The Lobbying Against One Bill Cost All Of Us $60 Billion In Climate Damages, Economists Say

Corporate lobbying reduced the likelihood of passing the Waxman-Markey clean-energy bill a decade ago, resulting in an expected $60 billion in climate costs to society, according to economists from UC Santa Barbara and the University of Chicago.
The economists use Waxman-Markey, the most promising U.S. climate bill to date, to demonstrate a way to quantify the social impact of lobbying. Their method also shows how bills can be better written, they say, to withstand lobbying campaigns.
"We calculate that lobbying lowered the probability of enacting the Waxman-Markey bill by 13 percentage points, representing an expected social cost of $60 billion (in 2018 dollars)," write Kyle C. Meng of the University of California and Ashwin Rode of the University of Chicago in the latest issue of Nature Climate Change.
Among firms that stood to lose from Waxman-Markey, according to Meng and Rode, these spent the most on lobbying:
Fedex ($35.84 million)
Boeing ($27.74 million)
American Electric Power ($14.1 million)
Prudential Financial ($12.7 million)
United Parcel Service ($11.28 million)
Marathon Oil ($9.61 million)
Duke Energy ($9.59 million)
Walmart Stores ($9.34 million)
Ford Motor Company ($9.1 million)
Firms that stood to gain spent even more, including $53.7 million from GE, $49.66 million from PG&E, and $18 million from Chevron. But those firms were less successful at influencing policy, the economists say:
"Our statistical analysis suggests that lobbying by firms expecting losses from the policy was more effective than lobbying by firms expecting gains," they write.
In all, firms spent about $700 million on lobbying the bill.
Waxman-Markey, formally known as the American Clean Energy and Security Act, would have set a cap on carbon emissions and established a trading system in which polluters pay for allowances to exceed the cap. It passed the House but died in the Senate in 2010. At the time, both chambers were controlled by Democrats.
The economists constructed a model based on game theory to determine the impact of lobbying on the bill's outcome. They multiplied the emissions that might have been avoided had Waxman-Markey passed, by the social cost of carbon calculated by the Obama White House, to calculate that the failed regulation results in $60 billion in expected climate damages.
The authors concede a number of uncertainties in the study. They only had access to lobbying records for publicly-traded firms, so private firms and advocacy organizations are omitted from their calculations. However, publicly-traded firms accounted for the vast majority of lobbying expenditures on Waxman-Markey, they say: about 86 percent.
They also can't be certain of the impact of other events on the fate of Waxman-Markey, including the BP oil spill, the rise of the Tea Party, and the sudden death of Sen. Edward Kennedy, which cost the Democratic Party its filibuster-proof majority in the Senate. They don't mention the aftermath of the 2008 recession.
Their method can be applied to other policy fields, they say: "Beyond climate policy, the methods proposed in this paper may be applied towards quantifying the social costs associated with political lobbying in other policy domains."
Meng is an assistant professor of economics at UCSB and Rode is a former UCSB PhD student now with the Energy Policy Institute at the University of Chicago (I sometimes host podcasts for EPIC). The economists say their results can guide policymakers to write climate bills that don't encounter such successful opposition:
"Our findings offer lessons for how future proposed climate policies can be designed to reduce political opposition. In particular, we demonstrate through a series of counterfactual exercises how more sophisticated targeting of which firms get free permits under a cap-and-trade program can increase the probability of policy enactment."