Litigation against fossil fuel companies over the costs of climate change is heating up, posing a new threat to the industry.
Since 2017, U.S. cities, counties, and the state of Rhode Island have sued companies such as ExxonMobil, Shell, BP, and Chevron on the basis that they sold products that cause climate change while misleading the public about the associated harms.
The lawsuits, some filed by municipalities far from the coasts, make public nuisance claims under state law, seeking compensation for the costs of adapting to droughts, wildfires, severe storms, and other effects of climate change.
This month saw a major development in one of those cases, when 26 companies sued by the city of Baltimore asked the U.S. Supreme Court to keep a Maryland state court from hearing the case. The companies want the case transferred to federal court, where similar lawsuits have failed and a single ruling could be issued, rather than sprawling decisions across jurisdictions.
Meanwhile, a separate lawsuit filed by New York state against Exxon — which takes a different legal approach — goes to trial Oct. 23, accusing the company of committing securities fraud by misleading investors about the danger climate change poses for its business.
New York alleges that Exxon underrepresented the potential future costs to its business of climate regulations, deceiving investors of their true financial exposure.
That case could see an earlier resolution than the public nuisance suits, which are years away from being resolved and will likely eventually come before the U.S. Supreme Court. New York had been investigating Exxon for more than three years before filing the lawsuit in New York’s Supreme Court, suggesting the state believes it has strong evidence to succeed.
Just the threat of litigation, along with shareholder advocacy and public pressure, has already pushed the fossil fuel industry to become more conciliatory on climate change.
“There was a point of time if companies supported climate policy or clean energy, it would be an admission they are contributing to the problem and causing harm,” said Sue Reid, vice president of climate and energy at Ceres, a nonprofit organization that works with companies and investors to mitigate climate change. “We are way past that point now. Companies fully understand their products and business contributed to extraordinary risk and economic impacts. Now it’s their imperative to minimize their exposure.”
David Bookbinder, an attorney with the libertarian Niskanen Center, is working with Colorado counties, along with the city of Boulder, on a public nuisance lawsuit filed last year against Exxon and Suncor Energy.
He says the results of the unfolding public nuisance cases could help determine who bears the costs of climate change.
“It’s an attempt to hold these companies responsible for these actions,” Bookbinder said. “They made and sold products knowing they would cause climate change. Now the chickens have come home. The local governments are paying more and more money to provide basic government services that are more expensive because of climate change. The question is who pays for those — local governments or companies.”
Bookbinder says the public nuisance cases could be successful in state court even though the U.S. Supreme Court dismissed the argument in a 2011 decision, American Electric Power v. Connecticut. The justices said the Clean Air Act displaces the common law nuisance claims in regulating greenhouse gas emissions at the federal level, ruling that Congress and the Environmental Protection Agency are “better equipped to do the job than individual district judges issuing ad hoc, case-by-case decisions.” But cities and counties say the courts have not settled whether a state public nuisance claim is a possible remedy.
Companies, however, are fiercely fighting the lawsuits, contending that addressing climate change is a shared global challenge better handled through public policy and that litigation threatens to undermine cooperation between the industry and policymakers.
“We are confident that the courts will once again find that climate change requires a broad and innovative response from policymakers, not a liability ruling from state or federal courts,” said Phil Goldberg, special counsel for the Manufacturers’ Accountability Project, an initiative of the National Association of Manufacturers, which is supporting the fossil fuel companies. “If these municipalities really want to do something about climate change, they should work with manufacturers on local energy innovations, not waste time and resources on this baseless litigation.”
Reid said that the manufacturers’ argument is disingenuous given that industry trade groups continue to lobby against carbon pricing, even though individual companies give rhetorical support to such measures.
“These companies have been investing extraordinary resources to lobby against good policy,” Reid said.
Companies also spend a much larger portion of their budgets on oil and gas, despite increasing funding for renewables.
“From everything I’ve seen in the Senate, the industry lobbying and electioneering apparatus remains adamantly opposed to the solution CEOs claim to support,” said Sen. Sheldon Whitehouse, a Rhode Island Democrat.
Even if the plaintiffs lose, companies may be prodded into settlements that force changes in how they operate and the policy they support.
Fossil fuel companies have sought legal liability protection in exchange for them backing a carbon tax.
However, the Climate Leadership Council, a group that has proposed a carbon tax plan that Exxon and other oil companies have endorsed, recently stripped out a provision that would have protected companies from certain lawsuits based on their historical emissions.
It’s a sign of how the tide is shifting against fossil fuel companies, said Sarah Ladislaw, senior vice president and director of the Energy and National Security program at the Center for Strategic and International Studies.
“It’s become quite evident that no blanket exemption will be given to oil and gas companies that will cover the full range of liability, and no policy would be able to get enacted that could get most people advancing these lawsuits to say ‘this was totally worth it, I’ll stop suing’,” Ladislaw said.
