Absurd: NZ courts can now decide on climate change

Dr Oliver Hartwich
The Australian
15 February, 2024

The World Justice Project ranks New Zealand 7th out of 142 countries on its ‘Rule of Law Index’, narrowly ahead of Australia’s 13th place. However, Australia still has hope – if only because of a recent decision by the Supreme Court of New Zealand.

The case is easily told. Mike Smith, an indigenous activist fighting climate change, filed a lawsuit against seven large New Zealand companies for their carbon emissions. Smith claims that they are causing him harm.

The case falls under what lawyers call ‘tort law’. It is an ancient branch of the common law dealing with making good damage unlawfully caused to one person by another.

In his case, Smith argued that the seven companies were responsible for the torts of ‘public nuisance’, ‘negligence’ and a hitherto unknown tort of ‘damage to the climate system’.

Armed with these claims, and supported by pressure group Lawyers for Climate Action, Smith went to court. The defendants promptly applied to strike his claims out. In legal parlance, such a ‘strike out’ means that the court considers a claim too frivolous to be taken seriously.

In the first instance, the High Court struck out Smith’s public nuisance and negligence claims.

However, the High Court allowed Smith to take his damage to the climate system forward, not least to see whether that fabled new tort really exists.

The Court of Appeal did not think so. It threw out Smith’s whole case.

This is where Smith’s case would have ended, had it not been for the New Zealand Supreme Court, the highest court in the land. A couple of years ago, it permitted Smith to argue his case.

Last week, we finally learned the verdict. The Supreme Court not only allowed Smith to have his claim of damage to the climate system heard in the lower court. It did so on all three alleged torts.

You do not have to be a lawyer to understand the problems with New Zealand’s top judges’ decision last week. But perhaps one must be a lawyer to come up with it.

To be clear, the Supreme Court did not decide that Smith will eventually win his case. But it does mean that the court believes that he might.

Still, is this a logical analysis of Smith’s claims?

To answer this, we need to consider a little background on climate change and New Zealand’s policy for dealing with it.

In the grand scheme of planetary emissions, New Zealand is a rounding error. Of every tonne of global carbon emissions, New Zealand is responsible for 1.7 kilograms. Since Smith sued only seven New Zealand companies, his case is effectively about a few grams out of each global tonne of carbon emissions.

Now, in tort law, the general rule is that there must be a close link between a defendant’s actions and the plaintiff’s alleged damage. The legal standard is that it cannot be “too remote”, i.e. the specific action must be causally connected with the harm.

Could any reasonable person think there is such a close link? Would anyone seriously believe that a (globally speaking) tiny amount of carbon dioxide from a specific emitter would cause specific harm in Mr Smith’s life? Had the Supreme Court followed the Court of Appeal’s lead, the case would have been closed.

If the link between action and damage is too loose, then anything goes. According to chaos theory, the flap of a butterfly’s wing can cause a hurricane. By Smith’s logic, if the butterfly had an owner, that owner should pay for the rebuild after the storm.

If this is already problematic, it gets worse. New Zealand has a legislative framework for dealing with carbon emissions: the Emissions Trading Scheme, or “ETS.” All non-agricultural emitters of climate gases in New Zealand must buy carbon units. These units permit them to emit these gases.

The seven companies Smith sued had such certificates for their emissions. So, they were complying with the rules and regulations put in place by Parliament and administered by government.

A key part of the rule of law is predictability. If you play by the rules and obey the law, you should not have anything to fear. So how could the companies find themselves sued when they are complying with environmental law?

But wait, not even that is the end of this absurd story. That is because of the way the ETS works.

Under New Zealand’s ETS, the government auctions and allocates a fixed number of emission credits each year. Trading in ETS units only determines who emits how much of that total amount.

If Smith is ultimately successful in his claim, the seven companies will emit less in future. However, under the logic of the ETS, others will emit more. New Zealand’s total emissions will not change by a single gram.

Suing the government for not running a tighter cap would have had some coherence. Suing individual participants in the market does not. Again, one would have expected the Supreme Court to take this into account. Obviously, it did not.

Absurdities abound in this case. Law students learn that without a reasonably close connection between action and damage, there can be no tort. Not so, apparently, in this case.

Law students also learn that statute is the dominant source of law. Of course, this does not prevent common law from being applied and developed. But in this case, the Supreme Court has opened the door for climate change to be brought into common law when a sophisticated statutory regime is already in place.

Moreover, trying to deal with climate change through the common law is doomed to fail under the ETS. In effect, the existence of the ETS makes any common law tort toothless and superfluous.

All of this is, frankly, concerning. The most troubling thing about the Supreme Court’s decision is the signal it sends: Matters of policy and politics (such as climate change) can be decided by the courts. In a democracy, however, voters elect Parliaments to deal with the problems facing society. How democratic would it be for the courts to usurp such matters from elected lawmakers?

New Zealand is lucky to be one of the world’s highest ranked countries for the rule of law. But with decisions like the one just delivered by the Supreme Court, one may wonder for how much longer.

To read the article in The Australian website, click here.

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