top of page

Will the law courts ultimately end the fossil fuel industry? Part 3 of a 4-part series.

The Everlution Blog is devoted to discussing issues related to the ever increasing ecological footprint of human beings. If we have the determination, we can reduce that footprint, even with more population and more affluence. We have the technology to overcome human-induced climate change - the biggest issue we have ever faced. But we have to get going as our species is irreversibly altering the greenhouse gas levels that have been stable for the last 800,000 years.


 

Climate activism by young people
Global civic group Avaaz found strong public support for a lawsuit brought this year by six young Portuguese people against 32 governments, which was heard at the European Court of Human Rights. Image courtesy of https://phys.org/news/2023-09-youth-climate-case-euro-rights.html

There has become a tsunami of climate litigation in recent years, much of which has been successful in

claims made against corporates and government agencies. In fact, there are 2,500 cases on foot

at this moment. These lawsuits are helping rewrite the public narrative on climate change and, in

some cases, are resulting in a real shift in government and corporate policy – whether they win

or lose.


This four-part blog series titled Will the law courts ultimately end the fossil fuel industry? discusses the

impacts of current and potential litigation against the fossil fuel industry and governments which

support it.


Part 3:


The enforcement issue


The direct influence of litigation can be difficult to untangle and is not always immediately positive. In both the UK and Ireland, campaigners are returning to court because they consider previous judgments challenging government climate policy have not been properly implemented.


Enforcement is a serious problem in some jurisdictions. Colombia's Supreme Court was celebrated for ruling in 2018 that the government must protect its part of the Amazon from deforestation for future generations. The Bogotá-based non-profit Dejusticia notes that serious deforestation continued until a change of government in 2022. Even unsuccessful litigation, however, "can shape narratives around climate action, encouraging decision-makers to change their approach", the LSE report concluded.


Young people leading the way to protect the health of the planet for their future.
Victorian teen Anjali ‘Anj’ Sharma, 16, helped lead the class action lawsuit by eight Australian teens challenging the Federal Minister for the Environment, Sussan Ley, to protect young people from climate change. Image courtesy of http://envlaw.com.au/sharma/

For example, in Australia, teenager Anjali Sharma failed in her attempt to establish through the courts that the federal environment minister had a legal duty of care to protect young people from climate change. But she encouraged independent senator, David Pocock, to introduce a bill which, if passed, would require governments to consider the wellbeing of current and future children when making decisions that are likely to contribute to climate change.


More generally, experts say climate litigation helps raise awareness about the climate crisis and gives a boost to civil society. A YouGov poll on behalf of global civic group Avaaz found strong public support for a lawsuit brought this year by six young Portuguese people against 32 governments, which was heard at the European Court of Human Rights.


The Irish Climate Case, meanwhile, has gathered a petition of over 12,000 signatures before winning at the Supreme Court in 2020. Clodagh Daly, manager of Community Law & Mediation's Centre for Environmental Justice who was closely involved in the case, says the final judgment mobilised climate activists in Ireland and legitimised their demands.


Changing the narrative


Some see litigation as a "powerful storytelling tool", which can do more than science alone to communicate the problem and its underlying causes.


Successful litigation against governments has also planted the seeds for lawsuits against corporations. One of the most important so far was brought by Dutch NGO Milieudefensie against Shell. In 2021, the court ruled that Shell must cut its CO2 emissions by 45% compared to 2019 levels – a decision the fossil fuel firm is appealing.


Eline Zeilmaker, senior legal advisor on the case for Milieudefensie, says the ruling shifted the way in which the Dutch press covered the climate crisis "and it made people aware that corporations have a key role to play and they have to act now".


The Shell case inspired other lawsuits, including one against Italian oil major Eni. Beyond the fossil fuel industry, an Indonesian island threatened by rising sea levels has started legal action against Swiss cement producer Holcim.


Claims against marketing greenwash have arguably been some of the most effective in making tangible changes. Earlier this year, European dairy company Arla Foods was banned from using the phrase "net zero climate footprint" when marketing its products in Sweden after a court ruled it had misled consumers. And Austrian Airlines was required by a court to post a message on its website's homepage and social media saying it had misled the public with adverts offering CO2-neutral flights.

As well as seeking to hold polluters accountable, campaigners say the aim of litigation is to shift wider corporate behaviour – and there is evidence this is now happening.


Following the success of its Shell case, Milieudefensie threatened 29 multinational corporations with legal action if they did not publish ambitious climate plans. Later that year, one of the targeted companies, Dutch retailer Ahold Delhaize, significantly increased its corporate target to cut CO2 emissions. In particular, it aimed to reduce emissions from the supply chain of its supermarket brand Albert Heijn to 45% by 2030, compared with 2018 levels. Its previous goal had been a 15% reduction. Ahold Delhaize tells the BBC that its increased ambition was not related to Milieudefensie's campaign, and that it had already been working on revising its strategy in line with the latest climate science. Milieudefensie is continuing to heap pressure on corporations, announcing that it has now chosen five financial institutions as potential litigation targets.


Ingrid Gubbay, European head of human rights and environmental law at law firm Hausfeld, says litigation has been a big driver of corporate climate risk management in recent years. "These things are rattling the private sector, as they are policymakers."



These are the 29 key climate polluters


ABN AMRO, ABP, Aegon, AholdDelhaize, AkzoNobel, Atradius, BAM Groep, Boskalis Westminster, BP, Dow, DSM, Exxon Mobil, FrieslandCampina, ING Groep, KLM, LyondellBasell, NN Group, PfZW, Rabobank, RWE, Schiphol, Stellantis, Tata Steel, Unilever, Uniper, Vion, Vitol, Vopak, Yara. Also counting Shell, this makes 30.



Equity value depletion and investment funds access


A study by the LSE found litigation posed a real cost risk to fossil fuel firms because it lowered their share prices. The stock market responded most strongly in the days after cases against carbon majors, which include the world's largest energy, utility and materials firms, cutting their relative value by an average of 0.57% after a case was filed, and by 1.5% after an unfavourable judgment.


There is no published research yet investigating the long-term impacts of climate litigation on corporate value. Nor is there any evidence that big fossil fuel firms have significantly changed their business models in response. For instance, earlier this year Shell dropped a target it had set in 2021 to cut oil production gradually for the rest of the decade. This was despite it court case loss against Milieudefensie. Shell claims it has met its goal for cutting production for 2030 early.


However, investment analysts are aware that even modest share price drops are a big deal for investors, banks and companies because of both the financial and reputational costs.


As a result, climate litigation is increasingly being viewed as a serious issue by financial institutions. At a recent conference, Frank Elderson, member of the European Central Bank's executive board, said it was becoming "a major source of risk that needs to be properly anticipated and addressed".


In May this year, the French bank BNP Paribas announced it would stop funding new gas projects. That came just a few months after campaigners sued the bank for financing fossil fuels in the first climate-related lawsuit against a commercial bank, a case that has not been dropped.


Gubbay says climate litigation in Europe has been one factor driving the development of new corporate sustainability laws. And lawyers expect it to be a recurring theme in annual reporting as companies around the world become subject to stricter disclosure rules. BP's climate-related financial disclosures report from April, for example, says legal proceedings could reduce its financial liquidity and credit ratings.


Even insurance companies are concerned. The Hawaii-based fossil fuel firm Aloha Petroleum sued its insurer for refusing to cover climate lawsuits against the company, in one of a small but growing number of such cases. However, the UNEP and Sabin Center report also warned of a growing legal backlash that could delay climate action.


In the US, concerns have long been raised that companies working together on climate change could be hit with anti-trust lawsuits that penalise early movers and stymie further action. This has been a key tension point within an ailing industry net-zero alliance.


In some countries, vulnerable workers and communities are challenging action on climate change that they say disproportionately harms them and are not part of a just transition. The Mexican Center for Environmental Law, for example, is suing the Mexican government, arguing it has not considered how its energy sector programme for 2022-36 will improve overall wellbeing, reduce negative social and environmental impacts and guarantee human rights.


Companies are also seeking compensation for government climate policies through controversial dispute settlement systems embedded within investment treaties. For example, in response to Queensland Land Court's recommendation on the Waratah coal mine, Palmer has begun legal action against the Australian government under a free trade agreement with Singapore. His Singapore-based company Zeph investments, which owns Waratah Coal, is claiming A$69bn ($45bn/£36bn) in compensation, alleging the judge had a biased "pro-climate change, anti-coal" stance.



Pie chart of Australian super funds supporting the fossil fuel industry.
Market Forces estimates more than $140 billion of Australians’ retirement savings are invested in companies directly involved in expanding fossil fuels. Image courtesy of https://www.marketforces.org.au/campaigns/super/outofline/

On a final note, it has become evident in Australia, at least, that banks and superannuation funds are ignoring any risk signals. Australian banks ANZ, Commonwealth Bank of Australia, NAB and Westpac have provided AUD$57.5 billion to the fossil fuel sector since the Paris Agreement, according to Market Forces. The banks increased their lending to the sector by 15% in 2022, with a total of AUD$13 billion provided between January 2021 and December 2022. Meanwhile, Whitehaven Coal is in the process of refinancing an AUD$1 billion loan with NAB and Westpac to help fund new coal mining activities.

A new report, also by Market Forces, reveals Australia’s 30 biggest super funds increased their investment exposure to Australian and international companies most responsible for expanding fossil fuels in 2022 to a total of more than AUD$34 billion. Australia’s biggest funds have increased their investment exposure to companies developing new or expanded coal, oil and gas projects by 50 per cent over the past year, in their default investment options. On average, these super fund options have more than 9 per cent of their members’ share investments in these climate-wrecking companies. Applying this average across the whole superannuation industry, Market Forces estimates more than $140 billion of Australians’ retirement savings are invested in companies directly involved in expanding fossil fuels.


Be careful too of the so-called sustainable superannuation funds. Australia’s ASIC is currently looking at potential greenwashing claims by super funds that say they do not invest in fossil fuel operations, but in fact are investing either directly or indirectly in these companies.


In Part 4 we will conclude this series by peering into the near future to come to a conclusion as to whether the law courts will ultimately end the fossil fuel industry. Post this series we will run another series on how organisations can eliminate opportunities for greenwashing claims against them. This means organisations need to walk the talk, not just say things!



23 views0 comments

Comments


bottom of page