“Innovative” industries fall back on time-tested tactics to influence D.C.
This edition of the Revolving Door Project newsletter was originally published on our Substack. View and subscribe here.
With each passing day, Biden and his party appear to be facing ever more severe political headwinds. Inflation remains elevated, with a new variant threatening to further aggravate supply chain problems. Meanwhile, the (warranted) response to the war in Ukraine has specifically pushed gas prices upwards. Add to this that the Federal Reserve appears eager to throw millions out of work to slow the economy and that some of Biden’s outstanding nominations are in peril thanks to his own, uncooperative co-partisans, and things are undoubtedly looking bleak.
But we should not surrender to debilitating pessimism. As my colleague Hannah Story Brown wrote on our blog last week, many of the ongoing crises have also created an important opening to kick the transition from fossil fuels into high gear and double down on attacks on corporate greed. Rather than simply react to troubling trends, Hannah argues, President Biden needs to go on offense with the tools at his disposal. Using the Defense Production Act, Biden can scale up the production of heat pumps and other technologies at home and abroad to reduce the demand for Russian oil. He can use his emergency powers to simultaneously accelerate decarbonization and limit new oil extraction. And he can direct his administration’s enforcers to crack down on any corporation or ultra-wealthy individual who engages in crisis profiteering or flouts the rules.
President Biden has begun to rhetorically make the case that, as Hannah puts it, “the price of oil is nothing compared to the price of freedom lost.” Now, he needs to implement the sort of “people-centric policies that ease the burden of the energy transition off of everyday Americans, onto the corporations and billionaires profiting from war and environmental destruction,” to match.
Governance
Actually enacting a crackdown on corporate polluters, however, will require some changes at the Department of Justice, particularly the Environment and Natural Resources Division (ENRD). ENRD “files the most environmental lawsuits of any organization in the U.S “putting it at the center of environmental policy. In recent memory, however, it has hardly used this power to great effect. Under President Trump, ENRD lawyers defended fossil fuel companies, opposed environmental justice organizations in court, and brought only a paltry number of enforcement actions against polluters. That has continued to an astounding degree under President Biden.
As Hannah Story Brown explained in The American Prospect yesterday, it doesn’t have to be this way. ENRD attorneys have the means to pursue a more ambitious legal agenda for a liveable planet. Through the exercise of prosecutorial discretion, the division can enter into strategic settlements with environmental organizations, impose painful consequences on environmental offenders, and otherwise “seek and even create opportunities to pursue environmental goals for the public benefit.”
Making ENRD an unambiguous ally for climate action will require more, however, than simply shifting the division’s moral and strategic approach. As Fatou Ndiaye explains in a new blog, ENRD’s work, like that of so many other agencies, has suffered as a result of government underfunding over the last decade. Although the division’s overall staffing levels have climbed gradually over that time period, the growth has not been sufficient to keep up with inflation or economic and population growth. Furthermore, the number of lawyers the division employs has fallen. At the same time, the loss of staff at the Environmental Protection Agency (EPA), particularly its Criminal Investigation Division (CID), has resulted in fewer case referrals to the ENRD and falling prosecution numbers.
The omnibus spending bill that Biden signed into law yesterday will provide the ENRD with a slight increase in funding to support some new hiring, but it is only a fraction of what is needed. Congress only appropriated $40 million, or approximately 4 percent over the FY 2021 enacted funding levels, to support “General Legal Activities” at the DOJ (a pool of money that supports the Tax Division, Civil Division, Civil Rights Division, Criminal Division, ENRD, Office of Legal Counsel, Interpol, Office of the Pardon Attorney, and Office for Access to Justice). That is well short of the $100 million increase that President Biden requested and almost $200 million shy of where “General Legal Activities” funding would be had it simply kept pace with inflation since 2010. If the ENRD receives the same percentage of that funding that it did in 2021, it will get an increase of $5 million, just enough to support the proposed hiring of 18 new attorneys to support environmental justice initiatives (a number that was, almost certainly, insufficient to begin with).
Over the coming weeks, we will be carefully reviewing the omnibus funding agreement to assess how effectively it addressed acute, long-running capacity shortfalls. What we’re seeing so far, however, is not encouraging.
Personnel
Washington has decisively turned its attention to cryptocurrency. In recent weeks, there’s been buzz about new legislative proposals, guidance from Office of Foreign Assets Control on crypto firms’ obligations with regards to sanctions (hint: they have to follow the rules too), and a new executive order to coordinate regulators’ response to the rapidly growing industry.
Crypto is doing its best to arm against regulatory scrutiny and to shape new policy making to its liking. In both cases, its primary weapons are the same: revolving door hires. In a recent report, the Tech Transparency Project identified “nearly 240 examples of officials with key positions in the White House, Congress, federal regulatory agencies, and national political campaigns moving to and from the industry.” It’s not just the volume that’s impressive here but the seniority of those officials crypto has snatched up. As the Wall Street Journal notes, “those working for or advising cryptocurrency firms or investment funds include three former chairs of the Securities and Exchange Commission, three former chairs of the Commodity Futures Trading Commission, three former U.S. senators, and at least one former White House chief of staff, former Treasury secretary and former chair of the Federal Deposit Insurance Corporation.”
(Take special note of crypto hack Larry Summers, who should be identified by reporters in alignment with his economic interests in crypto, rather than as a Harvard prof or former Treasury Secretary)
As regulators take a closer look at the crypto industry over the coming months in line with President Biden’s executive order, these figures will be doing their best to deploy their connections and inside knowledge to secure the most favorable outcomes possible for the industry. The Biden administration and its financial regulatory appointees should recognize that this represents a threat to public trust in the outcome of their deliberations and should immediately take steps to insulate these processes from undue influence.
In a report out last week, my colleagues Hannah Story Brown and Dylan Gyauch-Lewis explore another emergent sector with pressing interests in Washington: the carbon offsets industry. Hannah and Dylan dig deep on why carbon offsets, “which represent a certain amount of emissions purportedly prevented or removed from the atmosphere, and are bought and sold at variable prices,” are a snake oil solution to the climate crisis. They go on to explore how agencies across the executive branch could help call the industry’s bluff or foam the runway for it to take off. Troublingly, several high-profile officials within the administration, including Secretary of Agriculture Tom Vilsack and Secretary of Energy Jennifer Granholm have been uncritically touting the benefits of a closely-related technology, carbon capture, and pushing for expanded federal investments in it. Assistant Secretary for Fossil Energy and Carbon Management Brad Crabtree, meanwhile, founded and served as a director for the Carbon Capture Coalition. Hannah and Dylan’s report makes clear that, with so much at stake, this is a space to watch closely in the coming months and years.
Observers will not have to wait long. In The American Prospect, Dylan zoomed in on one of the earliest tests of how regulators will treat carbon offsets: the Securities and Exchange Commission’s long-awaited proposed rule on climate-related risk disclosure which is due out this month. As Dylan writes, “The more significant the disclosure mandated—for instance, if [the SEC] requires companies to report gross instead of net emissions, and to identify all specific carbon offset projects they invest in to lower their net emissions, with emissions “prevention” and emissions “reduction” qualified differently—the less likely that corporations will be able to greenwash themselves with half-baked solutions.” The more permissive standards that industry is hoping to see, in contrast, would make it more likely carbon offsets “become accepted and adopted as a primary mechanism for addressing the climate crisis by companies and governments alike.”
Independent Agencies
A recent report by the United States Sentencing Commission (USSC), an independent agency housed in the Department of Justice, found that inmates’ requests for compassionate release throughout the early stages of the pandemic in 2020 “were granted far less often in conservative-leaning multistate U.S. judicial regions than in more liberal-leaning ones.” The problem, in part, lies with a lack of guidance on what constitutes “extraordinary and compelling” circumstances that would permit a compassionate release, leaving interpretation wholly up to judges’ discretion. The USSC has been unable to issue that guidance because it has lacked a quorum since 2019. To date, President Biden has not nominated a single person to fill any of the six vacancies on the board (three people would need to be confirmed to restore the board’s quorum). This is just the latest example of the consequences of neglecting independent agency nominations, even to seemingly obscure boards.
Want more? Check out some of the pieces that we have published or contributed research or thoughts to in the last week:
Where the Government’s Environmental Lawyers Stand
Carbon Offset Legitimization Would Undermine Climate Progress, New Report Argues
The SEC Must Avoid Legitimizing Carbon Offsets
To Take Down Corporate Polluters, the DOJ’s Environmental Enforcer Needs More Capacity
Biden’s Ban on Russian Fuels Could Be a Climate Turning Point
WallStreetBets founder debuts new fund that mimics Nancy Pelosi stock trades
Now Let’s Do the American Oligarchs