On 18 July 2022, one of the hottest days on record in the UK, the High Court of England and Wales (the “Court”) ruled that the UK Government’s Net Zero Strategy (“NZS”) breached the detail and reporting requirements of the Climate Change Act 2008 (the “CCA 2008”). The Court determined the NZS to be “unlawful” and “inadequate” in meeting the UK’s 2050 net zero ambitions. On 14 October 2022, the UK Government confirmed that it would not appeal against the NZS ruling, having previously applied for permission to do so. It must now publish a revised draft of the strategy by the end of March 2023.
The decision marks the beginning of a new wave of climate change litigation in the UK against governments and corporates. It forms part of the global trend of increased, successful climate change litigation globally, and is the first case of its kind in the UK, establishing the CCA 2008 as a means of holding the UK Government to account.
The judicial review challenge was brought by Friends of the Earth, ClientEarth, Good Law Project and environmental campaigner Jo Wheatley (the “Claimants”). The Claimants brought the challenge against the Secretary of State for Business under the following grounds:
- Section 13 of the CCA 2008: under section 13, the Secretary of State has a continuing duty to prepare policies and proposals that will enable the carbon budgets to be met. The Claimants argued that the NZS would only achieve 95% of the required emissions reductions, leaving the rest to be determined by a qualitative judgment about the future effects of the proposed policies. Accordingly, the Claimants argued, the NZS was unclear as to how each policy contributed to the total reduction. Further, the Secretary of State had failed to take into account matters that he was legally obliged to consider. In particular, he did not consider the contributions that each quantifiable policy would make to meeting the carbon budgets, and under his qualitative analysis, which policies would make up the 5% shortfall and in what way.
- Section 14 of the CCA 2008: under section 14, the Secretary of State is required to prepare a Parliamentary report, as soon as reasonably practicable after a carbon budget is set, setting out proposals and policies for meeting those budgets, as well as the expected timeframe within which those policies are expected to take effect and their impact on the economy. The Claimants argued that, in light of the arguments made regarding section 13, the Secretary of State had failed to include information necessary to discharge his reporting obligations.
- Section 3(1) of the Human Rights Act 1998: the Claimants also argued that the High Court should favour their interpretation of sections 13 and 14 of the CCA, due to its consistency with section 3(1) of the Human Rights Act 1998, which provides that legislation must be read in a way that is compatible with the rights set out in the European Convention on Human Rights (“ECHR”). Increasingly, Claimants are using the human rights enshrined in the ECHR to bring climate change claims across Europe, whilst human rights are also being invoked further afield at the UN Human Rights Committee. For example, in the Dutch Court’s decision that the Shell Group globally should cut their emissions by 45% by 2030 (the Milieudefensie et al v Shell case, see more detail in our article Climate change activism and its impact on parent company liability) the Claimants relied on article 2 (the right to life) and article 8 (the right to a private and family life).
The Court held that neither the Secretary of State, nor Greg Hands (the energy minister that approved the NZS) knew how each individual policy would contribute to achieving the legally–binding net zero target. As a result, the credibility of the NZS could not properly be assessed and the government was ordered to publish an updated draft by the end of March 2023. As regards each of the grounds of challenge, it was held that:
- Section 13 of the CCA 2008: the Court held that section 13 does not require satisfaction that the numerical estimate of emissions reductions set out in a carbon budget will enable 100% of the target to be met. Nevertheless, it did recognise that, under the CCA, the Secretary of State has duties that are crucial to the operation of the legislation (including setting carbon budgets and preparing policies). The Court found that the Secretary of State had not been informed of: (a) the quantitative effects of individual policies; and (b) in the qualitative analysis, which policies were relied upon to make up the 5% shortfall and in what ways. Given that the Secretary of State is legally obliged to take those considerations into account in assessing the NZS, and he was not provided with the relevant information, he had failed to discharge his duty under section 13.
- Section 14 of the CCA 2008: The Court endorsed the Claimants’ position that a report under section 14 is important; not only to enable Parliament to scrutinise the Secretary of State’s policies and to hold him to account, but also to provide transparency so that the public can properly understand how the government intends to meet statutory targets. The Court held that the NZS lacked any quantitative assessment of the expected impact of individual policies to reductions greenhouse gas emissions.
- Human Rights Act: The Court held that section 3(1) of the Human Rights Act 1998 only enables the Court to depart from the ordinary meaning of the language used by Parliament where that would be incompatible with a Convention right and therefore rejected the Claimants’ argument in this regard. This contrasts with recent international cases. In the Milieudefensie et al v Shell case mentioned above, the Dutch Court accepted that human rights played a role in the relationship between the Claimants and Shell, concluding that the consequences of climate change pose a threat to the human rights of Dutch residents. Human rights have also been successfully invoked beyond the ECHR in other jurisdictions. On 23 September 2022, in a truly landmark decision (Daniel Billy and others v Australia), the United Nations Human Rights Committee found that Australia is violating its human rights obligations to islanders of the low–lying Torres Strait through climate change inaction. The Committee found that Australia’s failure to take sufficient steps to secure the communities’ safe existence on their island violated the islanders’ rights to enjoy their culture and be free from arbitrary interferences with their private life, family and home. The Committee also asked Australia to compensate the claimants for the harm suffered, and to do whatever needed to secure the communities’ safe existence. This is a landmark decision in many respects: it is the first time that an international tribunal has found a country has violated human rights law through climate inaction; the first time a nation-state has been found responsible for their greenhouse gas emissions under international human rights law; and the first time that Indigenous peoples’ right to culture has been found to be at risk from climate impacts.
Is the trend set to continue and how will it impact corporates?
The NZS ruling forms part of a wave of climate change litigation in the UK and globally, which is set to continue to be a rapidly-developing area of law. These types of cases are not only brought by activists against governments and corporates, but also by regulators, investors and shareholders – for example, the recent shareholder derivative action initiated against Shell’s board of directors in the UK. As regards the aforementioned Milieudefensie et al v Shell case, Shell confirmed on 20 July 2021 that it would be appealing the judgment, so it remains to be seen whether the Dutch Court will hold Shell to its climate targets or whether the decision will be overturned.
The revised NZS, which will be published next year, will include a more granular framework together with quantifiable data points and impact assessments. This will help to ensure that the UK’s targets are more data-based, with a view to avoiding potential allegations of greenwashing (see more detail on greenwashing risks for corporates and practical recommendations here).
Companies looking to minimise reputational and legal risks to their business will be well advised to consider the revised NZS in detail, to closely follow the outcomes of the Shell claims in Holland and the UK, and to assess their own climate-related strategies, targets and progress.