The Climate Movement’s Secret Weapon

Federal agencies have an opportunity to take immediate action against climate change using anti-monopoly policy.
Nibera for Noema Magazine
Credits

Daniel A. Hanley is a senior legal analyst at the Open Markets Institute. Follow him on Twitter at @danielahanley.

In the face of escalating extreme weather events, monopolistic corporations that profit from activities that accelerate climate change have consistently blocked U.S. politicians’ attempts to avert disaster. In some cases, they fund think tanks that publish anti-climate propaganda. In other cases, they spend millions on lobbying politicians. State legislatures provide no sanctuary either, with big oil and gas companies providing funds to political campaigns and lobbying. In other cases, companies like Monsanto and Koch Industries directly fund lawsuits to protect their private interests. No opportunity to thwart progress seems to be wasted.

Even corporations with purported climate goals are, overall, apathetic about encouraging lawmakers to enact comprehensive solutions. They often resist changing their operations, and over 90% of corporate sustainability pledges fail.

To mitigate the most adverse effects of global warming, it is evident that we must rein in concentrated corporate power. And we don’t have much time to do it — some scientists estimate we have less than 10 years before the most disastrous effects occur, and we’re already experiencing many of them.

For progressives, robust action from Congress appears to be almost hopelessly stymied. Fortunately for us, President Joe Biden has created an opportunity for federal agencies to take immediate action using anti-monopoly policy.

It is understandable, given the impending human-caused climate catastrophe, that advocates often prioritize decarbonization above all else to avoid the devastating effects of climate change. However, market structure matters. All markets, corporations and business strategies are products of the laws created by the state. Thus, when firms take a specific action, it is often a result of the legal paradigm within which they are operating.

“To mitigate the most adverse effects of global warming, we must rein in concentrated corporate power.”

Anti-monopoly policy rests on the principle that the law should structure markets to widely disperse economic power, promoting fairness and democracy and ensuring that corporations are operating in the public interest. If the past 50 years of inaction are any indication, without robust restraints on concentrated corporate power, firms will continue to elevate their own profits and the interests of financiers above the health, safety and welfare of the communities they serve. As long as corporations control markets, rather than the public and their elected officials, we’re unlikely to see serious long-term action to avert climate change.

In the past year, President Biden signed two executive orders authorizing administrative agencies to enact anti-monopoly policies — ones that could make the marketplace fairer, greener and more democratic. These policies could be America’s secret weapon against climate change. And of the more than 400 agencies that make up America’s administrative apparatus, the Federal Trade Commission (FTC), United States Department of Agriculture (USDA) and the Federal Energy Regulatory Commission (FERC), in particular, have great potential to enact a green agenda.

Reining In Corporate Greenwashing

One need only look to recent congressional hearings to see that major oil companies keep peddling the idea, like big tobacco companies in the 1990s, that they do not know the harmful effects their business operations have on the health of the planet. Meanwhile, a plethora of evidence shows that, at least since the 1970s, oil companies have known that emitting excessive amounts of carbon dioxide can have “globally catastrophic effects.”

Fossil fuel corporations routinely use advertising to misrepresent the actual scope and scale of their ostensibly green policies and the environmental benefits of their products and services. In March, the environmental groups Earthworks, Global Witness and Greenpeace USA petitioned the FTC accusing Chevron of using television and digital advertisements to “misrepresent the benefits of [natural gas].” The company uses deceptive jargon, the petition said, to mislead consumers about the extent of its emissions-reducing efforts, while initiating no substantive changes to its operations and increasing the extraction and production of oil and gas.

Congress has explicitly empowered the FTC to prohibit “unfair or deceptive acts or practices.”  Rather than have a marketplace controlled by dominant corporations and caveat emptor (“buyer beware”), Congress’s reasoning goes, the FTC would be able to create a fairer marketplace and establish a minimum level of conduct among companies selling or advertising to potential buyers.

FTC guidelines require corporations to substantiate objective claims in their advertising by clearly and prominently displaying accurate evidence. And while the guidelines do not have the force of law, violations can act as the basis of lawsuits the agency can bring against corporations that do not sufficiently communicate to the public the facts supporting their environmental claims.

For example, Kellogg settled with the FTC because the company claimed that children who ate its Frosted Mini-Wheats cereal experienced an almost 20% improvement in attentiveness. In an investigation, the FTC found that the study Kellogg used showed few of the participants had seen such an improvement.

“As long as corporations control markets, we’re unlikely to see serious long-term action to avert climate change.”

While enforcement of the substantiation requirement has been lackluster for decades, the FTC can easily reinvigorate it and increased litigation would also create a strong deterrent effect for other potential violators. Recent events do indicate, however, that the FTC is likely to consider increased enforcement in this area. In July, the FTC announced it also plans to update its guidelines to create stricter corporate marketing standards and to provide clearer examples of what constitutes a violation. And in October, the FTC sent notices to hundreds of businesses about fake or misleading reviews.

Lastly, the FTC can use its rulemaking powers to proactively regulate corporate conduct and advance a green agenda. Although procedurally cumbersome, the FTC can establish a clear demarcation for acceptable marketing practices. The commission should specifically promulgate rules that prohibit corporations from, without clear and specific evidence, exaggerating and deceiving consumers regarding the biodegradability, carbon offsetting or environmental benefits of any product or service.

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Incentivizing Green Agriculture

Agriculture is a significant source of greenhouse gases in the United States, comprising 10% of total emissions. The USDA is among the industry’s primary regulators and has significant power to get it to adopt more pro-climate policies.

The USDA could make the copious amounts of money it disperses to farms contingent upon their implementation of practices that stop overproduction and support the land and surrounding communities. In particular, the agency could use the Environmental Quality Incentives Program (EQIP), which Congress designed to help farmers implement conservation programs that would create “cleaner water and air, healthier soil and better wildlife habitat, all while improving agricultural operations.”

Effectively, however, these grants have instead become a federal subsidy for some of the largest, most polluting corporations, whose massive and concentrated operations are diametrically opposed to a pro-climate agenda. Multiple independent investigations have revealed that the USDA has disproportionately given EQIP grants to large industrial farming operations. One of these investigations found that, in 2008, industrial dairies made up “only 3.9% of all dairy operations nationally, yet they receive an estimated 54% of all EQIP dairy contracts.”

Rather than subsidize Big Ag’s scheme to pass the buck on implementing green policies to taxpayers, the USDA could require all agricultural businesses to implement practices that reduce emissions in order to receive funding. In line with the original intentions of the program, the USDA could modify how it allocates EQIP grants to advance smaller, independent producers and their efforts to implement climate-friendly policies and practices.

The USDA could also promote and assist with the development of agricultural cooperatives — corporate entities that are democratic and owned by communities, independent producers and workers. In the face of predatory monopolistic corporations, small and independent farmers and workers originally turned to the cooperative model in the late 19th century as a way to fight against concentrated corporate power and unfair labor practices.

The USDA is the main federal agency tasked with supporting cooperatives, in agriculture and beyond. But the agency’s cooperative department has steadily lost staff and resources, while unchecked cooperative mergers and consolidation have turned some cooperatives into predatory monopolies that dominate many regional markets and exploit the very people they were created to serve. Some of these agribusinesses work against the public interest in many ways: Among their worst offenses are driving egregious overproduction and committing widespread pollution — but the USDA can help change that.

“The USDA could require all agricultural businesses to implement practices that reduce emissions in order to receive funding.”

The USDA can expand the presence of cooperatives and ensure they are operating as a more democratic corporate structure. Specifically, the USDA can implement stronger antitrust enforcement against monopolistic cooperatives and ensure they are working for the benefit of their members and the public. The agency can do this by submitting amicus briefs to courts arguing for the law surrounding cooperatives to be interpreted favorably, by using its investigative authority to clarify when cooperatives violate the obligations to their members to not “unduly enhance” prices and by more vigorously enforcing its injunctive authority to prevent cooperatives from using monopolistic practices.

Lastly, the agency can also allocate funds specifically devoted to supporting current cooperatives and the creation of new ones. With additional enforcement and attention, the USDA can help to restore agricultural co-ops to the democratic entities they were intended to be.

This would create a marketplace that is more responsive to consumer demands and more favorable to engaging in green policies, rather than policies that provide short-term wealth maximization for financiers and corporations. These initiatives could rebalance the market to prioritize more environmentally safe local food production, mitigate agricultural pollution and, because of the creation of more agricultural producers, help create more resilient food supply chains — vital moves as the climate crisis continues to wreak havoc on food production.

Opening Up Competition In Energy Markets

Congress created the FERC in 1935 (then known as the Federal Power Commission) and gave the agency broad regulatory authority over many aspects of the nation’s electrical system, including wholesale and electricity transmission.

Electrical utilities play a major role in the climate crisis. Currently, 25% of polluting greenhouse emissions produced in the U.S. are derived from electrical generation. Electrical utilities control specific geographic areas with expensive fixed infrastructure (such as electrical lines connected to buildings and power generation plants), which makes potential competition more difficult than in many other industries.

FERC, however, can open up competition in these energy markets by blocking mergers between electrical utilities that would grow the fossil fuel industry and prevent the development of clean and renewable technologies. FERC analyzes mergers under a comprehensive “public interest” standard, which effectively means that the agency has enormous discretion to deny an acquisition and encourage the development of and access to clean, just and renewable alternative energy sources. Since the 1980s, however, FERC has approved almost every utility merger under its jurisdiction — allowing powerful private utilities more control over the electrical grid, suppressing renewable alternatives and reducing the number of independent retail electric utilities by nearly half.

Congress actually mandates that FERC align its operations and regulations with the “overriding policy of maintaining competition to the maximum extent possible consistent with the public interest.” It also gives FERC the power to require electrical utilities to expand and connect their transmission facilities with alternative generation and transmission companies, as long as the order is in the public interest and “will encourage overall conservation of energy or capital, optimize the efficiency of use of facilities and resources or improve the reliability of any electric utility system.”

Considering that the climate crisis is already causing massive disruptions to the nation’s electrical grid, requiring the expansion of electrical lines to alternative sources such as solar to mitigate the climate crisis is undoubtedly in the public interest. Furthermore, the Supreme Court has stated that the agency’s organic statute allows FERC “to consider conservation, environmental and antitrust questions.” FERC’s regulatory authority even extends to preventing electrical utilities from engaging in practices that are unfair or discriminatory. Thus, FERC can mandate that transmission lines extend to alternative sources and then prevent dominant electrical utilities from engaging in practices that would inhibit the usage of renewable energy sources.

Through anti-monopoly policy, the climate movement has many largely underused tactics at its disposal for pushing the government to protect markets, workers, communities and the environment. With the authorizations provided by President Biden — and with the right personnel, policies and enforcement — these executive agencies can take significant steps toward curtailing the most devastating effects of the climate crisis. They can and must act now.