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Testing Our Assumption: Challenging Fossil Fuel Companies Helps Solve Climate Change

February 7, 2019

A growing number of communities, and lawyers, around the world are focusing their attention on global fossil fuel companies, arguing that they are legally liable for their products’ contribution to climate change and at least partially responsible for resulting climate-related costs. Other legal investigations and cases emphasize that the companies misled the public and their shareholders about the global risks of fossil fuel use, and that these actions have slowed progress on climate policies around the world.

Broadly, communities are asking:

  • Do oil, gas and coal companies bear some legal responsibility for selling products that they have known for decades would harm people?
  • Does insisting on that legal responsibility represent a turning point in the fight against climate change, similar to when tobacco and asbestos companies were first held liable for harm resulting from their products?
  • How can our communities and their taxpayers afford to deal with the rising tide of climate costs, especially if the companies that made massive profits selling fossil fuels do not pay a share of those costs?

These campaigns and legal strategies seek to force Chevron, Shell, ExxonMobil, Saudi Aramco and other major fossil fuel companies to incorporate the costs of their products into their bottom line and business model. These companies employ some of the top minds on energy and have massive resources that could help the world pivot quickly away from fossil fuels – if they had the incentive to do so.

The hope is that if these companies risk paying a share of the costs associated with oil, gas and coal burning, then they and their investors will make different decisions about what their future as an energy company looks like. They would at last have an incentive to stop lobbying against climate action, and rapidly increase their investment in alternative energy and developing new, low emissions technology, re-evaluating the business model of their companies.

These climate-focused legal actions and campaigns are still relatively young and have not, at least yet, resulted in final legal rulings against fossil fuel companies. However, it is not too early look at how fossil fuel companies have responded to calls to take responsibility. Is there any sign that this type of legal strategy does have the potential to change the behaviour of international companies? Will they be ignored, fought aggressively, or can “fossil fuel accountability campaigns” help address climate change by changing the behaviour of profit-motivated fossil fuel companies?

The state of the campaigns globally and in Canada

Outside Canada, over a dozen U.S. cities and one state (Rhode Island) have sued fossil fuel companies for a share of the costs of preparing for climate change. Claims brought by New York City, San Francisco and Oakland have been dismissed, but those decisions are under appeal.

Meanwhile, the Peruvian community of Huarez has sued coal giant RWE in Germany for a share of the costs of reducing the climate-related risks from a glacial dam, with a court of appeal giving the case the green light to proceed. Friends of the Earth Netherlands is suing Royal Dutch Shell to force it to do more on climate change. In the Philippines, a human rights complaint against 47 fossil fuel companies (including five Canadian companies) for their respective contributions to climate change has just wrapped up, with the Commission scheduled to release its findings in June 2019. Recently the island nation of Vanuatu also announced an intention to sue fossil fuel companies.

Canadian communities have so far resorted to letters, rather than the courts. Sixteen BC local governments have sent “Climate Accountability Letters” to 20 of the world’s largest fossil fuel companies which – through their operations and products – have helped cause almost 30% of human-caused GHG emissions. One of these communities, Whistler, recently courted national controversy because it chose to also send a copy of its letter to a Canadian company (none of the 20 largest are Canadian). Recently, however, some BC communities have started considering litigation, and there are reports that others are thinking about it.

There have also been discussions about fossil fuel company liability in Ontario. For instance, Greenpeace Canada is planning a toolkit for communities considering lawsuits, and the Ontario NDP Energy and Climate Change Critic, Peter Tabuns, introduced a Liability for Climate-related Harms Act in the Ontario legislature that would have made it easier to sue fossil fuel producers for climate costs (it was ultimately defeated).

How has industry responded?

Looking back on the behaviour of Exxon, Chevron, Shell and other fossil fuel giants over the past decades, and the way that they have undermined renewable technology, lobbied against climate action and made massive profits selling their reserves as fast as possible, it’s pretty clear that they’ve lacked a financial incentive to do their part to solve climate change. In fact, they’ve had an incentive to do the opposite.

So with the fossil fuel industry on now notice that it might be held to account, and the risks of litigation becoming ever more credible, are we seeing better corporate behaviour? It appears that we might be, at least from some of the larger players. (See “the Good,” below)

We’re also seeing retaliation and PR responses. While this is a problem for those targeted by the industry, from a certain perspective these types of responses indicate that the industry is taking the threat of liability seriously. (Nonetheless, we’ll call this “the Bad,” below).

The Good

It is often hard to tell for sure whether a company’s actions are the result of the risks of litigation. Some of the following clearly are, but others are nevertheless major changes in past practice that have occurred since the risks of litigation began to crystalize.

  • Chevron discloses climate litigation risk. In February 2017 Chevron became the first major fossil fuel company to acknowledge the risk of being sued for its contribution to climate change in its disclosures to shareholders, writing about an “increased possibility of governmental investigations and, potentially, private litigation against the company.” This was months before the current round of lawsuits in the U.S. had been launched, but after the launch of the RWE case, the Philippines Human Rights Commission and our Climate Law in our Hands initiative.
  • ExxonMobil and others support carbon taxes. In February 2017 the newly launched Climate Leadership Council (CLC), established by Exxon, Shell, BP and others, unveiled a proposal for a carbon tax of $40/tonne. Strongly suggesting that this new initiative was linked to fear of climate litigation, the authors explicitly proposed that a carbon tax should bring “an end to federal and state tort liability for emitters.” In October 2018 Exxon contributed $1 million to the Americans for Carbon Dividend committee of the CLC to advocate for this carbon tax proposal. However, some climate advocates have worried that the true purpose of this newfound interest in carbon taxes may be to remove liability.
  • Shell boosts investment in renewables. In July 2017, Shell upped its investment in renewable energy from $200 million per year to $1 billion per year and then to $2 billion per year in November 2017. The July increase in funding was actually a few days prior to the first U.S. lawsuit being filed against the company (although Shell was an active participant in the Philippines Human Rights complaint). By November, five lawsuits had been filed, including lawsuits from San Francisco and Oakland that singled out Shell with just four other fossil fuel giants. There is nothing conclusively suggesting a link between litigation and Shell’s newfound interest in renewable energy, although Shell itself has referenced its $2 billion commitment in its response to the City of Victoria’s demand that the company pay a share of climate costs.
  • ExxonMobil distances itself from anti-climate lobbying. In July 2018 ExxonMobil withdrew from the American Legislative Exchange Council (ALEC), an industry lobby group, over the group’s support for climate denial. As the Union of Concerned Scientists points out, the company still maintains ties with and funding for other organizations that advance climate denial, but nonetheless, ExxonMobil’s departure from ALEC seems like a positive shift.
  • Chevron and ExxonMobil commit to reducing emissions. In September 2018 Chevron, ExxonMobil and Occidental Petroleum became the first U.S. members of the Oil and Gas Climate Initiative, making commitments to reduce their own emissions.

None of the above changes represent the type of ground-breaking shifts that we would see if these oil and gas companies really recognized that they could be held liable for harm caused by climate change. However, they do represent a change in how these companies are engaging on climate change, possibly with an eye to arguing that their actions were reasonable should litigation go ahead. Some are clearly linked to the risks of liability – while others may (or may not) be. The question is whether these trends will continue and whether companies will start reducing their investment in fossil fuels and increasing investment in renewables in more significant ways.

The Bad

Of course, the news is not all good. No company likes being told that its business model is based on products that harm communities, and that it needs to pay up. Retaliation by the fossil fuel industry is evidence that you have their attention. Retaliation has been ramping up, both in the law courts and in the court of public opinion.

In the courts, ExxonMobil has launched a series of aggressive legal actions against some of the cities and lawyers that have sued it. The company alleges that meetings to discuss legal strategy amount to an illegal conspiracy to coerce the company into changing its practices. Other legal actions launched by ExxonMobil suggest that the local government plaintiffs that have filed litigation have misled their own investors about the risks to the city of sea level rise (although a former Securities and Exchange Commission official found nothing wrong in the cities’ disclosures).

In the court of public opinion, the industry response, at least in the U.S., has been led by the ironically named Manufacturers Accountability Project (MAP), a project of the National Association of Manufacturers (NAM). According to NAM, litigation against fossil fuel companies “jeopardizes the ability of all manufacturers to continue growing and providing jobs to millions of Americans.”

MAP has been placing opinion pieces in papers across the U.S. dismissing the local government lawsuits as ridiculous, unwinnable or brought for political purposes. They also attack the individual lawyers bringing the cases, sometimes echoing Exxon’s suggestion that they are part of a conspiracy or framing them as ambulance chasers. The lawyers in the U.S. are bringing their cases on a “contingency basis,” meaning that they will only be paid if they win, which has put MAP in the awkward position of simultaneously arguing that the cases are ridiculous and will be dismissed while also arguing that the lawyers expect to win and be paid big bucks.

Here in Canada, the letters sent by local governments to the world’s largest fossil fuel companies flew under the public radar until recently, when the Resort Municipality of Whistler precipitated a boycott campaign by also sending one copy of its letter to a Canadian company. Some Alberta oil and gas companies quickly convinced CIBC to cancel part of its upcoming investor conference in Whistler, while the municipality was lambasted in the mainstream media and on social media. A resort destination like Whistler is particularly vulnerable both to charges of climate hypocrisy and to boycotts, but the resulting furor has definitely shown that pointing out that oil and gas companies need to take some responsibility for their products – even through a letter instead of litigation – can result in retaliation.

Conclusion

On one hand, the fossil fuel industry continues to expand its production and plans for that to continue. On the other, climate scientists warn that climate change costs could be almost unimaginable and will definitely  . The disconnect between the harm caused and the profits being made by fossil fuel pollution are getting increasingly hard to ignore.

Campaigns and legal strategies to hold fossil fuel companies accountable for local impacts directly challenge that disconnect. As such, it’s not surprising that they have resulted in blow-back and retaliation from the oil and gas industry and its supporters. The ferocity of the response may be evidence of how badly the industry wants to avoid discussion of its moral and legal responsibility to avoid an unimaginable future.

However, there are hopeful signs that this approach also encourages at least some positive changes among fossil fuel company behaviour, if not yet the type of dramatic shifts in business model that the world needs. We hope that these more positive changes may increase as more communities around the world start demanding that the fossil fuel industry share some of the responsibility for the costs associated with climate change.

 

This article originally appeared on Slaw. View the original version here.

Author: 
Jessica Clogg, Executive Director & Senior Counsel
Andrew Gage, Staff Lawyer