 1994. Parties to the Convention, which has the distinction of having been ratified by all 193 UN member states, have since met annually at Conferences of the Parties (COP) to review and assess its implementation and enforcement. The climate change conference in Paris at the end of the year (COP21) has the lofty – and many argue unrealistic – ambition of achieving a binding and universal agreement on climate.

International human rights treaties, however, are difficult to enforce, as the success of treaty body monitoring mechanisms is at the mercy of its level of access to information and the cooperation of the states under review. An additional barrier is the issue of financing, as the question of who fronts the money for mitigation and adaptation projects becomes all the more pressing. What is the role of treaties to address the funding gap, if that potential exists at all?

These lingering questions framed the discussion at Fordham’s symposium last month. Three sets of speakers presented on the theoretical framework linking human rights and climate change; the viability of a treaty-based approach to mitigation and adaptation measures; and litigation strategies addressing the human costs of climate change. Some, including Professor Katrina Wyman of New York University School of Law, were skeptical of treaty-based responses on the basis of practical difficulties – e.g., challenges to implementation and enforcement – and lack of moral incentives. Stephen Kass, Chair of the New York City Bar Association’s Special Task Force on Legal Issues of Climate Adaptation, was no more optimistic that the upcoming conference in Paris will be any more successful in yielding firm, binding caps on greenhouse gas emissions levels than previous COPs. As an alternative, rather than pressuring countries to place a cap on their economic development, Kass favored the soft cap approach, whereby countries make corresponding annual payments to adaptation funds if and when they exceed predetermined target emissions levels. Others, including Niranjali Amerasinghe of the Center for International Environmental Law (CIEL), spoke of innovation in litigation, which now has the opportunity to use the latest advances in technology and science to make claims against not just producers, but also emitters of greenhouse gases. Further, rather than adopting merely a rights-based approach to climate change and human rights litigation, attorneys are increasingly looking toward tort law principles by raising claims relating to products liability and using language such as “duty to warn.”

The bottom line remains that countries that are contributing the least to climate change are paying the highest costs. Ahmed Sareer, Ambassador of Maldives to the United States and Permanent Representative of Maldives to the United Nations, represents an archipelago nation where 99 percent of the territory is ocean, with just one percent land. On average, the islands sit only five feet above sea level; the vast majority of residents live on an island not much bigger than Roosevelt Island in New York. Residents of his country have already faced the impact of climate change, with thousands forced to emigrate from the islands when their homes and communities became uninhabitable. In the symposium’s keynote address [video below], Ambassador Sareer stated the international community’s obligation simply and clearly, “We know that neither our country nor any vulnerable nation is capable of fully addressing the climate crisis and human rights of its citizens. It depends on others taking action as well.”

Jennifer Li is a Staff Writer for Rights Wire. She is also the Symposium Editor of the Fordham International Law Journal.

Rights Wire is pleased to present a video recording of the keynote address given by Ahmed Sareer, Ambassador of Maldives to the United States and Permanent Representative of Maldives to the United Nations.