Courts are the new front line in climate change action

18 / 02 / 2019

After years of political apathy, we are witnessing a change in attitude to climate change. This year for the first time the members of the World Economic Forum have put climate change at the top of their list of concerns for the world economy. And last year saw significant gains by green parties in countries such as Germany, Belgium, the Netherlands and Luxemburg as liberal-minded votersfrustrated with the traditional mainstream parties voted for them.


However, it is the change in the assessment of climate change risks by the financial and insurance sectors and climate change litigation which are the game changers.


Banks, insurance companies and international financial institutions are dramatically changing their approach to the funding of energy projects. For example, the Dutch bank ING explained at a gas conference in London last November that it had calculated its carbon emission obligations based on the Paris Agreement and that its approach to funding of energy projects would ensure that it meets these obligations. Similar announcements were made by Citibank and many other banks in recent months.


What this means in practice is that in the future it will be very difficult, if not impossible, to get funding for coal projects regardless of the support such projects get from local or national politicians. It may also become increasingly difficult to secure funding for gas and oil projects. This is a game changer which will impact on the bottom line for energy companies.


At the same time, courts have become the new front line of climate change action and are forcing states to adopt more ambitious climate change targets. The last few years have seen an increase in the number of cases brought against states and energy companies. The most famous case is the Urgenda case brought by 900 Dutch citizens and the Urgenda Foundation against the government of The Netherlands. In May last year, the appeal court upheld the decision of the district court which found that The Netherlands had an obligation under Article 8 of the European Convention on Human Rights to reduce carbon emissions and it had failed to adopt sufficiently ambitious targets for CO2 reduction by 2020 (compared to the 1990’s level). It court ordered it to reduce CO2 by 25% by 2020.


The Dutch government announced in mid-November last year that it would publish a forecast of carbon emissions for 2020 in early 2019, and, if such a forecast revealed that the court-imposed target will not be reached, it would adopt new measures to meet the target.


A similar case was brought in August last year against EU institutions before the Court of Justice of the EU in respect of climate change targets adopted for period post 2030.

It is quite likely that courts in other states of the EU will follow the approach taken by the Dutch court as similar cases are brought there. This means that the energy industry should expect more ambitious targets to be adopted much sooner than expected.


In addition, energy companies are facing legal cases brought against them for contributing to climate change and/or failing to take steps to reduce carbon emissions. The court proceedings which ExxonMobil is facing in numerous states in the US, including for misleading its shareholders regarding climate change, as well as the case brought by the Peruvian farmer from Huarez against RWE before the German courts for RWE’s contribution to the melting of the glacier above his village, are just two examples of legal challenges facing energy companies.


The risks are, therefore, rising that energy projects will have to be abandoned in the future as more ambitious targets are imposed by courts. The fact that states continue to provide incentives for coal and fossil fuel projects is unlikely to give sufficient comfort to the industry going forward.


And with their shareholders demanding the right to know how they will adapt their business models to meet the targets for carbon emissions reduction, 2019 will certainly be a challenging one for traditional energy companies. It, however, represents an opportunity for the green economy!


Ana Stanič, M.Sc., British lawyer for EU and international law, E&A Law, will bw guest of the 1st GreenTechInnovation Breakfast 8th March 2019.






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