A Dutch Court orders Shell to reduce its emissions – a harbinger of the climate litigation era

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30-minute read

 

On May 26th, the District Court of The Hague in the Netherlands ruled that Royal Dutch Shell (“RDS”) must curtail its scope 1 to 3 global carbon emissions by net 45% by 2030 compared to its 2019 levels. The plaintiffs based their claims on the fact that Shell has not acted in accordance with the “unwritten standard of care” laid out in Dutch law, ignoring the protection of both the environment and citizens. This decision is ground-breaking not only because it is the first time a company has the legal obligation to reduce its CO2 emissions, but also due to the underlying arguments developed by the Court. It stated that Shell should actively put in motion its reduction obligation through the corporate policy of the wider Group, including its overseas subsidiaries. It also posited that the pressing need to comply with the reduction obligation outweighs the negative consequences that Shell could face from a commercial point of view, requiring a drastic adjustment of the Group’s energy package (despite contractual obligations as well as obligations ensuing from long-term concessions). The “in step with society’s progress” approach of Shell regarding the pace of its transition is considered by the Judge as “intangible, undefined and non-binding for the long-term”, and the proof that the Group disregards its individual responsibility. Shell immediately declared it would appeal the court ruling, however the latter has been declared provisionally enforceable. The judges indeed refused “maintaining the status quo until a final and conclusive decision”.

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In the area of sustainable finance, decisions made, or expected to be made by central bankers and supervisors have been the subject of intense discussion and scrutiny (see previous articles here). Less attention has been paid to the role of judges. Yet this is another striking example of the intervention of key institutions beyond their traditional roles and mandates, “stepping in” to tackle climate change.

Civil society is mobilizing in various ways on climate change (sit-in, boycott, protest, etc.). Among the tools chosen, the law appears to become the preferred instrument of this societal activism. These mobilizations and uses of the law manifest themselves through “judicial activism” in the Courts, taking the form of “climate litigation”. We are witnessing the multiplication of climate lawsuits, whether they involve States or Carbon Majors [1] (notably the big oil and cement companies).

It is therefore increasingly important for companies and financiers to understand the dynamics of climate litigation. Who are the plaintiffs? What are the different types of climate litigation cases? What are their legal grounds? What are their consequences? These are paramount questions.

Thus, we decided to dig into the judicialization of climate actions around the world, with a particular focus on the recent, and considered historic, Dutch Court ruling against Shell. Throughout this paper, we will also comment on the landmark decisions rendered over the last two years by the German Constitutional Court and the French supreme Administrative Court.

The success of the claimant NGOs in the Netherlands will most likely incentivize others to sue companies. Mainly, this decision will “inspire” judges in other ongoing cases [2]. In total, a number of 1,587 cases of climate litigation have been identified as being brought between 1986 and the end of May 2020 [3]. A number of these lawsuits target corporations such as Casino, Volkswagen or Total [4]. In their strategy and legal reasoning, NGOs invoke the report “Carbon Majors” which identifies the 20 companies [5] contributing the most to climate change worldwide. One of the likely consequences of the Shell decision is that every single company name of this list could expect to face some forms of lawsuits across jurisdictions worldwide.

The judicialization of climate actions is a global phenomenon. NGOs are globally organized. Furthermore, decisions rendered by Courts often have extra-territorial consequences. In the case of Shell, its subsidiaries based overseas (i.e. not in the Netherlands) are not exempted of the obligation.

Climate litigation now encompasses a growing number of composite disputes aimed at:

  1. Penalizing companies that emit greenhouse gases in an abusive manner;
  2. Holding accountable States whose climate policies are considered insufficient;
  3. Preventing the adoption of measures deemed “climaticide”, such as the extension of airports [6] or the authorization to operate new offshore petroleum sites.
     

In the first part of this paper, we will analyze thoroughly the climate lawsuit against Shell. In the second part, we will present the state of play on climate lawsuits per category of actors, differentiating States, Corporations, and within this category, financial Institutions. In the third and latest part of this article, we will explore further considerations on climate litigation with a prospective and critical standpoint.

 

TABLE OF CONTENTS

 

Part I: The climate lawsuit against Royal Dutch Shell

  • The plaintiffs, their demands and legal arguments
  • The elements invoked by the Court to reach its decision
  • Takeaways and critical arguments from Shell Decision

Part II: State of play on climate lawsuits per category of actors

A. Climate lawsuits against States.

B. Climate lawsuits against corporations.

C. Climate lawsuits against financial institutions.

Part III: further considerations on climate litigation

  • Are these decisions or legal cases unleashing progress?
  • What is the effectiveness of such decisions?
  • Are all these actions legitimate?
  • Key criteria scrutinized by judges to define climate liability
  • Actions seeking money damages for losses have so far been dismissed

Sources

To go further

 

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Part I: The climate lawsuit against Royal Dutch Shell

The plaintiffs, their demands and legal arguments

As the top holding company, RDS establishes the general policy of the Shell group. Shell's public target is “to become a net-zero emissions energy business by 2050, in step with society's progress in achieving the goal of the UN Paris Agreement on climate change”.

 

Before digging into the lawsuit against the company, below we propose a snapshot of RDS’ current targets (see table 1). One of the most important is its Net Carbon Footprint (NCF) metric, which is the average intensity (expressed in gCO2e per unit of energy sold), weighted by sales volume, of the energy products sold by Shell (trading activities are included, non-energy products such as chemicals, lubricants and bitumen are not, any emissions stored in sinks are deducted). Areas of actions are split across operational efficiency, natural gas shift, renewable power, biofuels, electric mobility, CCS and natural sinks.

 

Table 1 : Sample of Shell's climate change related targets

Carbon Intensity

(Scope 1, 2 & 3)

Absolute Carbon (scope 1, 2, 3)

Hydrocarbons production

Negative
emissions

  • 6-8% net reduction by 2023
  • 20% by 2030
  • 45% by 2035*
  • 100% by 2050*

(vs 2016 baseline, 79gC02/MJ)

 

NB: Calculation also includes emission energy sold by Shell but produced by others

*Carbon intensity including all mitigation actions (Shell & customers)

Reduction of the total carbon emissions from energy sold from 1.7 gigatons CO2e per annum as of 2018 to 0 in 2050

  • Confirmation that total oil production peaked in 2019
  • Decline in oil production of 80% by 2030 vs peak year 2018.
  • To offset around 120 million tons of CO2e a year by 2030
  • through nature-based solutions
  • 25 million tons a year of carbon, capture and storage (CCS) capacity by 2035

Sources : Company's website and ODDO BHF

 

The lawsuit against Royal Dutch Shell was filed by seven activist groups, including: Milieudefensie [7], Greenpeace Nederland, Fossielvrij NL, de Waddenvereniging, Both Ends, Jongeren Milieu Actief and ActionAid. To render its decision, the Dutch court thoroughly assessed the value of statements, targets and commitments of Shell.

 

The lawsuit pertains to Shell’s alleged weak climate targets and inappropriate actions in regard to the “unwritten standard of care“(i.e. the failure by Shell to protect both the environment and citizens). The plaintiffs referred to human rights, specifically the right to life and the right to respect for private and family life [8], as well as soft law endorsed by Royal Dutch Shell [9].

 

Specifically, the claimants built their argument on scientific data, chiefly using the Intergovernmental Panel on Climate Change SR15 report (available here) and the IEA’S Net Zero Emissions by 2050 [10] (available here) scenario as a basis. Note that this is not a reference to the report on net zero emissions (NZE) scenario for 2050 published by the IEA in May 2021 (see our article in this month newsletter), but the World Energy Outlook (WEO) published in October 2020, in which the IEA designed an  aggressive decarbonization trajectory by 2030 to achieve carbon neutrality by 2050.

 

They argued that Royal Dutch Shell has the obligation to ensure that CO2 emissions attributable to the entire group (scope 1 through 3) will have been reduced by latest 2030 (compared to 2019), and this, in one of the following manners with the first one being preferred:

  • 45% in absolute terms, or net 45% (using the IPCC SR15 report and the IEA’s Net Zero emissions by 2050 scenario as a basis);
  • 35% (using the IEA’s Below 2 Degree Scenario as a basis);
  • 25% (using the IEA’s Sustainable Development Scenario as a basis).

 

The Group has, according to the plaintiffs, continuously violated this obligation by implementing a hazardous and disastrous group-wide corporate policy, which is not in line with global climate targets to limit global warming at level preserving the habitability of the planet.

 
The elements invoked by the Court to reach its decision   

Much like most other oil companies (see our various articles), Shell has pledged to become a net-zero energy business by 2050. However, its overall business plans still have to be adequately adapted in order for its corporate strategy to be in line with the Paris Agreement targets. According to the Court, “Shell’s policy intentions and ambitions for the wider group are intangible, undefined and non-binding for the long-term. The Group’s climate ambitions are deemed conditional by the Court as the Shell emphasizes an approach “in step with society’s progress”, dependent on the pace at which global society moves towards the climate goals of the Paris Agreement. The Court identifies the following elements as being either lacking or insufficient:

  1. Emissions reduction targets for 2030 are lacking completely (something the Group contests) [11].
  2. Shell’s Net Carbon Footprint (NCF) [12] ambition identifies the year 2035 as an intermediate step.

 

This decision taken by the district Court of The Hague acknowledges the fact that Royal Dutch Shell’s activities have not been in accordance with Dutch Law by consciously hampering the gradual phase-out of fossil fuels. The ensemble of plaintiffs argued that the company has continuously been breaching Article 6:162 of the Dutch Civil Code pertaining to the unwritten standard of care.

 

In its ruling, the Court recalls several conventions, international agreements, and policy intentions regarding climate and the environment, mentioned below.

 

Table 2. Conventions, international agreements, and policy intentions that have been laid out by the following international organizations, institutions, or initiatives

  1. The UN Climate Convention
  2. The Intergovernmental Panel on Climate Change (IPCC)
  3. The United Nations Environment Program (UNEP)
  • UNEP Annual Report
  • UNEP Production Gap Report 2019
  1. The Paris Agreement
  2. The International Energy Agency (IEA)
  • The World Energy Outlook 2020
  • Net Zero Emissions by 2050 Case (presented in the 2020 World Energy Outlook)
  1. The European Union (EU)
  • Article 191 of the Treaty on the Functioning of the European Union (TFEU), including the EU’s environmental goals.
  • The EU ETS Directive (Directive 2003/87/EC), involving the EU’s scheme for greenhouse gas emissions trading.
  1. The Dutch Supreme Court
  • Urgenda judgment ordering the Dutch State to reduce its GHG emissions by at least 25% by the end of 2020 (relative to 1990).

 

The Court developed an argumentation spread over 14 different aspects or items, altogether leading to its decision on the reduction obligation, gauging plaintiff’s’ griefs and the Group’s defense.

 

Table 3. Criteria used to assess Shell’s lack of care for both environmental and social aspects

  1.  The policy-setting position of RDS in the Shell group policy-setting position of RDS
  1. The Shell group’s CO2 emissions
  1. The serious and irreversible consequences of the CO2 emissions for the Netherlands and the Wadden region
  1. The right to life and the right to respect for private and family life of Dutch residents and the inhabitants of the Wadden region
  1. The UN Guiding Principles
  1. RDS’ check and influence of the CO2 emissions of the Shell group and its business relations
  1. What is needed to prevent dangerous climate change
  1. Possible reduction pathways
  1. The twin challenge of curbing dangerous climate change and meeting the growing global population energy demand
  1. The ETS system and other ‘cap and trade’ emission systems that apply elsewhere in the world, permits and current obligations of the Shell group
  1. The effectiveness of the reduction obligation
  1. The responsibility of States and society
  1. The onerousness for RDS and the Shell group to meet the reduction obligation
  1. The proportionality of RDS’ reduction obligation

 

Takeaways and critical arguments from Shell Decision

Below, we summarize the key arguments made by the Court and draw some lessons that could apply to other cases and/or echo Sustainable Finance technical discussions.  

 

i. Conditional ambitions or intentions are criticized as they are used to "renege responsibilities". In the Dutch Court’s view, “RDS’ policy, policy intentions and ambitions for the Shell group largely amount to rather intangible, undefined and non-binding plans for the long-term (2050). These plans are furthermore not unconditional but – as can be read in the disclaimer and cautionary notes to the Shell documents – dependent on the pace at which global society moves towards the climate goals of the Paris Agreement”. The Court deduces that Shell retains the right to undergo a less rapid energy transition if society were to move slower. According to the Dutch Judge, the Group monitors developments in society and lets States and other parties play a pioneering role. In doing so, it disregards its individual responsibility, which requires the Group to actively effectuate its reduction obligation through the Shell group’s corporate policy.

 

ii. Scope 3 emissions: companies are held accountable for their scope 3 emissions and the ones of their subsidiaries. The decision reads: “through the energy package offered by the Shell group, RDS controls and influences the Scope 3 emissions of the end-users of the products produced and sold by the Shell group”. The Dutch Court reminds that around 85% of Shell’s total emissions are scope 3. It also acknowledges the parent company’s responsibility vis-à-vis its subsidiaries (incl. intermediate parents, operating companies and service companies).

 

iii. Significance matters: major historic and current companies/emitters are expected to mitigate much more. Parties argue about Shell group’s position in the hierarchy and about the percentage of the global CO2 emission that can be ascribed to the Group. The Court explains that “the Shell group is a major player on the worldwide market of fossil fuels” and pinpoints that the total CO2 emissions of the Shell group (Scope 1 through to 3) exceeds the CO2 emissions of many states, including the Netherlands”. It is mentioned that from 2006/2007 onward, the Shell group invested in tar sand in Canada to extract tar sand oil, from late 2017/January 2018, the Group began to focus on the extraction of oil and gas from shale, which requires a drilling technique known as fracking. The Court pinpoints this “is an intensive process that costs extra energy and consequently may culminate in a higher CO2 emission per unit of energy generated as compared to the conventional extraction of petroleum and natural gas”.

Several academic projects attempt to attribute responsibilities based on historic and cumulated emissions. The scholar Richard Heede provided a comprehensive review of institutions extracting fossil fuels that have contributed the most to global warming [13]. Note this work is not quoted in the ruling. Transition scope and timing per company may vary according to responsibility and capacity. The Dutch Court states the Oxford Report around differentiated responsibility and capacities and subsequent requirements: “There is wide consensus that capacity should be a key factor in determining the scope and timing of commitments, with those with higher capacity (e.g. developed jurisdictions, larger companies) taking more aggressive and expansive targets”.

Several arguments in favor of such differentiated financial sacrifices and efforts are mentioned:

  • Historical responsibility and past behavior should be a relevant consideration
  • Context-based differentiation is however not always clear cut. For example, many global companies have worldwide operations and supply chains 
  • Larger emitters should be required to meet more stringent standards than smaller entities
  • Not all actors have the same control over their emissions
     

The Court argues that despite “the absence of well-defined and concrete specification” for sharing decarbonization efforts/burden, Shell is expected to do its part. It says, “the not-disputed circumstance that RDS is not the only party responsible for tackling dangerous climate change in the Netherlands and the Wadden region does not absolve RDS of its individual partial responsibility to contribute to the fight against dangerous climate change according to its ability”.

 

iv. The combination of obligation of results and of means. The Dutch Judge acknowledged Shell’s transition process as being arduous and intricate. It is not the role of Judges to propose a granular and time-bound transition strategy. For this reason, the Court has decided the following:

Royal Dutch Shell has total freedom to comply with its reduction obligation as it sees fit, and to shape the corporate policy of the Shell group at its own discretion. The Court notes here that a ‘global’ reduction obligation, which affects the policy of the entire Shell group, gives Royal Dutch Shell much more freedom of action than a reduction obligation limited to a particular territory or a business unit or units.”

The Court therefore did not mention how Shell was to meet the reduction targets, and, more problematically, nor how it might monitor or enforce its ruling.

It is worth attention that the Court considered emissions scopes differences although acknowledging Shell is responsible for its scope 3 emissions. It imposes an obligation of results “as regards the Scope 1 emissions of the Shell group” and an “obligations of means” for scope 3 emissions reduction (commercial relations, including end-users).

That being said, this obligation of means is not loose. It is rather defined as “a significant best-efforts obligation” as regards the business relations of the Shell group, including the end-users, whereby RDS may be expected to take the necessary steps to remove or prevent the serious risks ensuing from the CO2 emissions generated by them, and to use its influence to limit any lasting consequences as much as possible.

 

v. Companies are expected to take “appropriate action” and to use their leverage in order to prevent or mitigate adverse impact. The Court says that if the company “lacks leverage there may be ways for increasing it. Leverage may be increased by, for example, offering capacity-building or other incentives to the related entity, or collaborating with other actors”.

 

vi. Another call to halt new fossil fuel capacities development and investment. The Report from the IEA on net-zero scenario was released at the same period than the Dutch Court Ruling (see our article on IEA's NZE scenario, here). Tangible foreseeable consequences of the reduction obligation are pinpointed by the Court. Throughout the lawsuit, Shell maintained that its planned investments in new explorations are compatible with the predetermined reduction target of the Paris Agreement, which has been continuously refuted by the Milieudefensie-led coalition. The Court argues that “A consequence of this significant obligation may be that RDS will forgo new investments in the extraction of fossil fuels and/or will limit its production of fossil resources”.

 

vi. Negative emissions are acceptable in reduction obligation. The Dutch Court dismisses the claimants’ call to exclude compensation of CO2 emissions. It acknowledges that “scenarios that assume large-scale negative emissions could perhaps be questioned”, but also says that it is generally accepted that there must be room for scenarios with negative emissions. According to the Court, an absolute reduction of 45% in 2030 without the option of compensation of CO2 emissions, would have been beyond the broad consensus.

 

vii. Reduction pathways calculations were “simple”: there is no rocket science calculation behind the number put in the Court’s ruling. It reportedly includes what it calls “a broad consensus” from the IPCC’s SR15 Report. This broad consensus is referred to as “a widely endorsed consensus that in order to limit global warming to 1.5°C, reduction pathways that reduce CO2 emissions by net 45% in 2030, relative to 2010 levels, and by net 100% in 2050, should be chosen”. The Court includes this broad consensus in its interpretation of the unwritten standard of care.

 

viii. Meeting energy demand argument is not a clincher. The concept of “twin challenge” (climate change mitigation and meeting the increasing global energy demand of the rapidly growing world population) is challenged. This notion is present in Shell’s communication, and under words and semantics in oil & gas (“O&G”) companies’ public communications. The United Nations (“UN”) sustainable development goals (“SDGs”), especially the goal number 7 “ensure access to affordable, reliable, sustainable and modern energy for all” cannot be invoked to dilute climate responsibility. The Court says that “It is not the intention for SDG (…) to detract from the Paris Agreement or to interfere with these goals.” It pinpoints that this also follows from SDG 13 (“Take urgent action to combat climate change and its impacts”) and the preamble under 8 of the Paris Agreement, which emphasizes “the intrinsic relationship that climate change actions, responses and impacts have with equitable access to sustainable development and eradication of poverty”.

The Court concludes that “The UNSDG sustainability goals can therefore not be a reason for RDS to not meet its reduction obligation”.

 

ix. The argument about competition distortion and counter-productive effects on global emissions does not hold. Shell argued that the reduction obligation will have no effect, or even be counterproductive on global emissions, because the place of the Shell group will be taken by competitors. In its defence, the company has argued that imposing a reduction obligation would lead to unfair competition and a potential disruption of the ‘level playing field’ on the oil and gas market. Undermining forerunners’ market share at the indirect benefit of less climate ambitious companies (especially national oil companies, NOC) is an argument regularly made by O&G companies’ decision-makers. The Dutch Court asserts that “Even if this were true, it will not benefit RDS”. This argument is simply dismissed as it does not absolve the Group of its “individual partial responsibility”.

 

x. Climate change catastrophe outweighs companies’ commercial interests.  The Court has recognized that Shell’s transition is of an onerous nature and that “the reduction obligation will have far-reaching consequences” for the Group. The reduction obligation infers a major policy change, requiring an adjustment of the company’s energy package (despite contractual obligations as well as obligations ensuing from long-term concessions, which may limit its freedom of choice as regards to its energy package).

 

The Court argued the following:

Due to the serious threats and risks to the human rights of Dutch residents and the inhabitants of the Wadden region, private companies such as RDS may also be required to take drastic measures and make financial sacrifices to limit CO2 emissions to prevent dangerous climate change. For these reasons, RDS’ argument, namely that accepting the reduction obligation, as advocated by Milieudefensie et al., is highly unusual and has no precedent, does not benefit RDS.”

The Court acknowledges that the “reduction obligation requires a change of policy, which will require an adjustment of the Shell group’s energy package”. Furthermore, it confesses that it “could curb the potential growth of the Shell group” but in the end counter-argues that “the interest served with the reduction obligation outweighs the Shell group’s commercial interests”.

 

xi. Uncertainty does not preclude companies’ liability. The uncertainty around the nature and severity of the dangers of climate change, and around the mitigation measures to be adopted, cannot exclude companies’ liability. The notion of “precautionary principle” [14] is unwritten but present in the decision rationale.

 

xii. Inter-generational justice is considered: Future generations are explicitly referred to as it was in the Decision from the Karlsruhe Court in March 2021 (see below).

 

xiii. Soft law claims, or commitments can somehow “backlash”. It is noteworthy that the Dutch Court based its decision notably on the soft law endorsed by Shell, such as the UN Guiding Principles on Business and Human Rights, the UN Global Compact and the OECD Guidelines for Multinational Enterprises. This legal case is an illustration of the advanced used of soft law engagements.

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Subsequent to the decision, RDS announced that it will seek ways to accelerate its energy transition strategy and deepen carbon emission cuts. In a statement on its website (here), Shell mentioned thatit will continue to focus on the efforts of investing in low-carbon technology, hydrogen, renewables and biofuels, and appeal the Court’s decision. On 9 June, 2021, Ben van Beurde, Chief Executive Officer at Shell wrote in a LinkedIn post entitled “The spirit of Shell will rise to the challenge” that “this ruling does not mean a change, but rather an acceleration of Shell’s strategy” and that Shell “will seek ways to reduce emissions even further in a way that remains purposeful and profitable. ” Regardless of the appeal decision, this Case is already historical. It is not isolated as other similar lawsuits are forthcoming.  In the second part of this publication, we review the state of play of climate lawsuits.

Part II: State of play on climate lawsuits per category of actors

The Göppel et al. case (also known as the Neubauer et al. case) in Germany, Grande-Synthe in France, and New York City versus Exxon Mobil in the United States illustrate that numerous litigation cases are underway around the world. Therefore, the Shell Decision is less of a one-off than a turning point. Its singularity lies in the fact that companies were never before imposed legally binding reduction obligations.

 

We observe a shift in climate change litigation, with judges trying to make the Paris Agreement more effective and basing their decisions on scientific data. Climate strategic litigation has different purposes: facilitate climate regulation by forcing and clarifying climate policies. But also reinforce climate responsibilities, asking corporations and States for more transparency to strengthen their liability in front of stakeholders and consumers.

 

Since the Urgenda case in 2015, tribunals have been increasingly exposed to climate change. The model followed by Courts was to challenge governmental planning. But now, decisions go further in time (with references to future generations and decisions aiming at having an impact in the future), actors (including private actors, towns and cities) and courts mobilized (institutional courts, civil courts and human rights courts).

 

The Sabin Center for Climate Change Law from Columbia University is at the forefront of climate change litigation expertise. It administers the website Climatecasechart.com that provides two databases of climate change caselaw.

 

Legal cases in the databases are organized by type of claim and are searchable. Often, links are available to decisions, complaints, and other case documents. It is possible to browse Climate Change Litigation by Country or Jurisdiction.

 

Figure 1. Non-U.S. Climate Change Litigation (as of June 2021)

Source: Climatecasechart.com

A. Climate lawsuits against States

A turning point in climate litigation strategy came in 2015 with the case of Urgenda v. The Netherlands. For the first time in the world, a national judge recognized a State's responsibility for inadequate action against global warming and enforced it to take more effective measures to sustainably reduce its greenhouse gas emissions and protect its population. This case paved the way for a series of court decisions — in South Africa, Colombia, the United States, France, India, Norway, New Zealand and Pakistan.

 

The German Climate law invalidated by the Constitutional Court of Karlsruhe

 

In an important ruling on April 29, 2021[15]  the Constitutional Court of Karlsruhe invalidated part of the provisions of the Federal Climate Change Act (BundesKlimaschutzgesetz - KSG) of December 12, 2019. This ruling follows several complaints from NGOs and citizens filed between 2018 and 2020[16]. While Germany has committed to aiming for climate neutrality by 2050, according to the Karlsruhe Court the effort shifted to future generations after 2030 would constitute a "radical reduction burden" at the risk of severely and disproportionately limiting their freedoms.

 

The law requires that 2030 carbon emissions must be cut by 55% from the level of 1990, and sets annual allowances by economic sector. With this decision, the Court asks the State to specify how it intends to distribute the CO2 budget fairly after 2030. Indeed, the Court does not say that CO2 emissions reduction target that the State has set for itself by 2030 is insufficient to meet its obligations. The Judges thus give the State until the end of 2022 to set sectoral reduction targets from 2031.

 

Why is this decision historic?

  • It is the first time that a Constitutional Court has ruled on the appropriateness and fairness of climate mitigation decisions taken by governments until 2050.
  • It acknowledges a German constitutional objective to combat climate change, which derives from the Basic Law, which refers directly to the COP21 objective of climate neutrality by 2050. Therefore, the State has an international obligation to fight against climate change[17]. 
  • It formalizes an obligation of the State to protect its citizens through measures that are sufficiently commensurate with the issues at stake and that respect the rights of future generations. 

 

  • The provisions of climate laws need to be specific and fair between generations, in this case, the provisions of the Federal Climate Change Act were viewed as:
    • "Incompatible with fundamental rights insofar as they lack sufficient specifications for further emission reductions from 2031 onwards" and would violate the freedoms of future generations who will have to take more drastic measures as a result.
    • Violating the principle of proportionality, which requires that this objective be achieved in a manner that is more respectful of fundamental rights. The Court states that "the challenged provisions do violate the freedoms of the complainants, some of whom are still very young" in that they "irreversibly offload major emission reduction burdens onto periods after 2030". 

 

  • The Court asserts “one generation must not be allowed to consume large portions of the CO2 budget while bearing a relatively minor share of the reduction effort if this would involve leaving subsequent generations with a drastic reduction burden and expose their lives to comprehensive losses of freedom. At some point in the future, even serious losses of freedom may be deemed proportionate and justified under constitutional law in order to prevent climate change. This is precisely what gives rise to the risk of having to accept considerable losses of freedom. The objective duty of protection arising from Art. 20a GG encompasses the necessity to treat the natural foundations of life with such care and to leave them in such condition that future generations who wish to continue preserving these foundations are not forced to engage in radical abstinence."

 

 

The Grande Synthe case in France

 France, the State has just been found guilty of non-respect of its engagements aimed at fighting global warming through the Grande Synthe case judged by the Council of State (Conseil d’État, the supreme administrative Court) on November 19, 2020, and the “Affair of the Century” judged in first instance by the Administrative Court of Paris on February 3, 2021.  For the first time, the Council of State was called upon to rule on a climate trial. At the end of 2019, two appeals asked the administrative judge to note the illegality or faults committed by the State in refusing to adopt new measures to combat climate change in order to instruct it to take ambitious climate policies. Consequently, the Court ordered an investigative measure inviting the applicants and the Government to produce, within three months, elements allowing to verify whether “the refusal to take additional and stricter measures is compatible with the respect of the objective for 2030”.

 

The French supreme Administrative Court argued that the global instruments – the United Nations Framework Convention on Climate Change and the Paris Agreement signed by the European Union and France – do not have “direct effect” and must be accompanied by “complementary acts to produce effects with respect to individuals”. It found them in the two European “Climate Energy Package” [18] and in the French texts setting the reduction and adaptation targets - as derived from the Energy and Climate Act [19]. It is therefore the French legislative provisions, in that they set out the means to implement both the United Nations Framework Convention and the Paris Agreement and the European standards, which make them “justiciable” before the French courts. Such decision highlights the binding nature/ normativity of programming laws (the net zero targets from governements in general somehow fall into this category, although they are not always specifically defined with intermediary targets and granular sectorial and/or regional sub-targets).

 

Table 5. Climate litigation before French Jurisdictions

Case

At issue

Status

Commune de Grande-Synthe v. France

Filing Date: 2019.

Whether the French government’s failure to take further action to reduce greenhouse gas emissions violates domestic and international law. Grande Synthe is a coastal commune located in an area of climate risk index classified as very strong. The city suing the State, “having regard to its level of exposure to risks […] and their direct and certain impact on its situation and its own interests justify an interest giving it standing to request the annulment of the implied decisions under appeal”.

 

Decided (2020). The French administrative supreme Court (the “Conseil d’Etat”, or Council of State) released on November 19,2020 its first decision on climate change. The judges asked the Government to report on the effectiveness of the French climate policy and its ability to meet the objectives of climate trajectory adopted by the legislator in application of the international commitments of France.

Notre Affaire à Tous and Others v. Total

Filing Date: 2019.

Whether a French oil company violated the French Commercial Code by failing to adequately report climate risks associated with its activities and take action to mitigate those risks in line with the goals of the Paris Agreement.

Pending. On January 28, 2020, plaintiffs filed a complaint asking a Nanterre court to order Total to recognize the risks generated by its business activities and make it conduct consistent with the goal of limiting global warming to 1.5°C. According to the plaintiffs, their complaint relies on the Law on the Duty of Vigilance, as well as the duty of environmental vigilance arising out of the French Environmental Charter.

External Contribution to the French Constitutional Council

 

 

Environmental group filed memorandum asking French Constitutional Council to invalidate the French Parliament's adoption of an energy and climate bill, alleging that the measures provided are insufficient to achieve carbon neutrality by 2050.

Pending. Filing Date: 2019.

Friends of the Earth et al. v. Total

NGOs sued oil company alleging inadequate environmental assessment of proposed oil project.

Pending. Filing Date: 2019.

Friends of the Earth et al. v. Prefect of  Bouches-du-Rhône and Total

Whether a permit to operate a biorefinery must take into account climate impacts of palm oil production and use.

Pending. Filing Date: 2018. On April 1, 2021, the Administrative Court of Marseille partially invalidated Total's permit to operate a biorefinery in France and asked the company to study the climate impacts of imported palm oil.

Notre Affaire à Tous and Others v. France

Filing Date: 2018

Whether the French government’s failure to take further action on climate change violates a statutory duty to act under domestic and international law.

Pending. On February 3, 2021, the Administrative Court of Paris issued a decision recognizing that France's inaction has caused ecological damage from climate change and awarded the plaintiffs the requested one euro for moral prejudice caused by this inaction.

IPC Petroleum France SA v. France
Filing Date: 2018

Whether placing an eventual expiration date on a fossil fuel mining permit in service of national mitigation goals violates the permit holder’s right to peaceful enjoyment of property.

Decided. On December 18, 2019, the French Administrative Supreme Court upheld a decision to include an expiration date in a fossil fuel mining permit.

 

 

B. Climate lawsuits against corporations

Suits against corporations can be classified across several categories: GHG emissions reduction, Misleading advertising, Environmental assessment and permitting and Disclosures. For each one, the table below provides example of cases.

 

Table 6. Examples of suits against corporations

Categories of litigation

Cases

Issue







GHG emissions reduction

Envol Vert et al. v. Casino:  French supermarket chain Casino violated the French Duty of vigilance law through the involvement of its subsidiaries (Exito and GPA) in cattle-industry that caused deforestation in Brazil and Colombia.

Pending.
Filing Date: March 2021.
First hearing in 12-18 months.

Greenpeace Poland v. PGE Giek: Greenpeace sued utility to compel GHG reductions.

Pending.

Filing Date: March 2020.

Citizens’ Committee on the Kobe Coal-Fired Power Plant v. Kobe Steel Ltd., et al.: 31 Japanese families sought to prevent construction of two new coal-fired units.

 

Pending.

Filing Date: 2018.

 

 


Misleading advertising

Complaint against BP in respect of violations of the OECD Guidelines: Client Earth filed complaint against BP for allegedly misleading advertising campaign.

Pending.

Filing Date: 2019.

Environmental assessment and permitting

Carballo et al. v. MSU S.A., UGEN S.A., & General Electric: A preventive action against UGEN SA and General Electric Internationale regarding the thermoelectric power station in the city of Barker, province of Buenos Aires, Argentina.          

Pending.

Filing Date: 2017.







Disclosures

Norwegian Climate Network et al. v. Statoil: NCN filed a complaint alleging that Statoil was in breach of the OECD guidelines owing to its investment in the oil sands in Alberta. It was asserted that the oil sands in Canada must not be exploited to achieve climate stability.

Decided (2012). The National Contact Point rejected the case in its initial assessment, but highlighted the risk posed by oil sands operation to the climate and the environment.

Germanwatch v. Volkswagen: Germanwatch alleged in its complaint that Volkswagen violated various climate obligations because of its climate damaging product range and business strategy. It also accused the company of being in transparency breach by not informing its consumers about the actual fuel consumption of VW automobiles.

Decided (2007) [20]. 

 

C. Climate lawsuits against financial institutions

Climate change liability lawsuits are also targeting financial institutions (pension funds, banks, etc.). One notices attempts to hold investors and financiers accountable for the impact their investments have on climate change. We are witnessing the first contours of banks and investors’ responsibility. Not only commercial banks are targeted (see ING in the table below), but also central banks (Central Bank of Belgium). However, apart from dedicated purpose financing (e.g., a loan for a specific fossil fuel project), the link between an investor or financier and the consequences of climate change is more difficult to demonstrate, and more of an indirect nature (which precludes the "causal link" often required by judges).

 

Table 7. Examples Climate Litigations on financial institutions

Case

Cause

Issue

ClientEarth v. Belgian National Bank

Belgian National Bank's failure to meet environmental, climate, and human rights requirements when purchasing bonds from fossil fuel and other greenhouse-gas intensive, and so, violating EU law.

Pending.
Filing Date: April 2021.

BankTrack, et al. vs. ING Bank    

Failure to commit appropriately to achieving targets under the 2015 Paris Agreement.

Decided in 2019. The final statement by the NCP [21] held that ING is obliged under the OECD Guidelines for Multinational Enterprises to set climate goals that are aligned with the Paris Agreement.

McVeigh v. Retail Employees Superannuation Trust  

An Australian pension fund member filed suit against the REST alleging that the fund violated the Corporations Act 2001 by failing to provide information related to climate change business risks and any plans to address those risks.

Decided in 2020: The parties reached a settlement where the Australian pension fund agreed to incorporate climate change financial risks in its investments and implement a net-zero by 2050 carbon footprint goal. Filing Date: 2018.

Abrahams v. Commonwealth Bank of Australia (“CBA”)

 

Failure to disclose climate change-related business risks—specifically including possible investment in the controversial Adani Carmichael coal mine.

Withdrawn. Before the court issued any decision, the shareholders withdrew their suit after the CBA released a 2017 annual report that acknowledged the risk of climate change and pledged to undertake climate change scenario analysis to estimate the risks to CBA's business. Filing Date: 2017.

 

***

Part III: further considerations on climate litigation 

Are these decisions or legal cases unleashing progress?

On average, many trials are unsuccessful. Nevertheless, this failure is relative because these legal debates have a real impact on public awareness and on policymakers. Following public opinion pressure, policymakers sometimes adjust their policies and pick some of the measures or proposals advocated by civil society representatives. It has been the case in France, with a ban on short-haul domestic flights, once qualified as an “extreme policy”.


What is the effectiveness of such decisions?


An important question is the extent to which Courts can force States to act or companies to revise policies and strategies. In the case of the decision against the French State, what happens after this three-month period has elapsed? As pointed out in the Court’s press release, the court could condemn the state to adopt the measures necessary to resume the decarbonization course planned. In a landmark decision on the matter handed down on July 10, 2020, the Council of State enjoined the French Government (executive power) to take all necessary measures to reduce pollution levels without delay, on penalty of a record fine of 10 million euros per six-month delay. Situations will vary according to the rule of law and relations between Constitutional or Administrative Court and executive and legislative powers, as well as the enforcement of justice ruling. In Nigeria, in 2005, a court issued a judgment confirming that gas flaring violates the right to life and dignity of person. However, Nigeria remains one of the top seven gas flaring countries in 2021 [22]. This illustrates the limits of the law. 

Are all these actions legitimate?

The legitimate question arising from these legal cases is nothing new and refers to that, fundamental, of the role/mandate of judges. One argues that NGOs and local governments are pushing judges to define climate policies, a definition that belongs to the executive and legislative powers.

The legitimacy of the decisions rendered by judges can well be questioned. For some observers, the judges should be subject to a certain amount of restraint and would have to remain within the strict limits of their function of interpreting and applying the rules of law, the elaboration of which would be exclusively within the legislative and executive powers.

 

There is a particularly marked desire among some judges to change the material and procedural rules that often do not allow to give reason to claimants, in the light of the specificities of the climate litigation. An excerpt from a decision handed down by the High Court of Lahore (Pakistan) in 2015 (Leghari Case) illustrates this willingness to go beyond current conceptual and normative frameworks.

“It appears that we have to move on. The existing environmental jurisprudence has to be fashioned to meet the needs of something more urgent and overpowering, i.e. Climate Change. From Environmental Justice, which was largely localized and limited to our own ecosystems and biodiversity, we need to move to Climate Change Justice”.  

Key criteria scrutinized by judges to define climate liability

Climate liability limitations arise from the difficulty for plaintiffs to establish that they meet the three legal criteria for standing: injury-in fact, causation and redressability. In the recent years, Courts have been witnessing increasing “judicial activism”. Judicial activism is decisive in bringing climate disputes to a successful conclusion: it often appears necessary for judges to go beyond their traditional functions to open the courtroom to climate change litigation, and to establish the liability of States in the climate crisis.

 

Injury-in fact: in the case of climate change, how can one prove that one is personally affected by a phenomenon that is harmful to humanity as a whole and, on the other hand, that one is a victim of a phenomenon whose negative impacts are beginning to be felt and whose future consequences are still uncertain? In recent years, judges have been led to adopt a more flexible interpretation of this principle, which is explained by the increasing permeability of the Courts to scientific evidence of the effects of climate change.

 

In 2007, in Massachusetts v. EPA, the U.S. Supreme Court ruled that the collective nature of the damage caused by global warming is not an obstacle to the recognition of the State of Massachusetts' standing - as long as the latter claims a concrete injury, characterized by the loss of its coastal domain due to rising sea levels. More recently, in 2016, in Juliana, et al. v. United States of America, the U.S. District Court for the District of Oregon recognized the existence of concrete, individualized, and imminent harm to the plaintiffs, resulting from, among other things, difficulties in accessing drinking water and food, the risk to their safety from flooding and fires, and the destruction of agricultural crops due to rising temperatures.

 

Causation refers to the establishment of a causal link between the damage suffered by the plaintiff and the "climaticide" behavior of which a State (or a Company) is accused. It can be laborious to establish such direct link between an entity’s greenhouse gas emissions and the localized effects suffered by an individual in a given region: while the anthropogenic origin of climate change is a scientifically established fact, the human origin of a specific event remains very difficult to determine or to isolate from other factors. Moreover, even if there are now precise estimates of the respective GHG emissions of the various States, it remains difficult to quantify the share of any particular one in global warming. Thus, if general causality is established, the same cannot be said of specific causality, making it impossible for the plaintiff to prove it. However, on this point too, some national judges now seem inclined to adopt an extensive conception of causality.

For example, in Urgenda Foundation v. State of the Netherlands aforementioned, the Dutch court found “[a] sufficient causal link can be assumed to exist between the Dutch greenhouse gas emissions, global climate change and the effects (now and in the future) on the Dutch living climate”. In this respect, it states that the Dutch greenhouse gas emissions have contributed to climate change and, by their nature, will continue to contribute to it. 

 

Redressability relates to the judge's ability to reject a petition when the dispute submitted to him/her falls within the exclusive jurisdiction of the legislative or executive powers, or when the political nature of the dispute calls into question the legitimacy of the judiciary to hear it. This argument, which is based on the principle of separation of powers, is the basis for most of the dismissals by U.S. judges in climate litigation. However, some scholars consider that climate regulation does not fall within the exclusive competence of government authorities. In this sense, and in practice, some judges no longer hesitate to set aside the application of this doctrine in order to assert jurisdiction - while taking care not to encroach on the discretionary power of the executive in matters of climate regulation.
 

Actions seeking money damages for losses have so far been dismissed

As of now, actors are asked to refrain from undertaking projects (airports, terminals) and/or ordered to take actions and strengthen their transition policies. The purpose of the climate lawsuit is the adoption of bolder and stricter mitigation, and is not so much obtaining compensation for the damage suffered by the plaintiff. However, this can change. As a result of the inertia of global warming and the already locked-in temperature increase, physical damages will occur and remultiply. No tribunal has awarded damages or compensation to parties yet, various cases filled by citizens, local governments, cities or even investors were rejected, including: 

 

  • Native Village of Kivalina v. ExxonMobil Corp (2008): Action by native Alaskans seeking damages from oil and power companies for impacts of climate change on their village.
  • Board of County Commissioners of Boulder County v. Suncor Energy (U.S.A.), Inc (2018): Action by Colorado local governments seeking damages and other relief from fossil fuel companies for climate change harms.
  • Rhode Island v. Chevron Corp (2018) :State of Rhode Island lawsuit seeking to hold fossil fuel companies liable for causing climate change impacts that adversely affect Rhode Island and jeopardize State-owned or -operated facilities, real property, and other assets.
  • District of Columbia v. Exxon Mobil Corp (2020) :Lawsuit filed by the District of Columbia against oil and gas companies for allegedly violating the Consumer Protection Procedures Act by misleading consumers about “the central role their products play in causing climate change.”
  • Barnes v. Edison International (2018) : Securities class action against utility company in Southern California alleging misrepresentations regarding exposure to wildfire risk.
  • York County v. Rambo (2019): Federal securities class action brought by bond investors in PG&E in connection with California wildfires in 2017 and 2018.

Sources :

  • IEA, “Net Zero by 2050: A Roadmap for the Global Energy Sector” (May 2021) – available here.
  • IPCC, “Global Warming of 1.5°C” (October 2018) – available here.
  • LexisNexis, “Tsunami juridique au Conseil d’État Une première décision « climatique » historique” (November 2021) – available here.
  • Sabin Center for Climate Change Law, “Climate Change Litigation Databases” – available here.
  • Shell, “Shell response to Dutch court ruling in case brought by Milieudefensie” (May 2021) – available here.
  • The Hague District Court, “Judgment of 26 May 2021 in the case of Milieudefensie et al. v. Royal Dutch Shell” (May 2021) – available here (in English).

To go further:

- Jacqueline Peel, Jolene Lin, “Transnational Climate Litigation: The Contribution of the Global South” (June 2019) – available here.

- Judith Rochfeld, “Justice pour le climat ! Les nouvelles formes de mobilisation citoyenne” (August 2019) – available here.

- Martha Torre-Schaub, “Les dynamiques du contentieux climatique ; usages et mobilisations du droit pour la cause climatique” (December 2019) – available here.

- Martha Torre-Schaub, Blanche Lormeteau “Les dynamiques du contentieux climatique ; usages et mobilisations du droit” (March 2021) – available here.

[1] See CDP (2017), Carbon Majors Report 2017 available here.

[2] Judges read each other’s and can borrow some legal reasoning of other judges’ decisions despite legal system national differences.

[3] Joana Setzer and Rebecca Byrnes (2020), “Global trends in climate change litigation: 2020 snapshot – Policy Report”, available here.

[4] Total, now called TotalEnergies is sued by a group of NGO – namely Notre Affaire à Tous, Sherpa, ZEA, FNE, les EcoMaires, alongside 15 local governments.

[5] According to the 2017 Report, these companies are: Saudi Aramco, Chevron, Gazprom, ExxonMobil, National Iranian Oil Co, BP, Royal Dutch Shell, Coal India, Pemex, Petróleos de Venezuela, PetroChina, Peabody Energy, ConocoPhillips, Abu Dhabi National Oil Co, Kuwait Petroleum Corp, Iraq National Oil Co, Total SA, Sonatrach, BHP Billiton, Petrobras – CDP Carbon Majors Report 2017 available here.

[6] See for instance the decision Friends of the Earth Ltd v. Heathrow Airport Ltd. Available here.

[7] Milieudefensie is the Dutch wing of the Friends of the Earth organization.

[8] The temperature rise in the Netherlands has so far developed about twice as fast as the global average.
The Court mentions health risks and deaths due to hot spells, increasing infectious, water-related and foodborne diseases, deterioration of air quality, UV exposure, flooding along the coast and rivers, excess water, water shortage, deterioration of water quality, salinization, raised water levels and drought.

[9] Among which the UN Guiding Principles on Business and Human Rights, the UN Global Compact and the OECD Guidelines for Multinational Enterprises.

[10] The Court used the 2019 and 2020 World Energy Outlook Reports to make its decision. In the World Energy Outlook 2020, published in October 2020, the IEA introduces the ‘Net Zero Emissions by 2050 (NZE2050) case’, which is a translation of a net zero scenario in 2050 for the energy sector – WEO 2019 and 2020 available here and here.

[11] Despite the Court ruling, Shell does, however, mention a 20% reduction by 2030 compared to 2016 in net carbon intensity, available here (other targets are a reduction of 6-8% by 2023, 45% by 2035 and 100% by 2050, using the same 2016 baseline). However, this is deemed too conditional – intangible, undefined and non-binding –, that is the explanation provided by the Court.

[12] The NCF ambition is a long-term ambition with which the Shell group seeks to reduce the CO2 intensity of the energy products sold by the group by 2050. It is an intensity-based standard that focuses on the Shell group’s relative contribution to the emissions reduction in the total energy system. The NCF ambition pertains to a reduction of the CO2 intensity of Scope 1, 2 and 3 emissions. The NCF ambition is generally adjusted every five years. Shell (2021), available here.

[13] Richard Heede (November 2013), “Tracing anthropogenic carbon dioxide and methane emissions to fossil fuel and cement producers, 1854–2010”, available here.

[14] The precautionary principle enables decision-makers to adopt precautionary measures when scientific evidence about an environmental or human health hazard is uncertain and the stakes are high.

[15] Constitutional Court of Karlsruhe (April 29, 2021), Press release of the decision — available hereAn unofficial English traduction of the decision exists, available here.

[16] Nine young people filed the constitutional complaint (Jakob, Sophie, Hannes and Paul Backsen, Lueke Recktenwald, Luisa Neubauer, Johannes and Franziska Blohm,  Lucas Lütke Schwienhorst). The complainants were natural persons. The court declared that "(…) environmental associations, however, have no standing to lodge a constitutional complaint".  

[17] Article 20 of the German Basic Law enshrines the obligation to protect the climate and combat climate change. "Art. 20a GG obliges the state to involve the supranational level in seeking to resolve the climate problem. The state cannot evade its responsibility by pointing to greenhouse gas emissions in other states. On the contrary, the particular reliance on the international community here gives rise to the constitutional necessity to actually implement one’s own climate action measures at the national level and not to create incentives for other states to undermine the required cooperation."

[18] Decision No 406/2009/EC of 23 April 2009 on the effort to be made by Member States and Regulation (EU) 2018/842 of 30 May 2018 on binding annual GHG emission reductions by Member States from 2021 to 2030 in order to meet the commitments made under the Paris Agreement.

[19] Act No. 2019-1147 of 8 November 2019.

[20] Complaint against Volkswagen AG under the OECD Guidelines for Multinational Enterprises. Available here.

[21] All governments adhering to the OECD Guidelines have established a National Contact Point (NCP). An NCP has two main tasks : raising awareness of the OECD Guidelines with businesses, trade unions and non-governmental organisations; and contributing to the resolution of issues that arise from the alleged non-observance of the Guidelines in specific instances.

[22] Global Gas Flaring Tracker Report,available here.