8. Climate Change Litigation: A Reference Area for Liability

For this chapter, it is useful at the outset to establish broad categories of horizontal civil litigation in the climate context. These categories provide an understanding of the various forensic and legal issues⁴ to be discussed in the sections that follow.

Firstly, there are a number of tort/nuisance type cases that have been brought in the USA, Germany and the Netherlands that will be presented in more detail below (¶ 14 et seq) and that are at the centre of the following analysis. Pertinent to the subject matter of the study, the defendants in these cases are private entities, large GHG emitters (the ‘carbon majors’,⁵ ¶ 97). These cases can be divided further by the type of action involved, namely;

In addition to the foregoing, there have been actions brought by shareholders against major GHG emitters claiming a loss of company value due to a failure to adapt business strategies to climate change, demanding climate-risk disclosures⁸ or arguing for staying certain investments, such as in Poland where shareholders argue that building a new coal-fired power plant violates fiduciary duties.⁹ A non-disclosure claim in Australia was halted after the defendant bank included a climate-risk assessment in its 2017annual report.¹⁰ These cases also belong in the category of horizontal climate litigation but have little to do with concrete physical and environmental damage as they focus on the risks of climate change to company/shareholder value.

At the outset, it is also necessary to establish that cases involving private companies do not even come close to covering all the legal actions directly or indirectly aimed at climate protection or restitution for negative impacts. On the contrary, most cases considered to fall under the heading of climate change litigation are in fact cases that address States or invoke public law. Some of these latter group of cases are listed here, again in broad categories to give context to the following discussion:

Public law litigation is very relevant to private liability litigation because the science and forensics as well as many legal principles, in particular regarding causation and attribution, used in State-related cases can also be used in arguments in civil cases. Furthermore, since business decisions and the conduct of major polluters can have a similar impact on global climate change as policy decisions by national legislators, it does not seem far-fetched to demand similar standards of care from such private actors. How administrative or constitutional courts are continuing to examine and interpret the duty of care against the background of climate science necessarily also influences civil courts. This has been examined in depth in the context of the due diligence obligations of companies in Chap. 7. Turning this argument around, some French courts have now applied to the State statutes originally designed to restrict certain private behaviour to prevent, for example, ecological damage.⁴⁰ These decisions will be examined further below.

Nevertheless, one of the important lessons learned from past and ongoing cases is the difficult relationship between State duties and the duties of private entities. The parallel existence of public and civil law cases raises a few core questions regarding climate-change litigation: Is there a parallel responsibility for both States and private enterprises and to what extent do State and private duties align? Can the behaviour of private entities be justiciable at all if the State assumes responsibility for climate protection (as is the case in most jurisdictions, at least generally)? We will turn to this question first, in the next section.

This chapter approaches the issues raised above as follows: Using a comparative approach, tort/nuisance type cases from the USA, Germany and the Netherlands are presented in the first part of this chapter (¶ 14 et seq) with a focus on the preliminary question of justiciability. While forensic questions, especially the problem of causation, are also relevant here, the main point of the analyses is the overlapping duties of State and private actors and the often-raised general hypothesis that State duties exclude responsibility for private actors.

The second part of the chapter (¶ 55 et seq) will then explore the issues of standing and compensable damage as well as causation in more detail. The forensic challenges that arise in this context are very different, depending on the broad categories of civil cases outlined above (¶ 5 et seq). In fact, as will be seen, some types of claims avoid forensic problems altogether. The analysis will also include an examination of policy proposals designed to enhance procedural and substantive laws to engage companies’ commitments to address climate change.

The third part (¶ 135 et seq) will revolve back to the relationship between private and State duties, irrespective of whether they are referred to as such or as duties of care, due diligence etc. in the given set of applicable rules. The argument will be made that new positive duties of private actors exist, or are at least emerging, that are similar to State duties and are essentially aimed at meeting the reduction targets of the Paris Agreement. It will be seen that international environmental law, while not directly binding private entities,⁴¹ can be used to specify general obligations under national law. General rules of liability may thus serve a gap-filling function where there are currently no statutory cross-border due diligence obligations in national and European law as discussed above (Chap. 7).

The anthropogenic causes of climate change are no longer disputed by any serious scientist⁴² and have not been contested by the defendants in the cases presented below. Nevertheless, tort/nuisance liability actions against large GHG emitters (the ‘carbon majors’) have largely not been fully successful, nor have there been many such cases to date.

We approach the reasons for this in a practical manner, looking at the countries in which tort/nuisance actions have actually been brought, namely the U.S., Germany and—most recently—the Netherlands, where for the first time a multinational company (Shell) has been held responsible for its contribution to climate change. While U.S. courts have seen by far the most cases, the one case brought before German courts was the first tort/nuisance-based climate case to pass the ‘motion to dismiss stage’ and will be decided on the merits. The German Court of Appeals of Hamm found the plaintiff had stated his claim conclusively and that further evidence, in the form of written scientific expertise as well as a site visit, was needed to arrive at a verdict.⁴³ In contrast, all U.S. claims have been dismissed for ‘purely legal’ reasons by citing that the plaintiffs had no claim, even if all their allegations were found to be true.

This relative success of the German case seems odd at first, considering that both the U.S. and German legal systems require the plaintiff to plausibly argue what are essentially the same issues,⁴⁴ including the neuralgic points mentioned above (¶ 3). In particular, the plaintiff must show

The discussion below will, however, demonstrate that there is a very specific reason for this divergence. The dismissal of the U.S. lawsuits in the cases analysed below did not primarily hinge on forensic questions but on the more fundamental problem of justiciability, ‘political question’ and preemption or, to put it more simply, the relationship between public and private law.

This points to the overlap between State or government duties to address climate change, which clearly exists and is subject to litigation around the world, with any private actor duties which could be the basis for this latter group’s liability. Any tonnage of CO2 or other GHG emitted will be:

The same is not so true for natural processes such as emissions of methane from cattle or F-gases from industry. However, for the bulk of the ‘damaging substances’ that have negative impacts on the environment, property, health etc., there is a sense of overlapping responsibility for both the State as well as the producers and users of said products. This is especially the case since emissions of CO2 are not explicitly forbidden and can be, as in the case of the EU (since 2005) and some states in the USA,⁴⁵ explicitly allowed through the purchase of an emission certificate.

Each emitted molecule of a ‘damaging substance’ can thus be attributed simultaneously to various actors within the State and the private sector. Each actor has a distinct pattern of behaviour that may involve acts of commission and omission: the State through regulation and/or enforcement or a lack thereof, primary producers through extracting and selling substances such as fossil fuels while further downstream, companies and consumers contribute by ultimately emitting. The legal duties assigned to each actor are accordingly directed at the relevant but very different actions (regulating, stopping or minimising extraction and/or sale, stopping or minimising emissions). This chapter does not seek to conclusively define and differentiate sector-specific duties of care within the private sector, rather its focus is on the overlap between State and private duties as such and the fundamental question of the relationship between State and private responsibility. A topic that is already highly controversial in itself and has been addressed differently in varying legal systems.

It is important to understand that, in the U.S., GHG emissions are subject to regulation under the CAA by the Environmental Protection Agency (EPA), as the Supreme Court held in the landmark decision of Massachusetts v EPA,⁴⁶ see below. This case was the first and arguably most successful case of climate-change litigation in the U.S., and yet, as we will see, also the main reason why tort-based climate-change cases have either been dismissed or must overcome specific difficulties to proceed.⁴⁷

It was against this backdrop that the first wave⁵⁰ of U.S. tort-based climate litigation took place between 2005 and 2011 with the claims primarily based on the torts of public and private nuisance under federal common law.

In a unanimous decision, the Supreme Court dismissed the case,⁵¹ arguing that the plaintiffs’ claims were displaced by the CAA. In the Court’s opinion, the CAA transferred the sole power to regulate GHG emissions to the EPA. The argument rests on the principle of separation of powers, namely, by enacting the CAA, Congress had used its legislative powers to authorise the executive branch (the EPA) to impose carbon-dioxide caps and had, as a result, taken that competence away from the judiciary. This delegation of power to the EPA had to be respected by the courts, even if the agency refused to set emission caps or to regulate carbon-dioxide emissions at all. The Court added, however, that the EPA’s inaction in itself would be subject to judicial review, as the Court had decided in the case of Massachusetts v EPA mentioned above. Effectively, the plaintiffs had sued the wrong defendant because the Supreme Court decided that the state duty excluded possible private duties as the duty to regulate had been placed on the EPA.

While the Supreme Court decided that the plaintiff’s mitigation claims, aimed at the judicial imposition of emission caps, were displaced by the CAA, it is also interesting to note which arguments did not lead the Court to dismiss the case: An equally divided Court (4:4) found that the plaintiffs had sufficiently alleged standing under Article III of the Constitution. The Court’s written opinion does not give much insight on why it arrived at this conclusion. Nonetheless, the result in itself is remarkable because, by refusing the defendants’ argument that the plaintiffs lacked standing, the Supreme Court effectively acknowledged that the plaintiffs had sufficiently alleged a concrete injury of their rights and causation. In other words, the Supreme Court would not have dismissed the case without further examination of the facts had it not been for the displacement by the CAA. Furthermore, since the Court had not ruled on the question of damages, but rather on injunctive relief and an in-effect reduction of GHG emissions by the defendants, it initially remained open whether such claims would also be displaced by the CAA.

Nonetheless, the District Court dismissed the case, finding that the claims were barred by the political question doctrine and also asserting that Kivalina lacked standing since it had not sufficiently established causation. On appeal, the 9th Circuit did not dwell on those questions. Instead, it waited for the Supreme Court’s decision in American Electric Power and then—at least in the majority opinion⁵⁵—solely relied on the Supreme Court’s displacement argument to dismiss the claim.

Although American Electric Power, as we have seen, did not concern a damage claim, the majority in the Kivalina case assumed to “have direct Supreme Court guidance” on the issue and simply acknowledged a “slightly different context” between seeking injunctive relief (i.e., setting of emission caps) on the one hand and damages on the other.⁵⁶ While the CAA gives the EPA the power to regulate emissions by setting caps it does not provide for any damage remedies, however, the Court found that the CAA displaced all common-law actions. This reasoning has been contested by U.S. scholars⁵⁷ and did not necessarily follow from the Supreme Court’s decision in American Electric Power that was limited to the specific case and the relief sought. Nevertheless, the Supreme Court denied the plaintiffs’ petition for a writ of certiorari⁵⁸ without comment.⁵⁹

The District Court dismissed the case for lack of standing and political question grounds, declaring itself unfit to develop a standard of unreasonableness and arguing that such matters best be left to the legislative and administrative branches.⁶¹ In 2009, before the Supreme Court’s decision in American Electric Power, a panel of the Court of Appeals for the 5th Circuit found that the plaintiffs had sufficiently alleged causation to have standing and that their claims were not barred by the political question doctrine.⁶² This view is especially notable since the injuries were incurred by a single extreme weather event and such events are generally said to be much harder to attribute to climate change than a phenomenon such as rising sea levels.⁶³ This decision, however, was later annulled for procedural reasons and, after more procedural turbulence and a refiling of the case in 2011,⁶⁴ the District Court’s 2005 decision became legally binding. Though the Court of Appeal’s annulled decision does not carry much precedential value,⁶⁵ it still illustrates that the main hurdle for getting past the motion to dismiss stage is neither causation nor the political question doctrine, but the issue of displacement by the CAA.

To date, at least two District Courts have dismissed such claims, holding that tort-based climate-change cases could not be brought under state law due to the interstate nature of GHG emissions and confirmed that federal common law was displaced by the CAA.⁷¹ Other decisions, however, have granted plaintiffs’ motions to remand and rejected the argument that state common law was displaced.⁷² The final say on these claims is still open.⁷³

The District Court in Essen dismissed the claim, holding that causation (‘traceable cause’) had not been sufficiently established. Moreover, RWE’s contribution was found to be insignificant: even if the company’s emissions were proportionally causal for global warming, the court argued, there were too many tortfeasors to be able to attribute consequences of climate change, in short, the plaintiff’s situation would be the same even if RWE had never emitted anything.⁷⁸ A year later, the Court of Appeals in Hamm disagreed, holding that the plaintiff had conclusively alleged both causation and attribution.⁷⁹ The court found the plaintiff had stated his claim conclusively but further evidence, in the form of written scientific expertise as well as a site visit, was needed to arrive at a verdict.

Notably, and in sharp contrast to the U.S. decisions presented above, the Court of Appeals in Hamm did not have any problem accepting the overlap between State and private duties,⁸⁰ although the German equivalent to the CAA, the Bundesimmisionsschutzgesetz (BImSchG) provides a statute similar to the CAA in the U.S. and the German cap and trade scheme (Treibhausgasemissionshandelsgesetz—TEHG) applies to the coal-fired facilities owned and operated by RWE which emit GHGs. This is because the statute itself expressly regulates the issue of preemption and the relationship between public and private law in Section 14 BImSchG, which is a universally applicable federal law, and provides for a differentiated approach:⁸¹

[1] Nobody shall have the right to request cessation of operation at any installation on grounds of civil-law claims, not based on specific titles, to protection against the detrimental impacts emanating from any piece of land on neighbouring premises, insofar as the license for such an installation has become final; it shall only be admissible to insist on such precautionary measures as are necessary to prevent such detrimental impacts. [2] If such measures are not technically feasible according to the best available techniques or not economically viable, compensation may only be claimed for the actual damage suffered.⁸²

Section 14[1] BImSchG thus only preempts claims aiming at a complete shutdown of a facility (e.g., a power plant), since the permission granted based on the BImSchG legalises the operation itself.

Having said that, a claim for the abatement of emissions of a given facility is, in principle, admissible (see also Section 14[1] BImSchG), however, an application for a specific abatement measure is highly unlikely to be successful. The concrete implementation of protective measures must be left to the operator of the facility⁸³ and the law limits abatement claims to measures that are technically feasible and that do not involve unreasonable costs.⁸⁴ It naturally follows from this that pure mitigation claims (injunctions) may therefore be difficult to conceive.

Under no circumstances, however, does the BImSchG displace or preempt compensatory claims for monetary damages or protection and, as a result, both adaptation and compensation for damage claims are set out in Section 14[2] BImSchG. Thus, the BImSchG legalises a plant and its emissions in the interest of the public, however, individuals can still demand protective measures with respect to their property and so forth as well as damages.⁸⁵ Since a claim under Section 1004(1) BGB does not require a breach of duty but only that the consequence of an interference with property is unlawful, it was irrelevant that RWE had not violated German public law.

The preliminary legal assessment of the court, particularly with respect to the application of partial causation, can be informed by the French cases mentioned above. Being based on a civil law stipulation, the courts found that the State’s omissions to reduce GHG emissions cause ecological damage.

In the Shell case, the plaintiffs successfully argued that the reasoning of the Urgenda courts regarding the State’s duty of care can also be applied to private defendants. As we have seen, the Urgenda judgments, although directed against the State, were based on a civil law provision at the outset. The Dutch law in Article 6:162 of the Dutch Civil Code is a basic and general provision regarding a ‘tortious act’:

• 1. A person who commits a tortious act (unlawful act) against another person that can be attributed to him, must repair the damage that this other person has suffered as a result thereof.
• 2. As a tortious act is regarded a violation of someone else’s right (entitlement) and an act or omission in violation of a duty imposed by law or of what according to unwritten law has to be regarded as proper social conduct, always as far as there was no justification for this behavior.
• 3. A tortious act can be attributed to the tortfeasor [the person committing the tortious act] if it results from his fault or from a cause for which he is accountable by virtue of law or generally accepted principles (common opinion). ⁹²

In the Shell case, the plaintiffs used this provision, in effect transferring obligations from the State to companies.⁹³ The district court largely followed the plaintiffs’ reasoning, holding that Shell had a duty to reduce its net CO2 emissions (Scope 1, 2 and 3) by at least 45% from their 2019 levels by 2030.⁹⁴ The court formed its view of the unwritten standard of care provided by the second paragraph of the above-cited provision by, inter alia, referring to the Urgenda case and the dangers climate change poses to human rights enshrined in the ECHR. While Shell is not directly bound by human rights obligations, the effects of climate change on human rights factored into the court’s overall interpretation of the open legal standard, as did the Paris Agreement, international soft law and climate sciences.⁹⁵

The relationship between the Urgenda case and the Shell case is somewhat similar to the relationship between the Massachusetts and American Electric Power cases discussed above, however, the outcomes are starkly different. On the one hand, there is a judgment obliging the State to regulate or to act, on the other hand, there is one that imposes the same or similar duties on corporate defendants. At the same time, the Shell case makes the issue of overlapping State and private duties particularly clear. The court also denied a preemption by the European Emissions Trading System (ETS), holding that Shell’s private law obligation was independent of State or EU legislation.⁹⁶

The above analysis shows that both U.S. and German courts have been divided on the issue of causation. There is, however, no fundamental difference between the two legal systems in that regard. The main difference is the interpretation of the relationship between private (tort) and public/administrative law by the judiciary. The question is whether the State, given existing statutes and regulations, is the sole carrier of justiciable responsibility concerning climate change or whether companies are accountable as well.

Since the decisions in American Electric Power and Kivalina, U.S. courts have taken the former view, at least with regard to federal law. In the first case, the Supreme Court argued that injunctive relief was not available under federal tort law against private polluters because the CAA transferred the power to regulate emissions to the EPA. The Kivalina court extended this reasoning and applied it to the question of adaptation type relief demands and damages.

In Germany, statutory law provides for the opposite, at least partially. While certain forms of injunctive relief (e.g., cessation of a permit for a facility) cannot be sought through civil law litigation, other forms of injunctive relief depend on technical and financial feasibility. Claims for compensation in the form of financial damages and adaptation type relief and protective measures are always admissible, at least this is the opinion of the High Court of Appeal in Hamm.

In the Shell case, the district court essentially blurred the difference between State and private obligations, arguing that private companies owe a duty of care which is, on the one hand, independent of State regulation and, on the other hand, largely corresponds to the State’s responsibility as determined by the Paris Agreement (Chap. 16). This highlights the question that arises regarding the existence, basis and extent of a positive duty of care, an issue that will be examined in the final part of this chapter (¶ 138 et seq).

The U.S. case law undermines an important aspect of tort and nuisance law, which has traditionally been used to tackle behaviour that may not be unlawful but still detrimental to individual rights. It is a field of law that constantly adapts standards of reasonableness in the view of current social and scientific findings.⁹⁸ In this sense, common tort law has a ‘gap-filling function’.⁹⁹ The view taken by U.S. courts regarding the displacement of federal common law claims runs counter this general idea.

The effect of this reasoning on legal protection is particularly strong because the cases would be able to rely on what is essentially a concept of strict liability. This is true for both the U.S. concept of private and public nuisance¹⁰⁰ and the relevant provision in the Lliuya case in Germany (Section 1004 of the German Civil Code). Public or private nuisance claims do not require unreasonable conduct but an unreasonable interference with protected legal interests.¹⁰¹ Therefore, in the cases discussed above, the main requirement for establishing liability was unreasonable damage suffered by the plaintiffs or the prospect of such damage and the causality of the defendant’s conduct. Arguing displacement due to the possibility of public law regulation under the CAA deprives the cases of any basis, without even entering into the merits. The French cases referred to above have found illegal behaviour on part of the State without indicating whether such reasoning could be applied to private entities. Given that a number of cases are pending in the jurisdictions examined, the issue here is far from closed. The results of this analysis suggest that the overlap of State and private duties remains an issue to be examined in further research.

Operating on the basis of a preliminary ‘green light’ evidenced in the RWE and Shell cases with respect to the justiciability of private liability (i.e., of how the overlap of State and private duties could be dealt with using tort/nuisance principles), attention will now turn to a deeper analysis of the legal and forensic problems associated with questions of damage and causation in climate-change litigation.

The issue of compensable damage is of central importance to answer two questions: Who has standing in court and what remedy can they claim? To undertake an effective structured analysis, it is important to first distinguish the different types of damage. As liability litigation is usually based on national tort law from the outset, it is important to keep in mind that the scope of legally protected interests, as well as the entitlement to enforce those interests in court, both depend on the legal system in which the claim is brought. This was discussed in depth in Chap. 6 and, as was made clear, the problems faced in liability litigation may vary from country to country.

The following section takes, as a starting point, the classical position that legal protection is primarily the protection of individual rights. It begins with the least problematic legal positions, that of absolute individual rights, as these are protected under almost all legal systems. We then look at the more problematic category of individual economic risk and financial loss before finally turning to the most difficult category, namely damage to collective goods and especially to the environment. This latter category is particularly important with regard to climate change impacts as, under varying scenarios, the IPCC reports leave no doubt that entire regions, ecosystems, watercourses and species will change, may be severely reduced or damaged or even disappear altogether.

This will cover the bulk of the impacts on individuals that result from anthropogenic climate change and other man-made impacts on nature and the environment because, in most cases, personal damage or risk can be linked to an impairment of individual rights. In the Lliuya and the Kivalina cases, for example, personal property is threatened by glacial melting or rising sea levels. In such cases, damages can include loss of profit if the affected property is used commercially. Similarly, climate change results in heightened health risks to certain groups of people¹⁰⁴ who may, as a result, be entitled to damages for the costs incurred to mitigate those risks.

As for forensics, the assessment of damages does not pose any unusual problems. The assessment of material damages, such as the value of property and even of pain and suffering, is the daily business of courts. If necessary, courts will hear expert opinions to guide them in these matters. In some cases, there is statutory guidance, such as the German Real Estate Value Assessment Ordinance (Immobilienwertermittlungsverordnung, ‘ImmoWertV’) that is used to determine the value of real estate. If property is destroyed by an extreme weather event, such as a flood or storm, the issue of determining baselines to put a figure on the damage occurs, however, this is no different to any other environmental case involving, for example, a chemical spill.

Though the protection of absolute individual rights is a general principle of tort /nuisance law across jurisdictions and legal systems, there is no uniform standard as to who is entitled to enforce these individual rights in court. While it is clear that life, health and liberty are legal interests possessed only by individual persons, impediments to property are more complicated, even though there is broad agreement that both individuals and private corporations can have and claim property rights. However, when it comes to the standing of public entities, such as municipalities, the legal situation varies even among “Western” jurisdictions. In the U.S., the legal concept of ‘public nuisance’ entitles, inter alia, municipalities to bring claims as was discussed in the Kivalina and American Electric Power cases (¶ 24 et seq). Municipalities can make claims not only if their own property is affected (e.g., infrastructure) but also on behalf of municipal citizens (so-called parens patriae claims).¹⁰⁵ In contrast, German law does not enshrine the concept of parens patriae standing meaning that actions based on the violation of individual rights must be brought by the impacted individuals.

For such jurisdictions as Germany, liability claims will, therefore, be individualised and it will be difficult to actually capture all of the damage caused. This situation is alleviated only partially by the newly established class determination action (“Musterfeststellungsklage) introduced in November 2018 in Section 616 of the German Code of Civil Procedure (Zivilprozessordnung, ZPO). Its purpose is to make it easier for consumers who have suffered similar damages from a certain business conduct, to take legal action by enabling consumer-protection organisations to sue on behalf of such individuals, thereby reducing said individuals' cost risk of litigation. Improved enforcement of civil law claims is also in the public interest as it prevents unlawfully obtained profits from remaining with the injuring party.¹⁰⁶ However, these legitimate aims are at best partially achieved by the statutory regulation as the main problem remains, namely that such collective action only allows the determination of the existence or non-existence of certain legal conditions for a claim and but not a claim for damages or abatement itself (Section 606(1) ZPO).¹⁰⁷ Therefore, individuals participating in a class determination action must bring a second action to obtain the remedy that they are actually seeking. Due to this construct, the intended incentive effect is unlikely to materialise on a larger scale and, with respect to climate change damage, it neither increases nor changes the type of damage covered by law.

Germanic jurisdictions are taking a particularly reluctant approach, usually denying compensation for pure economic loss outside of contractual relationships.¹¹⁰ If there is no violation of absolute rights, namely loss of property, there is, in principle, no claim under tort law (Section 823 or Section 1004 BGB). According to German legal doctrine, an exception is made only where there is an immediate interference aimed at the business itself (betriebsbezogener Eingriff).¹¹¹ This will usually not apply to the situations described above because the destruction of natural resources resulting from the behaviour of big polluters, such as fossil fuel companies, is not directed against specific enterprises. This approach is, as mentioned, rather specific to Germanic legal systems as Roman law tradition does not follow such a narrow concept. Rather, it is sufficient for plaintiffs to show a personal and actual interest in the claim to have standing.¹¹²

Firstly, there are the legal issues of standing and admissibility. This concerns the question of whether such damage can be claimed at all and, since it cannot be pinned to an individual, who can make such a claim. The answer depends to a large degree on the applicable legal system, be it international law or, as is normal in tort litigation, national jurisdictions. The French Administrative Court has resolved this by giving NGOs access to justice for ecological damage, as long as their statutes of association concern environmental protection. ¹¹⁵

Secondly, there is the forensic question of assessing damages. Even if environmental damage is covered in principle in the applicable jurisdiction, it is much more problematic to evaluate the damage suffered. The value of ecosystems and other environmental intangibles is much harder to determine than when assessing the economic damage incurred by individuals. This problem, however, only arises in damage claims as it is not present in legal actions seeking the restoration of habitats, protection or adaptation.

International cases against corporate defendants initially raise the question of what is the applicable law. The answer to this question is usually national law since international liability regimes do not normally apply to private activities (for exceptions Chap. 5 ). National bodies of law, however, take very different approaches when it comes to standing in and admissibility of claims relating to pure environmental damage.

Some jurisdictions are rather progressive on the issue, as is illustrated by Burlington Resources v Republic of Ecuador.¹¹⁸ Burlington Resources had brought an expropriation claim before the International Centre for Settlement of Investment Disputes (ICSD), while Ecuador, in its counterclaim, argued that Burlington was liable for damage caused to the environment. In the end, Ecuador was awarded compensation of almost USD 39.2 million. In this case, Ecuadorian law was applicable as the damage occurred in Ecuador which, since 2008, gives constitutional rights to nature (Pachamama) and establishes a system of strict liability for environmental damage.¹¹⁹

Similarly, the recent advisory opinion of the Inter-American Court of Human Rights¹²⁰ explained that forests, rivers and seas, at least under this special legal framework, constitute protected juridical interests in themselves. A similar ruling was made by the Colombian court¹²¹ in the climate change decision mentioned above and essentially means that pure environmental damage is recoverable. These cases have not been concluded by monetary awards, so it remains unclear how the respective bodies will value the loss or determine what is appropriate compensation.

In the U.S., the tort of public nuisance is available and can be invoked by public entities such as municipalities/states and, under certain circumstances, by individuals. Under federal common law, a public nuisance is defined as an “unreasonable interference with a right common to the general public”.¹²² According to U.S. legal doctrine, a claim requires proof that a defendant’s activity unreasonably interfered with the use or enjoyment of a public right and thereby caused the public-at-large substantial and widespread harm.¹²³ Under those circumstances, damages can be claimed for the violation of common goods (parens patriae),¹²⁴ which may also cover pure environmental damage in some scenarios.¹²⁵

On the opposite side of the legal spectrum stands German tort law tradition, where the violation of collective goods, such as the environment, is traditionally a ‘blind spot’. As we have seen, German tort law only protects individual rights under Section 823(1) and Section 1004(1).¹²⁶ Specifically, environmental goods are not viewed as ‘other rights’ in the sense of Section 823(1) BGB.¹²⁷ ‘Ecological damage’, namely the actual damage to the environment as a collective legal good, is only covered by private environmental liability law if it simultaneously presents itself as a violation of individual legal goods. In the German system, a tort similar to the American public nuisance category does not exist. No parens patriae torts are available and the standing of municipalities and States in civil courts is limited to cases involving a violation of the respective entity’s property.

This situation is barely mitigated by the influence of European law even though Directive 2004/35/EC on environmental liability has been transposed through the German Environmental Damage Act (Umweltschadensgesetz, USchadG, Chap. 6 ¶ 62 (Sect. 6.​6.​1)). These laws are supposed to cover legal ‘blind spots’ regarding pure environmental damage, but the protection is incomplete and not designed to establish private liability. Firstly, there is no comprehensive protection as the act is expressly limited to damage to water, land and protected species and habitats. It does not cover air/climate and is, therefore, far from being a comprehensive tool for climate protection.¹²⁸

Furthermore, existent European and German law dealing with environmental damage does little to address the fact that there is no established right to address private companies directly and claim damages. Redress is currently limited to preventive and remedial measures (Sanierungsmaßnahmen, Section 8 USchadG, Article 7 Directive 2004/35/EC) that can only be ordered by the competent national authority at the operator’s expenses (Section 9 USchadG, Article 7 Directive 2004/35/EC), establishing a public rather than private law regime.¹²⁹ As for standing, only environmental NGOs can request a competent authority to take action (Articles 12, 13 Directive 2004/35/EC, Sections 10, 11 USchadG). Individuals only have standing if they can show there has been a violation of their individual rights.

All in all, the admissibility of damage claims seeking compensation or mitigation for pure environmental damage will, in most cases, depend decisively on the regulations of the national legal system. Approaches to remedy this issue have been discussed in Chap. 6 and shall not be repeated here.

Looking at the RWE case (¶ 34 et seq) one may ask, however, if this prevents systemically effective litigation overall. In the RWE case, the adaptation request for protective measures to be taken against the risks posed by glacial meltwater is based on Luciano Lluiya’s property. If implemented, the city of Huaraz, as well as the watercourse that connects the current glacial lake to the city, and the ecosystem there would be protected. One could therefore argue that this issue, or hurdle to claims, is less prevalent in adaptation claims.

Regardless of such questions as to the calculation of compensation, the underlying premise of limiting reparations for pure environmental damage to compensation for economically taxed services has been criticised as insufficient in literature¹³⁵ and even within the ICJ.¹³⁶ Equitable considerations should play a greater role and lead to higher damages.¹³⁷ Indeed, in his dissenting opinion, Judge Dugard argued that other factors had to be taken into account, namely the contribution of deforestation to climate change and the gravity of a State’s violation of international law.¹³⁸ Judge Bhandari gave a separate opinion arguing that a precautionary approach should be factored in and even considered punitive or exemplary damages, awards that would have been unprecedented in international law.¹³⁹

The same evaluation problems, namely the role of equitable considerations, arise under national tort law. In the Ecuadorian Burlington Resources case, the ICSD—similar to the ICJ—found compensation to be the (sole) appropriate remedy, applying Ecuadorian law.¹⁴⁰ However, the calculation of damages can vary considerably from State to State. This is evident from the fact that some jurisdictions, most prominently U.S.A., award punitive damages as a deterrent while other States strictly reject this concept. For example, punitive damages are not enforceable under German law¹⁴¹ and immaterial damages can only be recovered where the law explicitly provides for it (Section 253(1) BGB), and there is no such provision for pure environmental damage. In a national setting, the loss of ecosystems could be quantifiable in a similar manner as the loss of forests and even single trees. Under German law, a particular method for quantifying damage to trees and forests has been sanctioned by the Federal Civil Court.¹⁴² The ‘Koch Method’ is, however, a procedure used to assess the economic value of a given tree based on the value-of-the-object proceedings (Sachwertverfahren). What is done essentially is (1) establishing the costs of planting a young tree, (2) adding the costs to grow the tree to the destroyed tree’s size, (3) adding a reasonable amount of interest to those costs and, if necessary, (4) subtracting the loss of value due to advanced age or damage on the destroyed tree.¹⁴³ This kind of method works well for economic assets and the like but is not feasible when dealing with the loss of intangibles such as culture or home (e.g., if Pacific Islands disappear). This issue is not resolved in human rights petitions, such as that presented by Torres Strait Islanders against Australia to the UN Human Rights Committee of the United Nations, since the cultural and ecological damage does not need to be quantified in this setting.

European environmental damage legislation, as laid down in the USchadG and Directive 2004/35/EC, are designed to facilitate restitution and compensation in natura. Annex II, no.1.1 of the Directive provides for the following remedial measures: Firstly, there should be primary remediation (i.e., restitution)., however, if full restoration by primary remediation is not successful, complementary remediation elsewhere is owed. For the interim loss of natural resources and services pending recovery, compensatory remediation is owed; however, this compensation does not entail financial compensation to the public but improvements to habitats at the damaged site or another site. Thus, European environmental damage law avoids forensic problems, at least insofar as it does not need to quantify environmental damage in monetary terms.

Overall, it appears that any liability claim for pure ecological loss caused by climate change would force a civil court to develop a new method for evaluation if such damage was covered by the court’s national jurisdiction.

Climate liability cases raise the question of the relationship between scientific and legal concepts of causality. Legal causation is not the same as scientific causation but is heavily normative: causation in the scientific sense, using the but-for test or condition sine qua non, does not necessarily lead to legal liability due to certain normative corrections.¹⁴⁴ Conversely, in the context of climate change liability, the question has to be posed to what extent the strict but-for causation can be relaxed in face of the fact that in climate research, often only probabilistic statements are possible.

We will approach these causation issues by differentiating two questions or stages of arguing causation: Firstly, it is necessary to establish sufficient contributory causation between climate change and a defendant’s conduct.¹⁴⁵ Secondly, there is the more complicated issue of tracing certain natural weather events or trends to climate change (‘detection and attribution’) and the problem of how to deal with probabilistic causation. As set out in more detail below (¶ 112 et seq), the problems described in this section will not arise in all cases involving private liability actions, but are essentially limited to litigation seeking compensation or adaptation whereas they are completely irrelevant in ‘mitigation’ cases, such as the Shell case.

The simple fact that the effects of a certain activity occur far away is not problematic as such.¹⁴⁶ However, it becomes increasingly difficult to prove that the tortfeasor’s behaviour caused or contributed to specific damage as the distance increases. In the German forest damage (acid rain) case, for example, the German Federal Court (BGH) found that plaintiffs had not established a sufficient causal link because the defendants’ emission contributions were mixed indistinguishably with those of other emitters and one emitter’s pollution could not be traced to the damage incurred by a specific forest owner.¹⁴⁷ However, this ruling was largely a product of the fact that the SO2-emissions relevant to this case stay at relatively low altitudes and are, therefore, subject to the wind and not dispersed homogenously.¹⁴⁸ Under such circumstances, the difficulty of establishing a causal link grows proportionately with the distance from the alleged source.

The causal nexus between a single company’s GHG emissions and climate change is much clearer because GHG emissions disperse homogenously in the atmosphere.¹⁴⁹ Therefore, the following stages of causation can be identified:

This causal chain of contributory causation was accepted as legally conclusive by the Court of Appeals in Hamm in the Lliuya case, and is now being tested on the merits.¹⁵⁰ It was also explicitly accepted by the courts in the Urgenda case and implicitly by the Paris Administrative Court.¹⁵¹

The second issue in attributing climate change loss and damage to individual polluters is that there are many emitters and, only when they are taken together, do they cause climate change (‘concurrent causation’).¹⁵² From the viewpoint of the but-for test of contributory causation, this is not a problem. Since each emission leads to a higher density of GHG in the atmosphere, all emissions contribute equally to global warming regardless of where they occur.¹⁵³ Thus, a causal link to a defendant’s emissions can be established, provided the weather event itself can be traced to anthropogenic climate change (¶ 100 et seq). A defence submitting that a certain molecule of CO2 may have been absorbed by oceans or forests would be inadmissible because the overall effect of contribution remains the same.

Making such a contribution to damage is sufficient to establish liability according to both German¹⁵⁴ and U.S.¹⁵⁵ jurisprudence. There is, however, the issue of adequacy or minimal causation: small emitters, such as individual consumers and small enterprises, are not legally liable because their contribution to climate change damage is negligible and falls under the de minimis threshold. A polluter’s contribution to anthropogenic climate change must therefore be measurable¹⁵⁶ in the sense that it must be responsible for a quantifiable share of the anthropogenically-generated CO2 accumulated in the atmosphere. Where exactly the threshold limit is set will be a matter for national law or the court in each given case.

If a significant contribution is established, it would be possible to apply principles of joint and several liability in principle. However, for climate change in particular, it has been proposed that an emitter is only liable for its share since assigning liability for all the damage, as would be the result of joint and several liability, would be excessive.¹⁵⁷ This may be different when holding States accountable for ecological damage, as discussed by Epstein and Deckert,¹⁵⁸ but it is in line with the principle that whenever an emitter’s share of total damage can be determined, it is liable for this share.¹⁵⁹ The RWE case follows this latter approach, while U.S. tort cases currently brought by municipalities follow the former. In any event, it is essential to specify the emitter’s contribution to climate change to both establish liability (i.e., the de minimis threshold has been exceeded) and to define the defendant’s share. For this task, Heede has laid the groundwork in the Carbon Majors Study,¹⁶⁰ which determines the emission share of the biggest GHG polluters. The data is regularly updated¹⁶¹ and can be used in court to determine a defendant’s portion of liability. This is being done in the Lliuya case where, according to the Carbon Majors Study, the emission share of RWE is 0.47% and this figure is being used to give the court a basis for estimating, under Section 287 of the German Civil Code, RWE’s share of the costs to install protective measures. The Carbon Majors Study is also being used in the pending U.S. cases referred to above and in the ongoing Shell case in the Netherlands. Its validity has been criticised by defendants and not yet been clarified by courts. Yet, at least in jurisdictions with disclosure rules, it should be possible to excise sufficient information about the actual emissions of a defendant in a particular case.

As it is feasible to determine emission shares, it is not necessary to resort to market or pollution share liability concepts as used in earlier high-profile U.S. cases involving tobacco and asbestos companies. This is because, in essence, those earlier concepts dealt with alternative causation.¹⁶² Those approaches may, however, prove useful in other environmental liability cases relating to air pollution, such as the aforementioned forest damage cases.

All in all, proving and quantifying big emitters’ causal contribution to climate change should be possible if courts approach the issue in the same way the Higher Regional Court in Hamm has in the RWE case. Some issues regarding the determination of individual emitters’ contributions remain, such as the question of which time frame of emissions may have to be considered,¹⁶³ especially in cases of fault-based liability.

For ‘slow-onset events’, the causal chain is scientifically clear in the sense of the conditio-sine-qua-non formula and contributory causation.¹⁶⁶ Climate science can even attribute a percentage of temperature and sea-level rise to the ‘carbon majors’. Moreover, it can differentiate between historical (pre-1980) and recent (i.e., 1980–2010) emissions. For example, according to recent studies, 26–32% of sea-level rise is attributable to historical emissions, and 11–14% to recent emissions.¹⁶⁷

The attribution of ‘extreme weather events’ is more difficult as it currently seems only possible to give statements of probability.¹⁶⁸ It is all but impossible to rule out that a single event would not have occurred without anthropogenic climate change. However, climate science has made rapid progress in the field of probabilistic attribution so that, according to an editorial in Nature magazine, “pinning extreme weather on climate change is now routine and reliable science”.¹⁶⁹ Therefore, proving the chain of causation in climate change litigation regarding extreme weather events becomes increasingly possible.¹⁷⁰

Attribution science is about determining the statistical significance of anthropogenic climate change on the probability or magnitude of a particular weather event.¹⁷¹ In recent years, it has become increasingly accurate and is now able to quantify the increased probability for single events, such as heat waves. For example, researchers have found that anthropogenic climate change tripled the likelihood of the three-year drought in South Africa that lasted until 2018. Beyond probabilistic statements, in 2017 attribution-science studies claimed, for the first time, that three extreme weather events would not have occurred at all without anthropogenic climate change.¹⁷²

However, such definite statements are rare and may remain the exception, depending on the questions that courts ask.¹⁷³ Therefore, the chances of successful climate liability litigation regarding extreme weather events largely depend on the question of whether and to what extent probabilistic and statistical attribution is sufficient to establish legal causation. This depends, once more, on the national jurisdiction and its relevant rules regarding the burden and standard of proof, which are, more often than not, not anchored in statutory law but rather set by jurisprudence on a case-by-case basis. While the burden of proof determines who must prove causation, the standard of proof determines the necessary degree of certainty about the causal chain, both aspects are briefly detailed below.

Firstly, this is the case where explicitly provided by law. For example, Section 6 of the German Environmental Liability Act (UmwHG) provides a legal presumption of causation regarding damage allegedly incurred by the operation of an industrial plant. A plaintiff only has to show that a defendant’s plant is likely to have caused the damage according to the circumstances of the individual case. If the plaintiff is successful, the burden of proof shifts to the defendant who then has to prove that the plant did not cause the damage. Since a plaintiff must only prove the substantial probability of causation within the scope of Section 6 UmwHG,¹⁷⁴ he or she can rely on studies that show statistical probabilities and many authors, when considering this scenario, have pointed to epidemiological studies.¹⁷⁵ This approach may also apply to the findings of climate change attribution science,¹⁷⁶ although Section 6 UmwHG has not yet been used to establish climate change liability, probably because the Section refers to single industrial facilities. However, the fact that the plant could not have caused the damage or weather event by itself, but only in combination with other factors, does not hinder the legal presumption of causation.¹⁷⁷

Secondly, German courts reverse the burden of proof where there is a violation of a legal duty to take safety precautions, such as that to refrain from unnecessary emissions.¹⁷⁸ A violation of a general duty of care under tort law to minimise dangers for the general public that result from a certain activity (Verkehrssicherungspflicht) is sufficient for this reversal to be enacted.¹⁷⁹ If a duty of care is breached, it is assumed that the same activity caused the damage. A duty of care to refrain from GHG emissions, or at least minimise them as much as possible, has already been assumed by the district court in the Shell case and such duties will be discussed in detail below (¶ 139 et seq). The legal assumption of causation following a breach of duty, however, does not necessarily help to establish liability because it is not the emitter's contribution to climate change that is unclear (see above) but whether the specific weather event was caused by climate change. In the RWE case, the plaintiff suggested that statements made in IPCC reports may establish prima facie facts which could result in a reversal of the burden of proof. Neither court in the RWE case has made a finding as to this assumption to date.

There is also a new and elaborate proposition to establish a ‘matrix of causation’ that takes into account not only necessity and sufficiency but also ‘sustenance’ as a new element of causation.¹⁸⁴ Sustenance in this context means the capacity of a factor to protect or maintain an effect despite certain structural changes in a model, which opens up the concept of causation to capture general trends.¹⁸⁵

Employing a more relaxed standard of proof deals with probabilistic evidence in a way that does not affect the ‘all or nothing principle’ of full compensation. Another approach is probabilistic-proportional liability, which establishes liability in proportion to an increase of risk and has been discussed in Germany in the context of environmental liability since the 1990s.¹⁸⁶ For example, if the risk of a flood or drought was increased by 50% by anthropogenic climate change, the tortfeasors can be held accountable for 50% of the resultant damage. Such probabilistic solutions have been promoted in the context of climate change tort litigation¹⁸⁷ because, especially from an economic analysis of the law perspective, the ‘all or nothing principle’ tends to be economically inefficient. Probabilistic concepts have already been applied in medical law in France and Belgium under the perte-d’une-chance theory¹⁸⁸ and in the U.S. in cases involving the negligent failure to reduce a risk.¹⁸⁹ Similarly, in a class action claiming damages for cancer allegedly resulting from the use of Agent Orange in the Vietnam war, the court proposed a settlement sum based on the increased probability of those exposed to the chemical getting cancer.¹⁹⁰ Transferred to climate change litigation, private liability for damage caused by extreme weather events could be summed up as follows: “Liability is apportioned among tort defendants based on the percentage by which anthropogenic influences contributes to the risk of harm, and further divided based on each plaintiff's share of the GHG ‘market’.”¹⁹¹

While some jurisdictions are open to relaxed standards of proof and probabilistic concepts, this does not yet apply to the German legal system, at least according to the dominant legal doctrine.¹⁹² However, Section 287 of the ZPO authorises a court to rule based on estimates. Some authors claim that the provision relaxes the standard of proof only regarding the legal consequences, namely the amount of damages or the contribution payable by a single tortfeasor for damage, but that it cannot be applied to the question of whether an action has contributed to a specific event.¹⁹³ However, this view is controversial since it is clear that, in both climate and medical cases, the evidential problems are similar and closely linked.¹⁹⁴ This issue remains controversial in the RWE case, with the plaintiff arguing that even if the exact percentage contribution to warming cannot be determined, the court is enabled, under Section 287 ZPO, to estimate the extent of RWE’s contribution to the risk of a flood in the concrete circumstances.¹⁹⁵

Under the dominant German legal doctrine, there is only a relatively relaxed standard of proof concerning the ‘typical course of events’. Such prima facie proof (Anscheinsbeweis) is, for example, applied in cases of severe medical malpractice.¹⁹⁶ Since this method has been developed for uniform events and ‘everyday life experiences’, its application to extreme weather events has been rejected in literature.¹⁹⁷ However, also under German law, there is still some room for judges to develop rules regarding the burden and standard of proof in the context of liability for extreme weather events. A practical and reasonable point of reference would be the probability of the event itself: a court could reverse the burden of proof or at least accept prima facie proof regarding damage caused by weather events that would have been extremely unlikely to occur in the absence of anthropogenic climate change. As noted above, IPCC statements have been argued to be prima facie truth in the RWE case.

The legal and forensic problems described above only fully present themselves with regard to claims for damages, such as in the Kivalina case (¶ 27 et seq). They are present in such cases because, when claiming damages, it is necessary both to substantiate the damage suffered, which may potentially lead to forensic problems in assessing the damage, and to prove a causal link between the concrete damage (e.g. the destroyed house) and the harmful event (e.g. the flood or storm).

Those issues can, at least partially, be avoided in claims seeking protection against risk rather than compensation for damage incurred. As previously suggested above, these non-compensation types of actions can be divided into three categories. Following the terminology of international climate change law, there are claims for (1) adaptation (i.e., protection against consequences of climate change, ¶ 114 et seq) and (2) mitigation (i.e., reducing and preventing further climate change, ¶ 117 et seq). Also pertinent to the issue of this study are (3) ’investor actions’ claiming a loss of company value due to a failure to adapt business models (¶ 120 et seq), however, these fall outside of the climate regime’s remit and relate to risks or damage to a company, resulting from a failure or delay in adopting adaptation or mitigation measures.

Regarding causation, there is no need to prove that anthropogenic climate change caused a singular weather event. This is because protection measures are, by definition, preventive and it is sufficient to prove that the applicant’s protected legal interests, such as his or her property, are concretely endangered as a result of anthropogenic climate change.¹⁹⁸ He or she must show that climate change has significantly increased the personal risk of becoming a victim of floods, storms and the like, so that protective measures are warranted. Because risk is the reference point, there is no need to establish a causal link to a specific weather event in the past. This can draw on precedent in U.S. medical law, where plaintiffs have successfully claimed costs of ongoing monitoring that is necessary because of an increased likelihood of latent damage; the same argument can be used in the context of climate change litigation with regards to an increased probability of extreme weather events.¹⁹⁹

Irrespective of the details, such constellations avoid the bulk of the legal and forensic problems because actions for injunctive relief are more ‘abstract’ than actions for protective measures. Plaintiffs are not claiming individual protective measures or damages and, as such, there is no need to determine a specific causal contribution to a concrete infringement. Rather, the situation corresponds to climate change litigation against States, where plaintiffs also demand policies that effectively reduce emissions. Consequently, only a more general causal chain between the defendant’s conduct, global warming and resulting risks must be shown.²⁰⁰ This avoids both forensic problems in proving causation and the need to assess damage.

A different and purely legal question is whether individuals have standing to bring actions for injunctive relief. This issue did not present itself in the Shell or the TOTAL cases because the plaintiffs there were NGOs. Individual standing may be called into doubt because plaintiffs demand measures that effectively not only serve to protect their own legal interests. They do not (only) demand the protection of their property, but a general change in company policy benefitting society at large. The question is, in other words, if there is standing for individuals only regarding adaptation or if this extends to mitigation. The answer is that mitigation is included because there is a specific need for legal protection in either constellation. Plaintiffs assert different risks to their individual rights: protective measures help with regard to concrete risks that are already unavoidable (adaptation), while injunctive relief seeks protection against risks that can still be minimised or avoided (mitigation). This is the basis of the many statutory and constitutional applications around the world directed against States which, in short, operate on the premise that better climate change mitigation protects both individual rights and the world at large.

This economic interest is also the reference point of causality.²⁰¹ Plaintiffs do not need to prove a causal link between a company’s behaviour and climate change loss and damage. Rather, shareholders must show that a company’s lack of mitigation or adaptation to climate change poses a financial risk to the company itself because the business model is not sustainable given its incompatibility with the reduction goals of the Paris Agreement.

As we have seen, the severity of legal and forensic problems associated with climate change litigation depend largely on the remedy sought. While actions seeking protection against risks can avoid many problems, claiming damages and compensation remains problematic.

Here, in the absence of a specific legal framework, the outcome of climate change litigation is rather unpredictable. As discussed above, much depends on the specifics of the national jurisdiction under which a proceeding takes place, nevertheless, uncertainties and risks persist for both plaintiffs and defendants. As climate change progresses and the once theoretical risks materialise into realities all over the world, it becomes increasingly likely that at least some courts will assign liability. It is, therefore, also in the interest of companies to have legal certainty as to the scope of their liability. To meaningfully explore some options of how this could be achieved, we will turn to a specific proposal.

In Canada, an independent law centre drafted a “Model Climate Compensation Act” (MCCA)²⁰² that aims to tackle the risks and uncertainties of climate change litigation against major emitters that are defined in Article 8 MCCA. The MCCA proposes rules for national jurisdictions as litigation is based on national tort law regimes and the implementation of liability standards seems more realistically achievable at the national as opposed to the international level.

The MCCA applies a nuisance approach that is restricted to major emitters and provides primarily procedural rules. While it deals with a variety of problems of climate change litigation, we will focus our examination of the MCCA on the issues discussed above and look at proposals regarding standing as well as compensable damage and causation. We will also introduce the idea of funds and/or insurance schemes that would make financial risks more calculable for emitters.

The MCCA also establishes parens patriae jurisdiction for State and local governments in its Article 5 and Article 6. This provides governments with extensive rights to bring claims for damages based on damage to public infrastructure, increased public health costs, harm to the natural environment and so forth. This would be a significant step forward for States, such as Germany, which do not know parens patriae standing, thus excluding local governments from bringing liability actions in the public interest and the interest of their citizens.

The MCCA does not reverse the burden of proof regarding causation, however, Article 10 (1) MCCA emphasises that courts have to take into account statistical evidence and Article 10(2) and (3) MCCA refer to the “balance of probabilities” or “doubling of the risk” standard of proof. Though this is already the standard in the U.S. and UK, such a rule would be a considerable step forward in the German legal system that relies on the ‘no reasonable doubt’ standard (¶ 108 et seq).

According to Article 16(1) MCCA, a major emitter that holds an acceptable insurance is not liable for damages covered by the policy. The scope and conditions of this insurance would be determined for each fund by its respective national government. Emitters could then purchase this insurance and the money would go into the Climate Compensation Fund (CCF), Article 16(6), Article 11 MCCA. In the event of extreme weather events that meet certain criteria (“triggers”), the policy would require a payment of funds into the CCF, which in turn would compensate victims.²⁰⁸

Beyond the voluntary approach of the MCCA, the compulsory financing of a fund by big emitters is also worth considering. Under such an approach, such companies would be legally obliged to pay a premium into the fund proportionate to their emission share (e.g., as a surcharge on emission certificates). In Germany, the implementation of such a concept would be legally possible as special taxes to finance certain tasks (Finanzierungssonderabgabe) are constitutional where there is a special financial responsibility for said task. Such responsibility exists, inter alia, regarding risks that are inherent to the professional activities of those being taxed. For example, banks can be forced to contribute to funds designed to protect citizens against the risk of financial crises²⁰⁹ and sewage sludge producers can be obligated to pay into a fund designed to compensate for damage stemming from sludge production.²¹⁰

Regardless of the particular design, the challenges of any climate-liability fund are defining the triggers and thresholds that give rise to claims against the fund. This requires defining under which circumstances, particularly to what degree of probability, can loss and damage be considered climate change induced. Other problems include the amount, distribution and modalities of compensation.²¹¹ In determining the compensation amount and its distribution, legislators could employ innovative concepts such as probabilistic-proportionate liability (¶ 110). It needs to be stated clearly, however, that the MCCA only deals with the consequences of past and ongoing emissions as partial contributors to climate change damage and, even then, this is only done so with regard to the compensatory dimension of liability. With respect to the preventive dimension, no resolution is offered by the MCCA as it does not tackle the issue of mitigation commitments or reduction pathways.

In the Shell case (¶ 41 et seq), the district court held that Shell has an independent duty of care to align its business model with the targets of the Paris Agreement and has until 2030 to reduce its CO2 emissions by 45% from its 2019 level.²¹² Taking a closer look at the court’s reasoning, we consider that it is based on general legal tort and human rights principles and is, therefore, transferable to other jurisdictions, though it ultimately depends on the case-by-case development of such duties by the judiciary.

Article 6:162 of the Dutch Civil Code is similar to Section 823 of the German BGB and represents an old concept of tort law. The positive social duty of care is an open and dynamic legal standard. Its existence and content with regard to a specific behaviour is the result of a balancing of interests in a specific context that calls for an assessment of all circumstances of the case in question.²¹⁴ As already mentioned (¶ 41 et seq), the same provision was used in the Urgenda case to establish the Dutch government’s duty of care. In the case against Shell, the court included 14 factors in its interpretation, essentially dealing with the following issues:²¹⁵

As for human rights, the District Court first cited the well-known dangers that climate change poses to the inhabitants of the Netherlands, particularly the results of rising sea levels. The court referred to the Urgenda judgments, holding that climate change threatens the rights to life, privacy and family as enshrined in Article 2 and Article 8 ECHR.²¹⁶ It then invoked the indirect horizontal effects of human rights. While the ECHR does not directly bind private corporations, it is accepted that its fundamental guarantees are, indirectly, relevant to interpreting private law in general and open legal standards and general clauses (i.e., in the case at hand, Article 6:162 of the Dutch Civil Code) in particular.²¹⁷

The court then turned to the task of concretising the extent of Shell’s duty of care, referring to the expectations of science and society. The judgment establishes an “international consensus”, which derives from international hard and soft law as well as the findings of climate science. The expectation that and how enterprises have to respect human rights is drawn from international soft law standards, particularly from the UN Guiding Principles on Business and Human Rights (UNGPs).²¹⁸ Even though these standards are non-binding, they are internationally endorsed, which allowed the court to correctly, but nevertheless courageously, refer to them when defining societal expectation in this regard. The standards of the UNGPs are particularly used to establish responsibility for emissions in supply chains (Scope 3).²¹⁹ As for the temperature targets and reduction pathways, the court invoked the Paris Agreement and the findings of organisations such as the IPCC and the International Energy Agency (IEA).²²⁰ The court deemed that, in the light of the dangers to human rights, Shell’s longstanding knowledge about climate change as well as the foreseeability of further damage, the considerable inconveniences of restructuring its business to bring it in line with current scientific knowledge and the goals of the Paris Agreement could not be considered disproportionate.²²¹

Since Shell’s emissions are governed by the European ETS, which would allow for more emissions than permitted according to the tort law standard as applied by the court, the court also had to decide on the question of the relationship between private law and public law as discussed above (¶ 18 et seq). It did so quite briefly, only stating that Shell’s obligation was independent of the State’s regulatory responsibility. As the social duty of care constituted a minimum of protection under private law, this threshold could not be further lowered by State regulation, or a lack thereof.²²²

The main difference between past injunction type cases, such as American Electric Power (¶ 24 et seq), and possible approaches today is the timeframe and the clarity of the result that needs to be achieved to protect both global climate as well as the legal interests, rights and indeed, the lives of millions of humans around the world. Today’s duties under tort or nuisance type claims would be directed forward in time, not backwards. The issue is no longer whether a company foresaw or could have foreseen the impacts of climate change throughout its history of producing emissions, though such knowledge will still be relevant when evaluating the proportionality of the imposition of mitigation duties. The question is to what extent each major emitter today has a duty to protect and reduce the risks associated with climate change as much as possible to achieve a level of protection that is objectively necessary and has been legally agreed upon in the Paris Agreement. Even if the Paris Agreement was to be disregarded as an international legal standard,²²³ the IPCC’s findings are more than clear about the world having to reduce emissions drastically to protect lives and ecosystems worldwide as there are big differences in the outcomes of “well below 2°C” or 1.5 °C warming, and other scenarios.

Today, we know that we essentially have 10 years to reduce emissions drastically and get to GHG neutrality as quickly as possible. This is highlighted in a current paper by some of the key scientists involved in IPCC projections modelled on reduction pledges versus the necessities of the global GHG budget.²²⁴ At the time that some of the cases discussed above (¶ 21 et seq) were brought to the attention of courts, the discussion was still very much focused on State obligations and relatively long timeframes. In 2010, science and the global public, including political and business leaders had reason to believe that the world still had about 30 years to only halve global emissions of GHGs from their pre-industrial levels. Given the fact that emissions have continued to increase dramatically, this is no longer scientifically viable. In fact, to keep within the agreed temperature target of the Paris agreement, reduction pathways must be very steep and immediate. The graph below displays this dilemma only concerning short-term targets, 2020 and 2030. It relates to time frames from the international climate regime and while, for example, the Paris agreement of 2015 may not be directly applicable to private entities’ duties with respect to preventing climate change, the graph clearly shows that there is very little time for global emissions to move towards GHG neutrality to avoid catastrophic future global-climate outcomes. The emissions gap, that is the gap between current policies all over the world and what actually needs to be done to reach the 2 °C target, as seen in Fig. 8.1 below, is already large, grows annually as emissions continue to rise and result in increasingly difficult to achieve pathways to reach the agreed-upon goals.

In our view, this can guide the interpretation of legal requirements in the context of tort provisions, particularly concerning standards of negligence. If it is true that the overlap of State and private legal duties with regards to mitigation (i.e., reducing emissions of GHG) does not lead to an exclusion of duties of private entities (¶ 48 et seq), it is sound to argue that a duty of care exists with respect to every large emitter, meaning the Shell case is something of a precursor. If a private actor is causing and contributing to a certain and identifiable risk, the majority of jurisdictions would deduct from such knowledge a certain independent duty to prevent such risk insofar as this is possible.

For example,²²⁵ the existence of social duties of care is well established in German tort law (Section 823(1) BGB). According to German legal doctrine, a person who creates or causes a risk to persist in his or her area of responsibility must take all reasonable measures and precautions to prevent harm to others (Verkehrssicherungspflicht).²²⁶ The existence and extent of a duty to avoid unreasonable dangers emerging from a certain behaviour essentially depend on the same factors that are discussed in the Shell case; the gravity, probability and foreseeability of the danger have to be weighed against the costs and inconveniences of countermeasures.²²⁷ As in the Shell case, this standard of care is flexible, dynamic and intensifies as scientific knowledge and technology advance, which together providing a better understanding of the risks and enhanced technical options to address them. It is acknowledged under both Dutch case law and German legal doctrine that the mere lack of legislation, or in this instance, a prohibition on emitting GHGs, does not preclude a duty of care for private entities, especially in the context of Section 14 BImSchG (¶ 38). Existing public law obligations constitute a minimum duty of care, but they are not exhaustive.²²⁸

Considering the progression and intensification of climate change-related damage, a corporate duty of care is also becoming increasingly evident from a human rights perspective. The disastrous consequences of further inaction for fundamental and human rights have an impact on the duties of big polluters, since those basic rights, though not directly binding private entities, are relevant to the interpretation of civil law. In Germany, for example, the legal relevance of the basic rights guaranteed under the German Basic Law for the interpretation of private law has been accepted by the German Constitutional Court since the 1950s.²²⁹ This approach follows the idea that fundamental and human rights are threatened today not only by State decisions and actions, but to a similar extent by those of private entities. Considering that a single private company, such as Shell, produces as much or more emissions than entire industrialised countries and is, therefore, a danger to fundamental and human rights, the indirect horizontal effects of human and basic rights clearly support the emergence of corporate duties of care.

Finally, there is now consensus as to what the minimum level of protection may look like given that the reduction targets set out in the Paris Agreement express global consensus and make it possible, for the first time, to define the obligations of companies in concrete terms.²³⁰ Compared to the present and impending losses of property, health etc., the costs of adapting business models to the Paris Agreement can hardly be a decisive factor.²³¹ Moreover, adaptation will be necessary anyway, as is argued in financial actions brought by investors (¶ 162 et seq), and an early start to the process is likely to reduce the associated costs in the long run.

This essentially leads to the social duty of care argued and applied in the Shell case and we would venture to argue that such a duty could be established for other significant emitters. Insofar as a particular emitter has control over its emissions, it flows from the duty to counter known risks, meaning that a reduction pathway leading to GHG neutrality would have to be pursued. In the Shell case, the court deemed that not only must a reduction pathway lead to this overall goal but, because of the company's unique control over the extraction of oil, the need to restrict emissions quickly and the realities of the global carbon budget, there are also identifiable targets that should be met between now and 2050, the specific date set to reach GHG neutrality.

Here, in our view, the standard of care of large private entities could merge entirely with the duties of States and human rights regimes or in the context of the implementation of international climate agreements and targets. In principle, this applies regardless of different legal approaches used to define State duties. For example, the German Constitutional Court’s argument that the remaining CO2 budget available under the Paris Agreement must not be used up prematurely at the expense of future freedoms and generations (¶ 8) could also be applied to private corporations. A duty of care would then demand that a company does not consume more than its fair share of the remaining budget.

In essence, the standard of care applied by a court would be a duty of conduct corresponding to universally accepted risk-reducing measures in the context of negligence statutes or provisions in civil codes or environmental liability provisions. The duty of conduct would arise regardless of whether or not one company’s following a reduction pathway would actually avert damage. This issue was treated at length in the Urgenda judgments where the courts unanimously ruled that no single emitter, in this instance the Dutch State, could nullify its own duty of care because other States violate their duties as well.²³² The German Federal Constitutional Court concurred with the reasoning of the Dutch courts.²³³ The argument that there are many other tortfeasors has also been rejected by the District Court in the Shell case as well as the court of 2nd instance in the RWE case in Germany. This is the logical consequence of a phenomenon such as climate change that is caused by cumulative emissions from various sources and processes: the nature of cumulative pollution is that taking away one contribution does not solve the whole problem.

It should be emphasised that the duty of care described here is directed at an enterprise’s own conduct and therefore does not rely on the attribution of or responsibility for the conduct of other companies. The latter may be achieved by statutory duties, such as the one underlying the TOTAL case described above (¶ 47). While statutory duties may be generally desirable, the line of argument in the Shell case is independent of legislative action and de lege lata. What can be said, however, is that it would be plausible to argue that there are climate change-related due diligence obligations both under the existing French code described in Chap. 7 and the newly introduced Supply Chain Act in Germany.²³⁴ Given the human rights implications of climate change, it seems somewhat inevitable that a due diligence obligation with procedural and substantive obligations for companies would arise, with the cumulative nature of climate change only creating a challenge for their implementation.

What requires further research is the corporate law argument against setting parameters for management and board decisions in this context. Amongst other issues, such research would help clarify if a defence argument is permissible which rests, at least in principle, on fiduciary duty and shareholder expectation?²³⁵

Finally, we briefly look at alternative and complementary approaches to define the positive duties of corporations to mitigate the effects of or adapt their business models to the reality of climate change. These approaches can serve as the basis for both an improved definition of management duties under corporate law and for a statutory provision, with the possibility of even extending into the field of due diligence obligations.

In contrast to the MCCA discussed above (¶ 123 et seq), the Enterprise Principles do not deal with compensation as they are focused purely on prevention,²⁴⁰ as such, they are not intended to address in any way the litigation problems described above (¶ 55 et seq). Having said that, they do define corporate duties whose violation would give rise to liability claims in civil courts and, according to the authors, the threat of liability serves as an important incentive for corporations to align with the Enterprise Principles.²⁴¹

The Enterprise Principles follow a different approach to defining a duty of care than was taken by the court in the Shell case. The Enterprise Principles are the counterpart to the Oslo Principles²⁴² that aim to define countries’ legal obligations regarding climate change. The basic idea of the Oslo Principles was that a global GHG budget could be divided among the globe’s countries on a per capita basis.²⁴³ The Enterprise Principles built on this by aligning corporate obligations with their respective countries’ obligations as stipulated under the Oslo principles. This is laid down in detail in principles 2–16 concerning GHG reduction obligations of corporations. The GHG budgets developed for States are also applied to corporations because, as was discussed under the heading “Duty Overlap” in (¶ 18 et seq), GHG emissions are primarily produced by corporations within a given country (principle 2).²⁴⁴ The Enterprise Principles seek to go beyond just the problems associated with Scope 1,2 and 3 emissions, i.e. emissions not only from a production facility in a certain country (Scope 1) but all emissions associated with the facility and production along the value chain (Scope 2 and 3).

The approach to defining corporate duties followed by the Enterprise Principles is, on the one hand, less straightforward than the line of argument in the Shell case. Rather than tying corporate behaviour to the reduction goals of the Paris Agreement (especially CO2 neutrality by 2050), the Enterprise Principles define corporate obligations depending on the CO2 budget of the country they are located in. This complicates defining duties of care regarding multinational corporations (cf. Principle 5). Conversely, the principles offer a variety of very concrete actions corporations would have to take to comply with their duty of care. This is not limited to reduction obligations but extends to obligations to consider GHG emissions when choosing suppliers (principle 17), the obligations of investors and financiers (principles 25–30) as well as required disclosures and other obligations owed to regulators, the public and shareholders (principles 18–24).²⁴⁵ This introduces another perspective on corporate duties, namely the duty to avert financial risks in the interest of the company itself and, ultimately, its shareholders.

In Germany, there have been no similar court cases to date, however, there have been many attempts to operationalise the duty to do business while protecting the climate, for example, by using indicators. The start-up “right.based on science” has published a study evaluating the effectiveness of the German stock market’s 30 largest companies’ climate targets.²⁴⁹ The evaluation is based on the economic climate impact model X-Degree Compatibility Model (XDC)²⁵⁰ and is intended to help external stakeholders, shareholders, owners, investors and would-be investors assess companies according to the climate-related sustainability of their business plans.²⁵¹ The report compares a baseline scenario, in which companies do not alter their behaviour at all, to a second scenario in which companies reach their respective current climate targets.²⁵² The XDC Model follows three steps:²⁵³ To begin with, the Economic Emission Intensity (EEI) is calculated by measuring the amount of GHG emissions per €1 million Gross Value Added (GVA) for each company. This is then scaled up to a global level to calculate the effect if each company operated as emission-intensely as the company analyzed. Finally, this data is translated into an effect on global warming measured in °C. The results were particularly sobering with regard to big energy suppliers such as E.ON and RWE, which returned results of 8.1 °C and 9.5 °C respectively if they met their own sustainability goals. If the proclaimed climate-related sustainability efforts on the part of such companies prove to be so strikingly insufficient, it could lead to investor reticence and both shareholders and third parties using the results as a basis for taking legal action and calling for more effective mitigation efforts.