BACKGROUND

Over the past decade, the rate of climate change litigation has been rising. By 2006, there were around 10 significant cases in the US. Increasing scientific certainty, emerging legal precedent and growing public awareness of climate change have combined to create an environment where legal actions are much more likely. This article will review the developments of climate change litigation in the US, the types of claims that could potentially be established in the UK together with possible consequences.

PROGRESS IN THE US

The majority of the cases discussing global warming in the US have been regulatory in nature, typically involving claimants seeking to compel government agencies to include climate change in their considerations of environmental consequences of actions under their jurisdiction.

The leading case is Commonwealth of Massaschusetts, et al -v- EPA [2007]

Litigation was initiated by claimants including 13 US states and 13 NGOs. The defendant was the federal Environmental Protection Agency (EPA) supported by automobile manufacturers and associates, 10 US States, fossil fuel suppliers and power generators.

The case concerned the refusal of the EPA to use its powers under the US Clean Air Act to regulate emissions form new motor vehicles by establishing greenhouse gas (GHG) emissions standards, with a view to tackling the issue of climate change. The EPA maintained that the Act did not authorise them to regulate as the emissions did not pose a direct health risk, and even if it did, it was not Congressional intent that the CAA be used to regulate GHGs as a means of responding to climate change.

The US Supreme Court judgement dealt with 3 key issues: whether the petitioners had standing to challenge the EPA's decisions; whether CO2 and other GHGs are pollutants under the Act and can be regulated by the EPA; and whether the EPA's decisions not to regulate GHG emissions were adequate.

The Court found that the US states had a special status in the context of standing, dismissing EPA's argument that the fact that GHG emissions cause widespread harm resulted in a lack of causation. The Court accepted that the effects of climate change were serious and well recognised and that for the State of Massachusetts, the injury it would suffer as a result of global warming included the loss of coast line, which affected its sovereign interest. The causal link was established between EPA's refusal to regulate GHG emissions and a connection with climate change which would contribute to the petitioners injury.

Once it was established that the petitioners had standing, and there was a causal link between the actions of the EPA and the injury, the Court held that the EPA did have the authority to regulate under the CAA as CO2 is an air pollutant. Further, there were no legal grounds supporting the EPA's refusal to use authority under the CAA to regulate emissions.

Result: The EPA must now reconsider its decision and decide what steps it will take to address emissions from both motor vehicle and stationary sources (accounting for around 60% of US carbon dioxide emissions).

The judgment could have a number of implications for climate change litigation:

  • Potential litigants may be emboldened to make claims given the implicit acceptance of the US Supreme Court of the science behind global warming and hence of a causal link between human activity and climate change.
  • Similar claims may be brought by US states against the US government, the decision on standing having effectively lowered the bar.
  • Courts may be more willing to entertain climate change actions and less willing to accept defendants' arguments that the issue of climate change is a matter best left to government.

[Update: on 26 January 2008 it was announced by President Obama that he would reverse the Bush Administration decision that prevented California from setting car emissions standards above those set by the CAA. It is reported that permitting the waiver to the CAA could open the door for California and 13 other states to reduce GHG emissions from passenger vehicles by 30% by 2016.]

More recent cases in the US have been less successful. In 2005, NGO's and cities in California sued the Overseas Private Investment Corporation (OPIC), a government-owned company, alleging that it had violated the National Environmental Policy Act (NEPA). The company supported a series of pipeline, oil field or power plant projects outside the US. The plaintiffs claimed that OPIC did not consider how the disputed projects impacted on global climate change. The court however held that not all of the projects constituted actions subject to NEPA review. The decision is currently on appeal.

Other actions have been brought under state laws. NGO's have intervened when an electric utility proposes to build a new power plant, arguing before the State Public Utility Commission that the plants are not needed (that all the necessary power can be gained from renewable energy sources) and that the power plants will be too expensive because they will be responsible for future carbon taxes. The results of such actions have been mixed. NGO's have yet to prevail before a state environmental agency or public utility commission, but they continue to file appeals in state and federal courts.

TYPES OF POTENTIAL CLAIMS IN THE UK

Against a government

As highlighted in the US cases above, domestic environmental laws often provide a basis for action against governments and their agencies. Actions are usually intended to ensure statutory obligations to protect the environment are met, including, in the US, those in relation to GHGs and the impacts of climate change.

Climate change cases such as those in the US are yet to be seen in the UK or Europe. Our Government has taken a much more proactive stance on tacking the global warming problem, whereas to date there has been no focused regulatory response in the US. The lack of climate change regulation is one of the main drivers for the climate change litigation in the US.

One potential avenue through which claims may arise in the UK against our Government is via the Climate Change Act. The Act sets a number of legally binding emissions reduction targets, responsibility for meeting them resting with the Secretary of State for Energy and Climate Change (SoS). However, no specific sanctions or penalties are stated to apply to the SoS if he fails to meet any of the deadlines or targets set out in the Act. It is, therefore, questionable whether any action could be mounted for such a failure.

Actions could be made by groups such as Friends of the Earth or Greenpeace for a judicial review challenge if targets or deadlines are missed, although a recent judicial review case in relation to fuel poverty brought by Friends of the Earth and Help the Aged indicates that the courts are already reluctant to allow judicial review of targets like these.

Against a company or individual

Claims against a company or an individual for damage related to climate change could be brought under a number of heads, for example negligence, nuisance or a product liabilities claim. However, in order to bring such a claim in tort, a number of elements may need to be established. For example, to establish a claim in negligence, a claimant must establish that a company or individual had a duty of care towards that claimant, that they breached that duty, and the result of such a breach has caused the damage claimed.

Potential defendants

Companies burning fossil fuels in the course of providing a product are one of the most obvious targets of climate change litigation, as has been seen in the US. However, so also are industries producing fuels to put them on the market. It would be hard to argue that these companies are not aware that the effect of emitting those GHGs into the atmosphere contributes to global warming to a certain extent. It has in fact been estimated that only 122 corporations account for 80% of all CO2 emissions worldwide.

Other potential classes of defendants could include company directors. The Companies Act 2006 requires directors to act in a way that is most likely to promote the success of the company for the benefit of its members as a whole. In doing so, directors must have regard to the likely consequences of any long term decisions and how they may impact on the community and environment. Directors will need to consider global warming issues or at least their company's emissions of GHGs in the future. Provisions introduced by the Climate Change Act 2008 give the power to introduce mandatory emissions reporting requirements on companies over a certain size from 2012.

Further, directors of companies supplying fossil fuels, producing GHGs or financing climate harming projects, could be in breach of a duty to act in the best interest of the corporation by failing to consider the increased financial liability and associated financial risks including those to shareholder value, corporate reputation, insurance and other associated commercial risks.

Insurance Attorneys in the US are beginning to warn of the risks for directors. Sedgwick New York Partner Edward Kirk highlighted that claims based on professional liability of directors may arise if ill advised investments are made in climate or energy related companies.

Causation

Stephen Tromans, an environmental law barrister at 39 Essex Street was interviewed recently by the Guardian on the potential for UK climate change litigation. He said that establishing causation would be one of the main difficulties. 'It is one thing to be able to link levels of GHGs with a specific event causing damage' he said, 'but, even assuming you can do that, quite another to establish causation against a particular company or industrial sector.'

If a company has emitted GHGs into the atmosphere it is very difficult to link those emissions to, for instance, a particular event of flooding, or wind, and to prove that those emission caused greater damage than that would have normally occurred.

There have been developments in this area, and recent reports indicate that scientists are making breakthroughs in judging the role of man-made climate change in extreme weather events. Myles Allen, a physicist at Oxford University has said that 'we are starting to get to the point that when an adverse weather event occurs we can quantify how much more likely it was made by human activity.' However, there is still the problem of linking the damage caused by the man made climate change to an individual company's emissions.

Answers to this problem may lie in drawing parallels with recent asbestos cases where legal precedents for making exceptions to the normal rules of causation have been established. For example, in the case of Fairchild -v- Glenhaven Funeral Services Ltd [2003], the claimant had been exposed to asbestos by multiple defendant employers. The House of Lords ruled that, providing the claimant could provide that each employer's breach of duty materially increased his risk, he could pursue a claim against any of them.

If specific weather events can be attributed to the activities of a class of potential climate change defendants, and the courts provide willing to adopt a 'market share' approach to the apportionment of liability, the potential for companies to be exposed to climate change litigation exists.

CONSEQUENCES: A US PERSPECTIVE

Insurance

The potential for climate change litigation in the US has become an increasing concern for insurers. The potential for a publicly traded policyholder to be exposed to liability risk associated with climate change has resulted in insurers beginning to raise issues in the underwriting process that precedes the issuance of policies. Issues that policyholders will have to address could include what actions they have taken to report their emissions, whether the responsibility for the management of climate-related risks is allocated and whether the company is planning for future regulatory scenarios.

Some insurers in the US have indicated that they may begin to exclude coverage for climate risks if a policyholder cannot show that it is taking steps to prevent the loss associated with the management of climate change. Further, if significant claims are brought under policies related to climate change risks, insurers are likely to try to rescind the policies issued to companies that fail to disclose the potential risk for such claims in the underwriting process.

Disclosure

A collection of US coal-fired power plants are already trying to pre-empt potential lawsuits by voluntarily providing investors with information on all the material financial risks associated with global warming.

Dynergy Inc, owner of power plants in 11 US states has agreed to disclose the information under an accord announced by Al Gore and the New York Attorney General Andrew Cuomo on the 23 October 2008. The settlement follows an August agreement with Xcel Energy Inc, in which that company agreed to disclose potential costs related to climate change. Under the deal made on the 23 October, Dynergy agreed to similar reporting to the US Securities and Exchange Commission.

The mandated disclosures include an analysis of risks related to present and probable climate change regulation, legislation, litigation and physical impacts on the environment. 'What is being announced here by the Attorney General today has incredible importance for the environmental crisis' Gore said in his statement. 'Investors have a right to the truth so that they can be freed from unnecessary and avoidable risks.'

CONCLUSION

The challenges faced by claimants in bringing actions for damage caused by climate change are significant. In the UK, the Government is progressing with setting targets for reducing emissions and so the type of case evident in the US that has arisen due to the lack of government action is less likely to materialise.

However, claims against individual companies could become a possibility. Already, US insurers are recognising that companies face climate change related risk. The failure to comply with changing legislation, the failure to disclosure emissions related data, or perhaps even unwise climate change related investments (certain major companies in the US are accused of having funded disinformation to cast doubt on the link between man-made emissions and global warming) could result in climate change related law suits. The possibility of claims based on the direct link between a company's action and damage caused by climate change is less likely, but given scientific developments and the Court's willingness to accept group liability in asbestos cases, not out of the question.