The legal costs of climate change

Energy companies need to consider how to manage the risk of climate change litigation. PHOTO: THINKSTOCK

Are the decades of what critics would describe as slack environmental efforts finally catching up with Canadian oil and gas companies?

A report makes that claim, suggesting advances in climate change science are altering the legal landscape concerning climate damages to create a major liability for Canadian energy companies from foreign and domestic judgments.

Payback Time? What the internationalization of climate litigation could mean for Canadian oil and gas companies, by the Canadian Centre for Policy Alternatives (CCPA), a centre-left think tank, and West Coast Environmental Law (West Coast). It considers total potential liability of five oil and gas companies – EnCanada, Suncor, Canadian Natural Resources, Talisman, and Husky Energy – and concludes they could be incurring a global liability as high as $2.4 billion per year for their contribution to climate change.

The study, by Andrew Gage, staff counsel at West Coast, and UBC professor Michael Byers, joins a body of research that considers how the law might be used to recoup the costs of climate change from companies that contribute to it.

“As with tobacco companies in the 1980s, these producers are confident the law will not hold them responsible for these damages,” says Gage. “But rising levels of climate damage, increasing scientific evidence about the links between emissions and the damage they cause, and an emerging public debate about who is financially responsible for this damage, could change the situation very quickly.”

Climate change litigation
Because the impacts and causes of climate change are global, climate damages litigation could take place in, and apply the laws of, any of the countries where damage occurs. These countries may also choose to adopt new laws clarifying the legal rules around climate damages litigation, much as Canadian provinces did to facilitate tobacco litigation. As a result, large-scale greenhouse gas producers and their shareholders are exposed to significant legal risks that will only grow into the future.

“Substantial shifts will be required of large-scale greenhouse gas producers and their investors if they hope to manage the risk of climate damages litigation, such as moving away from fossil fuels, and supporting the adoption of international agreements that could link the reduction of liability risk to the provision of financial assistance or future emission reductions,” says Byers.

The National Roundtable on the Environment and the Economy (now shut down) pegged the costs of climate changed at $5 billion annually by 2020. A report by the commission revealed Canada was nowhere near the Harper government’s goal of reducing emissions by 17% from 2005 levels by 2020.

Scientists are also honing in on the sources of greenhouse gases. Research from the Climate Accountability Institute in Snowmass, Colo. has narrowed the source of two-thirds of all carbon emissions from 1854-2010 to 90 private and state-owned corporations, including the five based in Canada.

The study concludes civil liability for large-scale green house gas emitters is extremely likely, particularly as the costs associated with climate change rise.

Download a copy of the report here.

This article appears in the Nov/Dec 2014 issue of PLANT West.