Pressures on businesses of virtually “every stripe” to commit to and implement plans to reduce carbon dioxide equivalent (CO2e) emissions have continued to grow. Businesses face a two-pronged attack when it comes to emissions of CO2e – increased regulations and litigation.
As we look at the remainder of the year ahead, it appears that there will be a continued focus on climate-related issues including climate-related litigation. Of course, it is an election year so that may play into the politics of environmental protection.
US Leads Climate Litigation
A website created by the Sabin Center for Climate Change Law at Columbia University in conjunction with the law firm, Arnold & Porter, tracks climate-change litigation. The site reports on global climate-change litigation and is updated monthly.
According to that website, the United States leads the way with 1,725 cases with links to 11,353 case documents. Globally (more than 55 countries), there are 865 cases, with links to 1,901 case documents.
One of the cases that got a lot of attention in the US was filed by a group of children, Held v. Montana. In that case, the court found that state lawmakers had violated the constitutional rights of young people by ignoring the planet-warming effects of fossil fuel projects. For other climate cases, see “Climate activists end 2023 with major court wins” in E&E News/Politico.
Climate Litigation and Market Capitalization
One interesting take on this growing trend of climate litigation is the effect on the market capitalization of the company facing litigation.
The London School of Economics and Political Science looked at over 100 climate-related lawsuits between 2005 and 2021 and “found that the filing of a climate-based litigation claim or corresponding unfavorable court decision reduced the market capitalization of the defendant company by about 0.41%, on average.”
The study also found that simply filing a climate-related lawsuit could decrease a company’s market valuation by 0.35%, while an actual court decision finding liability on the company reduced the defendant company’s market capitalization by 0.99%” (Source: Cadwalader).
See “Impacts of climate litigation on firm value.”
Businesses have to contend to more regulation (from more agencies) and litigation of emissions associated with greenhouse gases.
Security and Exchange Commission
The regulatory pressures are many and varied.
The Biden Administration has continued to use the whole-of-government approach to address concerns over CO2e emissions. Climate, like no other environmental issue, is increasingly involving a variety of federal agencies. Take for example, the recently finalized rule from the Security and Exchange Commission (SEC) – “The Enhancement and Standardization of Climate-Related Disclosures for Investors.” This rule requires approximately 2,800 US companies to report Scope 1 and Scope 2 emissions. In their final rule, the SEC backed down from requiring reporting Scope 3 emissions, which are indirect emissions by suppliers.
This final rule is already facing legal challenges. There is a coalition of states suing stating that the rule exceeds the SEC’s statutory authority. Environmentalists are not pleased that Scope 3 emissions were excluded.
For an overview see the SEC 4-minute video, New Climate-Related Disclosure Rules.
Greenwashing
There have been lawsuits related to “Greenwashing” – companies making claims around sustainability efforts and CO2e reduction that are not substantiated.
As reported in a blog by Womble, Bond and Dickinson, New York State Attorney General Letitia James has filed a lawsuit against the beef producer JBS in state court for their climate-related claims.
In the blog, they state, “The allegations center around JBS’s allegedly misleading marketing claims related to its commitment to reduce climate pollution over the next decade.” The complaint focuses on deceptive advertising, global emissions reduction pledge, and more.
They also state in the blog that agriculture and consumer products companies need to be especially mindful of these greenwashing claims when considering their advertising and public statements on climate issues.
Energy
Oil and Gas companies continue to be a major target of litigation and by all indications, they will continue to face legal pressures. According to a blog by the law firm, Zelle, “2024 is likely to be another busy year for climate litigation. In the US Big Oil lawsuits, we can expect to see decisions on the substantive issues or, at least, procedural decisions that hint at the court’s approach to them. The nuances of different state laws mean that there will likely be different outcomes and further uncertainty for the oil and gas sector. We expect to see more cases filed using strategies that have proved successful, for example, deception.”
On May 11, 2023, the USEPA proposed “New Carbon Pollution Standards for Fossil Fuel-Fired Power Plants to Tackle the Climate Crisis and Protect Public Health.” Recently, this rule was delayed for existing natural gas plants. This delay according to a blog by Snell & Wilmer was partially in response to concerns by environmental justice groups who argued the rule did not adequately protect disadvantaged communities.
The same blog speculated that the delay may also have to do with the upcoming elections.
Final Thoughts
There are almost no industries that are unaffected by the current focus on reducing CO2e emissions. Should litigation to force the SEC to include Scope 3 emissions in reporting successfully develop, then the umbrella of affected industry will grow substantially. This would include agriculture.
An overly zealous approach to “rid” society of fossil fuels would have very serious consequences. As the London School of Economics report shows, climate litigation can affect a company’s bottom line. Further, as reported by The University of Michigan Center for Sustainable Systems states, “About 79% of the nation’s energy comes from fossil fuels, 8.0% from nuclear, and 13.1% from renewable sources.” Clearly, we are still highly dependent on traditional fuels to run our energy-intensive society.
It has always been important for the regulated community to closely monitor and comment on developing regulations. However, in today’s world, the regulated community includes a growing list of businesses, and the federal agencies that are proposing new rules are no longer confined to typical environmental regulators.
If you need assistance with an environmental issue, contact us at info@dragun.com or 248-932-0228.
Dragun Corporation does not use artificial intelligence in drafting our blogs or any other material.
Alan Hahn drafted this blog. Alan has an undergraduate degree in Environmental Studies and completed a graduate program in Environmental Management. He has worked in environmental management for 45 years. He has written hundreds of blogs and articles. His published work includes Michigan Lawyers Weekly, Detroiter, Michigan Forward, GreenStone Partners, Manure Manager Magazine, Progressive Dairy, and HazMat Magazine.
Jeffrey Bolin, M.S., reviewed the blog. Jeff is a partner and senior scientist at Dragun Corporation. He is a published author, frequent speaker, and expert witness. His expertise in environmental due diligence, PFAS, vapor intrusion, and site assessments has led to projects in the US, Canada, and overseas. See Jeff’s Bio.
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