The legal tussle to hold corporate polluters accountable for climate loss and damage

The stage has been set for a series of major battles over whether corporations can be held accountable through the courts for loss and damage from climate change.

In recent months, lawsuits aimed at holding the fossil fuel industry and other big polluters to account for the climate crisis have made progress in US and European courts, but they also face a growing political and legal backlash.

The swell of climate litigation over the past decade has sought - and often succeeded in - challenging governments and companies over their failure to cut greenhouse gas emissions or put in place appropriate adaptation measures.

However, climate change is already causing harm in the real world and is on track to do much worse in the future. Not all of these impacts can be adapted to - and not every community has the resources to do so. 

Enter the concept of loss and damage. This is best known as part of the lexicon of climate politics in which the most vulnerable countries - particularly small island nations - have for decades tried to secure money for the harm that they realised was disproportionately going to affect them.

Early proposals sought to set up a global fund under the UN Framework Convention on Climate Change (UNFCCC), initially framed as ‘insurance’, that nations would pay into based on their contributions to global greenhouse gas emissions and their capacity to pay. But governments of high-emitting countries were suspicious of anything that might impose legal and financial responsibilities, and explicitly refused to accept any liability for current and future harms. 

As a result, it took years for countries to agree on any tool for addressing loss and damage. A voluntary fund, when it was finally set up in 2022, is still the subject of terse negotiation and the money committed to it falls far short of the hundreds of billions that are needed.

This has left an "accountability gap" between polluter governments and polluter corporations, according to a new report published by NYU School of Law’s Climate Law Accelerator (CLX). With concern about the impacts of climate change and the cost of responding to it growing, public authorities and non-profit organisations have gone directly after the private sector. 

The report examines a distinct set of lawsuits seeking recompense from companies for loss and damage from climate change. Drawing on a new database, it identifies more than 50 cases trying to claw back cash from the world’s biggest polluters for climate impacts such as extreme heat, sea level rise, storms, reduced snowpack, flooding and wildfires, and biodiversity loss. (The Centre for Climate Integrity has its own database of accountability lawsuits in the US.)

The CLX report notes that some early lawsuits focused on car manufacturers and electricity firms - industries that were perceived to be major emitters at the time. 

That changed after researcher Richard Heede published a landmark study in 2013 which quantified for the first time the amount of historical carbon emissions attributable to specific companies; mostly fossil fuel firms but also large cement manufacturers. The focus of loss and damage litigation soon shifted to a group known as the ‘carbon majors’, says the report, with Heede’s database serving as “critical evidence” (The latest update has just been published, tracing half of fossil fuel and cement CO₂ emissions in 2023 to just 36 state- and investor-owned companies.).

Two-thirds of loss and damage lawsuits have been filed by state and local governments in the US, the new report reveals.

The most well-known example is probably California suing five companies as well as oil and gas industry trade group the American Petroleum Institute in 2023. The state claims they engaged in a “decades-long campaign of deception” about climate change and the risks of fossil fuels that has forced it to spend tens of billions of dollars.

The state is "recycling" a successful legal strategy used during the 1990s to hold the tobacco industry to account, according to CalMatters.

These cases generally seek compensation from fossil fuel firms and their trade organisations based on companies’ direct and indirect greenhouse gas emissions. They also target companies considered most responsible for spreading misinformation about climate change.

Together, litigants hope this demonstrates culpability for the problem in the eyes of a court under a variety of laws on unfair business practices, nuisance, consumer protection and even racketeering.

ExxonMobil, which has been credited with leading an international effort to cast doubts on climate science and is one of the largest carbon majors, is among the most commonly sued, alongside Chevron, BP and Shell.

However, new information about climate disinformation is coming to light all the time. To keep the statute of limitations open, a number of claims include the phrase ‘Does 1 through 100’. An example of this is a claim brought by the Pacific Coast Federation of Fishermen’s Associations about closures of Dungeness crab fisheries. These fictitious defendants can be replaced with real companies if further evidence is uncovered during the legal process. 

Growing reality

In addition to evidence about polluters, loss and damage litigation is responding to the growing reality of climate change and fast-moving developments in attribution science that examine the extent to which a specific extreme weather event was made more likely or worse by climate change.

In 2023, Multnomah County in Oregon filed a lawsuit against ExxonMobil, Shell, Chevron, BP, ConocoPhillips and other fossil fuel companies for the 2021 Pacific Northwest heat dome which research showed was “virtually impossible” without human-caused climate change. It wants US$50 million in actual damages, US$1.5 billion in future damages and around US$50 billion for an abatement fund to “weatherproof” the city, its infrastructure and public health services for future extreme weather.

Although most cases are in the US, loss and damage litigation is a global phenomenon. 

Peruvian farmer and mountain guide Saúl Luciano Lliuya, whose home high up in the Andes is at risk from a melting glacier, wants German energy company RWE to pay 0.47% of the overall cost of building flood defences, a proportion equivalent to RWE’s contribution to global emissions.

Although the sum of money at stake is very small - €17,000 is a small fraction of RWE’s €1.6 billion profit last year - the case is being fiercely fought because it could set such an important precedent for corporate liability in Germany and beyond. The fact that it was admitted at all has was an important legal milestone.

The case was originally launched in 2015, but over the past decade science has since caught up with it. In 2022, judges from Germany visited Peru to determine the level of potential damage.

Not every loss and damage lawsuit is against the fossil fuel industry. Four people from the Indonesian island of Pulau Pari are suing Swiss cement maker Holcim for climate change impacts on their island, including sea-level rise and flooding. Concrete, of which cement is a main ingredient, is estimated to be responsible for 4%-8% of the world’s CO2 emissions. 

The four islanders are demanding compensation for climate damages they have suffered, a financial contribution to flood–protection measures and the rapid reduction of Holcim’s carbon emissions. A court is currently considering whether civil law is the right legal option for this case and whether there is an interest worth protecting.

These two lawsuits "may foreshadow a coming wave of transnational loss and damage litigation", says the CLX report, "following in the footsteps of transnational human rights litigation". More European cases are currently in the works.

In Canada, a campaign called ‘Sue Big Oil’ is slowly building momentum. Driven by West Coast Environmental Law (WCEL), it calls on local governments in British Columbia to band together to sue global fossil fuel companies to recover a share of climate-related costs. Nine authorities have signed up so far, including Slocan and Squamish, representing around 370,000 people in total. 

WCEL says it will encourage local governments to decide among themselves which will step forward as lead plaintiff and hire a legal team.

Although carbon majors are the main target of this kind of litigation, it's worth noting that they're not the only ones. In another new report, Zero Carbon Analytics identifies Brazil and Indonesia as fertile locations for such lawsuits, often seeking compensation for the collective harm caused by emissions from deforestation (like this successful one against a rancher in Brazil).

State-owned firms

One notable absence from loss and damage litigation is lawsuits against state-owned fossil fuel firms, even though they have cumulatively emitted more greenhouse gases than private companies. Litigants focus on cases they think they can win, and courts are considered less sympathetic to claims against state-owned companies - particularly in countries with authoritarian governments.

But Ashley Otilia Nemeth, director of programmes at CLX and co-author of the new report, believes there may very well be such a case in future. Last year, UN human rights experts sent several governments a written warning about the responsibilities of the financial backers of the oil company Saudi Aramco under the UN Guiding Principles on Business and Human Rights, expressing concern about the oil giant’s actions undermining the UN Paris Agreement. Saudi Aramco is the world’s single biggest corporate emitter, but it has no plans to curtail fossil fuel production.

Fossil fuel companies in the Global South have also largely escaped loss and damage litigation, the report notes. “The focus on suing privately owned Western companies in many ways... mirrors the wider discourse on loss and damage, which has centered on the outsized carbon footprint of Western countries, particularly the United States,” it says. 

It is also due to a lack of resources to bring expensive lawsuits and geographical gaps in the climate science available to back up claims. It's notable that the initial technical report on flooding that supported Lliuya’s claim against RWE was commissioned by the United States Agency for International Development (USAID) - a department that has now been gutted by the Trump administration. 

Mixed progress

If any loss and damage lawsuits eventually succeed, they would set an important legal precedent, says Zero Carbon Analytics with particular impacts in the liability insurance market. Third-party litigation funders will be watching closely to see if they can support and make money off future claims.

But none have got that far yet, and the progress of cases in the US has been mixed. 

In February, a court threw out a lawsuit by New Jersey claiming fossil fuel industry actions to obfuscate the link between burning fossil fuels and global warming violated state law. A pair of loss and damage lawsuits brought by Anne Arundel County and Annapolis, and a third by Baltimore City, were also recently dismissed by Maryland courts.

Claimants in all these cases are appealing, but they are the latest in a string of blows. The CLX report describes the US in general as a "hostile" jurisdiction to loss and damage claims. Plaintiffs have found it difficult to convince judges that courts are the right place to address these issues or they they should be held uniquely responsible.

On the other hand, loss and damage lawsuits in Hawaii, Massachusetts and Rhode Island are close to trial in state court now that most procedural hurdles have been overcome. The Supreme Court declined to intervene in the first case, brought by the city and county of Honolulu and the Honolulu Board of Water Supply against Chevron, Sunoco and other firms. 

Most recently, a landmark lawsuit by Puerto Rico municipalities against the fossil fuel industry was allowed to proceed by a court.

The group, which has grown since the initial filing and now counts 37 public authorities, filed a case against Exxon, Shell and other big companies in 2022 for alleged violations of the Racketeer Influenced and Corrupt Organizations Act (RICO). It claims the companies caused and exacerbated hurricanes in 2017 by misrepresenting the dangers of their products. 

The latest decision moves the case into full discovery. But the court dismissed state law claims, including those related to strict liability, unjust enrichment, and public and private nuisance.

The most important loss and damage lawsuit outside the US is due to get a long-awaited public hearing later this month. 

On 17 and 19 March, the Higher Regional Court of Hamm in Germany will hear Lliuya’s claim against RWE. The court will decide whether there is a sufficient flood risk to affect Lliuya’s property; if it considers there is, only then will it look at the extent to which this risk is attributable to RWE’s emissions.

The progress of any these cases is uncertain. And there are no direct precedents for how they should proceed.

But the CLX report notes that there is a "robust body of toxic tort and environmental pollution precedent" in the US that could support claims. And wider climate litigation in other countries could provide a basis for liability; a successful lawsuit against the French government awarded a group of NGOs a token euro for moral damages (albeit not compensation).

How much eventual compensation is awarded - particularly for non-economic injuries such cultural loss - will be an interesting question for the court. Climate Analytics estimates climate damages attributable to the 25 biggest emitting oil and gas companies between 1985 to 2018 at around US$20 trillion.

Backlash

Like all litigation, loss and damage lawsuits come with a risk of backlash.

Last year, a group of 19 Republican-led states filed a legal complaint in the US Supreme Court against five Democrat-led states that have sued energy companies for climate loss and damage: California, Connecticut, Minnesota, New Jersey and Rhode Island. They claim these lawsuits raise grave constitutional problems because they threaten to "impose ruinous penalties and coercive remedies that would affect energy and fuel consumption and production across the country". 

More recently, a Colorado Supreme Court judge considering whether the city and county of Boulder can pursue a loss and damage case against ExxonMobil and Suncor Energy expressed concern that cumulative claims against the oil industry might eventually amount to regulation.

And last week, a fresh campaign was launched to try to quash this kind of litigation altogether. The American Energy Institute, which has ties to a former Trump judicial adviser Leonard Leo, describes accountability lawsuits as the “biggest risk” to the US’ current energy agenda, purporting to counter misinformation claims by showing that understanding and concern about climate change has been mainstream for decades (including in this 1991 clip from sitcom Cheers).

The CLX report warns that courts are not immune to politics. Trump has previously threatened to stop the “wave of frivolous litigation from environmental extremists” and is already seeking to pull power and authority away from the judiciary.

The law is also being wielded in other ways to try to prevent accountability for loss and damage.

Twenty-two US states are suing New York over its recently approved Climate Change Superfund Act, which requires the US’ biggest greenhouse gas emitters over 2000-24 to pay US$3bn every year for the next 25 years. The money would be used to repair and upgrade infrastructure damaged by extreme weather events.

The states, led by West Virginia, claim New York’s law is an “overreach” and would lose thousands of jobs. If the case succeeds, it could seriously erode a key environmental law.

Vermont, the first state to enact such a climate damages law in the US, is also being sued over it in federal court. 

Maryland, for its part, has introduced a bill to ban state and local governments from filing climate loss and damage actions in the state. 

“As the impacts of climate change increase, we should expect that local governments are going to respond in ways that protect their constituents and their fiscal stability.”

Although litigation and domestic policy efforts operate in “separate lanes”, Nemeth says they both demonstrate the “swift defensive posture” of big polluters. “Carbon majors are well-resourced and well-represented so it is not surprising that they would wage protracted fights on jurisdictional issues in loss and damage cases, as well as challenge any legislation that seeks to impose liability for climate damages."

However, communities around the world have shown that are no longer willing to foot the bill for climate change, and they are leveraging various legal tools to manage those enormous expenses. The US is not the first to go down the policy route over climate loss and damage; the Philippines is working on a legal framework which, if passed, would be the first such national policy in the world and could have consequences far outside its borders.

If government policies do not address the looming insurance crisis - particularly in the US in response to more frequent and extreme weather - then more public bodies, citizens, and perhaps even insurers themselves could head down the litigation route to recoup costs. 

“As the impacts of climate change increase,” says Nemeth, “we should expect that local governments are going to respond in ways that protect their constituents and their fiscal stability.”