Cooling off? Climate change litigation in New Zealand

New climate change litigation is trending down, notwithstanding increases in climate-related disasters worldwide. We expect New Zealand to follow suit when it comes to claims against corporates, at least pending the outcome of the “test case” of Smith v Fonterra. However, based on international experience, we may see more claims against Government entities challenging decisions of regulatory bodies where climate change is relevant and policy responses to climate change.

Global trends

The rate of new climate change proceedings may be slowing globally, according to the latest annual statistics published by the Grantham Research Institute on Climate Change and the Environment [1]. 2023 was the second year in which the number of new proceedings decreased from pinnacle of 2021. The Institute suggests that this is a result of consolidation and concentration of strategic litigation efforts in high-impact areas.

In particular, Government cases have seen recent successes. These cases challenge policy response ambitions or implementations.

Although there is a significant number of ongoing cases worldwide, precedents are becoming available slowly, as many of these cases have not yet reached a final decision stage or even the evidential stage.

One important case that has provided an appellate decision is Milieudefensie v. Shell. The first instance decision of the Hague District Court in 2021, hailed as a landmark decision for climate change litigation, required Shell to increase its emissions reductions. However, that order was overturned on appeal late last year.

Environmental group Milieudefensie (Friends of the Earth Netherlands) sued Royal Dutch Shell for its claimed contribution to climate change [2]. They alleged that Shell owed a duty to comply with an unwritten standard of care set out in the Dutch Civil Code and that Shell’s failure to adequately reduce its carbon emissions now and in the future was a breach of that duty. The Hague District Court accepted the existence of the claimed unwritten duty of care and ruled that it required Shell, when determining its group corporate policy with respect to carbon emissions, to observe due care, which the Court found it had not. The Court held that Shell was required to reduce its global scope 1, 2 and 3 emissions by 45% by the end of 2030 as compared with 2019 levels.

The Court of Appeal of the Hague also recognised that Shall was constrained by a duty of care arising from a social contract requiring private companies to take responsibility for combating climate change in line with international obligations, even where that was not explicit in in the written laws of the country where it operated.

However, the Court of Appeal did not order Shell to adhere to specific emissions reductions because it had largely met the reduction targets in respect of scope 1 and 2 emissions. For scope 3 emissions, the Court of Appeal determined there was insufficient scientific consensus about specific reduction percentages to which corporates like Shell should adhere. The Court considered the issue problematic, given the varied nature of carbon emissions, different carbon intensities of fossil fuels and alternating sector outputs. It also found that there was insufficient consensus from climate reports on the reduction figure upon which courts could base an order against a specific company in the oil and gas sector.

Finally, the Court accepted Shell’s position that there was insufficient evidence to establish that a reduction in Shell’s emissions would lead to a global reduction because end-users would seek out fossil fuels from other sources.

New Zealand’s climate change landscape

These issues are yet to be resolved on our shores. In the Supreme Court’s decision in early 2024, Smith v Fonterra survived the defendants’ strike out applications. However, there are unlikely to be a final outcome in that case for several years, as it progresses through case management, trial and possible appeals.

There is more activity in claims against Government. In the second half of last year, the Better New Zealand Trust issued proceedings against the Minister for Transport challenging the Government’s weakening of the Clean Car Standard. The group seeks a determination of whether changes to that standard meet the statutory requirement of increasing the supply of zero and low emission vehicles in New Zealand and is consistent with our emissions reduction plan.

Similarly, the High Court this year heard, and dismissed, Major Gas Users’ Group Incorporated’s appeal from a decision of the Commerce Commission related to input methodology changes in the face of climate policy, which it said resulted in higher gas user costs.

We expect more challenges to decision-making and policy changes in New Zealand over the next few years.

Looking further into the future, we may see some litigation in two other areas within the corporate claims categories:

Cases concerning decision-making and management of corporations, including possible claims against directors and officers tasked with ensuring the success of a business. Internationally, seventeen ‘transition risk’ cases have been recorded as issued since 2015, with one new case in 2023 [3]. In New Zealand, these claims would face the difficulty that they would need to be shoehorned into the director’s duties provisions in the Companies Act 1993.
Cases challenging the flow of finance or other services such as insurance to projects and activities that are considered high-emitting or are otherwise not aligned with climate policy. This issue was explored as part of the Finance and Expenditure Committee’s Inquiry into banking competition, including at the hearings held between October and December 2024.

Conclusion

Climate change litigation is still developing both globally and in New Zealand, with climate policy and frameworks being tested to mitigate or slow climate change and to balance. As demonstrated by the lengthy discussion regarding social contract in Milieudefensie, the cases spotlight the tension between government policy, private rights and public interests. Although the number of climate cases issued is decreasing, new cases are more likely to be brought in a more consolidated and strategic manner.

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