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Mitigation – reducing emissions – actions against corporations

A significant percentage of global GHG emissions come, directly or indirectly, from burning fossil fuels. In turn a high percentage of these emissions can be attributed to a small number of large fossil fuel companies. Legal action is increasingly being targeted at these companies/corporations, sometime called “Carbon Majors”, especially the privately owned ones. This is usually in an attempt to compel them to change behaviour so as to reduce emissions. Sometimes compensation for damage is sought as well.

These sort of actions are usually quite complicated to bring but as more and more are brought, individuals and communities can use material from existing actions to launch their own. Actions may be based on one or more of the following

  • Principles of “tort” or “delict” where someone who causes harm has to pay for the harm caused or stop the harmful activity or both
  • Principles of human rights
  • Actions based on dishonest or misleading denials of climate change or unjustified claims about how environmentally friendly or “green” a corporation is
  • Actions to compel full disclosure of CC risks to a corporation’s shareholders, insurers, lenders, auditors, other stakeholders or regulators
  • Actions against managers of investment or pension funds to require CC liabilities and risk to be taken into account
  • Anti-competitive behaviour of high carbon activities

For those seeking to hold the fossil fuel industry to account, there is a guide from WCEL on how to go about it here

1

Tort, delict or “no harm” principles

These types of actions are usually brought by people or groups of people who have suffered identifiable harm from CC. This could include a wide range of individuals. Bringing this type of legal action is a high risk in the sense that none has so far succeeded. But many people think that this may well change shortly.

Example: In Lluya v RWE AG [2015] a Peruvian farmer is bringing an action in Germany against the largest German electricity generating company. He alleges that it is in part responsible, through its GHG emissions, for melting of glaciers near his home and farm. He is claiming damages, a declaration and an injunction. The German appeal court ruled in late 2017 that the case should proceed to an evidentiary phase.

Increasingly cities or municipalities are bring actions in respect of damage to the whole local area. Most of these claims are by coastal cities threatened by sea level rise.

Example: After similar actions by Californian municipalities, the City of New York has in 2018 brought proceedings against a number of large fossil fuel companies seeking compensation for the current and future cost of sea level rise and other CC damage.. The complaint in that case provides much useful information for anyone considering a similar action (see for details here ). The case was dismissed in July 2018 on the basis that common law claims were displaced by the Clean Air Act, although this is subject to appeal. The Californian cases have also been dismissed.

Sometimes action may be taken by those whose livelihoods are particularly affected. An example is the suit in 2018 by the crab fishermen on the US Pacific Coast

These types of action usually involve

  • A claimant (individual, municipality, or other), who can show that they have suffered or will suffer damage from CC
  • One or more fossil fuel or power generation corporations as defendant
  • Proceeding in a court of tribunal which will accept jurisdiction against the defendants (see “where Can I take Legal Action”)
  • Allegations that the defendants are responsible for a significant shares of global GHG emissions
  • (sometimes) allegations that (a) the risk of damage were known to or foreseeable by the defendants (b) the defendants wrongly sought to discredit climate science (c) the defendant’s past and current business plan were and are incompatible with appropriate emission reduction including to levels specified by the Paris agreement.

The cases usually rely on specific rules of the country where the action is brought, “Torts” or wrongs relied upon include “negligence”, “private nuisance”, “public nuisance” and “trespass”

The best way for concerned individual citizens to act is usually to seek to persuade their local municipality to bring an action for the benefit of all residents.

A specimen complaint letter is [here – to be added]

2

Human Rights principles

Human Rights are normally enforceable, if at all, against public bodies not private companies. For more details see [refer to section on CC and HR]

However in some countries, action may be possible against corporations on Human Rights grounds relating to CC. CC potentially threatens many human rights including  those to life, livelihood, food and water.  This is discussed in  a recent ELAW report about holding corporations accountable for CC, which mentions for example Brazil, Colombia, Ecuador, India, Kenya, and Mexico as countries where this sort of action may be possible.

Also in the Philippines, the Human Rights Commission has been asked to investigate the Human Rights consequences, in CC terms, of emissions by many large fossil fuel companies. It has accepted jurisdiction to do so and has held hearing in the Philippines, New York and London. The petitioners’ argument are here

3

Misleading information or deception

There is increasing evidence that some fossil fuel corporations act or acted, themselves and with others, to deny or cast doubt on risks of GHG emissions at the same time as recognising internally and privately that the risk were real. If allegations such as this are established, the defendant may be liable for the torts of conspiracy or deceit. This

In addition legal action may be possible to stop false claims about whether products are “green”“climate change friendly”. It is usually easiest to initiate this action by a complaint to the relevant authorities

Example: The Australian Competition and Consumer Commission (ACCC) challenged Goodyear Tyres for falsely labeling its LS200 tyres as “environmentally-friendly” because its production process emitted less carbon dioxide and its new BioTRED technology increased the life of the tyre and improved fuel economy. ACCC charged that Goodyear Tyres was misleading consumers about the environmental benefits of its tyres, breaching sections 52 and 53(c) of the Trade Practices Act 1974. Goodyear Tyres gave a court-enforceable undertaking that it would halt its false advertising and partially compensate all customers who had relied on it during 2007 and 2008

4

Disclosure of and taking account of CC risks

Many corporations are subject to various types of CC  risks from their activities.  Those in the fossil fuel sector are particularly exposed, but the risks extend across many industry sectors The three main categories of risk are

  • Physical or operational risks. Corporations  may have assets or businesses exposed to sea level rise; flooding or extreme weather events
  • Transitional risks. These are the financial risk associated with rapid transition t a low carbon economy. Carbon intensive businesses as well those dependent on such businesses  may be a serious risk from such transition
  • Liability risk – the risk of being sued for activities that contribute to CC

 

Institutional investors, including pension funds, may be required by law to consider risks to corporations in which they invest, including CC risks, and failure to do this may lead to legal action.

A good source for further information, including pointers on when and how to take action on this,  is the website of  Commonwealth Climate and Law Initiative

5

Anti-competitive behaviour

Although the law in this area is unclear, corporations whose activities are carbon intensive may have an unfair competitive advantage if they externalise costs which are taken into account in the operations of low carbons competitors. This may lead to breaches of law designed to outlaw unfair competition.

6

The Importance of Insurance and Insurers

Nearly all corporations have liability insurance which pays out if they are found liable as a result of their activities. In addition the executives and directors often have their own personal insurance (called D&O Insurance) which pays out if the directors and executives are found personally liable in respect of the company’s actions.

The importance of Insurance and insurers in terms of reducing actions to reduce CC is often overlooked. Insurance is important in at least two ways.

Firstly Insurers are in business to make a profit. They can impose terms and conditions of Insurance on the companies they insure. In order to protect themselves against unnecessary risks, they can often require the company concerned to change its behaviour or risk not being able to find Insurance at a reasonable price or at all.

In addition most general liability insurance and D&O insurance contains exclusions which mean that the insurance company is not liable to pay out in certain situations. For example if the company or the executives concerned have been fraudulent or deceptive or reckless or done something similarly culpable, the insurance may not pay out. In a number of CC related lawsuits currently in progress, this type of allegation is being made. The issue of whether or not insurance is valid may be an important factor in the approach of the company to litigation brought against it as well is the way it behaves generally

 

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