Climate Litigation Risks Look Set to Multiply

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The recent groundbreaking court ruling requiring Royal Dutch Shell to slash its emissions could unleash a new wave of similar cases against oil firms and carbon-intensive industries. This decision -- handed down by a Dutch court and obligating Shell to cut its emissions by 45% by 2030 -- marks the first time human rights arguments had been used to demonstrate a climate-related "duty of care" on the part of a corporation (NE Jun.3'21). Industry is likely to fight back hard and argue they can't abruptly stop meeting energy demand -- but they may also act on the pressure to speed up their energy transition strategies, if Shell's response is any indicator. The UK-Dutch major said last week that it will now look to speed up its plans to cut greenhouse gas emissions, without providing further details yet, even as it appeals the court ruling. The company has also pushed back against the idea that climate lawsuits against individual companies will help to decarbonize the world. "Imagine Shell decided to stop selling petrol and diesel today," CEO Ben van Beurden said in a LinkedIn post. "This would certainly cut Shell's carbon emissions. But it would not help the world one bit. Demand for fuel would not change," he wrote. New Wave of Litigation Legal activists however dispute this argument, and, galvanized by the Dutch court ruling, hope to unleash a new wave of climate litigation against big carbon emitters. There are currently around 1,483 climate litigation cases globally, according to the UK-based Grantham Institute. The US-based Sabine Center for Climate Change Law at Columbia Law School put the figure slightly higher, counting around 1,677 lawsuits in US courts and 483 in other countries. Most lawsuits so far have focused on pressuring governments, although activists are increasingly targeting businesses. The recent Dutch ruling is "a defining moment in climate litigation," in the words of lawyer Roger Cox, who was involved in the Shell case through Friends of the Earth Netherlands. It will "have major consequences for other big polluters," he asserts (NE Jun.3'21). Legal Precedents The recent Shell ruling builds on a previous case in the Netherlands. The country's High Court ruled in 2019 that the Dutch government has a legal obligation to prevent dangerous climate change. Activists are looking to apply the same duty of care arguments across Europe where similar laws exist. Campaigners scored a recent victory in Germany, with the Federal Constitutional Court in Berlin largely accepting a constitutional complaint from nine young people that fundamental rights are being violated by insufficient climate protection. It ruled end-April that the government must amend the Federal Climate Protection Act by the end of 2022 to increase climate ambition. German utility RWE is also facing a lawsuit over the climate impact of its operations from a Peruvian farmer (NE Dec.21'17). A group of Polish citizens is also taking their government to court to boost climate action (related). Similar arguments are being used in France as part of a case against TotalEnergies brought forward by an alliance of French local authorities and NGOs. They want to force the firm to drastically cut emissions under France's "duty of vigilance" law. In late May, the Federal Court of Australia also established a new duty of care in a class action to block a coal project, although the court stopped short of issuing an injunction to force the government to block it, the Grantham Institute notes. US Traction The Dutch verdict will have less immediate impact in the US, however, where most cases are seeking monetary damages based on different laws rather than curbs on emissions. If anything, it might work against those lawsuits: An attorney who works climate cases in the US suggests the arguments used in the Shell case could bolster US industry arguments that these cases are really about emissions -- not the other issues like consumer protection, as claimants argue. This, in turn, would invoke widely accepted federal case law that favors oil companies. While US climate lawsuits haven't gained much traction so far in terms of rulings against oil companies, they aren't going away, either. The question of whether they can proceed under state tort law is still being hashed out (NE Sep.24'20). Just this past Monday, the US Supreme Court rejected a bid by Chevron, BP, ConocoPhillips, Exxon Mobil and Royal Dutch Shell to review an appellate ruling indicating that state tort claims brought by the cities of Oakland and San Francisco against the companies can proceed in state-level courts. It comes on the heels of another ruling last month that yielded a partial win for oil companies. Ultimately, oil companies want federal courts to address the climate suits because the options for federal remedies to tort claims are more limited -- with dismissal of complaints also seen as more likely in federal courts. Big Tobacco Parallel Activists sometimes draw parallels to the legal battles waged against Big Tobacco, which initially deflected case after case before finally losing. While the oil industry refutes any comparison between smoking and fulfilling the world's energy needs, it still faces potential brand reputation risk from these battles. "Even if a judgment is favorable, association with highly emotive environmental issues is not going to improve investor and consumer perceptions," suggests global risk consultants Verisk Maplecroft. The expanding nature of climate litigation and the uncertainty around financial penalties -- which can potentially amount to billions of dollars -- also adds to financial risks, it said in a recent outlook. Ronan Kavanagh, London

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