Global warming and environmental legislation: will ‘David’ defeat ‘Goliath’?

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When the owner of a small Peruvian farm moved to sue a giant of the energy industry, no-one noticed, but, as the case progresses, it could have a major impact on legislation and how future lawsuits brought on the grounds of global warming are handled. It could also spur the investment needed to accelerate the technological advances to deal efficiently with the menace of climate change.

Perhaps most significantly, it could force through the implementation of currently slow-moving regulatory changes.

On 30 November 2017, a lawcourt in Hamm, western Germany, deemed Saul Luciano Lliuya’s case against a power plant operator admissible. The company’s plants emit large quantities of greenhouse gases (GHGs), which Lliuya claims is causing an Andean glacier to melt, with the negative knock-on effect of causing adverse changes to local rainfall. The court ordered a series of studies to determine how the energy producer could be sued, even though it does not have any energy production capacity on or local to Lliuya’s property.

The essential question the court in Hamm will need to answer is whether the energy producer, as the operator of coal-fired power plants, is guilty of contributing to GHG emissions and consequently to global warming, and if so, to what degree?

Saul Lliuya is not asking for much. He is only seeking reimbursement of costs for the work he and his community have done to deal with the increased risks of flooding, calculated pro-rata based on the energy company’s contribution to global greenhouse emissions.

A pivotal global warming test case…

Of course, that is not what is really significant here. Setting aside Lliuya seeking indemnity, this case is about trying:

  • to write a new chapter of environmental law
  • to determine how to establish responsibility among the different stakeholders involved in the warming of the planet
  • to establish the seriousness of this responsibility, and
  • to detail the nature of possible compensation.

…that will need to consider some complex questions

The court in Hamm will need to address a number of fundamental questions.

  • Should it refrain from finding one operator guilty on the grounds that numerous others will escape conviction?
  • Can the energy supplier invoke its obligations to provide its clients with what they ask for, i.e. abundant, cheap energy?
  • Given the multiple stakeholders, is it even possible to build a hierarchy of responsibility upon which the court can base its decisions in determining how legitimate compensation sought by plaintiffs can be proportionally awarded?
  • Are the real guilty parties those governments that still refuse to take the drastic measures needed, such as taking stock domestically at a fair, realistic and dissuasive level of the future costs that global warming will generate?
  • And underlying any governmental inertia, is there also the inertia of the average citizen who would rather not change his or her comfortable, established way of life, who refuses to pay more for what can still be bought cheaply, or who would rather not have to invest fairly large sums in making their homes more energy efficient, with insulation and heat pumps, for example?
  • And finally, would there not also be manufacturers who clearly understand what is at stake and thus pre-emptively invest massively – often with the help of public authorities – in fossil-fuel power plants?

Public authorities will have to up their game…

The issue that this little-known case brings to the fore is that, to deal with global warming, public authorities will need to become more involved than they have ever been. While they will need to enact new rules, they will also have to compensate the losses of certain players who have been weakened by the need to adapt to new climate paradigms, and incite primary players financially to make the necessary investments. Without a doubt, the first countries to make these major changes, and agree to spend the money necessary to do so, will be the winners of the future.

…but it could be down to the courts to break the impasse

In this light, justice, the third power, may need to intervene to stop everyone from continuing to go around in circles. In other words, it may need to be the one that

  • provides the last line of defence in terms of the rights of citizens who have suffered damages due to global warming and
  • forces energy producers to go beyond making simple promises, actually evaluate precisely the ecological and environmental consequences of their actions, and then make – and act upon – the strategic decisions that arise from them.

The Hamm court’s ruling will be carefully studied.


More blog posts on global warming and related issues

More blog posts by Alexandre Jeanblanc

 

Alexandre Jeanblanc

Investment Specialist, SRI

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