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Sharing the burden of climate losses by the corporate sector or see you in Court?

Jaap Spier, Sam Wiegers
Reading time : 4 minutes

In this article, Jaap Spier and Sam Wiegers discuss the urgent need for the corporate sector to address climate losses or face litigation. They highlight the gap between policy and action and call for ambitious, legally binding measures to combat climate change. Emphasizing mitigation, renewable energy transition, adaptation, and addressing climate-related losses, especially for vulnerable countries, they propose voluntary contributions from corporations and investors as a practical solution. This approach could avoid costly litigation and benefit both victims and contributors, while prioritizing mitigation and immediate support for those most affected by climate change.

Sharing the burden of climate losses by the corporate sector or see you in Court?

Both authors initiated an international project, with very distinguished experts, on how to deal with climate losses.

Elisabeth Maruma Mrema’s blog ‘Green Rights’ highlights the formidable progress made since the 1972 Stockholm Declaration. David Boyd rightly noted that the absence of effective enforcement is the Achilles’ heel of international environmental law; also that human rights law can help to overcome this problem (The human right to a healthy environment: protecting life on Earth).

The many laudable (legal) sustainability concepts, emanating from a series of declarations, resolutions, and guidelines, mostly contain rather open and at times ambiguous responsibilities of States, enterprises, and investors. The same goes, by and large, for the myriad of human rights. UNEP’s ‘Environmental Rule of Law: Tracking Progress and Charting Future Directions’, points to the role of courts “because other branches of government are falling short” (p. 135).

Concrete, ambitious, balanced, and legally binding instruments, keeping pace with the urgent demands of people and the planet, would be most welcome, if not for other reasons than creating a level playing field to the greatest extent possible. For now, they are a phantom. UNEP refers to a series of why “legislatures and executive agencies have failed to adopt the climate laws necessary to address climate change”: “concerns about competitiveness, influence of donors and lobbyists and the need to take actions that are economically painful in the short-term for long-term environmental and economic benefits” (o.c. at 135).

However important and useful as building blocks for further development of the law and as a legal basis for ground-breaking judgments, most of the innovative legal concepts do not provide sufficient guidance for compliance by States, enterprises, and investors. Seeing the utmost urgency of coming to grips with climate change, other strategies should be considered. Not because the many declarations e tutti quanti are meaningless – they are certainly not, as convincingly illustrated by Boyd (o.c.) – but because we are desperately running out of time and too little action is being taken.

Mrema hits the mark that it is bitterly needed to translate policy into action. In the realm of climate change, four interrelated issues are of paramount importance: (i) mitigation, (ii) the transition towards renewable energy, (iii) adaptation, and (iv)how to cope with losses caused by climate change.

Global emissions must be curbed at the greatest possible pace and to the greatest possible extent. Reduction trajectories should be (a) based on the imperative to keep the increase of global temperature as close to 1.5C as still within reach, (b) the most recent insights from climate science and (c) other relevant information, including UNEP’s sobering emission gap reports. These trajectories should be both ambitious and workable.

Adaptation measures require (a) a sound assessment of the adverse consequences they aim to counter, (b) the probability of such consequences, (c) the likelihood that the proposed measures will be effective, and (d) a cost-benefit analysis including the effects on nature and people. Vulnerable countries, disproportionally impaired by climate change, should receive adequate financial means to effectuate adaptation.

The thorny issue of how to deal with climate change-related losses – the costs of adaptation and other losses – does not get the attention it deserves. Admittedly, there is a lot of debate concerning the Loss and Damage Mechanism. COP 28 made progress towards climate justice by providing funds to vulnerable countries to settle part of their cataclysmic costs of mitigation and adaptation. It would, however, be against the odds if (many) affluent countries are going to majorly increase their contributions, let alone in the very near future. Hence, additional funds should come from other sources.

Averting still avoidable climate-related catastrophes by means of adaptation, and compensating for other climate-related losses requires a significant contribution from the corporate sector and investors. In the absence of clear, universally binding, and enforceable legal instruments, voluntary contributions could majorly contribute, and seem most cut out for the clock that is ticking. They only stand a favourable chance if enterprises and preferably also investors realise that it is in their best interest to contribute their fair share, however, calculated. We are mindful that some enterprises may face criticism, or even litigation from some investors if the latter believe that the former scatter around presents, however unjustified such stance would be.

Particularly in the US, States, counties, and cities have sued fossil fuel companies to foot their alleged climate bill; see e.g. here, here, and for other examples here. If Courts granted these plaintiffs victory, they would turn things upside down. It would be unsatisfactory, if not appalling, if US victims would reap the fruits of liability, seeing the US’ significant contribution to global warming, both in absolute terms and on a per capita basis. Even more so because the US is a very affluent country compared to many other developed countries.

There won’t be enough funds to compensate for all climate losses, the cataclysmic costs of adaptation included. The costs of a speedy transition towards renewable energy will be astronomical; this transition must be effectuated within very few decades (likely less than two). Crushing liability would mean that no money will be left for the transition. Priority should be given to losses suffered by vulnerable countries and people living in these countries. Vulnerable victims need the money urgently to repair their losses. To that effect voluntary contributions, not based on liability, could be a win-win situation if properly designed. Both prospective plaintiffs and defendants would avoid costly and time-consuming litigation. A fata morgana? Perhaps, but it deserves in-depth consideration and exploration, which a small group of eminent experts is currently working on.

However important a focus on losses suffered by the most vulnerable victims, mitigation should remain our first and foremost priority because it reduces future losses. At the same time, it would be mistaken to turn a blind eye to the disastrous consequences of climate change on vulnerable countries and people who did not cause the global problem in the first place.