Scenario #3: Liability Risk: Litigation Against Carbon Emissions Companies across all sectors are considering their strategies around climate change. Climate change is likely to impact businesses in three distinct ways:
large loss to the energy industry plausible. A database of US and non-US climate change related litigation has 1,477 court cases across 25 countries. 100 The majority of the litigation is filed in the US, with Australia, the UK and New Zealand also having a large number of cases, see Figure 12.101
• Physical Risks – ways that increases in extreme weather events might cause damage and disruption to business activities, supply chains and operations;
In terms of litigation against corporates, we are seeing State’s Attorneys General and cities file lawsuits. New York and Massachusetts State’s Attorneys General are investigating Exxon Mobil for alleged misrepresentation of financial exposure to climate change. The investigations started in 2016 and are still active today.
• Liability Risks – how an organization’s carbon emissions are contributing to the causes of climate change, potential implications of that, and the costs of plans to reduce emissions; and • Transition Risks – the potential impacts of society switching to a new lower-carbon economy.
Using a public nuisance claim, several US cities, counties and states are seeking damages from major oil and gas suppliers. These cases are claiming current damages due to the impacts of severe weather and future losses from infrastructure improvements to fight against sea level rise. The legal arguments suggest that major energy companies knew about the harm posed by their products and continued to mislead the public by not highlighting the potential risk. Three of the cases brought in California and New York were moved to federal court, where the judge said that such issues should be handled by Congress and the President.102
For energy companies, the second issue of liability risks is likely to be of major significance. This scenario considers the potential liability dimension of mass torts and lawsuits being brought against companies in the energy value chain for historical and present contributions to climate change and seeking redress from harms being caused by climate change effects. As climate change impacts take hold, we are seeing an increase in the number of climate change related lawsuits against oil companies and governments. The entire energy value chain is potentially subject to similar litigation, analogous to the current situation of litigation regarding opioid-related deaths in the United States. The scope of lawsuits against drug companies is widening rapidly to include healthcare providers and retail pharmacies. The likelihood of a successful claim of current or future climaterelated damages against the oil industry remains low, but the legal arguments in such cases are evolving, making a Cambridge Centre for Risk Studies
A final strand of litigation aims at holding governments accountable for not meeting climate change targets. Our
100 (Sabin Center for Climate Change Law at Columbia Law School and Arnold & Porter 2019d) 101 (United Nations Environment Programme 2017) 102 (Hasemyer 2019)
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Scenario Applications: Stress Testing Companies in the Energy Value Chain
