By Colin Johnson, Joseph Kirby and Sophie Munson, HKA
In recent years there has been a rise in the number of climate-change-related cases being brought globally. We are seeing a growth in the number of climate-change-related disputes, both through litigation and arbitration, with a significant portion of these cases being brought against governments.
As part of this, we are seeing cases brought against governments for two different largely opposing reasons: (1) for taking action to mitigate climate change, and (2) for not taking enough action to mitigate climate change. There are also a number of cases against “carbon majors” for alleged impacts caused by their actions, and an increasing number of cases brought or threatened against directors, financiers, insurers and others as alternative ways to block particular activity.
The trend in increasing cases is demonstrated by certain databases which have collated data on climate change litigation cases across the world. These include the Climate Change Laws of the World (CCLW) database of global cases outside of the United States, maintained by the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and Political Science; and the separate US Climate Change Litigation database of cases from the United States, maintained by the Sabin Center for Climate Change Law at Columbia Law School in collaboration with Arnold & Porter. For a case to be classified as “climate change litigation” and therefore be included in the scope of these databases, the case must (1) generally be brought before a judicial body, and (2) include a significant issue of law/fact regarding the science of climate change and/or climate change mitigation/adaptation efforts.
According to the CCLW database, there have been 1,842 cases of climate change litigation brought globally between 1986 and 31 May 2021. Of these, the majority (1,389 cases) have been brought in the US. We summarise these total global cases in Figure 1, by the year in which the case was brought.
This data shows that climate change litigation is a growing phenomenon, both within the US and globally. In the past six years alone, the number of cumulative cases has more than doubled globally, with approximately 1,000 cases being brought between 2015 and 31 May 2021, compared to the approximately 850 cases brought over the preceding 29 years from 1986 to 2014.
From the CCLW database of global cases brought outside of the US, it is apparent that these climate change litigation cases have typically been brought by corporations, individuals and non-governmental organisations (NGOs), with the overwhelming majority brought against governments and state entities. We show the breakdown of plaintiff and defendant type in Figure 2 and Figure 3 respectively.
Source: Graph produced by HKA using data as at 31 May 2021 from the Climate Change Laws of the World (“CCLW”) database of global climate litigation cases outside of the United States, maintained by the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and Political Science, and the separate US Climate Change Litigation database of cases from the United States maintained by the Sabin Center for Climate Change Law at Columbia Law School in collaboration with Arnold & Porter.
Climate change cases are being brought against governments for a variety of reasons. A significant proportion of such cases seen to date can be grouped into two opposing types:
Of this first class of climate cases brought against governments, perhaps the most notable such case to date is the matter of Urgenda Foundation v. State of the Netherlands (2015), in which a Dutch environmental group, the Urgenda Foundation, and 900 citizens sued the Dutch government to do more to limit global climate change. The Court in the Hague ordered the Dutch government to limit greenhouse gas emissions to 25% below 1990 levels by 2020, finding the government’s existing commitment to a 17% reduction insufficient. The Court cited numerous bases for this decision, including reference to (but not limited to) article 21 of the Dutch Constitution, EU emissions reduction targets, principles under the European Convention on Human Rights and the sustainability principle embodied in the UN Framework Convention on Climate Change. After several rounds of appeal, the Supreme Court of the Netherlands upheld the decision in December 2019. This has been hailed as a landmark case as the first decision by any court in the world ordering a state to limit greenhouse gas emissions for reasons other than statutory mandates.
In terms of the second class of climate cases brought against governments challenging mitigation measures implemented by governments, examples include litigation brought by corporations seeking annulment of emissions cap and trade schemes enacted by governments to limit and control greenhouse gas emissions. One such example was the case brought in 2007 by EnBW (a major German energy producer) which requested the nullification of the German National Allocation Plan (a component of the EU Emissions Trading System [ETS] which caps emissions and sets out rules for emission allocations), with EnBW claiming that certain allocation rules were effectively illegal state aid. The Court ruled this case inadmissible.
Other cases that have been brought by corporations against governments have been observed in the arbitration space. Due to the nature of arbitral proceedings, data on arbitration cases relating to climate change related disputes is more scant, but some such cases have been observed in recent years, including cases brought by corporations against governments. In terms of investor-state dispute settlement (ISDS), there are recent examples of energy companies bringing claims against states following the state’s implementation of stricter measures to reduce greenhouse gas emissions. In the ongoing case of RWE v Netherlands (2021), RWE (Germany’s largest power producer) filed a claim in February 2021 suing the Netherlands government under the Energy Charter Treaty after it announced a transition away from coal. Following the Urgenda decision (described above), the Dutch government pledged to phase out all coal-fired power plants by 2030, meaning that RWE’s Dutch Eemshaven coal plant, which was built in 2015 and allegedly cost over €3 billion, would need to be closed or converted to use alternative fuels. RWE claims that the Netherlands’ phase out plans do not include adequate compensation for closing or converting the plant, which RWE considers unlawful, and sources say that RWE is claiming around €1.4 billion from the Netherlands.
Similarly to the Netherlands, Germany has announced a planned coal phase out by 2038. However, unlike the Netherlands, Germany’s planned coal exit includes compensation for plant operators. Germany introduced this compensation scheme alongside its coal exit after experiencing a decade-long battle between the German government and major energy companies after its accelerated phase out of nuclear plants following the Fukushima disaster in 2011. Germany did not initially offer compensation to nuclear plant operators under this nuclear phase out; however, after multiple lawsuits were filed against the German government, Germany agreed to compensate RWE, Vattenfall, EnBw and E.ON €2.4 billion for losses suffered under Germany’s exit from nuclear power.
Under the compensation scheme for its coal exit, Germany has agreed compensation with RWE for the phase out of its lignite coal plants of €2.6 billion and €216 million under the hard coal phase out auctions, without the need for formal litigation or arbitration. Another plant worthy of note under this scheme is Vattenfall’s Moorburg plant, which was successful in its compensation bid to Germany and stopped generating at the end of 2020, less than six years after it formally started operations.
It is also worth noting, in the sense that governments can be “damned if you do- damned if you don’t”, that there is a state-aid investigation by the European Commission investigating the legality of the lignite payouts that could overturn the compensation. This shows to some extent the different competing pressures governments are under.
When we think of litigation relating to climate change, we may think of action against the “Carbon Majors” – the major fossil fuel companies. Cases against Carbon Majors are included in the cases against corporations, and to date, there have been far fewer climate-related litigation cases brought against Carbon Majors compared to those raised against governments. There have, however, been some milestone cases brought against Carbon Majors in recent years that reference climate change as a key issue – the outcomes of these cases could significantly shape future cases against Carbon Majors.
Such cases include Milieudefensie et al. v Royal Dutch Shell plc. brought by NGOs and over 17,000 citizens against Shell in 2019. This case built on the landmark Urgenda decision (described above) and extended similar ‘duty of care’ arguments from countries to corporations, with the plaintiffs alleging that Shell’s contributions to climate change violate its duty of care and human rights obligations. This case was successful and, on 26 May 2021, a judgment of the Hague District Court ordered the Shell group to reduce its CO2 emissions by at least net 45% relative to 2019 levels by the end of 2030. This case may provide a basis for future cases to be brought against high emitting corporations, citing breaches of a duty of care and human rights with respect to climate change.
Recent advances in attribution science (which tests links between actions and outcomes – particularly relating to climate change) are strengthening the arguments of plaintiffs and enabling climate-related cases to be brought against specific emitters. Many of the claims against Carbon Majors have been supported by scientific research that seeks to use quantitative methods to ascertain the proportion of global greenhouse gas emissions that have been produced by specific Carbon Majors over time. For example, some cases have relied on conclusions from the 2013 paper by Richard Heede of the Climate Accountability Institute: Tracing anthropogenic carbon dioxide and methane emissions to fossil fuel and cement producers, 1854–2010, which used historical production records of 90 Carbon Major entities (leading producers of oil, natural gas, coal and cement) from 1854 through to 2010, to ascertain the CO2 and methane emissions from the activities (such as sale of hydrocarbon fuels, emissions from flaring and venting, own fuel use, etc) of these 90 Carbon Majors. When compared with estimates of total global carbon emissions of industrial CO2 and methane from 1751 to 2010, the author found that these 90 Carbon Majors had contributed 63% of total global industrial emissions. Similar studies using the same methodology have been produced subsequently, to reflect more recent data.
This research was at the basis of the claim brought by Luciano Lliuya in the German courts in Lliuya v RWE AG (2015). This claim was brought by a Peruvian farmer in relation to costs that would be incurred in order to protect certain land near the town of Huaraz from increased flood risk. Mr Lliuya’s case was that emissions from RWE contributed, in part, to global warming, and a resulting increased flood risk from melting glaciers near the land. He claimed a 0.47% contribution to the required costs from RWE, on the basis that RWE had contributed 0.47% of total global emissions, according to Heede’s study. The Essen District Court initially dismissed the case, citing a lack of a clear causal chain, however, on appeal, the Higher Regional Court in Hamm ruled in November 2017 that the case was well founded and could proceed to the evidentiary phase, which remains ongoing. The case could set interesting precedents regarding the liability of a specific carbon emitter for damage potentially caused to global third parties, from emissions past and present, as well as in regards to the evidential basis for establishing causation.
Whilst climate change-related disputes are still a relatively young area, all signs point to continued growth in the scale and significance of these matters. As the global focus on climate change increases, it is likely that further cases will be brought by NGOs and individuals against governments and carbon majors, seeking the enforcement of greater action against climate change, and potentially seeking damages for the impacts of climate change (like in the Lliuya case described above). As such, climate-related litigation can be seen as a global driver of climate goals.
Given the global scale of action required to meet commitments under the Paris Agreement, and the UN’s goal of net zero carbon emissions by 2050, governments will likely implement further climate policies and legislation in the near future – this may be met by an increase in ligation and arbitration cases brought against governments, by corporations. In this regard, climate change litigation and arbitration may cause delays or even rollbacks of climate action.
The effects of geopolitical trends towards increased climate action do appear to be reflected in the activities of the courts. However, it is worth noting that investor-state arbitration may still provide some protection for energy companies. Some officials are calling for reform to, or even withdrawal from, the Energy Charter Treaty, in order to align with climate goals and to remove the safety net that some argue it offers to major emitters.
As well as more of all the above, what else might be on the way? We see the following potential areas as likely developments: