FRIENDS OF THE EARTH AND OTHERS v SECRETARY OF STATE FOR BUSINESS, ENERGY AND INDUSTRIAL STRATEGY

As temperatures rise to unprecedented levels across the UK, so too does the pressure on both the Government and businesses to tackle the climate change crisis. 

On 18 July 2022, the High Court ruled that the UK Net Zero Strategy (“NZS”), which sets out plans to decarbonise all sectors of the UK economy, does not meet the Government’s obligations under the Climate Change Act 2008 to produce detailed climate policies that show how the UK’s legally-binding carbon budgets will be met.  While this is an important ESG decision with implications for insurers and insureds, it is not in our view in the same league as the run of cases following the ECHR decision in Urgenda.

Background

Following the 21^st Conference of the Parties (COP21), the Paris Agreement on Climate Change was agreed and adopted in 2015. The UK then ratified the agreement in 2016. The UK responded to the Paris Agreement in two main ways. Firstly, s.1 of the Climate Change Act (CCA 2008) was amended in June 2019 to require the Secretary of State to ensure that the net UK carbon account for the year 2050 is at least 100% lower than the 1990 baseline.  Secondly, in December 2020 the UK communicated its Nationally Determined Contributions to the United Nations Framework Convention on Climate Change  to reduce greenhouse gas (“GHG”) emissions by 2030 by at least 68% compared to 1990 levels. Following this, the UK Government then published its NZS in October 2021 in the build-up to COP26 in Glasgow.

This application for judicial review challenged the NZS on three grounds:

1. Under s.13 CCA 2008, the policies and proposals within the NZS would not enable the carbon budget to be met.
2. Under s.14 CCA 2008, the NZS did not include the necessary information or detail required to evaluate if the carbon budgets would in fact be met.
3. Under s.3 of the Human Rights Act 1998, so far as possible primary legislation must be given effect in a way that is compatible with rights protected under the European Convention of Human Rights.

Decision

 First Ground

The High Court ruled that the first ground of the Claimant’s challenge only succeeded in part, as the Claimants’ argument consisted of two claims.

Firstly, the Claimants argued that the NZS needed pure numerical projections in order enable 100% of the carbon budget to be met. However, the High Court held that “there is no reason to think that Parliament intended that s.13(1) could only be satisfied by the predicted numerical effects of those policies which are quantifiable”. It was held that the Defendant did not need to be satisfied that his numerical estimate of emission reductions from quantifiable polices will enable 100% of the target in a carbon budget to be met.

However, the Claimants also argued that there were omissions from material provided to the Energy Minister in October 2021 prior to the NZS being signed off. It was held that it was not possible for the Minister to make a decision as to his departments approach to making up the 5% shortfall and therefore he did not discharge his duty under s.13 CCA 2008.  

Second Ground

This is the ground where the Judge was more critical of the Defendant.

The Claimants criticised the NZS as it failed to set out the numeric contributions of the individual policies and the relevant timescales. In addition, they argued that the strategy did not reveal the quantification carried out by BEIS and that the polices only addressed 95% of the necessary reductions and did not address how the 5% shortfall was to be made up.

The High Court did not accept the Defendant’s narrow interpretation of s.14 CCA 2008. The judgment clarifies that the Defendant treated the requirement to “set out” proposals as amounting to little more than a requirement to publish the measures when in fact s.14 requires the Government to be clear about how it intends to meet its statutory targets. Mr Justice Holgate highlighted the Explanatory Notes to the CCA 2008 and stated that explanation and quantitative analysis are essential.

Finally, the NZS was held to “not go below national and sector levels to look at contributions to emission reductions made by individual policies”. In order to comply with s.14 CCA 2008, the Judge held that it ought to have done so. Therefore, as a matter of law the NZS did not comply with s.14. 

Third Ground

The High Court rejected the third ground as it was “too ambitious in a number of respects” and did not accord with established principle.

The Claimants argued that if ss13 and 14 CCA 2008 were interpreted in the way the Defendant contended then it would contravene human rights under the Convention. However, the Judge held that this argument went beyond Strasbourg case law.

Discussion

Where does this Judgment leave us? The Defendant was ordered to lay before Parliament a renewed NZS dealing with the defects before the end of March 2023 .

Friends of the Earth stated that “This landmark ruling is a huge victory for climate justice and government transparency. It shows that the Climate Change Act is a piece of legislation which has teeth, and can, if necessary, be enforced through our court system if the government does not comply with its legal duties.”

While this may be broadly true, it is important to note that this case is very different from cases such as Urgenda Foundation v. State of the Netherlands in 2019, where the issue was the legality of the State of the Netherlands’ decision to reduce its emissions reduction target. In that case, the Dutch Court held that the Dutch Government failed to explain why the reduction was justified in light of international consensus that the target should be increased. 

This case is not about the levels of the UK emissions reduction targets, but concerns the specifics of the NZS, which is far more nuanced. The details of the NZS will have to be clarified and particularised but the ultimate goal posts have not changed.

As a reflection of this, the Third Ground in this case appears to build on the arguments presented in the Urgenda case by framing climate change as a human rights issue.  A similar approach was taken in Neubauer, et al. v. Germany in 2020, a claim brought by a group of German youths in a legal challenge to Germany's Federal Climate Protection Act. Like with Urgenda, the argument was that Germany’s target of reducing GHGs was insufficient and consequently violated their human rights as protected by the German constitution. 

While the claimants in Urgenda and Neubauer were successful in formulating their arguments around human rights, the facts of this case are very different. Mr Justice Holgate specifically noted that Urgenda provides no assistance in interpreting a Minister’s duty to formulate policy where the applicable legislation gives wide scope as to the content of the policy. In essence, this claim is not about insufficient GHG reduction targets, but rather improving on the detail and quantification of how the planned policy will achieve the UK’s climate targets.

Although the Claimants did not win on all points, by no means will this be the end of matters.  When the revised NZS is put before Parliament next March, it will no doubt receive significant scrutiny by the Claimants. 

On that, it is an interesting point to note that governments, like businesses, are facing ever mounting interrogation around their climate change policies / ESG frameworks. The lesson to be taken from this case is that having good targets is one thing, but they must be backed up with a sufficiently detailed strategy supported by clear policy.  Without that, the spectre of greenwashing will remain.

On a final note, we have noticed that a trend appears to have developed where climate activists first sue a national government due to their insufficient climate change policy and, having succeeded there, the activists, utilising the same sort of arguments, move on to target corporates based in those jurisdictions. By way of example, Urgenda was followed by a claim against Royal Dutch Shell.  Similarly, in Germany, Neubauer preceded the various climate activist claims being levelled at the major German car manufacturers.  The big question is, will the Claimants’ mixed success in this claim against the UK government precipitate an increase in claims against UK-based corporates?

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