At the end of last year, a group of eleven Republican state Attorneys General filed a lawsuit that will have significant, presumably unintended, and rather strange consequences on the energy market. Naturally, the energy sector and price Americans pay for that energy is in the balance.
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 then using their leverage to pressure coal companies to shut down or accommodate “green energy” goals.
The supporting evidence is weak, to say the least. As was widely reported at the time, the Big Three firms participated in environmental efforts aimed at working with businesses across a variety of sectors to severely curtail greenhouse gas emissions and do so in a way that supposedly creates 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, along with BlackRock, withdrew from the Net Zero Asset Managers (NZAM) initiative. These decisions gained widespread attention, with the companies citing a variety of 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. But that claim is wrong, to be charitable.
In reality, coal’s decline has been the result of simple 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 actually remains higher than it was in the 25 preceding years. Coal production, meanwhile, has been on a steadier downward trend.
Paxton’s allegations simply do not line up with market behavior.
This group of AGs is trying to force the market back into a form of energy that has been naturally declining for a long time. Importantly, their attempt to impose different results poses a risk to domestic energy investment.
The most economically beneficial and productive energy agenda would be to allow all energy sources to compete freely and openly so that American consumers and businesses can access energy that is reliable, affordable, and secure. An artificially disrupted energy market – like this lawsuit would lead to – can create imbalances between supply, demand, and investments, all of which can be costly to consumers.
This is a posture that is congruent with what the Trump Administration has broadly outlined as its energy agenda. And 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 climate activists on the left who for years have been pursuing the exact same goal.
Any effort that artificially redirects investment—whether by encouraging or discouraging specific sectors—only distorts that balance, and weakens our energy grid’s long-term resilience, which is already deeply in need of investment.
In fact we now face a situation where 70 percent of America’s power grid is more than 25 years old and in need of repairs.
To update America’s declining energy infrastructure and keep pace with the surging energy demand, we need broad-based investment, not just in fossil fuels or renewables, but in nuclear power and net-generation technologies as well.
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 our markets to continue adapting to consumer needs and technological advancements as it has been—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 are what 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.
