Brace for impact - climate change litigation is fast approaching

In 2016, Australia ratified the Paris Agreement and the Doha Amendment to the Kyoto Protocol; however, any serious action on climate change remains to be seen.

At the same time, some states and territories also have emissions reduction targets. The uncoordinated approach is a problem for at least two important reasons.

First, climate change is an ever-increasing phenomenon, with tremendous impact on corporate, social and political discourse. Any meaningful legal framework to govern climate change requires the development of a legal consensus at the federal level, in line with international commitments.

Second, there is a rising wave of climate change-related litigation globally which is headed for Australia. Climate change litigation 2.0 (targeting companies) and climate change litigation 3.0 (targeting governments) will sink Australia, unless drastic measures are implemented.

Under the current legal regime, company directors may only be liable if found to be in breach of their duty of care or for failing to address a foreseeable risk. However, guidance from case law suggests that it is difficult to establish that the actions or omissions of a particular entity or director caused or contributed harm to be suffered by another. With the arrival of climate change litigation 2.0, this will all change.

For one, litigation 2.0 will force companies to assess and report on the risks of climate change and potentially set out plans for mitigating those risks. The recent tide of comments from the Australian Securities and Investments Commission, the Australian Prudential Regulatory Authority and the Reserve Bank of Australia are a testament to this.

Companies and their directors could soon face liability (including personal liability) if they fail to assess and address risks relating to climate change. Investors, shareholders and even communities will be able to recover losses and seek damages from companies and their directors, auditors and advisors, for failing to assess and mitigate risks.

As major climate change attribution studies emerge to assist in tracing particular weather events with greenhouse gasses, causation will be easier to establish. It is likely that in the future, courts will rely on such studies to conclude that a particular entity has contributed, at least in some proportion, to a particular harm.

It would be interesting to see how companies and directors brace for impact as climate change litigation 2.0 approaches.

Although unprecedented and unheard of in Australia, climate change litigation 3.0 will be the next phase. It will allow Australians to bring action against the government for failing to mitigate risks.

Claims of this nature around the world are already proving to be quite successful. The Urgenda litigation in the Netherlands is the leading example. In that case, a Dutch NGO argued that the Netherlands Government had breached its duty of care to the Dutch people by failing to mitigate the risks of climate change and reducing greenhouse gases. The remedy ordered by the court was that the Netherlands Government reduce emissions by at least 25 per cent by the end of 2020.

Similarly, the Juliana case brought against the US government argued that current policies fail to satisfy their obligations to hold certain essential resources on trust for all US citizens. The case is currently awaiting a determination as to whether it will go to trial.

We can only ignore it for so long - in the coming years, we are destined to see a rise in climate change litigation in Australia. While this may be welcome news for practitioners, it is not so much for companies and governments, who need to re-examine their approach to assessing and mitigating climate change risks now. If not, litigation 2.0 and 3.0 will do it for them.