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From Climate Justice to Climate Liability

The recent COP27 climate conference in Sharm El-Sheikh was a disappointment on many counts. But by securing the developed world's acknowledgement that it bears some responsibility for the global costs of climate change, this COP could one day be remembered as a major turning point.

LONDON – Many have dismissed last month’s COP27 climate conference as a failure, owing to the lack of progress on pledges made at the COP26 summit last year, and to the absence of clear commitments to phase out fossil fuels. More broadly, the COP process itself has been criticized as inadequate and ultimately unworkable, given its reliance on unanimity among all the parties.

But COP27 did produce one notable breakthrough: the world’s advanced economies, including the United States and the European Union, finally accepted some responsibility for the “loss and damage” caused by climate change. In the bureaucratic language of the final communiqué, they agreed “to establish new funding arrangements for assisting developing countries that are particularly vulnerable to the adverse effects of climate change in responding to loss and damage.” A special committee comprising 24 countries has been established to determine how the new fund will be financed, managed, and distributed. Their conclusions are due at the COP28 summit in the United Arab Emirates late next year.

Yet, given that the Republicans will soon have control of the House of Representatives, it is hard to believe that the US will be putting much cash on the table. There is also uncertainty about whether China will be a major contributor. Although it is now a leading source of emissions, the United Nations still considers it a “developing” country. Finally, while the EU has accepted, in principle, that the countries most responsible for climate change should help bear its costs, it is heading into a recession, which will most likely limit Europeans’ contribution.

China’s involvement is especially important. Not only does it generate almost one-third of global emissions, but the EU has made Chinese contributions a condition for its own participation. Hence, former British Prime Minister Gordon Brown warns that we could end up with a “fund without funders.”

But as real as that danger is, it should not diminish the importance of what governments agreed to at COP27. The developed world’s acceptance of responsibility for the impact of climate change establishes grounds for reparations, and indicates a degree of liability that will now be tested in courts around the world. “Climate justice” will evolve from a powerful slogan into a live legal issue. If climate change is the result of emissions – past and present – and if it is driving the increased incidence and severity of extreme weather, that means this year’s flooding in Pakistan and creeping desertification in North Africa can be attributed to those who caused the emissions.

But who, exactly, is liable? The developed world’s governments have accepted that they are partly accountable. But responsibility, and therefore liability, might also be attributed to the companies that have produced, sold, and profited from the sales of the products that generated the emissions. Energy companies can try to argue that until the 1980s and 1990s, there was no scientific consensus on the adverse climatic effects of burning hydrocarbons. But from the 1990s onwards, that defense cannot stand.

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The age of potential liability thus began around 30 years ago, when the Intergovernmental Panel on Climate Change and others started creating a body of credible scientific research. And now, the age of real climate liability is upon us. For the companies involved – particularly those subject to the laws and political decisions of the advanced economies – such liability is an existential threat. It is analogous to the Master Settlement Agreement that resolved the conflict between the tobacco industry and 46 US state attorneys general over responsibility for the medical costs associated with smoking.

But whereas that settlement required the companies to pay a total of $206 billion over 25 years, climate change and its associated costs are much bigger. The risks are global, and they are still growing, because emissions continue to rise. In fact, the worst is yet to come, and the potential costs are almost beyond calculation.

There will be a ferocious legal battle, to be sure. But simply by accepting responsibility for the global costs of climate change, in principle, the parties to the UN Framework Convention on Climate Change have let the genie out of the bottle. Fossil-fuel companies and their investors will not be able to claim that they weren’t warned.

True, COP27 left many participants and observers disappointed. Climate scientists, activists, and others are understandably dismayed that the urgency of climate change is being ignored, and that more immediate issues such as the cost-of-living crisis and Russia’s war in Ukraine are crowding out the attention of policymakers and the public. But the reality is that COP27 will likely be remembered as a watershed moment. Now that the developed world has finally accepted a degree of financial responsibility for the loss and damage caused by climate change, the broader climate debate will henceforth turn on the question of liability. And that, in turn, could fundamentally change the main protagonists’ incentives.