It was only a matter of time, really. Ever since a Dutch court ordered Shell to cut its carbon emissions by 45 percent by 2030, it opened the gates to a lot more environmental litigation against the oil industry. And now, after the release of the IPCC's latest and expectedly alarming climate report, it seems to be a good time for more litigation. Earlier this year, a court in The Hague told Shell to reduce the carbon emissions of its products, the emissions coming from its suppliers, and those generated by people using the company's products by 45 percent from 2019—and to do it by 2030.
This was a landmark ruling that caused a wave of joy among environmentalist groups: "This is a monumental victory for our planet, for our children and is a step towards a liveable future for everyone. The judge has left no room for doubt: Shell is causing dangerous climate change and must stop its destructive behaviour now," said the director of Friends of the Earth, the group that had brought the emissions case against Shell.
A few months later, the Australasian Centre for Corporate Responsibility filed a lawsuit against Australian energy major Santos, challenging Santos' claims that natural gas provided clean energy and questioning the company's net-zero emission plans.
"Santos' 'clean energy' and 'net zero' claims pose a major risk to investors as it becomes increasingly more difficult to differentiate between companies taking genuine action versus those relying largely on offsets or unproven technologies," said Dan Gocher, director of climate and environment at the ACCR, also saying that "Santos has perfected the art of greenwashing, and shareholders continue to be misled by Santos' clean energy claims."
Related: Iraq Secures New Investments In Its Booming Oil Industry These could be the first signs of a major shift in the oil industry. Bloomberg this week reported environmentalist groups are telling energy companies they'll see them in court, as Greenpeace tweeted, following the release of the report. The trigger: the latest climate report by the Intergovernmental Panel on Climate Change.
The report, published last month, attributed—with a high to an extremely high degree of likelihood—the accelerated and increasingly dramatic changes in the planet's climate to our use of fossil fuels and the resultant emissions. This made Big Oil the biggest and easiest target for climate-related litigation.
"For young people who are arguing that they will be affected [by climate change] in the future, this report is useful for them," said Louise Fournier, legal counsel at Greenpeace, as quoted by Bloomberg. Fournier also said Greenpeace will be among claimants, too. And net-zero commitments that energy companies have rushed to make seem to be irrelevant.
"We're going to see copycat cases happening in jurisdictions against corporations using similar arguments to the Shell case," Bloomberg quoted Rupert Stuart-Smith, member of the Oxford University's Sustainable Law Programme's management team, as saying.
And thanks to the IPCC's latest report, which outlines a climate situation more urgent than the panel's previous reports, litigants in Europe will be able to claim greater damages and demand greater compensation, according to the counsel who represented Friends of the Earth in their case against Shell.
The European Union is doing its best to maintain its reputation as a low-carbon pioneer lately, with its Green Deal that has tied economic recovery from the pandemic to achieving certain low-carbon energy goals. In this environment, activists have a much better chance—and have already booked several successes—of suing Big Oil for its business.
This does not seem to be the case in the United States, despite the litigious culture. In fact, so far cases brought against Big Oil majors on environmental grounds have consistently failed in court. Some cases have been dismissed by judges; others Big Oil has straight out won, such as Exxon, which won in a New York lawsuit alleging it misled investors with regard to accounting for the costs associated with climate change.
Even if there are a lot more court cases in the U.S. surrounding climate-related topics, the chances of any of these actually succeeding are slim, Bloomberg reports, citing legal experts. This is simply because of the legislative framework in the country, which is very different from that in European countries.
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"The IPCC report does nothing to change the primary problem for U.S. climate litigants -- the U.S. legal system isn't set up to handle this type of claim," the report cited Brandon Barnes, a senior litigation analyst with Bloomberg Intelligence, as saying. "A climate liability claim against a company or group of companies is always going to fail unless Congress changes the laws around liability. Until then, the courts are going to continue to punt the issue to the legislative branch.”
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As annoying as this may be for would-be litigants, there are other ways to pressure U.S. companies into doing certain things, the most popular through activist investors. These got a research boost this week, with two reports calling for a major cut in oil and gas production.
One was a report by Carbon Tracker, which urged Big Oil to start planning for 50-percent lower oil and gas output in the future if they want their business to be aligned with the Paris Agreement targets. The other was a study that said the world needed to keep 60 percent of untapped oil in the ground if it was to meet those targets. Those two, the IPCC report and the doubtless dozens of more reports on the subject bound to keep coming out should provide enough of a basis for investor pressure on the "unsuable" U.S. Big Oil.
By Irina Slav for Oilprice.com
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This does not seem to be the case in the United States, despite the litigious culture. In fact, so far cases brought against Big Oil majors on environmental grounds have consistently failed in court. Some cases have been dismissed by judges; others Big Oil has straight out won, such as Exxon, which won in a New York lawsuit alleging it misled investors with regard to accounting for the costs associated with climate change.
The litigation game against the producers of fossil fuels is based upon a premise that is false: that it is fossil-fuel producers who should be held responsible for the effects of increasing atmospheric concentrations of greenhouse gases (GHG).
In May, the US Supreme Court ruled 7–1 in BP PLC v. Mayor and City Council of Baltimore that federal appellate courts have the jurisdiction to examine all of the arguments made by litigants on whether such lawsuits belong in federal or state courts. The plaintiff cities and states usually prefer state courts as the venues, as they are seen as more likely to rule against the defendant fossil-fuel producers, in substantial part because the Supreme Court ruled in 2011, in an 8–0 decision (American Electric Power v. Connecticut) written by Justice Ginsburg, that “it is primarily the office of Congress, not the federal courts, to prescribe national policy in areas of special federal interest.”
Producers produce fossil fuels not for the fun of it but obviously because there is a huge consumer market for reliable, affordable energy complementary with capital assets that produce a stream of goods and services satisfying consumer preferences efficiently.
In other words, consumer demands are the ‘raison d’être’ of any industry, whether producing final goods and services or intermediate inputs. This is so obvious that it is natural to ask why climate litigation is overwhelmingly directed at the fossil-fuel producers when it is consumers who demand and consume fossil fuels.
So why have the courts in the United States, the Netherlands and elsewhere failed to go after every industry in the economy that uses fossil fuels? Should the courts not sue consumers of fossil fuels for the purported “harm” that their consumption preferences engender.
Still the courts are happy to blame fossil-fuel producers for all that “damage” despite the fact that agriculture and cement production and a myriad other processes emit far more GHG than those attributable narrowly to the use of fossil fuels. Assigning “blame” to the producers of fossil fuels rather than the users is an obvious gambit to make the litigation game manageable; they cannot sue everyone.
If European courts aim to weaken further European oil majors, that is their affair. But one consequence of that is that the last barrels produced will be Arab, Venezuelan and Russian. Put bluntly, the Arab Gulf producers along with their Russian counterparts and PDVSA of Venezuela will be earning enormous revenues boosted by rising crude oil prices.
The most sensible way to combat climate change is to focus on reducing carbon emissions from fossil fuels and not their actual use.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
Clearly, if you want to get rid of oil and gas, you need to go after the consumer, not the producer. If you restrict production but not demand, the price will spike and you will make the oil and gas companies rich, while the population will be suffering. However if you are able to move the consumer onto other, hopefully greener alternatives, then the oil & gas will go down in price with lower demand, and the production will naturally decline. No ridiculous lawsuits necessary.
O&G is in no way comparable to the tobacco companies that produced a product with no benefits to the society, except for addiction. This is an industry that brought about the rise of the current civilization, with plentiful of cheap energy and raw materials to support our growing world population and raise billions from poverty and hunger. Literally!