29 July 2004

US States sue industry over climate damage - could it happen here?

Five of the US' largest power companies - which are also allegedly the US' top five emitters of carbon dioxide - are being sued by eight states over their production of carbon dioxide and the damage it's said to cause. It's a case which could open the door to similar litigation here.

We looked at the possibility of this sort of litigation in Australia before (see our Alert from last year). While a class action is already underway in the United States, this action is much more significant as it is being brought by eight state Attorneys-General and New York City, which have the will and deep pockets to pursue these defendants and others like them. It's a tactic that American state Attorneys-General have already successfully used against the tobacco industry, which has been required to pay billions into state coffers. This time, the claims are seeking abatement of greenhouse gas emissions, not damages.

The nuisance of global warming

California, Connecticut, Iowa, New Jersey, New York, New York City, Rhode Island, Vermont and Wisconsin are the plaintiffs, but they expect other state and local governments to join the case. The defendants are American Electric Power Inc, The Southern Co., the Tennessee Valley Authority, Xcel Energy Inc. and Cinergy Corp. Although the plaintiffs have not ruled out adding other utilities to the case, they say that if they are successful against the market leaders, others will follow.

The claim filed in the Federal Court in Manhattan alleges that the defendant utilities have caused a public nuisance by emitting carbon dioxide, which then contributes to global warming and resulting environmental, economic and medical harm.

Damages are not being sought by the plaintiffs; instead, they want the court to order the defendants to cap their carbon dioxide emissions and then reduce those emissions each year by a specified percentage. They say that it's feasible for the defendants (which are voluntarily reducing emissions already) to reduce emissions by 3 percent a year over a 10 year period.

Could it happen here?

The short answer is yes, at least in theory, although possible plaintiffs would need to overcome a number of legal hurdles and possible defences. Australian common law also recognises the action of public nuisance. There are two main requirements for this action: standing (ie. an interest that is affected) and damage to a public right. Attorneys-General would have standing to bring an action in public nuisance, (although they are unlikely to launch such a claim here). It is also possible that the emission of carbon dioxide which contributes to climate change could be the subject of a nuisance claim by particular classes of persons especially vulnerable to the effects of climate change (for example, farmers, wine growers, insurers). No matter how useful power generation might be, its social utility is not a defence.

Although emitters may have environmental protection licences authorising their particular activity, these would not necessarily prevent public nuisance claims being brought for emitting carbon dioxide. These licences do not regulate the emission of carbon dioxide as regulators have not previously considered carbon dioxide to be a pollutant which required a licence. This is likely to change in the future.

As the regulation of greenhouse gases becomes more likely, so too does the prospect of civil enforcement proceedings of environmental laws by Green interest groups and individuals. Actions could potentially be brought under various environmental statutes, which in some States have open standing provisions (that is, allowing any person to bring proceedings) in relation to breaches of those statutes.

Last year Climate Action Network Australia (CANA) represented by plaintiff law firm Maurice Blackburn Cashman wrote to the directors of selected Australian companies of the financial risks which climate change posed to the companies (see our Alert from last year). It remains to be seen whether this or other groups will actually bring proceedings in Australia, and if they do, on what basis. It is also unlikely that Australian Attorneys-General would bring an action like the US complaint. However, the US action does show that climate change litigation is now more than a mere possibility. Both sides of the issue in Australia will monitor the US case closely as it unfolds.

In the light of this development, Australian companies whose activities generate greenhouse gases need to assess how they would respond to a public nuisance action if it is brought in Australia and the likelihood of the emission of such gases being more stringently regulated, irrespective of whether Australia ratifies the Kyoto Protocol.

If you would like any further information or an individual briefing (no charge) in relation to any of the issues contained in this Alert or the implications of climate change on your business, we would be more than happy to assist.