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Climate Change Litigation: Can the Courts Save the Planet?

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About The Author

Jesse Hope (Guest Contributor)

Jesse is a Philosophy, Politics and Economics graduate from Durham University, who later completed the GDL and LPC at BPP University. He is about to commence his training contract at a US law firm, with the aim of specialising in international commercial disputes and public international law.

The time is past when humankind thought it could selfishly draw on exhaustible resources. We know now the world is not a commodity.

François Hollande

More than three years on from the historic 2015 Paris Agreement governments around the world are stalling. Many industrialised economies are struggling to meet their targets set under the Paris Agreement, and even if they were, temperatures would still surpass the 1.5°C cliff edge. Spurred on by an increased sense of urgency, citizens and activists are venting their frustrations in the polls, on the streets, and – increasingly – through the courts.

There are now over 1000 lawsuits worldwide which have climate change as either a key or contributing consideration in their legal argument or adjudication. Previously, claims tended to be based on enforcing existing environmental statutes and challenging administrative decision-making. While these earlier cases achieved important regulatory victories, such as clarifying emissions allowances and strengthening environmental impact assessments, they largely brought about only incremental change.

The past five years has seen a bolder generation of litigation emerge, which seeks to hold governments and corporations directly accountable for the effects of climate change. An increased awareness of the financial risks of climate change, coupled with the consolidation of climate legislation and science, has made it possible for litigants to draw upon constitutional rights, tort, and company law. However, it remains to be seen whether these burgeoning cases can bring about the radical change that activists seek.

The Paris Agreement

The increasing number of claims brought against governments has partly been enabled by the Paris Agreement which established an international framework to achieve net zero emissions by the mid-21st Century. Unlike its predecessor, the Kyoto Protocol, all of the 196 signatories to the Paris Agreement voluntarily determine their own emissions target, known as the ‘Nationally Determined Contributions’ (NDCs).

Although each contribution is not legally enforceable, litigants can use the Paris Agreement as an international yardstick to assess whether a country’s climate response is adequate or not. In particular, the framework has exposed the accountability gap between the consensus to limit global warming to 1.5°C above pre-industrial levels and current government inaction. Furthermore, the Paris Agreement has resulted in 106 new climate change policies at the national level, which have in turn provided litigants with additional footholds to challenge governments.

The right to life, liberty and a healthy environment

The latest wave of government lawsuits has also been fuelled by the proliferation of environmental constitutional rights over the past two decades. Of the 196 countries with constitutions, 148 have enshrined some form of environmental rights. For example, Article 42 of the Constitution of Kenya 2010 recognises the ‘right to a clean and healthy environment’, while the Ecuadorian constitution was the first to legally recognise the ‘Rights of Nature’.

Not only do such rights provide litigants with a unique and substantial basis for their claim, they also make it harder for defendants to argue that combating climate change should be left solely to the executive or legislature. As constitutional rights, their adjudication falls squarely within the power of the judiciary.

Rights-based litigation

The trend towards reframing climate change as a constitutional, rights-based issue was catalysed by the 2015 case Urgenda Foundation v. The State of the Netherlands [2015]. The District Court of The Hague found that the Dutch government was acting unlawfully – in contravention of the right to life and right to respect for private and family life, under Articles 2 and 8 of the European Convention on Human Rights (ECHR), respectively – by failing to pursue a more ambitious emissions target. In reaching its conclusion, the Court also cited Article 21 of the Dutch Constitution relating to environmental protection, the government’s constitutional duty of care, and the ‘no harm’ principle under customary international law. Guided by The Netherlands’ obligations under the Paris Agreement, the Court ordered the government to reduce emissions by at least 25 percent by the end of 2020.

This historic ruling resulted in similar claims being brought around the globe. In Leghari v Federation of Pakistan [2015], the Court declared that Pakistan’s delay in implementing its National Climate Change Policy 2012 and the Framework for Implementation of Climate Change Policy 2014 breached fundamental rights. Referring to the rights to life, human dignity, information and property under Articles 9, 14, 19A and 23 of Pakistan’s Constitution, the court ordered for the government to establish a Climate Change Commission to help the country adapt to increased flooding and more severe droughts. More recently, in 2018, Friends of the Irish Environment filed a lawsuit against the Irish government, claiming that its National Mitigation Plan 2017 violated the Irish Constitution and its human rights obligations under the ECHR. Whether the case concerns mitigation commitments or failure to provide adaptive measures, all three claimants used the Paris Agreement and national environmental policy to articulate constitutional breaches.

Yet perhaps the most well-known rights-based litigation since Urgenda is the US case of Juliana v. United States [2016]. The claim, brought by 21 young Americans, combines constitutional arguments based on the rights to life, liberty, and property (similar to those in Urgenda) with the public trust doctrine. The latter concerns the argument that the US government’s licensing of fossil fuel extraction fails to meet their obligation to hold essential resources in trust for future generations.

In 2016, for the first time in a federal court, Judge Ann Aiken of the US District Court for the District of Oregon, upheld the claim that access to a clean environment was a fundamental right and declared the case justiciable. However, since then, the Trump administration has done everything in its power to challenge Juliana’s standing and eventually secured an emergency stay for an interlocutory appeal, which was held on 4 June 2019. In light of American Electric Power Co. v. Connecticut [2011], which found that it was Congress, rather than the courts, who gave the Environmental Protection Agency the authority to regulate air pollution, many legal commentators suspect that the Ninth Circuit pre-trial judges will prevent the case from proceeding; or, in the event that the case does proceed, the decision will at least be construed narrowly, therefore making it harder for similar cases to reach the Supreme Court in future. Therefore, despite galvanising the country and being within reach of the nation’s highest court, Juliana is a reminder of the significant procedural and legal hurdles that litigants still face in the US.

Carbon Majors and the problem with causation

The last five years have also witnessed a surge in tort, negligence and nuisance claims against fossil fuel companies, driven largely by advances in climate science. The publication of the Climate Accountability Institute’s report in 2014 found that 90 of the largest carbon producers from 1854 to 2010 are responsible for two-thirds of all global carbon emissions. Not only did this publication provide litigants with a set of defendants, it also dismissed claims by the ‘Carbon Majors’ that their emissions were insignificant within the historical context, and should therefore not be held responsible for the effects of climate change.

Nevertheless, the biggest hurdle in common law cases against corporations has been establishing a causal connection between the defendant’s actions – emitting significant volumes of greenhouse gases – and the claimant’s injury, whether it be the relocation of island villages or persistent crop failure. In Native Village of Kivalina v ExxonMobil [2008], which argued that ExxonMobil’s greenhouse emissions caused coastal erosion and melting of Alaskan sea ice, the court concluded that the claimants could not trace the particular emissions that caused their specific harm. Similarly, in Comer v Murphy Oil USA [2005], the transboundary nature of greenhouse gasses prevented the claimants from showing that Murphy Oil’s emissions had proximately caused Hurricane Katrina to become more destructive.

Is partial liability the answer?

The development of attribution science in recent years is helping litigants overcome these causation thresholds. Armed with more precise, localised climate data, scientists are increasingly able to attribute climate change damage to a specific company based on their historical emissions. In Lliuya v RWE AG [2016], a Peruvian farmer filed a lawsuit against Germany’s largest electricity producer on the grounds that their greenhouse gases had contributed to the melting of a glacial lake near his town, thereby increasing the flood risk.

As with Kivalina and Comer, the German court found that there was no ‘linear causal chain’, as many emitters had contributed to the flood risk. However, subject to further legal opinions and scientific reports, it did find that RWE was partially responsible and apportioned damages in a way that resembled the ‘market share’ approach used in some US product liability cases. In the same way that liability for harm caused by a defective product is based on each defendant’s market share, the court awarded the farmer $21,000 in damages based on RWE’s emissions. This sum represents 0.47% of the total cost of the flood protection, which also equates to the percentage of carbon dioxide in the atmosphere that can be traced back to RWE.

Big oil is the new big tobacco

The latest wave of private law litigation has also sought to exploit the wealth of tobacco litigation precedent from the beginning of the century. As with smoking, climate change creates significant public health risks, yet the attribution of harm is complicated by multiple sources. Drawing parallels with landmark tobacco cases such as USA v Phillip Morris [2005], public authorities are bringing claims against Carbon Majors on the grounds that they have deliberately funded misinformation and anti-science campaigns to mislead the public about the devastating effects of climate change.

A recent example is the case of Rhode Island v Chevron Corp. [2018], in which a US state brought a claim against a fossil fuel company for the first time. Rhode Island’s Attorney General alleged that 21 energy companies’ release of carbon dioxide created a public nuisance by causing increased acidification of the ocean and sea levels to rise quicker. Rather than working to reduce these harms, the claim asserted that the companies had ‘concealed the known hazards of their products’ in order to maximise their profits – and, in the meantime, the state government picked up the bill. The parties are currently engaged in a jurisdictional battle, as Rhode Island is fighting to have its case heard in state court to take advantage of tougher public nuisance laws. Nevertheless, in the event that the case does get transferred to the federal court, Rhode Island is unlikely to face the same standing questions which troubled the claimants in Kivalina and Comer. This is because in Massachusetts v EPA [2007], the Supreme Court found that states were entitled to ‘special solicitude’ which was not available to individual claimants.

However, even with standing and jurisdictional questions settled, judges still find the defences mounted by energy companies persuasive. For example, in City of Oakland v. BP p.l.c [2017], the federal court sided with five energy companies over the cities of Oakland and San Francisco on the grounds that humanity has benefited immensely from electricity and the companies should therefore not be punished. They also ruled that the Clean Air Act displaces federal common law on the issue of greenhouse emissions, leaving the courts unwilling to act. The municipalities are currently appealing the dismissal on the grounds that they are not seeking to prevent the companies from producing fossil fuels or regulate emissions, but rather, to obtain financial redress for the damage they knowingly caused.

Financial risk and shareholder action

As well as tort-based claims brought by those directly affected by climate change, companies are facing action from shareholders under company law. To account for the transition and physical risks posed by climate change, such as tougher environmental regulations, shifts in consumer preferences, and disruption to supply chains due to extreme weather events, investors are demanding an equivalent level of disclosure.

This was seen in Abrahams v Commonwealth Bank of Australia [2017], in which shareholders claimed that the Australian bank’s annual report failed to properly disclose the climate change risks relating to an investment in a coal mine. By not including this information, the shareholders asserted that they could not make an informed assessment about the bank and its financial position, contravening Sections 292(1)(b), 298(1) and 299A(1) of the Australian Corporations Act 2001. It was only after directors published a subsequent report, including such risks, that shareholders withdrew their claim.

Directors’ failure to consider climate change risks can also lead to shareholders litigating over breach of fiduciary duties. In October 2018, ClientEarth, an NGO and shareholder in a Polish utility company Enea SA, filed a claim in the Regional Court of Poznań after the company approved the construction of a coal power plant. The claimants in ClientEarth v Enea [2018] plan to argue that Enea SA’s board members have failed to act in the best interests of the company by not considering rising carbon prices, competition of cheaper renewables, and changes in EU subsidies for coal power.

Whether claims relate to financial disclosure or directors’ duties, shareholder litigation does not face the same justiciability and causation hurdles that still trouble tort-based claims. Nor are shareholder claims limited to those who suffer loss directly from climate change: large banks, pension funds, insurance companies, and private equity houses could also face litigation. At the same time, litigants can draw upon the growing number of climate change disclosure guidelines. For example, in December 2017 major central banks launched the Network for Greening the Financial System, which monitors climate risk management; and, in June 2019, the G20 Task Force on Climate-related Financial Disclosures published their latest recommendations on disclosure standards.

11 years to save the planet

With just over a decade to prevent irreversible damage from climate change, litigation can play an important role in averting a climate crisis. While rights-based litigation in the US still faces an uphill battle, in relation to justiciability and the composition of the Supreme Court bench, the landmark cases of Urgenda and Leghari are already driving similar claims in Ireland, France, and Canada. Moreover, with NDCs set to be ratcheted up before the UN Climate Change Conference 2020, litigants will be able to use these tougher commitments to put national governments under renewed pressure.  

Advances in attribution science has also opened up new legal avenues. Carbon Majors are now being held partially liable for climate damage and the judicial ingenuity witnessed in Liluya is likely to spread to other jurisdictions, facilitated by the rise in transnational judicial networks and specialist environmental tribunals. At the same time, unsuccessful claims can still alter corporate behaviour; ongoing litigation is detrimental to share prices, and the disclosure process can reveal sensitive internal documents, both of which can result in further litigation.

Recasting climate change as a significant financial risk has the potential to bring about more immediate, wide-reaching change. Some of the world’s largest companies now face over one trillion dollars in climate change risks; with many companies exposed by inadequate disclosure standards or short-sighted decision making at board level, litigation can help drive fossil fuel divestment and a shift towards low emission products. While climate change litigation has existed for decades, the past five years have seen the courts become a true frontier for climate action. Courts are now willing to instruct governments to adopt bolder emissions targets, award damages against Carbon Majors and encourage financial institutions to reconsider their dirty investments – which, together, may just save the planet.

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Tagged: Company Law, Courts, Environmental Law

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