Title: Opening the Floodgates: Climate Liability for Big Businesses (A Case Study by Meher Indoliya)
By: Meher Indoliya
As many around the globe face the very real and incredibly devastating effects of climate change, there seems to be an increased public awareness that big corporations are responsible for much of the emissions that trigger these catastrophes. A prominent question has arisen — will these entities be legally held accountable for the disruptive impacts they have on people’s lives through these events?
For a decade, one Peruvian farmer has been attempting to answer this very question. Saúl Luciano Lliuya, who lives in the Andes, sued RWE over the risk of a melting glacier flooding his home. RWE is a German energy company and one of the largest emitters of greenhouse gases in Europe. Although RWE did not operate in Peru, Lliuya sued on the grounds that RWE’s significant emissions exacerbated adverse effects of climate change, and that they had partial responsibility for his town being at risk. He reasoned that they should pay for 0.47% of the cost for a flood defence system, which is the exact proportion that RWE contributed to global emissions.
The amount in damages that RWE would have to pay is relatively small — only 18000 USD — but this case had the potential to set an enormous precedent. It could be used to determine whether corporations can be found liable for their emissions. Lliuya ultimately lost the case due to the judge finding that the probability of the aforementioned flooding occuring was too small to hold RWE liable, but it is important to note that his case lost because of a factual reason rather than a legal one. The case still established a precedent that major greenhouse emitters can be held legally liable for the potential impacts of their emissions — the reason that Lliuya lost was because in his specific case, there objectively wasn’t a strong enough possibility of a flood. The door is still open for others to sue emitters for the effects of their significant emissions, given that these effects can be proven. Therefore, many environmental organizations still saw the decision as a win.
This case heavily involves issues of corporate liability and corporate social responsibility, specifically in the context of climate-related damages. Research Fellow Noah Walker-Crawford at the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and Political Sciences claimed that the ruling set a significant precedent, as “although the claim was ultimately dismissed on the facts — because the risk in this case was not found to meet the legal threshold — the judgment clearly signals that causation in climate litigation is legally possible. This decision clarifies how climate science can inform judicial decision-making on corporate climate liability.” In other words, the court recognized that particular companies' emissions could potentially be linked to specific climate risks, establishing a basis for similar suits, and that these companies can, in principle, be found legally liable for these harms.
The implications of this decision are therefore enormous. Corporations now face the possibility of being held accountable in courts for their emissions. The question of who is responsible for the disastrous and detrimental effects that climate change-related events have on people’s lives finally has a legal answer — it is the companies who contribute significantly to climate change. Corporations may find it desirable to change how they operate in order to align with ethical and environmental standards. In their quest for profit, they will now have to account for the possible losses that these suits bring them; the social harms they contribute to will be reflected in their own success.
In my opinion, the decision reached in Lliuya v. RWE is both legally reasonable and groundbreaking. The basis that Lliuya used to sue — that corporations should pay for the damages that their historic emissions have caused — was affirmed. The Court did, therefore, legally acknowledge the harms caused by these emission giants and offer a path to hold them liable. However, their ruling also ensured that there was a threshold of evidence needed that the emissions would contribute to these real-life harms before they awarded damages. In doing so, they set a precedent based on climate science and corporate liability while also establishing reasonable limitations.
In the wake of this case, climate litigation has won a landmark victory. In turn, the way corporations operate may be changed forever in order to adjust to this new standard of dealing with corporate externalities.