There is a growing trend of legal action targeting businesses, particularly fossil fuel and other energy companies, on the basis that their greenhouse gas emissions have contributed to climate change.
Local and state governments in both coastal and landlocked jurisdictions have been the main instigators of this kind of legal action.3 While these cases have predominantly arisen in the US, they are also beginning to occur in other jurisdictions.4 Large fossil fuel focused corporations have been the main target of such litigation, presumably because they produce a substantial proportion of carbon emissions and are viewed to have the financial resources to meet large claims.
Below, we consider three significant climate change disputes which highlight the nature of claims seeking either a cap on emissions or compensation for harm caused by fossil-fuel induced climate change.
American Electric Power Co. v. Connecticut (Connecticut)
This case involved an action by several US state and local governments, as well as land trusts, against five US energy companies.
The governments alleged that the energy companies had been contributing to the nuisance of global warming through their greenhouse gas (carbon) emissions and sought an order to cap and reduce their carbon emissions.
The energy companies represented the five largest corporate emitters of carbon dioxide in the US, owned and operated fossil fuel-fired power stations in twenty states and generated significant revenue and market share.
In an 8-0 decision, the US Supreme Court dismissed the complaint, holding that federal common law in this area was displaced by the Clean Air Act; and since Congress had entrusted the Environmental Protection Authority to decide how greenhouse gases should be regulated, it was not for federal courts to issue their own rules.
Decided in 2011, Connecticut is a seminal case that has set a high bar for parties, particularly in the US, seeking to rely on common law grounds such as nuisance to make companies with large emission profiles reduce emissions.
Nonetheless, this and other more recent cases demonstrate a growing willingness for parties to attempt to use the courts as a last resort to achieve emissions reduction outcomes.
Lliuya v. RWE AG (Lliuya)
Saúl Luciano Lliuya, a Peruvian farmer, filed claims for declaratory judgment and damages in a German court against RWE AG (RWE), Germany’s largest electricity producer. Lliuya’s suit alleged that RWE knowingly contributed to climate change by emitting substantial volumes of greenhouse gases, which caused the melting of mountain glaciers near his town, thereby giving rise to flooding risk. Lliuya characterised RWE's emissions as a nuisance that he and the local authorities had incurred compensable costs to mitigate.
Acknowledging that RWE was only a contributor to climate change, Lliuya asked the court to order RWE to reimburse him for 0.47% of the costs incurred to establish flood protections, in proportion to RWE’s estimated annual contribution to global greenhouse gas emissions.
The court at first instance dismissed Lliuya’s requests for declaratory and injunctive relief, as well as his request for damages. The court noted that it could not provide Lliuya with effective redress, in that his situation would not change even if RWE ceased emitting, and that no linear causal chain could be discerned directly linking RWE’s emissions to the harms suffered by Lliuya.
On 30 November 2017, an appeal court allowed Lliuya’s appeal against that decision. The court held that his arguments for damages from RWE were admissible and allowed the case to proceed.
The next phase of this proceeding is for the court to examine the evidence underpinning Lliuya’s claim. While the facts must be established, the court’s recognition in this case that a private company could be liable for climate change related damages resulting from its greenhouse gas emissions is a notable development.5
City of Oakland v. BP p.l.c. (Oakland).
On 19 November 2017, San Francisco and Oakland local governments (Oakland Plaintiffs) filed lawsuits in the California Superior Court against five large energy companies, claiming that the carbon emissions from the fossil fuels they had produced and sold had created an unlawful public nuisance. The Oakland Plaintiffs sought to require the companies to abate the alleged nuisance by funding a climate adaptation program to protect public and private property from sea level rise and other climate change impacts.
On 25 June 2018, the federal district court for the Northern District of California granted a motion to dismiss the complaints, applying Connecticut and Kivalina.
The Oakland Plaintiffs attempted to differentiate their claims from the above cases on the basis that the claims were not in relation to the companies’ greenhouse gas emissions, but rather, the sale of fossil fuels to other parties who would eventually burn them.
However, the court rejected this argument, stating that if the companies could not be sued for their own greenhouse gas emissions, they could not be sued for the greenhouse gas emissions of others. Further, the court held that while the Clean Air Act, and thus presumption of displacement by the legislature, did not apply to foreign emissions, it did not have jurisdiction to deal with such claims, which were the domain of the executive and legislature.
This case is a recent reinforcement of the position in Connecticut and similar cases.
Consistent with the cases outlined above, the most common legal basis for claims in this category has been the common law tort of nuisance,6 with global warming characterised as the relevant nuisance and greenhouse gas emissions as contributions to this nuisance. Alternative grounds include trespass,7 negligence,8 civil conspiracy,9 environmental laws and human rights laws.10
Litigants have sought damages11 for:
- alleged loss arising from harm already caused,
- the prospective adaptation costs of dealing with climate change in future,12 and
- injunctive relief to limit greenhouse gas emissions.13
Most claims have been unsuccessful so far.14 Key barriers for parties bringing claims have been the court’s lack of authority to consider the matter (ie justiciability), difficulties in establishing a causal link between the greenhouse gas emissions of specific businesses and the harm suffered (ie causation), and demonstrating that the party seeking to bring the action has sufficient connection to the issue (ie standing) to support that party’s participation in the case.
Despite these barriers, the number of claims continues to rise. Over time, there may be increasing pressure on companies to accept responsibility for activities which contribute to climate change from parties who bear the costs of addressing the impacts of climate change, such as the governments and farmer in the cases considered above.
Further, new research, such as Heede’s study mapping and quantifying cumulative emissions of the 90 largest carbon producers, and other developments in climate attribution science, may be used in an attempt to support new claims which hope to overcome the causation barriers of earlier cases.15
Even where the claim is unsuccessful, defending this kind of litigation can involve significant financial and reputational costs. Further, there is a risk that costs associated with climate change litigation may not be covered by general commercial liability insurance where they are not “accidental’, leaving businesses who are sued on climate change grounds particularly exposed.16
Therefore, it is important for companies, particularly those with large greenhouse gas emissions profiles, to assess their exposure to climate related litigation and other risks, and take steps, where possible, to reduce this risk.