Authors: Naomi Tarawali and Nikita Lall
Introduction
It has been said that Europe (and indeed, the rest of the world) is facing the “double jeopardy of climate change and energy insecurity”.[1] The actions and interventions of states and state-owned enterprises in the energy sector are crucial to the prospect of effectively navigating these unprecedented challenges.
Perhaps unsurprisingly, climate change related disputes are on the rise around the world (the number of climate change related proceedings has more than doubled since 2015).[2] Between May 2021 to May 2022, more than 70% of climate litigation cases were brought against governments.[3] In this blog post, we consider the extent to which the threat of litigation, particularly against states/state-related entities, may be one of the mechanisms that drives change regarding climate issues and the inevitably entwined energy crisis and insecurity.
Litigation Trends
Recently, a number of cases have been brought against state-owned power companies, in particular with regard to their use of non-renewable energy and lack of use of renewable energy. This trend is consistent with the fact that they are large contributors to climate change; state-owned entities account for 50% of oil and gas production.[4]
While some claims rely on states’ international law obligations (for an early example, see Communication 155/96: Social and Economic Rights Action Center (SERAC) and Center for Economic and Social Rights (CESR) v Nigeria (2001), where the African Commission on Human and Peoples’ Rights accepted that a state has a due diligence duty to prevent environmental harm)[5], many proceedings allege breaches of national law and are brought in national fora.
This is interesting in circumstances where many states have agreed to binding international environmental and climate related treaties, such as the Paris Agreement, but it might be because these agreements lack enforcement mechanisms readily available to individuals or organisations.
To give some examples: in the UK, judicial review applications are increasingly used. In 2022 Friends of the Earth filed a judicial review action against the Secretary of State for Business Energy and Industrial Strategy in respect of two decarbonisation policies adopted by the UK government, alleging breaches of the Climate Change Act and Equality Act. ClientEarth and the Good Law Project filed similar challenges and the cases were heard together. The High Court found in favour of the claimants, ruling that the ‘Net Zero Strategy’ (the government’s economy wide decarbonisation strategy) had been unlawfully adopted.[6]
Greenpeace also filed an action against the UK government regarding its approval of Shell’s gas field project ‘Jackdaw’. The plans for Jackdaw were initially rejected by the UK regulator on environmental grounds but were approved upon resubmission. Increasingly, energy security is presented as a counter to resistance against investment in fossil fuel projects: on approval of the Jackdaw project, then Business and Energy Secretary, Kwasi Kwarteng, emphasised the significance of British stored gas to UK energy security, while Shell welcomed the approval “at a time when UK energy security is critically required”.[7] Similarly, Shell pulled out of investment in a new oil field, Cambo, but reportedly reconsidered in 2022 amid oil price increases due to fears of Russian oil supply being cut-off because of the Russia-Ukraine war.
There is evidently a tension balancing climate change initiatives with concerns around energy security, and as these issues become more prominent, disputes look set to continue rising.
In the EU, in 2020 Greenpeace Poland filed a lawsuit against PGE GiEK, a subsidiary of state-owned utility, PGE Polska Grupa Energetyczna, which derives about 90% of its electricity from coal and reportedly emits around 20% of Poland’s carbon emissions. According to Greenpeace, the complaint relies on The Environmental Protection Law, which allows any person threatened by damage or suffering damage as a result of illegal impact on the environment to demand the liable entity take responsibility for it. Greenpeace has requested that that PGE GiEK halt any fossil fuel investments and achieve net zero greenhouse gas emissions from its existing coal plants by 2030.
Outside of the EU, the Friends of Nature Institute sued Gansu State Grid in 2017, a Chinese state-owned enterprise, for its high abandonment rate of wind power in violation of the Renewable Energy Law. The law requires grid companies to ‘purchase all electricity generated from renewable energy sources’ and ‘provide connection service’. Gansu State Grid purchased the electricity generated by wind power and solar energy, but did not connect it to the grid. The claimant requested Gansu use the electricity generated by renewable sources, pay for environmental damage caused by electricity generation through coal and apologise publicly. Gansu is arguing it does not have a duty to put all the renewable electricity it purchases on the grid. We understand the case is still pending in the courts.
The way forward
Research so far is not conclusive as to the effect of litigation in driving policy change. However, it does seem that proceedings against states and state-owned entities could bring about a range of direct and indirect consequences. If successful, a court might award appropriate remedies (for example, cessation, declarations and/or compensation). Even if unsuccessful or if cases settle, the threat of litigation may be influential in increasing public awareness, encouraging better due diligence and promoting compliance with policy outcomes. It will be interesting to see whether and how these litigation trends develop, and how states and state-owned entities balance tackling climate change and energy security.
[1] International Monetary Fund Working Paper, Climate Change and Energy Security: The Dilemma or Opportunity of the Century? [2022], available here.
[2] Grantham Research Institute on Climate Change and the Environment and Centre for Climate Change Economics and Policy, London School of Economics and Political Science, Global Trends in Climate Change Litigation: 2022 Snapshot [2022], available here.
[3] ibid.
[4] International Energy Agency, The Oil and Gas Industry in Energy Transitions [2020], available here.
[5] Derived from Principle 21 of the Declaration of the United Nations Conference on the Human Environment, Report of the United Nations Conference on the Human Environment, UN Doc A/CONF.48/14/Rev.1 [1973], available here. See also, the recent resolution of the United Nations General Assembly seeking an advisory opinion from the International Court of Justice on the obligation of States with respect to climate change: United Nations Environment Programme, UN resolution billed as a turning point in climate justice [2023], available here.
[6] Friends of the Earth, ClientEarth, Good Law Project v Secretary of State for Business, Energy and Industrial Strategy, [2022] EWHC 1841 (Admin).
[7] BBC News, Shell’s Jackdaw gas field given go-ahead by regulators [2022], available here.
Naomi Tarawali, Partner, Cleary Gottlieb
Naomi’s practice focuses on international dispute resolution. She has represented corporates and high net worth individuals in commercial arbitration, investor-state arbitration and international litigation proceedings, as well as in mediation and ADR processes. She has amassed an extraordinary range of experience across the full spectrum of disputes arising in the energy, power and mining sectors in Europe, the Middle East and Africa. She has been appointed to the Advisory Board of the Lagos Court of Young Arbitrators Network and was designated as one of Africa’s 30 Most Promising Arbitration Practitioners by the Africa Arbitration Academy in 2022.
Nikita Lall, Associate, Cleary Gottlieb
Nikita’ practice focuses on international and domestic disputes, including arbitration, litigation and advisory work in a range of sectors, including energy, transport and insurance. Her experience includes litigation in the High Court as well as the Supreme Court.