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Climate

Climate damage and liability, Part 2 of 4

(This is Part 2 of a four part article being published in the Lawyer’s Daily, based on a lecture I gave for Osgoode Hall Law School and the York Faculty of Environmental Studies.)

As shown in Part 1 of this article, the climate crisis is already causing large financial losses, and much more is ahead. Governments and individuals will increasingly face overwhelming bills. Most of the fossil fuels that are driving this crisis have been produced and sold by 103 companies, the Carbon Majors. Can they be made to pay for the resulting damage?

In Part 1, I showed some of the reasons why I expect governments, courts and public opinion to increasingly welcome the idea of making the Carbon Majors pay. When that appetite grows, lawyers will have options to offer, including:

  1. Suing governments, so that they make the Carbon Majors pay, and
  2. Suing the Carbon Majors directly.

Suing governments

A generation ago, courts usually refused jurisdiction over public policy issues that involved the public purse. They called them “non-justiciable”. But as the climate crisis worsens, even judges in their protected enclaves are starting to understand our deep jeopardy, and to think again before throwing cases out of court.

The leading world case on justiciability of government climate action is Urgenda v. Netherlands, Supreme Court of the Netherlands, December 20, 2019. Other cases are spreading around the world. (Full English text here.)

In Urgenda, an NGO asked the courts to force the Dutch government to keep its international commitment to limit the emission of greenhouse gases (GHGs) by at least 25% by the end of 2020, compared to 1990. The Dutch government did not deny the seriousness of the climate crisis, but absolutely denied that it was the proper role of the courts to make the government act.

The trial court issued the order requested by Urgenda in 2015. The Dutch government appealed, but the order has now been upheld by the Dutch Supreme Court. The Court ruled that the Dutch government’s failure to slash GHG emissions breached its obligations under the European Convention for the Protection of Human Rights and Fundamental Freedoms. The Convention gives Dutch residents the right to life, and the right to respect for private, family and family life. As a party to the Convention, the Netherlands is obliged to take appropriate measures when it knows of a real and immediate risk to human life or well-being. The Court ruled that the climate crisis creates such a real and immediate risk, because there is a serious risk that dangerous climate change will occur that threatens the lives and well-being of many in the Netherlands.

The Netherlands, like Canada, is a also party to the United Nations Convention on Climate Change. The aim of that treaty is to keep the concentration of GHGs in the atmosphere low enough to prevent major disturbances of the climate system. To achieve this, all countries must take measures to prevent climate change, in accordance with their responsibilities and capacities.

Every country is therefore responsible for its share of emissions. The Court rejected the argument, often heard in Canada, that the Netherlands’ own emissions are relatively small on a global scale and that reducing their own emissions will not alone solve the global problem. This, the Court ruled, cannot relieve the Netherlands of the obligation to do its part, and to appropriately reduce GHG emissions from its territory. 

Scientific evidence, summarized in the reports of the Intergovernmental Panel on Climate Change, show a great deal of consensus about the urgent need for rich countries to reduce their GHGs at least 25-40% by 2020. It is therefore the obligation of the Netherlands to do so. The government had failed to justify its policies to defer emission reductions to later years, given the strong evidence that leaving reduction measures until later means they will have to be more drastic and costly, while also causing a greater risk of abrupt climate change. 

On the question of justiciability, the Court acknowledged that decision-making on how to reduce GHG belongs to the government and parliament. They have a great deal of freedom to make the necessary political decisions. But it is the task of the courts to ensure that the government and parliament act within legal limits, such as their constitutional obligation to protect the right to life. It is an essential part of a democratic constitutional state for courts to offer citizens legal protection even against the government. The government does not protect citizens’ constitutional right to life when it defers GHG emission reductions in the face of clear evidence of the likely consequences. The government must therefore achieve the emission reductions ordered, though it is free to choose how to do so.

The Urgenda decision is a powerful precedent for Canada. Both the federal  and Ontario governments are already facing similar lawsuits, La Rose v. Her Majesty the Queen (Canada) in Federal Court, and Mathur et. al. v. Her Majesty in Right of Ontario in Ontario Superior Court. Both sets of young plaintiffs correctly allege that our governments’ failure to reduce climate pollution (GHGs) increases the risk of climate catastrophe and therefore violates their rights under sections 7 and 15 of the Canadian Charter of Rights and Freedoms. As in Urgenda, they ask the courts to order their governments to set a science-based GHG reduction target, and to take effective action to meet it. 

Faced with these powerful lawsuits, and at risk of being forced to act, governments may well be tempted to make the Carbon Majors pay instead of taxpayers. After all, that’s what they have done before. More details in Part 3.

Dianne Saxe

Categories
Climate

Climate damage: will fossil fuel producers have to pay? (Part 1 of 4)

This is Part 1 of a four part article being published in the Lawyer’s Daily. Part 2, click here.

The climate crisis is already causing large financial losses, and much more is ahead. Most of the fossil fuels that are driving this crisis have been produced and sold by 103 companies, the Carbon Majors. Can they be made to pay for the resulting damage?

Burning fossil fuels is creating a collision with physics. Humans have never lived in a world much warmer than today. On the current trajectory, we could be beyond the realm of all human experience within the next 30 years. 

The Bank of Canada recognizes climate change as a key vulnerability in the Canadian economy and financial system. The Bank estimates the negative effects this century at “potentially 1.5 to 23 percent of global annual gross domestic product (GDP) per capita”. Others are more pessimistic:

“Large-scale uneven impacts of climate change may destabilize existing institutional arrangements, increase incentives to violently redistribute wealth, or generate other forms of social conflict.” Hsiang, Oliva, Walker 2017

According to the Federation of Canadian Municipalities and the Insurance Bureau of Canada, Canadian governments already need $5.3 billion / year just to adapt to the hotter, weirder weather that past emissions have already locked in.

Who should pay for all this?

There is one obvious answer. We know that burning fossil fuels is the major cause of climate damage. And we know who produced those fossil fuels:

  • 70% of global human-caused climate pollution comes from fossil fuels produced by 103 companies.
  • 35% of that pollution (1 million tonnes CO2e every forty minutes) comes from fossil fuels produced by only 20 of those companies. ExxonMobil itself produced fossil fuels that created 3.09% of global emissions 1965 to 2017.

The Carbon Majors have profited handsomely  from producing these fuels; ExxonMobil alone had gross profit of $56 billion USD ($Can 74 billion) last year. Much of that profit has been earned since they knew the climate consequences of their products. In the 30 years after James Hansen’s dramatic 1988 testimony to the US Congress,  oil production soared and climate pollution doubled.

Yet fossil fuels are legal products, widely used and heavily regulated. The Carbon Majors may produce fossil fuels, but we all use them. As a result, most of us benefit from a historically extraordinary level of wealth, comfort, and quality of life. Fossil-fuelled societies have lengthened human lives, and immensely expanded human population, while reducing slavery.Carbon Majors have been hugely important for the Canadian economy, and provide the economic foundation for many communities and families. 

In these circumstances, will governments and courts make the Carbon Majors pay for soaring climate damages? I predict that a critical factor will be public opinion about whether the Carbon Majors’ enormous profits were morally earned.

Public opinion on this question has begun to change, as many more people have become aware that: 

  1. The Carbon Majors’ huge private profits sit on a foundation of heavy public costs, including public investment, infrastructure and subsidies, plus pollution.
  2. The Carbon Majors’ pollution is threatening us, here, now, not just polar bears and future generations.
  3. We are desperately unprepared for what’s coming.
  4. The longer we delay strong action, the more it will cost us.
  5. Exxon and fossil fuel industry associations have, for decades, conducted an active campaign of disinformation, doubt and delay, to defeat, defer and weaken public regulation of the environmental and climate damage that they cause, in direct contradiction to their own scientific knowledge. Even today, Environmental Defence Canada has shown, fossil fuel industry lobbying is the single biggest barrier to effective climate action in Canada.

People will be more willing to make moral judgments of the Carbon Majors when they lose money, and there are increasing reasons to doubt whether Carbon Majors are good places to invest either equity or debt. The business plans of the Carbon Majors are incompatible with a stable climate and with the Paris Agreement. Fossil fuel divestment has been growing rapidly, more rapidly than any previous divestment campaign. More than 1100 institutional investors, including giant pension plans and entire countries such as Ireland, have pledged to divest from fossil fuels. Lenders such as the world’s largest international public lending institution, the European Investment Bank, are halting fossil fuel loans. Dozens of countries have pledged to reduce fossil fuel subsidies. 

In the stock market, the energy sector halved from 25% of the S&P 500 in 1980 to 12% in 2009; in 2019, it fell below 5%. This fall, Exxon lost its prized place in the top 10 of the S&P 500, for the first time since the index was created. Soon after, Moody’s downgraded Exxon’s outlook to negative, citing large negative cash flow, debt-fueled expansion, low commodity prices, and “rising litigation risk …related to climate change.” Mercer predicts that investing in sustainability will provide much higher returns in coming decades than today’s standard “Growth” portfolio.

For these and other reasons, I expect public opinion to increasingly welcome the idea of making the Carbon Majors pay. And as that appetite grows, lawyers are developing options to offer. Part 2 of this article will explore some of those options.

Dianne Saxe

Thursday, December 12, 2019

Categories
Climate

Court tobacco decision may set precedent for cases against fossil fuel companies

Extreme weather events, made more likely by the climate crisis, are costing Canada’s insurance companies heavily. Severe weather cost insurers $1.9 billion in 2018. But that’s not the only reason insurers should worry about global heating.

In February 2019, Canada’s Office of the Superintendent of Financial Institutions (OSFI) warned insurers that climate liability — the risk of being sued for climate damage — must also be “top of mind.” The OSFI is an independent regulator, supervising 400 financial institutions and 1,200 pension plans. 

Within weeks, the OSFI had more reasons for its warning, when a powerful court decision against Canada’s tobacco companies provided another precedent for holding climate polluters liable. 

Like “Big Tobacco,” the carbon majors — roughly 100 fossil fuel producers — have long known that their products cause climate change, but actively misled the public about it

Québec’s powerful court decision

In March 2019, the Québec Court of Appeal denounced just such conduct when it ordered tobacco companies to pay $15 billion in compensation and punitive damages (decision available in French only). This single decision made Canada’s tobacco companies — including Imperial Tobacco and Rothmans, Benson & Hedges — insolvent. Within two weeks, they were in bankruptcy protection.

Both the trial court and the Court of Appeal ruled that tobacco companies had conspired to sell their products without informing consumers of the deadly consequences of smoking, instead they cast doubt on accurate information about health risks. Despite knowing the risks, the companies “wilfully and knowingly denied those risks and trivialized the evidence showing the dangers associated with their products,” the court ruled.

The court decision means Rothmans, Benson & Hedges Inc., Imperial Tobacco Canada and JTI-Macdonald Corp. must pay more than $15.6-billion in damages to 100,000 Quebec smokers. Shutterstock

The court was outraged by tobacco companies’ flagrant conspiracy to mislead the public and to undermine the health warnings given by governments, medical bodies and anti-smoking groups: “[T]he harmful effects of smoking on health were not exactly denied but, rather, were characterized as being complicated, multi-dimensional and, especially, inconclusive, requiring much further research …,” it ruled. 

The companies created doubt in the public mind about the health risks of smoking through “denial, minimization, use of partial science to assert the existence of a scientific controversy … insistence on the weaknesses of the statistical links … transformation of facts into opinions ….”

The court illustrated this conspiracy by quoting the companies’ attacks on the credibility of science and scientists. For example, the companies’ campaigns to discourage health regulators from acting on the Royal Society of Canada’s 1989 report, “Tobacco, Nicotine, and Addiction”, included a group letter, stating: 

“We regard the Royal Society report as a political document, not a credible scientific review, and we look upon any attempt to brand six million Canadians who choose to smoke as “addicts” as insulting and irresponsible.“ 

Similarly, the Philip Morris Spokesperson’s Guide coached staff to attack the scientific evidence of addiction.

The court utterly rejected the companies’ excuses that they were merely selling a legal product in compliance with regulations, and that everyone knew cigarettes were dangerous. According to the court, the companies were guilty of:

[B]ad faith behaviour, resulting from a deliberate concealment of the effects of smoking on the health of users, and then from systematic denial, minimization and trivialization of these, based in particular on the idea, cleverly but artificially maintained, of a scientific controversy and on the alleged weakness of the relations between cigarette and diseases or dependence, all coated with a misleading advertising strategy … . 

Liability of climate polluters?

It’s not hard to see the parallel between the tobacco and fossil fuel industries. Like tobacco, fossil fuels remain legal and highly regulated products, initially considered harmless but now known to create severe damage. Like tobacco, the fossil fuel industries have spent heavily to mislead and to create doubt and delay. But the time for such doubt has run out.


Read more: Directors are in the crosshairs of corporate climate litigation


Civil liability for selling dangerous products while misleading the public is a kind of tort law. According to the Supreme Court of Canada, ”foreseeability is the fundamental moral glue of tort.“ 

Foreseeable climate damage to agriculture, water, infrastructure and others is already in the tens of trillions of dollars. Recent developments in attribution science — determining whether a storm or heatwave is caused or made worse by climate change — have made it easier to tie that damage to emissions from the carbon majors and the products that they sell. 

Courts are not ideal places to make public policy, but climate liability lawsuits are growing teeth. Tobacco cases show the way.

This article was first published in The Conversation.