Yves here. I find it hard to know where to begin with this climate litigation ruling and the underlying law. It may seem oh so bold to impose tough pollution disclosure standards on companies. Here, the public allegedly got a win because a French court decided to extend the reach of climate change emissions reporting from the company proper to its customer.
In fact, this entire approach is just about the worst possible way to crack down on climate change>. It is dereliction of duty by the French government. They’ve kicked a problem over to the courts, which will result in at best occasional successful lawsuits and fines for climate abusers. Instead, the legislature needs to man up and pass serious laws that, depending on the nature of the harm to the public, either prohibits activities entirely or imposes taxes. The executive then enforces. The only place for the courts in a proper climate-damage-combatting regime is for suits either due for failure to enforce or arguable enforcement overreach.
And it is no secret as to when taxation or prohibition are the more fitting approach. We’ll again hoist a section from a classic paper by the then Executive Director for Financial Stability at the Bank of England, Andy Haldane, from his paper, The $100 Billion Question:
The taxation versus prohibition question crops up repeatedly in public choice economics. For centuries it has been central to the international trade debate on the use of quotas versus subsidies. During this century, it has become central to the debate on appropriate policies to curtail carbon emissions.
In making these choices, economists have often drawn on Martin Weitzman’s classic public goods framework from the early 1970s.13 Under this framework, the optimal amount of pollution control is found by equating the marginal social benefits of pollution-control and themarginal private costs of this control. With no uncertainty about either costs or benefits, a policymaker would be indifferent between taxation and restrictions when striking this cost/benefit balance.
In the real world, there is considerable uncertainty about both costs and benefits. Weitzman’s framework tells us how to choose between pollution-control instruments in this setting. If the marginal social benefits foregone of the wrong choice are large, relative to the private costs incurred, then quantitative restrictions are optimal. Why? Because fixing quantities to achievepollution control, while letting prices vary, does not have large private costs. When the marginal social benefit curve is steeper than the marginal private cost curve, restrictions dominate.
The results flip when the marginal cost/benefit trade-offs are reversed. If the private costs of the wrong choice are high, relative to the social benefits foregone, fixing these costs through taxation is likely to deliver the better welfare outcome. When the marginal social benefit curve is flatter than the marginal private cost curve, taxation dominates. So the choice of taxation versus prohibition in controlling pollution is ultimately an empirical issue.
So the sort of data French companies are reporting could be used to develop analyses to determine what sort of laws or regulations to devise. But as I read it, the intent is instead simply to provide information to facilitate private lawsuits. From the post:
Nevertheless, the ruling expands the options for corporate accountability efforts against oil companies in France. And it may set a precedent for European Union rules requiring similar reports from companies in other countries, which will come into effect in 2028.
So this is an exercise to facilitate wet noodle lashings. Private parties and perhaps sometimes government entities will file suits based on these disclosures. Legal battles will take years. Most polluters will not be sued and any awards will come well after the bad conduct. Such a lame deterrent will not change behavior.
By Aminta Ossom, Lecturer on Law, Senior Clinical Instructor, Harvard University; Harvard Kennedy School. Originally published at The Conversation
A recent decision by a French court requires a major European oil and gas company to report not only its own climate-warming emissions and those of its contractors but also those of its customers, who burn the oil and petroleum products the company sells.
The court’s ruling against TotalEnergies, under a French law passed in 2017, expands a growing front in the global legal fight against climate change. That movement seeks court rulings to hold corporations liable for their emissionsand the resulting warming of Earth’s atmosphere.
The court ruling gives TotalEnergies six months to report on the emissions from airlines, auto drivers and other customers using the company’s energy products. Those emissions represent the vast majority of the company’s total emissions. The company must also assess the risks of those emissions to the environment, human rights and health, and report how it plans to reduce those risks.
TotalEnergies has said it will abide by the ruling, though it still may choose to appeal. Nevertheless, the ruling expands the options for corporate accountability efforts against oil companies in France. And it may set a precedent for European Union rules requiring similar reports from companies in other countries, which will come into effect in 2028.
Corporate Responsibility
The French law requiring this type of reporting came as the result of the 2013 collapse of a clothing factory in Bangladesh that killed more than 1,100 people. Among the rubble were clothes from several French companies’ brands. The resulting public outcry led to the passage of the law, seeking to hold French companies accountable not only for their own corporate practices but for those of their contractors and subsidiaries.
In the TotalEnergies case, the company acknowledged that its own activities result in emissions that pose risks to the environment, but it said emissions from its customers were outside the scope of the law. The court disagreed, ruling not only that TotalEnergies must report on its customers’ emissions around the world, but that the company must also take steps to reduce the global harm of those emissions.
The court reasoned that TotalEnergies’ production of energy was closely linked to the harm from its customers’ use of those energy products. In a partial win for the company, however, the court declined to directly order TotalEnergies to reduce its overall emissions – including those of its customers – which would have meant effectively telling the company to sell less petroleum.
For its own operations, TotalEnergies reported around 34 million metric tons of carbon dioxide emissions per year – more than the emissions of Ireland, Finland or Denmark. The company estimated that its customers’ emissions were about 10 times that amount, putting it about even with Australia’s annual national emissions.
Affecting US Companies
This ruling will have repercussions in the United States, because TotalEnergies’ U.S. operations are extensive, including oil and gas production, refining and sales. It is the largest exporter of liquefied natural gas from the U.S., yet its U.S. oil and gas business is only about 4% of the company’s global total.
In addition, the French court determined that harms from emissions pose human rights and environmental risks that should be included in companies’ reports. That could, over time, be interpreted to require U.S.-based companies that operate in Europe to collect and share similar data about their emissions and those of their customers.
The prospect of this type of report is one reason U.S. energy companies have already sought to shape a new European directive on corporate risk evaluation, which requires all EU countries to develop national laws on risk reporting by 2028.
The French ruling also marks a rare decision against a corporation in a lawsuit over climate damage. Many climate law cases are brought against governments, which have joined treaties and made other international commitments to reduce greenhouse gas emissions. Companies are not parties to those agreements, and courts also tend to be wary of interfering in corporate management decisions.
The overall conclusion of the French court that corporations have a legal duty to help combat harms from climate change could also add weight to similar claims in lawsuits against companies in Belgium, Italy and Switzerland.
