At the end of last year, 11 Republican state attorneys general filed a lawsuit that will have significant, presumably unintended, and somewhat strange consequences on the energy market. Naturally, the energy industry and the price Americans pay for that energy are balanced.
Spearheaded by Texas Attorney General Ken Paxton, the lawsuit targets the “Big Three” financial asset managers: BlackRock, State Street and Vanguard. The principal accusation is that the managers manipulated the energy markets by limiting investment in coal.
The complaint alleges that these financial firms have suppressed traditional energy sources by acquiring stockholdings and using their leverage to pressure coal companies to shut down or accommodate “green energy” goals.
The supporting evidence is weak. As was reported at the time, the Big Three firms participated in environmental efforts aimed at working with businesses across various industries, curtailing greenhouse gas emissions, and creating long-term shareholder value.
These three firms have since left many of the broad coalition initiatives they were previously committed to; State Street and BlackRock withdrew membership with Climate Action 100+, and Vanguard and BlackRock withdrew from the Net Zero Asset Managers initiative. These decisions gained widespread attention, with the companies citing various reasons and all affirming their commitment to providing the best investment returns for their clients.
However, during their time as participants, the lawsuit claims, the defendants plotted to lower coal prices. This appears to be the fact on which the lawsuit hinges. That claim is wrong, to be charitable.
In reality, coal’s decline has resulted from economic and market trends. More affordable and efficient energy options, like natural gas and renewables, have slowly but steadily taken the lead, a trend that has occurred over many years.
The price of coal has spiked a couple of times in the last 25 years, and it remains higher than in the 25 preceding years. Coal production, meanwhile, has been on a steadier downward trend.
Paxton’s allegations do not line up with market behavior.
This group of attorneys general is trying to force the market back into a form of energy that has been naturally declining for a long time. Their attempt to impose different results poses a risk to domestic energy investment.
The most economically beneficial and productive energy agenda would be allowing all energy sources to compete freely and openly so that consumers and businesses can access reliable, affordable and secure energy. An artificially disrupted energy market, like this lawsuit would lead to, can create imbalances between supply, demand and investments, which can be costly to consumers.
This posture is congruent with what the administration has broadly outlined as its energy agenda. Paxton’s lawsuit not only places him at odds with these goals by trying to force an outcome that he and his cohorts prefer, but their sought-after remedy is for the asset managers to divest from coal companies, which also aligns him with environmentalists who for years have been pursuing the same goal.
Any effort that artificially redirects investment — whether by encouraging or discouraging specific businesses — distorts that balance and weakens our energy grid’s long-term resilience, which is already deeply in need of investment.
We face a situation where 70 percent of America’s power grid is more than 25 years old and needs repairs.
To update America’s declining energy infrastructure and keep pace with surging energy demand, we need broad-based investment in fossil fuels or renewables, and in nuclear power and next-generation technologies.
Creating uncertainty and having the government pick winners and losers, whether through policy or litigation, can only raise costs and reduce prospects for long-term energy reliability.
The better path forward is to allow markets to continue adapting to consumer needs and technological advancements, which may or may not include coal or any other single energy source. Building a resilient and prosperous energy future requires doubling down on principles that encourage diversity in energy sources and technological innovation that improves efficiency and environmental stewardship.
Those free-market values will help safeguard American security and unleash America’s full energy potential that fuels our economy and is a cornerstone of a prosperous future for American families.
