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SPILL ECONOMICS

California’s oil spill is proof that climate action is worth the cost

A clean-up team works on clearing the oil slicks at the Talbert Channel after a major oil spill off the coast of California has come ashore in Huntington Beach, California, U.S.
REUTERS/Gene Blevins
Oil company settlements after spills tend to undervalue the full social and ecosystem costs.
  • Tim McDonnell
By Tim McDonnell

Climate reporter

Published

The oil spill that slathered a stretch of prime California coastal real estate on Oct. 3 is the latest proof that the social costs of the energy transition pale in comparison to the costs of the fossil fuel economy.

Global energy prices are on a bender, but policies to cut the economy’s climate footprint are only partially to blame. Even with such a major oil spill as a vivid reminder, that fact could still imperil public support for climate action, with the major COP climate summit in Glasgow due to start Oct. 31.

California is experiencing another ecological crisis

The full extent of the spill remains unknown, but is likely at least 126,000 gallons, and could take months to clean up. The last major oil spill in California, in 2015, was about 101,000 gallons, and cost at least $69 million to clean up. Under US law, oil spill cleanup costs are meant to be covered by the guilty company—in the case of the most recent spill, Houston-based public oil company Amplify Energy. In cases where a company is unable to pay, or found not liable, cleanup agencies can tap a federal fund that is maintained through corporate taxes on oil and gas production.

But in practice, many costs still fall to the public.

Who pays?

Losses to local businesses like fisheries and tourism have to be litigated in civil court and may not be fully covered. Costs associated with lost quality of life and damage to ecosystems are routinely undervalued, according to an analysis by the research nonprofit Resources for the Future; in the case of the 1989 Exxon-Valdez spill, for example, real ecosystem damage may have been up to seven times higher than the $1 billion in restoration fees paid by the company. And the oil company can still write off lost profits on its taxes; in the case of the 2010 Deepwater Horizon spill, BP eventually passed $10 billion to taxpayers in this way, out of about $60 billion in total costs.

Social costs are even higher if the oil gets burned, of course. A Sept. 6 study from University College London found that by 2100, the cost of damages and lost economic opportunity from climate change impacts could be equal to up to $15,000 per ton of CO2 emitted today (the average American emits about 15.5 tons annually).

Clean-energy extractive industries aren’t immune from social costs either. Human rights advocates have raised alarm about labor abuses in Chinese solar panel factories, and mining for lithium, copper, and other minerals needed for clean energy technologies often mars landscapes and depletes water resources. But despite these issues, the net value to society of a fossil-free economy is clearly positive.

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