THE ROLE OF LAW IN RESPONDING TO CLIMATE CHANGE: EMERGING REGULATORY, LIABILITY AND MARKET APPROACHES
NICOLA ANNA MAY DURRANT BSc (Env)/LLB (Hons)(GU); Grad DipLP (ANU)
Thesis submitted in fulfilment of the requirements for the degree of Doctor of Philosophy
Faculty of Law/Institute for Sustainable Resources Queensland University of Technology Brisbane
2008
1 KEYWORDS
Climate Change, Climate Law, Climate Liabilities, Carbon Trading, Environmental Governance, Environmental Law, Environmental Policy, International Law.
2 ABSTRACT
Climate change presents as the archetypal environmental problem with short-term economic self-interest operating to the detriment of the long-term sustainability of our society. The scientific reports of the Intergovernmental Panel on Climate Change strongly assert that the stabilisation of emissions in the atmosphere, to avoid the adverse impacts of climate change, requires significant and rapid reductions in ‘business as usual’ global greenhouse gas emissions. The sheer magnitude of emissions reductions required, within this urgent timeframe, will necessitate an unprecedented level of international, multi-national and intra-national cooperation and will challenge conventional approaches to the creation and implementation of international and domestic legal regimes.
To meet this challenge, existing international, national and local legal systems must harmoniously implement a strong international climate change regime through a portfolio of traditional and innovative legal mechanisms that swiftly transform current behavioural practices in emitting greenhouse gases. These include the imposition of strict duties to reduce emissions through the establishment of strong command and control regulation (the regulatory approach); mechanisms for the creation and distribution of liabilities for greenhouse gas emissions and climate- related harm (the liability approach) and the use of innovative regulatory tools in the form of the carbon trading scheme (the market approach). The legal relations between these various regulatory, liability and market approaches must be managed to achieve a consistent, compatible and optimally effective legal regime to respond to the threat of climate change.
The purpose of this thesis is to analyse and evaluate the emerging legal rules and frameworks, both international and Australian, required for the effective regulation of greenhouse gas emissions to address climate change in the context of the urgent and deep emissions reductions required to minimise the adverse impacts of climate change. In doing so, this thesis will examine critically the existing and potential role of law in effectively responding to climate change and will provide recommendations on the necessary reforms to achieve a more effective legal response to this global phenomenon in the future.
3 TABLE OF CONTENTS
KEYWORDS……………………………………………………………………………………….… 2 ABSTRACT…………………………………………………………………………………………...3 TABLE OF CONTENTS ...... 4 LIST OF FIGURES ...... 10 TABLE OF CASES ...... 11 TABLE OF LEGISLATION ...... 20 TABLE OF TREATIES AND INTERNATIONAL ...... 27 LIST OF ACRONYMS ...... 31 STATEMENT OF ORIGINAL AUTHORSHIP ...... 33 ACKNOWLEDGMENTS…………………………………………………………………………...34
CHAPTER ONE – INTRODUCTION ...... 35 RESEARCH TOPIC ...... 35 REVIEW OF EXISTING LITERATURE ON LAW AND CLIMATE CHANGE ...... 40 A RELATIONSHIP OF RESEARCH TO EXISTING LITERATURE ...... 40 B EXISTING LITERATURE ON LAW AND CLIMATE CHANGE ...... 41 C IDENTIFIED GAP IN THE LITERATURE ...... 45 SCOPE OF THIS RESEARCH STUDY ...... 46 STRUCTURE OF THIS THESIS ...... 48
CHAPTER TWO – CLIMATE CHANGE IN CONTEXT :SCIENCE , ECONOMICS AND LAW .... 54 INTRODUCTION ...... 54 THE PHENOMENON OF CLIMATE CHANGE...... 55 CLIMATE CHANGE IMPACT PREDICTIONS ...... 57 A THE FIRST IPCC ASSESSMENT REPORT ...... 59 B THE SECOND IPCC ASSESSMENT REPORT ...... 61 C THE THIRD IPCC ASSESSMENT REPORT ...... 61 D THE FOURTH IPCC ASSESSMENT REPORT ...... 63 E REGIONAL PROJECTIONS AND THE CLIMATE CHANGE IMPACTS FOR AUSTRALIA ...... 67 F THE IMPACTS OF CLIMATE CHANGE ON THE ECONOMY ...... 71 INTERNATIONAL RESPONSES TO THE IMPACTS OF CLIMATE CHANGE ...... 73 A GENERAL OBLIGATIONS UNDER THE UNFCCC...... 73 B SPECIFIC EMISSION REDUCTION OBLIGATIONS UNDER THE KYOTO PROTOCOL ...... 76 C THE CREATION OF FLEXIBILITY MECHANISMS : ENGAGING THE MARKET ...... 78 COMPARATIVE MODELS OF ATMOSPHERIC REGULATION ...... 79 A THE INTERNATIONAL COMPLIANCE MODEL : PROTECTION OF THE ATMOSPHERIC COMMONS 79 B THE DOMESTIC MARKET MODEL : TRADEABLE EMISSION INSTRUMENTS AND ATMOSPHERIC POLLUTION ...... 84 KEY PRINCIPLES FOR AN EFFECTIVE LEGAL REGIME ...... 89 A REGULATION ...... 89 B LIABILITY ...... 90 C MARKET MECHANISMS ...... 92 CONCLUDING COMMENTS ...... 96
4 CHAPTER THREE - THE ARCHITECTURE OF THE CLIMATE CHANGE REGIME : AN ANALYSIS AND CRITIQUE OF THE INTERNATIONAL REGULATION OF GREENHOUSE GAS EMISSIONS ...... 98 INTRODUCTION ...... 98 THE OBJECTIVES OF THE REGIME: AVOIDING ADVERSE CLIMATE CHANGE ...... 101 THE REGULATORY APPROACH OF THE CLIMATE CHANGE REGIME ...... 107 THE STRUCTURE OF THE CLIMATE CHANGE REGIME ...... 109 A JURISDICTIONAL SCOPE OF THE COP/MOP ...... 112 B DISCRETIONARY DEPTH OF THE COP/MOP ...... 114 C RULE MAKING DISCRETION OF THE COP/MOP ...... 115 D SUBSIDIARY BODIES WITHIN THE CLIMATE CHANGE REGIME ...... 117 FRAGMENTED REGULATION OF THE FLEXIBILTY MECHANISMS...... 119 A OPERATION OF THE CDM ...... 119 B OPERATION OF THE JI MECHANISM ...... 123 C THE ROLE OF THE HOST COUNTRY ...... 127 D THE ROLE OF PRIVATE VERIFIERS ...... 129 E INTERNATIONAL REGULATION OF PRIVATE ENTITIES ...... 130 F INTERNATIONAL TRADE IN EMISSION INSTRUMENTS ...... 132 DEFICIENCIES IN THE MONITORING AND ENFORCEMENT OF THE INTERNATIONAL REGIME ...... 135 A DUE PROCESS AND NON -COMPLIANT STATE PARTIES ...... 143 B THE TREATMENT OF PRIVATE PARTICIPANTS ...... 147 INTERNATIONAL STATE RESPONSIBILITY AND CLIMATE HARM ...... 148 CLIMATE CHANGE IMPACTS AND HUMAN RIGHTS PRINCIPLES ...... 156 THE FUTURE INTERNATIONAL REGULATION OF CLIMATE CHANGE ...... 163 THE STRENGTHS AND DEFICIENCIES OF THE CLIMATE CHANGE REGIME ...... 167 A THE FLEXIBILITY MECHANISMS ...... 168 B THE EMISSION REDUCTION DUTIES ...... 169 C INTERACTION WITH DOMESTIC RESPONSES TO CLIMATE CHANGE ...... 170 D TREATMENT OF NON -COMPLIANCE WITH THE REGIME ...... 172 CONCLUSION ...... 173
CHAPTER FOUR - THE AUSTRALIAN LEGAL RESPONSE TO CLIMATE CHANGE ...... 175 INTRODUCTION ...... 175 NATIONAL RESPONSES TO CLIMATE CHANGE ...... 179 STATE-BASED RESPONSES TO CLIMATE CHANGE ...... 185 EXISTING EMISSIONS TRADING INITIATIVES...... 187 EMISSIONS TRADING PROPOSALS FOR AUSTRALIA ...... 190 THE REGULATION OF ENERGY SOURCES IN AUSTRALIA ...... 193 THE RESPONSE OF THE ASIA PACIFIC PARTNERSHIP TO CLIMATE CHANGE ...... 196 A OBJECTIVES OF THE AP6 ...... 197 B AP6 AND THE INTERNATIONAL RESPONSE TO CLIMATE CHANGE ...... 200 THE POTENTIAL IMPACT OF AUSTRALIAN REGULATION ON NATIONAL EMISSIONS...... 202 COMPARATIVE DOMESTIC REGULATORY APPROACHES ...... 204
5 A THE EUROPEAN UNION ...... 204 B THE UNITED KINGDOM ...... 206 C CANADA ...... 206 D THE UNITED STATES OF AMERICA ...... 207 E NEW ZEALAND ...... 208 CONCLUDING COMMENTS ...... 208
CHAPTER FIVE - THE ROLE OF ENVIRONMENTAL REGULATION , IN AUSTRALIA , IN RESPONDING TO THE IMPACTS OF CLIMATE CHANGE ...... 211 INTRODUCTION ...... 211 ADDRESSING CLIMATE CHANGE AND THE PROMOTION OF SUSTAINABLE DEVELOPMENT: INTERNATIONAL PRINCIPLES ...... 212 ENVIRONMENTAL PROTECTION AND AVOIDANCE OF HARM: NATIONAL PRINCIPLES IN AUSTRALIA ...... 216 DOMESTIC REGULATION UNDER THE CLIMATE CHANGE REGIME: DUTIES AND DISCRETION ...... 219 GREENHOUSE GASES, CLIMATE CHANGE AND HARM: THE SCIENTIFIC FINDINGS ...... 222 REGIMES TO PROTECT THE ENVIRONMENT: THE THEORETICAL REGULATION OF EMISSIONS ...... 223 REQUIREMENTS TO ASSESS THE ENVIRONMENTAL IMPACTS OF GREENHOUSE GAS EMISSIONS ...... 231 A THE PROPER ROLE OF EIA PROCESS IN ASSESSING EMISSIONS ...... 231 B DUTIES TO ASSESS IMPACTS IN STATE PLANNING REGIMES ...... 233 EVALUATING EMISSIONS AND ENVIRONMENTAL EFFECTS: THE LAW IN PRACTICE ...... 239 A THE TREATMENT OF CAUSATION IN ENVIRONMENTAL CASE LAW ...... 240 B THE ABSENCE OF CLIMATE CHANGE REGULATION AS A DETERMINING FACTOR ...... 246 C THE XSTRATA COAL MINE : A CASE STUDY ...... 248 I The Nature of the Objection to the Mining Expansion ...... 248 II The Nature of the Evidence Before the Tribunal ...... 250 III The Decision of the Land and Resources Tribunal ...... 251 IV The Findings of the Court of Appeal ...... 252 V The Governmental Response: Validating Legislation ...... 254 D THE ROLE OF JUDICIAL APPEAL IN REGULATING CLIMATE CHANGE ...... 257 POTENTIAL COMMONWEALTH REGULATION OF GREENHOUSE GAS EMISSIONS ...... 259 A THE THEORETICAL SCOPE AND OPERATION OF THE EPBC ACT ...... 259 B THE PRACTICAL APPLICATION OF THE EPBC ACT TO CLIMATE CHANGE ...... 263 AUSTRALIA’S LEVEL OF COMPLIANCE WITH THE CLIMATE CHANGE REGIME . 269 THE ROLE OF LAW IN FACILITATING ADAPTATION TO CLIMATE CHANGE ...... 270 A THE DUTY TO ADAPT TO CLIMATE CHANGE ...... 271 B ADAPTATION AND COASTAL DEVELOPMENT ...... 273 C ADAPTATION AND RENEWABLE ENERGY PROJECTS ...... 279 D ADAPTATION TO CLIMATE CHANGE AND COMMON LEGAL TRANSACTIONS ...... 282 I Climate Change and Sustainable Building Design ...... 282 II Adaptation to Climate Change and Green Leasing ...... 285 III Adaptation to Climate Change and Contracts for the Sale of Land ...... 290 CONCLUSION ...... 292
6 CHAPTER SIX - THE POTENTIAL ROLE OF THE COMMON LAW OF TORTS IN ADDRESSING CLIMATE CHANGE HARM IN AUSTRALIA ...... 295 INTRODUCTION ...... 295 CLIMATE CHANGE AND THE LAW OF TORTS ...... 296 THE HYPOTHETICAL CLIMATE SUIT: ACTIONS IN NEGLIGENCE ...... 298 DUTY OF CARE AND THE EMISSION OF GREENHOUSE GASES ...... 299 A DUTY OF CARE AND PHYSICAL HARM ...... 299 B DUTY OF CARE AND PURE ECONOMIC LOSS ...... 300 C DUTY OF CARE AND PUBLIC AUTHORITIES ...... 303 CAUSATION AND LIABILITY IN CLIMATE SUITS ...... 305 A THE STANDARD OF CARE AND EMISSIONS OF GREENHOUSE GASES ...... 305 B CALCULUS OF BREACH OF DUTY AND CLIMATE HARM ...... 305 BREACH OF DUTY AND DAMAGE IN CLIMATE SUITS ...... 313 A ESTABLISHING FACTUAL CAUSATION IN CLIMATE SUITS ...... 313 I Causation and the Climate System ...... 313 II Increase in the Risk of Harm from Climate Change ...... 318 III Relevance of Environmental Principles ...... 321 B SCOPE OF LIABILITY IN NEGLIGENCE ...... 323 I Intervening Causes and Climate Change Harm ...... 323 II Policy Considerations in Climate Suits...... 324 THE HYPOTHETICAL CLIMATE SUIT: PROFESSIONAL LIABILITY FOR CLIMATE- AFFECTED ADVICE ...... 325 A PROFESSIONAL ADVISORS , CLIMATE CHANGE AND NEGLIGENCE ...... 326 B ARCHITECTS , ENGINEERS , DEVELOPERS AND CLIMATE CHANGE ...... 327 C SURVEYORS , VALUERS AND CLIMATE ADVICE ...... 329 D PUBLIC AUTHORITIES AS ADVISORS ...... 331 E LEGAL ADVISORS AND CLIMATE ADVICE ...... 333 F DUTIES OF DIRECTORS AND AVOIDING CLIMATE RISKS ...... 334 POTENTIAL DEFENCES TO CLIMATE SUITS IN NEGLIGENCE ...... 335 THE HYPOTHETICAL CLIMATE SUIT: ACTIONS IN PUBLIC AND PRIVATE NUISANCE ...... 337 A ELEMENTS OF NUISANCE ...... 338 B POTENTIAL CLIMATE ACTIONS IN PRIVATE NUISANCE ...... 339 C POTENTIAL CLIMATE ACTIONS IN PUBLIC NUISANCE ...... 341 D UNREASONABLE INTERFERENCE AND PRIVATE NUISANCE ...... 342 E EXAMPLES OF CLIMATE CHANGE NUISANCE ACTIONS IN THE UNITED STATES ...... 347 ADEQUACY OF REMEDIES IN NEGLIGENCE AND NUISANCE ...... 349 THE ROLE OF INSURANCE IN ADDRESSING CLIMATE HARM ...... 350 PROSPECTS OF SUCCESS OF CLIMATE ACTIONS ...... 354 THE FUTURE OF TORT-BASED CLIMATE LITIGATION ...... 356
7 CHAPTER SEVEN – THE ROLE OF LAW IN A MULTI -NATIONAL GLOBAL CARBON MARKET : RIGHTS , DUTIES AND LEGAL INNOVATION ...... 359 INTRODUCTION ...... 359 THE STATUS OF THE ATMOSPHERE UNDER INTERNATIONAL LAW ...... 361 COMMODIFICATION OF THE ATMOSPHERIC COMMONS: RIGHTS TO EMIT AND THE CLIMATE CHANGE REGIME ...... 365 A LEGAL INNOVATION IN PROTECTING THE ATMOSPHERIC COMMONS ...... 365 B RIGHTS TO EMIT AND ASSIGNED AMOUNT UNITS ...... 370 C CDM PROJECTS AND CERTIFIED EMISSION REDUCTION UNITS ...... 373 I Temporary and Long-Term Instruments for Forestry ...... 376 D JI PROJECTS AND EMISSION REDUCTION UNITS ...... 379 EFFECTIVENESS OF THE EMERGING GLOBAL CARBON MARKET ...... 380 A CLEAR DEFINITION OF TRADEABLE EMISSION INSTRUMENTS ...... 383 B CLEAR , TRANSPARENT AND CONSISTENT RULES ...... 387 C ACCESS TO THE MARKET AND MINIMAL RESTRICTIONS ON TRADE ...... 388 D COMPATIBLE DESIGN OF INTERNATIONAL AND DOMESTIC MARKET SYSTEMS ...... 389 E APPROPRIATE MONITORING , VERIFICATION AND ENFORCEMENT PROCESSES ...... 390 LEGAL FEATURES OF THE EMERGENT CARBON MARKETS ...... 392 A THE INTERNATIONAL CLIMATE MARKET ...... 392 B THE EMERGENCE OF DOMESTIC CARBON TRADING SYSTEMS ...... 394 C EUROPEAN UNION EMISSIONS TRADING SCHEME ...... 396 D UNITED KINGDOM EMISSIONS TRADING SCHEME ...... 400 E NEW ZEALAND EMISSIONS TRADING SCHEME ...... 401 F US STATE -BASED TRADING SCHEME ...... 403 G VOLUNTARY CARBON TRADING SCHEMES ...... 403 H DESIGNING AN EMISSIONS TRADING SYSTEM FOR AUSTRALIA ...... 410 I Setting the Emission Reduction Target ...... 412 II Identifying the Participants ...... 413 III Defining the Tradeable Emission Instruments ...... 415 IV The Legal Infrastructure ...... 415 V The Use of Offsets and CCS in the System ...... 417 VI Linkages with Other International and Regional Carbon Markets ...... 417 I REQUIREMENTS FOR AN EFFECTIVE MULTI -NATIONAL GLOBAL MARKET ...... 418 AN EFFECTIVE LEGAL REGIME FOR THE CREATION OF CARBON OFFSETS: RIGHTS TO STORE IN THE EARTH’S SINKS ...... 422 A BIO SEQUESTRATION : STORAGE IN FORESTS AND SOILS ...... 423 B CARBON SEQUESTRATION AND AUSTRALIAN LAWS ...... 424 AN EFFECTIVE LEGAL REGIME FOR CCS: RIGHTS TO STORE GASES IN THE EARTH’S SUB-SURFACE ...... 430 A SEQUESTRATION WITHIN THE HIGH SEAS ...... 431 B REGULATION OF GEO SEQUESTRATION PROJECTS IN AUSTRALIA ...... 436 I Environmental Assessments and Approval Processes ...... 438 II Access to Property and Property Rights ...... 439 III Liabilities Associated with the Stored Carbon Dioxide ...... 440 C RECOMMENDATIONS FOR THE CONSISTENT REGULATION OF CCS ...... 442 RECOMMENDATIONS FOR A MORE EFFECTIVE LEGAL REGIME TO COMPLEMENT THE USE OF MARKET MECHANISMS ...... 444
8 CHAPTER EIGHT – CONCLUSION …………………………………………………………446 THE ROLE OF LAW IN RESPONDING TO CLIMATE CHANGE ...... 447 EFFECTIVENESS OF EXISTING LEGAL RESPONSES...... 449 A REGULATORY APPROACHES ...... 449 I International ...... 449 II Within Australia ...... 450 B LIABILITY APPROACHES ...... 451 C MARKET APPROACHES ...... 452 RECOMMENDATIONS FOR A MORE EFFECTIVE LEGAL RESPONSE ...... 453 CONCLUDING COMMENT ...... 458
BIBLIOGRAPHY ...... 460
9 LIST OF FIGURES
FIGURE 1: THE GREENHOUSE EFFECT ...... 56
FIGURE 2: ATMOSPHERIC CONCENTRATIONS OF CO 2 FROM MANUA LOA ...... 57
FIGURE 3: THE REGULATORY ARCHITECTURE OF THE CLIMATE CHANGE REGIME ...... 111
FIGURE 4: CLIMATE CHANGE : PROCESSES , CHARACTERISTICS AND THREATS . . 317
FIGURE 5: THE FUTURE MULTI -NATIONAL GLOBAL CARBON MARKET ? ...... 421
10 TABLE OF CASES
AUSTRALIA
Anvil Hill Project Watch Association Inc v Minister for Environment and Water Resources [2007] FCA 1480 (20 September 2007, Justice Stone).
Australian Conservation Foundation v Latrobe City Council (2004) 140 LGERA 100.
Australian Iron & Steel Ltd v Krstevski (1973) 128 CLR 666.
Ball v Consolidated Rutile Ltd [1991] 1 Qd R 524.
Bendix Mintex Pty Ltd v Barnes (1997) 42 NSWLR 307.
Bennett & Anor v Livingstone Shire Council & Ors (1985) QPLR 214.
Bentley v BGP Properties Pty Ltd (2006) 145 LGERA 234.
BGP Properties v Lake Macquarie City Council (2004) 138 LGERA 237.
Bonnici v Ku-Ring-Gai Municipal Council [2001] NSWSC 1124; (2001) 121 LGERA 1.
Booth v Bosworth (2001) 114 FCR 39.
Briginshaw v Briginshaw (1938) 60 CLR 336.
Brodie v Singleton Shire Council (2001) 206 CLR 512.
Bryan v Maloney (1995) 182 CLR 609.
BT Goldsmith Planning Services Pty Ltd v Blacktown City Council [2005] NSWLEC 210.
Caledonian Collieries Ltd v Speirs (1957) 97 CLR 202.
Caltex Oil (Aust) Pty Ltd v The Dredge "Willemstad" (1976) 136 CLR 529.
Capebay Holdings Pty Ltd v Sands [2002] WASC 287 (4 December 2002).
11 Carstens v Pittwater Council (1999) 111 LGERA 1 at 25.
Castro v Douglas Shire Council (1992) QPLR 146.
Challen v Mcleod Country Golf Club (2004) Aust Torts Reports 81-760.
Charles & Howard Pty Ltd v Redland Shire Council [2007] QCA 200.
Cohen v City of Perth (2000) 112 LGERA 234.
Comkey Pty Ltd v Caboolture Shire Council (2006) QPELR 399.
Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1.
Daniels (formerly practising as Deloitte Haskins and Sells) v Anderson (1995) 37 NSWLR 438.
Deepcliffe Pty Ltd v The Council of the City of the Gold Coast [2001] QCA 342 (31 August 2001)).
Deasy Investments Pty Ltd v Monrest Pty Ltd [1996] QCA 466 (22 November 1996).
Drake Brockman v Minister For Planning [2007] NSWLEC 490.
Elston v Dore (1982) 149 CLR 480.
Friends of Hinchinbrook Society Inc v Minister for Environment (No 2) (1997) 69 FCR 28.
Gartner v Kidman (1962) 108 CLR 12.
Grant Pastoral Co Pty Ltd v Thorpe's Ltd (1953) 54 SR (NSW) 129.
Gray v Minister for Planning and Others (2006) 152 LGERA 258, [2006] NSWLEC 720.
Greenpeace Australia Ltd v Redbank Power Company Pty Ltd and Singleton Council (1994) 86 LGERA 143.
Gutteridge, Haskins & Davey Pty Ltd [1993] 1 VR 27.
H v Royal Alexandra Hospital for Children (1990) Aust Torts Reports 81-000.
12 Halverson v Dobler [2006] NSWSC 1307.
Hargrave v Goldman (1963) 110 CLR 40.
Heydon v NRMA Ltd (2000) 51 NSWLR 1.
Kempsey Shire Council v Lawrence (1996) Aust Torts Reports 81-375.
Kraemers v Attorney-General (Tas) [1966] Tas SR 113.
Jackson Teece v Waverley Council [2007] NSWLEC 69.
John Van Haandel v Byron Shire Council [2006] NSWLEC 394 (unreported) (Commissioner Brown, Land and Environment Court, 20-21 June 2006).
Joslyn v Berryman (2002) 214 CLR 552.
Laferriere v Lawson (1991) 78 DLR (4th) 609; [1991] 1 SCR 541.
Luke v Maroochy Shire Council & Watpac Developments Pty Ltd (2003) QPELR 447.
Lynch v Mudgee Shire Council (1981) 46 LGRA 204.
Madell v Metropolitan Water Sewerage and Drainage Board (1936) 36 SR 68.
Maguire v Makaronis (1997) 188 CLR 449.
March v E & M H Stramare Pty Ltd (1991) 171 CLR 506.
MGICA (1992) Ltd v Kenny & Good Pty Ltd (1996) 140 ALR 313.
Mid Density Developments Pty Ltd v Rockdale Municipal Council (1993) 44 FCR 290.
Minister for Environment and Heritage v Queensland Conservation Council [2004] FCAFC 190.
Munro v Southern Dairies [1955] VLR 332.
13 Mutual Life & Citizens' Assurance Co Ltd v Evatt (1968) 122 CLR 556; (1970) 122 CLR 628.
Northern Territory v Shoesmith (1996) Aust Torts Reports 81-385.
Oldham v Lawson (No 1) [1976] VR 654.
Orica Limited and Anor v CGU Insurance Limited [2003] NSWCA 331.
Painter v Reed [1930] SASR 295.
Parkes v Byron Shire Council [2003] NSWLEC 104 (unreported) (Justice Lloyd, Land and Environment Court, 5 May 2003).
Parkes v Byron Shire Council [2004] NSWLEC 92 (unreported) (Commissioner Tuor, Land and Environment Court, 15 June 2004).
Perre v Apand Pty Ltd (1999) 198 CLR 180.
Pisano v Fairfield City Council [1991] Aust. Torts R. 69.
Polkinghorne v Holland (1934) 51 CLR 143.
Puntoriero v Water Administration Ministerial Corporation (1999) 199 CLR 575.
Queensland Adult Deaf and Dumb Society (Incorporated) v Brisbane City Council (1972) 26 LGRA 380.
Queensland Conservation Council Inc v Xstrata Coal Queensland P/L & Ors [2007] QCA 338.
Re Xstrata Coal Queensland Pty Ltd & Ors [2007] QLRT 33.
Ruthning v Ferguson (1930) 45 CLR 604.
Scurr v Brisbane City Council (No 6) (1975) QPLR 162.
Seltsam Pty Ltd v McGuiness (2000) 49 NSWLR 262.
Shaddock v Parramatta City Council (1981) 150 CLR 225.
14 St George Club Ltd v Hines (1961) 35 ALJR 106.
Stockwell v Victoria [2001] VSC 497.
Sullivan v Moody (2001) 207 CLR 562; 183 ALR 404.
Sutherland Shire Council v Heyman (1985) 157 C.L.R. 424.
Symons Nominees Pty Ltd v Road & Traffic Authority New South Wales (1991) Aust Torts Reports 81-081.
Ta Ho Ma Pty Ltd v Allen (1999) 47 NSWLR 1
Taralga Landscape Guardians Inc v Minister for Planning and Res Southern Cross Pty Ltd [2007] NSWLEC 59.
Telstra Corporation Ltd v Hornsby Shire Council (2006) 67 NSWLR 256.
The Aborigines and Islanders Alcohol Relief Service Limited v Mareeba Shire Council & Ors (1985) QPLR 292.
TNT Management Pty Ltd v Brooks (1979) 23 ALR 345.
Vincent v Peacock [1973] 1 NSWLR 466.
Voli v Inglewood Shire Council (1963) 110 CLR 74.
Walker v Minister for Planning [2007] NSWLEC 741; (2007) LGERA 124.
Wallaby Grip (BAE) Pty Ltd (in liq) v Macleay Area Health Service (1998) 17 NSWCCR 355 (CA).
Wallace v Powell [2000] NSWSC 406; (2000) 10 BPR 18,481.
Welbridge Holdings v Greater Winnipeg [1971] S.C.R 957.
Wildlife Preservation Society of Queensland (WPSQ) Proserpine/Whitsunday Branch Inc v Minister for the Environment and Heritage (2006) 232 ALR 510.
Woollahra Municipal Council v Sved (1996) 40 NSWLR 101; 91 LGERA 361.
15 Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515.
Wyong Shire Council v Shirt (1980) 146 CLR 40.
Yanner v Eaton (1999) 201 CLR 351.
UNITED KINGDOM
A-G v PYA Quarries Ltd [1957] 2 QB 169.
Alfred F. Beckett Ltd v Lyons [1967] Ch 449 at 482B.
Allen v Gulf Oil Refining Ltd [1981] AC 1001.
Barker v Corus UK Ltd; Murray v British Shipbuilders (Hydrodynamics) Ltd; Patterson v Smiths Dock Ltd [2006] All ER (D) 23 (May).
Barnett v Chelsea and Kensington Hospital Management Committee [1969] 1 QB 428.
Bolam v Friern Hospital Management Committee [1957] 1 W.L.R. 582.
Bonnington Castings Ltd v Wardlaw [1956] AC 613.
Bowater v Rowley Regis Corporation [1944] KB 476.
Bury v Pope (1586) Cr Eliz 118; 78 ER 375.
Cambridge Water Co. Ltd v Eastern Counties Leather plc [1994] 2 AC 264.
Caparo Industries PlC v Dickman [1990] 2 AC 605.
Daborn v Bath Tramways Motor Co Ltd [1946] 2 All ER 333.
Davies v Swan Motor Company (Swansea) Limited [1949] 2 KB 291.
Delaware Mansions Ltd v Westminster City Council [2001] 4 All ER 737.
Donoghue v Stevenson [1932] AC 562.
16 Earl of Harrington v Derby Corporation [1905] 1 Ch 205.
East Suffolk Catchment Board v Kent [1941] AC 74.
Edward Wong Finance Co Ltd v Johnson Strokes and Master [1984] AC 296.
Electrochrome Ltd v Welsh Plastics Ltd [1968] 1 QB 569.
Entick v Carrington (1765) 19 St. Tr. 1029 (K.B).
Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32.
Geddis v Proprietors of Bann Reservoir (1878) 3 App. Cas. 430.
Goldman v Hargrave [1967] 1 AC 645.
Greaves & Co (Contractors) Ltd v Baynham Meikle & Partners [1975] 1 WLR 1095.
Hedley Byrne v Heller [1964] A.C. 465.
Henderson v Merrett Syndicates Ltd [1995] 2 A.C. 145.
Home Office v Dorset Yacht Company Ltd [1970] AC 1004.
Hunter v Canary Wharf Ltd [1997] AC 655.
Julius v Lord Bishop of Oxford (1880) 5 App Cas 214.
Leakey v National Trust [1980] QB 485.
Malone v Laskey [1907] 2 KB 141.
McGhee v National Coal Board [1973] 1 WLR 1.
Merivale Moore Plc v Strutt & Parker [1999] Lloyd's Rep. P.N 734.
Midland Bank Trust Co Ltd v Hett, Stubbs and Kemp [1979] Ch 384.
Midwood & Co Ltd v Manchester Corporation [1905] 2 KB 597.
Miller v Jackson [1977] QB 966.
17 MLC v Evatt [1971] AC 793.
Moss v Christchurch Rural District Council [1925] 2 KB 750.
Pride of Derby and Derbyshire Angling Association Ltd v British Celanese [1953] Ch 149.
Robinson v Kilvert (1889) 41 Ch D 88.
Roe v Minister of Health [1954] 2 QB 66.
Sedleigh-Denfield v O'Callaghan [1940] AC 880.
Smith v Baker and Sons [1891] AC 325.
Smith v Eric S Bush [1990] 1 AC 831.
Spartan Steel & Alloys Ltd v Martin & Co [1973] 1 QB 27.
Stapley v Gypsum Mines Ltd [1953] AC 663.
Sturges v Bridgman (1879) 11 Ch D 852.
Tate & Lyle Industries Pty Ltd v Greater London Council [1983] 2 AC 509.
Tetley v Chitty [1986] 1 All ER 663.
The Wagon Mound (No 2) [1967] 1 AC 617.
Watt v Hertfordshire County Council [1954] 2 All ER 368.
Wilsher v Essex Health Authority [1988] AC 1074.
Woodridge v Sumner [1963] 2 QB 43.
X (minors) v Bedfordshire County Council [1995] 2 AC 633.
NEW ZEALAND
Greenpeace New Zealand v Northland Regional Council [2007] New Zealand Resource Management Appeals 87.
18 UNITED STATES OF AMERICA
Korsinksky v United States EPA , 192 Fed. Appx. 71 (United States Court of Appeals for the Second Circuit, 10 August 2006).
Massachusetts v Environmental Protection Agency 549 US (2007) (Supreme Court of the United States, decided 2 April 2007).
People of the State of California v General Motors Corporation et al (Case No. C06- 05755 MJJ, 2007, United States District Court for the Northern District of California).
State of Connecticut et al v American Electric Power Company et al 406 F. Supp. 2d 265; 2005 U.S. Dist. LEXIS 19964; 35 ELR 20186 (United States District Court For the Southern District of New York,15 September 2005).
INTERNATIONAL
Barcelona Traction Case , Barcelona Traction and Light and Power Co, ICJ Reports (1970) 3.
Chorzow Factory Case , Permanent Court of International Justice Ser. A. No. 13.
East Timor (Portugal v Australia) 1995 International Court of Justice Reports 90.
Lac Lanoux case , Spain v France, UNRIAA, XII, 281 at 315-317; 24 ILR 101 (English version).
Monetary Gold Removed From Rome (Italy v France, Great Britain, USA) 1954 International Court of Justice Reports 19.
The Corfu Channel case, Great Britain v Albania, ICJ, Reports (1949).
Trail Smelter Arbitration , United States v Canada (1931-1941) 3 RIAA 1905; (1939) 33 AJIL 182; (1941) 35 AHIL 716.
19 TABLE OF LEGISLATION
AUSTRALIA
Commonwealth
Commonwealth of Australian Constitution Act (Cth).
Corporations Act 2001 (Cth).
Energy Efficiencies Opportunities Act 2006 (Cth).
Environmental Protection and Biodiversity Conservation Act 1999 (Cth).
Seas and Submerged Lands Act 1973 (Cth).
Trade Practices Act 1974 (Cth).
Queensland
Civil Liability Act 2003 (Qld).
Clean Energy Act 2008 (Qld).
Domestic Building Contracts Act 2000 (Qld).
Environmental Protection Act 1994 (Qld).
Environmental Protection (Waste Management) Regulation 2000 (Qld).
Fair Trading Act 1989 (Qld).
Forestry Act 1959 (Qld).
Integrated Planning Act 1997 (QLD).
Land Act 1994 (Qld).
Law Reform Act 1995 (Qld).
20 Land Title Act 1994 (Qld).
Limitation of Actions Act 1974 (Qld).
Petroleum and Gas (Production and Safety) Act 2004 (Qld).
Water Act 2000 (Qld).
New South Wales
Byron Local Environmental Plan 1988 (NSW).
Byron Development Control Plan 2002 (NSW).
Civil Liability Act 2002 (NSW).
Coastal Protection Act 1979 (NSW)
Conveyancing Act 1919 (NSW).
Environmental Planning and Assessment Act 1979 (NSW).
Fair Trading Act 1987 (NSW).
Home Building Act 1989 (NSW).
Limitation Act 1969 (NSW).
Local Government Act 1919 (NSW).
Local Government Act 1993 (NSW).
North Coast Regional Environmental Plan 1988 (NSW).
Protection of the Environment Operations Act 1997 (NSW).
State Environmental Planning Policy No 71 Coastal Protection (NSW).
State Environmental Planning Policy (Building Sustainability Index: BASIX) 2004 (NSW).
21 Victoria
Domestic Building Contracts Act 1995 (Vic).
Environmental Effects Act 1978 (Vic).
Environment Protection Act 1970 (Vic).
Fair Trading Act 1999 (Vic).
Forestry Rights Act 1996 (Vic).
Limitations of Actions Act 1958 (Vic).
Planning and Environment Act 1987 (Vic).
Wrongs Act 1958 (Vic).
Australian Capital Territory
Building Act 1972 (ACT).
Civil Law (Sale of Residential Property) Act 2003 (ACT).
Civil Law (Wrongs) Act 2002 (ACT).
Fair Trading Act 1992 (ACT).
Limitation Act 1985 (ACT).
South Australia
Building Work Contractors Act 1995 (SA).
Civil Liability Act 1936 (SA).
Climate Change and Greenhouse Emissions Reduction Act 2007 (SA).
22 Development Act 1993 (SA).
Environmental Protection Act 1993 (SA).
Fair Trading Act 1987 (SA).
Forest Property Act 2000 (SA).
Limitation of Actions Act 1936 (SA).
Mining Act 1971 (SA).
Petroleum Act 2000 (SA).
Western Australia
Barrow Island Act 2003 (WA).
Carbon Rights Act 2003 (WA).
Civil Liability Act 2002 (WA).
Environmental Protection Act 1986 (WA).
Environmental Protection (Unauthorised Discharges) Regulations 2004 (WA).
Fair Trading Act 1987 (WA).
Limitation Act 1935 (WA).
Petroleum Pipelines Act 1969 (WA).
Planning and Development Act 2005 (WA).
Tasmania
Civil Liability Act 2002 (Tas).
23 Environmental Management and Pollution Control Act 1994 (Tas).
Fair Trading Act 1990 (Tas).
Forestry Rights Registration Act 1990 (Tas).
Limitation Act 1974 (Tas).
Northern Territory
Consumer Affairs and Trading Act (NT).
Limitation Act 1981 (NT).
CANADA
Climate Change and Emissions Management Act 2003 (Alberta).
Climate Change and Emissions Management Act: Specified Gas Emitters Regulation (Alberta Regulation 139/2007).
EUROPEAN UNION
Single European Act 1986 (EU).
European Union, Commission Regulation (EC), No 2216/2004 of 21 December 2004 for a standardised and secured system of registries pursuant to Directive 2003/87/EC of the European Parliament and of the Council and Decision No 280/2004/EC of the European Parliament and of the Council, Official Journal of the European Union L. 386/1 (29.12.2004).
European Union, Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council
24 Directive 96/61/EC (entry into force 25.10.2003) published in OJL of the 25.10.2003.
European Union. Directive 2004/101/EC of the European Parliament and of the Council as of 27 October 2004 amending Directive 2003/87/EC establishing a scheme for greenhouse gas emission allowance trading within the Community in respect of the Kyoto Protocol's project mechanism (entry into force 13.11.2004) published in OJL 338 of 13.11.2004.
NEW ZEALAND
Climate Change Response Act 2002 (NZ).
Climate Change (Emissions Trading and Renewable Preference) Bill 2007 (NZ): ‘Explanatory Note' (2007).
Resource Management Act 1991 (NZ).
UNITED KINGDOM
Climate Change Bill [HL] 2007-2008 (UK).
Company law Reform Act 2006 (UK).
Greenhouse Gas Emissions Trading Scheme Regulations 2005 (Statutory Instrument 2005 No. 925)(UK).
Greenhouse Gas Emissions Trading Scheme (Approved National Allocation Plan) Regulations 2005 (Statutory Instrument 2005 No. 1387)(UK).
UNITED STATES OF AMERICA
California Global Warming Solutions Act 2006 (AB 32).
25 Clean Air Act (CAA) 42 USC s/s 7401 et seq. (1970).
Connecticut Climate Change Act 2004 (Connecticut Public Act No. 04-252).
26 TABLE OF TREATIES AND INTERNATIONAL
LEGAL INSTRUMENTS
TREATIES
Charter of the United Nations (opened for signature 26 June 1945, San Francisco)(entry into force 24 October 1945).
Convention on Wetlands of International Importance especially as Waterfowl Habitat (the Ramsar Convention) (adopted 2 February 1971, Ramsar, Iran)(entry into force 1975).
Kyoto Protocol to the United Nations Framework Convention on Climate Change , opened for signature 16 March 1998 (entered into force on 16 February 2005).
IMO, Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter , the London Convention 1972 (entered into force 1975).
IMO, Protocol on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter, the London Protocol 1996 (entered into force 2006).
International Covenant on Civil and Political Rights 1966, 999 U.N.T.S. 171; U.K.T.S. 6 (1977), Cmnd. 6702; (1967) 61 A.J.I.L. 870.
International Covenant on Economic, Social and Cultural Rights 1966, 993 U.N.T.S. 3; U.K.T.S. 6 (1977), Cmnd. 6702; (1967) 6 I.L.M. 360.
United Nations Convention on the Law of the Sea 1982 (UNCLOS) (Agreed 10 December 1982, Entered into force, 16 November 1994).
United Nations Framework Convention on Climate Change , opened for signature on 4 June 1992, 31 ILM 849 (entered into force on 21 March 1994).
27 DECISIONS UNDER THE UNFCCC AND KYOTO PROTOCOL
UNFCCC, Compendium of Draft Decisions Forwarded for the Adoption by the Conference of the Parties serving as the first meeting of the Parties to the Kyoto Protocol at its first session (advance version)(FCCC/KP/CMP/2005/3/Add.3).
UNFCCC, 2005, Decision 1/CMP.1 'Consideration of commitments for subsequent periods for Parties included in Annex 1 to the Convention under Article 3, paragraph 9 of the Kyoto Protocol'(FCCC/KP/CMP/2005/8/Add.1).
UNFCCC, 'Decision 2/ CMP. 1 Principles, nature and scope of the mechanisms pursuant to Articles 6, 12 and 17 of the Kyoto Protocol', (FCCC/KP/CMP/2005/8/Add 1).
UNFCCC, Decision 3/CMP.1: 'Modalities and Procedures for a Clean Development Mechanism as Defined in Article 12 of the Kyoto Protocol. Annex: Modalities and Procedures for a Clean Development Mechanism', (FCCC/KP/CMP/2005/8/Add 1).
UNFCCC, 'Decision 3/CMP. 1: Modalities, Rules and Guidelines for Emissions Trading under Article 17 of the Kyoto Protocol, Annex: Modalities, Rules and Guidelines for Emissions Trading under Article 17 of the Kyoto Protocol', (FCCC/KP/CMP/2005/8/Add 1).
UNFCCC, Decision 5/CMP. 1 'Modalities and Procedures for Afforestation and Deforestation Project Activities under the Clean Development Mechanism in the First Commitment Period of the Kyoto Protocol, Annex: Modalities and Procedures for Afforestation and Deforestation Project Activities under the Clean Development Mechanism' (FCCC/KP/CMP/2005/8/Add.1).
UNFCCC, 'Decision 9/CMP.1: Guidelines for the Implementation of Article 6 of the Kyoto Protocol. Annex: Guidelines for the Implementation of Article 6 of the Kyoto Protocol', (FCCC/KP/CMP/2005/8/Add 2).
UNFCCC ‘Decision 11/CMP 1: Modalities, Rules and Guidelines for Emissions Trading under Article 17 of the Kyoto Protocol, Annex: Modalities, Rules and Guidelines for Emissions Trading under Article 17 of the Kyoto Protocol’, (FCCC/KP/CMP/2005/8/Add 2).
28 UNFCCC, 'Decision 13/CMP.1:Modalities for the Accounting of Assigned Amounts under Article 7, paragraph 4, of the Kyoto Protocol' (FCCC/KP/CMP/2005/8/Add.2).
UNFCCC, Decision 4/CMP.2: ‘Compliance Committee, Annex: Rules and Procedures of the Compliance Committee of the Kyoto Protocol’ (FCCC/KP/CMP/2006/6)
UNFCCC, 'Decision 5/CMP. 3: Compliance under the Kyoto Protocol' (FCCC/KP/CMP/2007/9/Add.1).
UNFCCC, 'Decision 7/CMP. 3: Demonstration of progress in achieving commitments under the Kyoto Protocol by Parties included in Annex I to the Convention' (FCCC/KP/CMP/2007/9/Add.1).
UNFCCC, Decision 27/CMP. 1 'Procedures and Mechanisms Relating to Compliance under the Kyoto Protocol, Annex: Procedures and Mechanisms Relating to Compliance under the Kyoto Protocol' (FCCC/KP/CMP/2005/8/Add 3)’.
UNFCCC, Decision 22/CP. 5 ' Institutional Linkage of the Convention Secretariat to the United Nations' (FCCC/CP/1999/6/Add 1).
UNFCCC, Decision 5/CP.6 'The Bonn Agreements on the Implementation of the Buenos Aires Plan of Action', (FCCC/CP/2001/5).
UNFCCC, ‘Decision 15/CP. 7 'The Marrakesh Accords' (FCCC/CP/2001/13/Add.2).
UNFCCC, Decision 25/CP. 8 ' Demonstrable Progress under Article 3, Paragraph 2 of the Kyoto Protocol' (FCCC/CP/2002/7 Add 3).
UNFCCC, 2005, Decision 1/ CP.11, 'Dialogue on long-term cooperative action to address climate change by enhancing implementation of the Convention' (FCCC/CP/2005/5/Add.1).
UNFCCC, 'Decision 1/CP. 13: Bali Action Plan' (December 1, FCCC/CP/2007/6/Add.1).
29 INTERNATIONAL LEGAL INSTRUMENTS
United Nations General Assembly, ‘Universal Declaration of Human Rights’ 1948, Adopted and proclaimed by General Assembly resolution 217 A (III) of 10 December 1948.
UNCED, 'United Nations Conference on Environment and Development: Agenda 21' (1992).
UNCED, 'United Nations Conference on Environment and Development: The Rio Declaration' ((1992) 31 ILM 874).
United Nations Economic Commission for Europe, Aarhus Convention on Access to Information, Public Participation in Decision-making and Access to Justice in Environmental Matters , opened for signature 25 June 1998 (entered into force 30 October 2001).
WMO/UNEP, 'Informal Meeting of Experts on Legal Aspects of Weather Modification: Draft Principles of Conduct for the Guidance of States Concerning Weather Modification' (1978) Digest of US Practice in International Law 1204.
World Summit on Sustainable Development, 'Johannesburg Declaration on Sustainable Development' (2002).
30 LIST OF ACRONYMS
AAU Assigned Amount Unit
AIE Accredited Independent Entity
CDM Clean Development Mechanism
CER Certified Emission Reduction
COP Conference of the Parties to the UNFCCC
DFP Designated Focal Point
DNA Designated National Authority
DOE Designated Operation Entity
EER Energy Efficiency Rating
ERU Emission Reduction Unit
ESD Ecologically Sustainable Development
EU European Union
GDP Gross Domestic Product
GEC Gas-fired electricity certificate
ICJ International Court of Justice
IPCC Intergovernmental Panel on Climate Change
ITL International Trading Log
JI Joint Implementation
31 lCER Long-term certified emission reduction unit (issued for afforestation or deforestation activities)
LULUCF Land Use, Land-Use Change, and Forestry
MOP Meeting of the Parties to the Kyoto Protocol
NGAC NSW Greenhouse Gas Abatement Certificate
PPM Parts Per Million
REC Renewable Energy Certificate
RMU Removal Unit (issued in respect of LULUCF activities)
SBI Subsidiary Body for Implementation
SBSTA Subsidiary Body for Scientific and Technological Advice tCER Temporary certified emission reduction unit (issued for afforestation or deforestation activities)
UK United Kingdom
UN United Nations
UNFCCC UN Framework Convention on Climate Change
US United States of America
VER Verified Emission Reduction Unit
VREC Victorian Renewable Energy Certificate
32 STATEMENT OF ORIGINAL AUTHORSHIP
The work contained in this thesis has not been previously submitted to meet requirements for an award at this or any other higher education institution. To the best of my knowledge and belief, this thesis contains no material previously published or written by another person except where due reference is made.
Signed:
Date:
33 ACKNOWLEDGEMENTS
Completing a PhD thesis is no easy feat especially when dealing with the dynamic area of climate change law and policy. I could not have completed this challenge within the three year period, as I did, without the encouragement and support of a number of people. My sincere thanks and appreciation go to: o my principal supervisor, Professor Fisher (Professor of Law), who’s unfailing confidence in my abilities provided me with the blank canvas on which to create my work; o my associate supervisor, Professor Grace (Director, Institute for Sustainable Resources), who taught me the fine art of profiling and networking in the international arena; o my mentor and strategic-thinking buddy, Professor Duncan (Assistant Dean, Research), who kept me on the straight and narrow and made the PhD journey fun; o my mother, Maria Durrant (J.P. Qual.), who’s encouragement, interest in my work, and ‘research assistance’ were vital in enabling me to remain motivated; o my father, the brilliant Dr Durrant, who wisely encouraged me to start a PhD in the first place and kept me on my toes by remaining a climate sceptic throughout; o my siblings, whose wit and cheerful dispositions helped me to find my inner zen when the going got tough; and o my fellow PhD scholars (past and present), our coffee breaks, Friday night drinks and other procrastination techniques were necessary reminders that life still functioned outside of the PhD room.
Finally, my appreciation goes to the Faculty of Law and the Institute for Sustainable Resources for providing the funding that made all this possible.
Thank-you to you all.
Niki Durrant November 2008.
34 Chapter One – Introduction
The Role of Law in Responding to Climate Change: Emerging Regulatory, Liability and Market Approaches
RESEARCH TOPIC
The purpose of this thesis is to analyse and evaluate the emerging legal rules and frameworks, both international and Australian, required for the effective regulation of greenhouse gas emissions to address climate change in the context of the urgent and deep emission reductions required to minimise the adverse impacts of climate change. In doing so, this thesis will examine critically the existing and potential role of law in responding to climate change through the integration of effective regulatory, liability and market mechanisms. It will provide recommendations on the necessary reforms to achieve a more effective and integrated legal response to this global phenomenon.
Humankind’s industrial and post-industrial society has been based upon activities and processes that rely heavily on the burning of fossil fuels leading to a ‘mutually antagonistic relationship’ between continued economic growth and development on the one hand and environmental protection and sustainability on the other.1 Climate change presents as the archetypal environmental problem with short-term economic self-interest operating to the detriment of the long-term sustainability of our society. Until recently, our fossil fuel dependence and greenhouse gas emitting activities have been regarded as not only lawful but socially and economically desirable within our society. 2 However, following increasingly persuasive scientific evidence regarding the real and urgent threat of
1 Andrew Gouldson and Joseph Murphy, Regulatory Realities: the implementation and impact of industrial environmental regulation (1998) London, Earthscan at 1. 2 Nigel Bankes, 'Legal Prescriptions for an Atmosphere That Will Sustain the Earth' in J Owen Saunders (ed), The Legal Challenge of Sustainable Development: Essays From the Fourth Institute Conference on Natural Resources Law (1990) Ottawa, Canadian Institute of Resources Law, 155 at 160.
35 climate change, the international community agreed to the United Nations Framework Convention on Climate Change (UNFCCC) in 1992.3 The UNFCCC included the overriding objective of stabilising greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system. 4 More specific emission reduction duties for developed nations were agreed through the Kyoto Protocol to the UNFCCC (Kyoto Protocol) in 1997. 5 Together, these international agreements acknowledge that climate change is a global problem requiring a global solution, and that it has become the common concern and the common responsibility of humankind. 6
The scientific reports of the Intergovernmental Panel on Climate Change (IPCC) strongly assert that the stabilisation of emissions in the atmosphere, to avoid the adverse impacts of climate change, requires significant and rapid reductions in ‘business as usual’ global greenhouse gas emissions. Previously, international debate centred on whether stringent reductions in emissions should be adopted to limit global warming to less than 2 degrees Celsius above pre-industrial levels. According to the IPCC report in 2007, that is no longer an option:
achieving a target of 2°C (above the pre-industrial level), at equilibrium, is already outside the range of scenarios considered….whilst a target of 3°C (above the pre- industrial level) would imply stringent mitigation scenarios, with emissions peaking within 10 years. 7
To minimise the adverse impacts of climate change, nation States must implement domestic regimes to rapidly reduce their national greenhouse gas
3 United Nations Framework Convention on Climate Change , opened for signature on 4 June 1992, 31 ILM 849 (entered into force on 21 March 1994) (the UNFCCC). 4 UNFCCC, ibid, Article 2. 5 Kyoto Protocol to the United Nations Framework Convention on Climate Change , opened for signature 16 March 1998 (entered into force on 16 February 2005) (the Kyoto Protocol). 6 Together, these international agreements are referred to as the ‘international climate change regime’. 7 B.S. Fisher et al, 'Issues related to mitigation in the long term context' in B. Metz et al (eds), Climate Change 2007: Mitigation. Contribution of Working Group III to the Fourth Assessment Report of the Inter-governmental Panel on Climate Change (2007) Cambridge, Cambridge University Press at 173.
36 emissions in order to achieve global reductions in atmospheric concentrations of greenhouse gases of the following magnitude and timescale :
using the ‘best estimate’ assumption of climate sensitivity, the most stringent scenarios (stabilizing at 445–490 ppmv CO2-equivalent) could limit global mean temperature increases to 2–2.4°C above the pre-industrial level, at equilibrium, requiring emissions to peak before 2015 and to be around 50% of current levels by 2050. 8
In assisting the global community to achieve these reductions, and stabilise atmospheric emissions at 450 ppm by 2050, it would be necessary for Australia to reduce its national emissions by approximately 90 per cent below 2000 levels
by 2050. 9 Moreover, the IPCC has warned the international community that:
decisions to delay emission reductions seriously constrain opportunities to achieve low stabilization targets (e.g. stabilizing concentrations from 445–535 ppmv CO2- equivalent), and raise the risk of progressively more severe climate change impacts and key vulnerabilities occurring. 10
The sheer magnitude of emission reductions required within this urgent timeframe will necessitate an unprecedented level of international, multi-national and intra-national cooperation and will challenge conventional approaches to the creation and implementation of international and domestic legal regimes. To meet this challenge, existing international, national and local legal systems must harmoniously implement a strong international climate change regime through a portfolio of legal mechanisms that transform swiftly current behavioural practices in emitting greenhouse gases. However, the incremental evolution of our legal systems means that, historically, the law has not responded swiftly to sudden societal transformations. The common law, in particular, is not well equipped to accommodate the urgency of such abrupt social and legal transformations. This inertia in the legal system has been described as follows:
8 Ibid. 9 Garnaut Climate Change Review, 'Emissions Trading Scheme Discussion Paper' (2008) at 39. 10 Ibid.
37 in all cases development of the common law, as a response to changed conditions, does not come like a bolt out of a clear sky. Invariably the clouds gather first, often from different quarters, indicating with increasing obviousness what is coming. 11
The purpose of this thesis is to examine critically the role of law in responding to the urgent global threat posed by climate change. The innovative legal mechanism adopted by the international community, to achieve the necessary reductions in global emissions, in the most cost-effective manner, is the artificial construct of tradeable emission instruments within a carbon market system.12 However, there are significant legal challenges in incorporating these market mechanisms into existing domestic legal systems and in facilitating the optimal operation of the emerging carbon markets. Moreover, these innovative and largely untested market instruments are unlikely, alone, to be sufficient to achieve all reductions in emissions necessary to respond to climate change. It is argued that the current law does not adequately respond to the significant temporal and spatial challenges of climate change. Rather, the current international approach to the regulation of greenhouse gas emissions is weak and inadequate while the domestic regulatory approach, in particular, is fragmented, inconsistent and legally discordant. Such fragmentation results in lawmaking with a fundamental disconnect from the international objectives of the climate change regime. Moreover, the incremental evolution of the existing legal systems is ineffective and inefficient for the significant temporal and spatial adjustments required to address promptly the consequences of climate change.
Within this context, this thesis will address particularly the following questions:
What role can the law effectively perform in achieving the significant and rapid reductions in global greenhouse gas emissions required to respond to the consequences of climate change?
11 Re Spectrum Plus Ltd (in Liq) [2005] 2 AC 680 at [33] per Lord Nicholls. 12 The term carbon market is used in this thesis to refer to those markets trading in carbon emission instruments as well as those trading in greenhouse gas emission instruments more generally.
38 Are the existing principles, rules and procedures of international law effective in responding to the consequences of climate change?
Can the Australian domestic legal system effectively respond to the international imperatives required of it?
What changes should be made to the international and Australian legal frameworks to achieve a more effective legal response to climate change?
It is submitted that the appropriate role of law will include the creation and implementation of an effective international regime to address the global phenomenon of climate change and the development of a consistent domestic legal system aligned with a nation State’s international obligations. Furthermore, the deep, short-term, reductions in emissions required will necessitate the creation and implementation, within the domestic sphere, of a combination of traditional and innovative legal mechanisms. These include the imposition of strict duties to reduce emissions through the establishment of strong command and control regulation (the regulatory approach); mechanisms for the creation and distribution of liabilities for greenhouse gas emissions and climate-related harm (the liability approach); and the use of innovative regulatory tools in the form of tradeable emission instruments within a carbon market (the market approach). The legal relations between these various regulatory, liability and market approaches must be managed to achieve a consistent, compatible and optimally effective legal regime to respond to the threat of climate change.
The mutually complementary roles of the legislature, executive and judiciary will all be significant in the effective creation, implementation and enforcement of these legal mechanisms. The legislature must establish clear guiding principles regarding the rapid and urgent response to climate change and these must be implemented through the establishment of specific standards and ad hoc determinations of the executive. The judiciary will also play an important role in the application, interpretation and enforcement of such standards and principles.
39 Together, these essential mechanics of the legal system may effectively facilitate rapid emission reductions through their influence upon the emitting behaviours of all members of the community.
REVIEW OF EXISTING LITERATURE ON LAW AND CLIMATE CHANGE
A Relationship of Research to Existing Literature
There is no shortage of published literature addressing the science, economics, policy and legal implications of climate change in our modern society. The challenge in reviewing this vast expanse of literature has been the identification of commentary that reflects a considered and informed analysis of the interactions between the emerging scientific, economic, policy and legal implications of climate change. For example, there is a significant volume of literature regarding the Kyoto Protocol. However, much of this has been written primarily by economists and environmental policy advisors with little or no legal analysis. The majority of identified economic literature, predominantly from the 1990s onwards, focuses on the advantages and disadvantages of particular emission reduction pathways and the costs and benefits of using market mechanisms in that context. 13 By contrast, the policy work in this field has tended to focus on future negotiations regarding the features of the Kyoto Protocol, and post-2012 treaty options, rather than on the legal mechanisms for the practical achievement of the goals of the climate change regime.14
13 For example, William D Nordhaus, 'To Slow or Not to Slow: the Economics of the Greenhouse Effect' (1991) 101(July 1991) The Economic Journal 920; David Pearce, 'The Role of Carbon Taxes in Adjusting to Global Warming' (1991) 101(July 1991) The Economic Journal 938. 14 For example, Michael Grubb, 'Options for an International Agreement' in United Nations Conference on Trade and Development (ed), Combating Global Warming: study on a global system of tradeable carbon emission entitlements (1991) New York, United Nations, 11;Michael Grubb and Adam Rose, 'Nature of the Issue and Policy Options' in United Nations Conference on Trade and Development (ed), Combating Global Warming:study on a global system of tradeable carbon entitlements , UNCTAD/RDP/DFP/1 (1992) New York, United Nations Conference on Trade and Development, 1;Deborah Stowell, Climate Trading: Development of Greenhouse Gas Markets (2005) Hampshire, Great Britain, Palgrave Macmillan.
40 No sustained academic legal research has been undertaken on the implementation of an effective integrated legal response to climate change, via the international and domestic sphere, in the context of utilising effective regulatory, liability and market mechanisms. In-depth legal analysis of any aspect of climate change regulation is relatively scarce and is generally limited to discrete areas of law and policy in a particular jurisdiction. Such analysis in the Australian regulatory context is rarer still. There is no published, comprehensive, evaluation of the international and domestic legal frameworks required to regulate greenhouse gas emissions, and respond to the consequences of climate change effectively, within the Australian context.
B Existing Literature on Law and Climate Change
The status of international law relating to climate change, prior to the commencement of negotiations to the Kyoto Protocol, was identified and assessed in the edited collection of Churchill and Freestone. 15 This collection considered the potential international law issues in attempting to regulate the global atmosphere and to control the emission of greenhouse gases. 16 The early design of the climate change regime, and potential institutional issues, were later assessed in the edited collection of works of Luterbacher and Sprinz during the early negotiation of the Kyoto Protocol.17 The policy implications of the Kyoto Protocol were also considered in the edited collected of Cameron and Zillman. 18 This collection of commentaries considered the key features of the Kyoto
15 Robin Churchill and David Freestone (eds), International Law and Global Climate Change (1991) London, Graham and Trotman. 16 For example, Alan Boyle, 'International Law and the Protection of the Global Atmosphere: Concepts, Categories and Principles' in Robin Churchill and David Freestone (eds), International Law and Global Climate Change (1991) London, Graham and Trotman, 7; R Churchill, 'Controlling Emissions of Greenhouse Gases' in R Churchill and David Freestone (eds), International Law and Global Climate Change (1991) London, Graham & Trotman, 147 and Jill Barrett, 'The Negotiation and Drafting of the Climate Change Convention' in R Churchill and David Freestone (eds), International Law and Global Climate Change (1991) London, Graham & Trotman, 183. 17 Urs Luterbacher and Detlef F. Sprinz (eds), International Relations and Global Climate Change (2001). 18 Peter D. Cameron and Donald Zillman (eds), Kyoto: From Principles to Practice. (2001) The Netherlands, Kluwer Law International.
41 Protocol and possible policy implications for international and regional energy sectors. 19
The legal rules and institutions of the agreed international climate change regime were analysed and presented in the text of Yamin and Depledge. 20 This commentary focuses on the application of public international law to nation States in relation to climate change. 21 In doing so, the guide focuses on the key institutions and substantive rules developed under the climate change regime, as they were in 2004, as well as the processes for the ongoing negotiation and evolution of the Kyoto Protocol. 22
Legal works by Freestone and Streck 23 and Yamin 24 , published in 2005, attempt to highlight some of the discrete legal issues and uncertainties within the legal framework of the Kyoto Protocol. The edited collection by Freestone and Streck contains papers addressing a range of discrete topics relating to the Kyoto Protocol including the implementation of emission reduction projects, contractual, property rights, accounting and taxation issues and embryonic examples of regional and domestic emissions trading. The brevity of the analysis in these chapters makes it difficult for the authors to substantively analyse the legal issues. The work of Yamin focuses primarily on the rules and institutional features of the market mechanisms under the climate change regime and highlights a number of the early institutional deficiencies in the operation of the
19 For example, Peter D. Cameron, 'The Kyoto Process: Past, Present and Future' in Peter D. Cameron and Donald Zillman (eds), Kyoto: From Principles to Practice (2001) The Netherlands, Kluwer Law International, 3, Peter G. Davies, 'Climate Change and the European Community' in Peter D. Cameron and Donald Zillman (eds), Kyoto: From Principles to Practice (2001) The Netherlands, Kluwer Law International, 27 and Gillian Triggs, 'The Kyoto Protocol and the Energy Industry: Australia and the Asian Pacific' in Peter D. Cameron and Donald Zillman (eds), Kyoto: From Principles to Practice (2001) The Netherlands, Kluwer Law International, 299. 20 Farhana Yamin and Joanna Depledge, The International Climate Change Regime: A Guide to Rules, Institutions and Procedures (2004) Cambridge, Cambridge University Press. 21 Ibid, 3. 22 Ibid. 23 David Freestone and Charlotte Streck (eds), Legal Aspects of Implementing the Kyoto Protocol Mechanisms: Making Kyoto Work (2005) Oxford, Oxford University Press. 24 Farhana Yamin (ed), Climate Change and Carbon Markets: A Handbook of Emission Reduction Mechanisms (2005) London, Earthscan.
42 regime. However, not all of the key institutional and interactive deficiencies are identified. The work of Stowell is also intended to analyse the features of the carbon markets. 25 However, this work is limited by a focus on the broad policy principles, national strategies and preferred outcomes of the negotiators to the Kyoto Protocol rather than a consideration of the specific legal mechanisms required to create, monitor and enforce the market systems.
Broader international compliance issues with the Kyoto Protocol are considered in the edited collection of Schram Stokke, Hovi and Ulfstein 26 and in the work of Doelle. 27 The former collection describes the design of the Kyoto Protocol compliance regime, identifies challenges to the effective operation of the regime, and considers the potential for external enforcement measures, including trade sanctions and responses by non-governmental organisations. The work of Doelle provides in-depth consideration of a range of issues associated with compliance with the climate change regime. The text presents an overview of the compliance system under the Kyoto Protocol, analyses the potential impact of the World Trade Organisation on the climate change regime and the potential role of the dispute settlement provisions under the United Nations Convention on the Law of the Sea. The role of human rights principles, in relation to the impacts of climate change, is also considered. The purpose of the text is to assess the effectiveness of these various mechanisms in motivating States to take action on greenhouse gas emissions and comply with the climate change regime. 28
The work of Verheyen provides a detailed analysis of the application of general international law principles, including the principle of State responsibility for
25 Deborah Stowell, Climate Trading: Development of Greenhouse Gas Markets (2005) Hampshire, Great Britain, Palgrave Macmillan. 26 Olav Schram Stokke, Jon Hovi and Geir Ulfstein (eds), Implementing the Climate Regime: International Compliance (2005) London, Earthscan. 27 Meinhard Doelle, From Hot Air to Action? Climate Change, Compliance and the Future of International Environmental Law (2005). 28 Ibid, xxii.
43 environmental harm, to the particular issue of climate change damage.29 Liability issues associated with the environmental, social and economic harm of climate change are also analysed in the relatively brief works of Grossman, 30 Allen 31 and Smith and Shearman.32 The papers of Grossman and Allen both focus on the potential for tortious actions for climate harm based on the United States of America (US) jurisdiction while Smith and Shearman assess the role of climate change litigation in the Australian environment. The purpose of the latter text is to ‘provide a detailed overview and analysis of the legal and scientific issues at the core of climate change litigation’. 33 Smith and Shearman specialise particularly in the areas of public health and the law and it is from this particular background that this overview is presented with an emphasis on liability for adverse impacts on human health.
Works specifically addressing the domestic regulation of climate change are more limited. Recent legal texts comprehensively analysing the provisions of the European Union and United Kingdom laws relating to carbon trading include the text of Robinson, Barton, Dodwell, Heydon and Milton 34 while an overview of the various aspects of US law relating to climate change is provided in the edited text of Gerrard. 35 The recent edited collection of Australian papers by Bonyhady and Christoff identify some of the emerging legal issues in Australian domestic law and present examples of climate related litigation in Australia and initiatives
29 Roda Verheyen, Climate Change Damage and International Law: Prevention Duties and State Responsibility, Developments in International Law: Volume 54 (2005) Leiden, Martinus Nijhoff Publishers. 30 David A. Grossman, 'Warming Up to a Not-So-Radical Idea: Tort-Based Climate Change Litigation, 28 Colombia Journal of Environmental Law 1 (2003)' in Durwood Zaelke, Donald Kaniaru and Eva Kruzikova (eds), Making Law Work: Environmental Compliance and Sustainable Development: Volume 1 (2005) 505. 31 Myles Allen, 'The Spectre of Liability: Part 1-Attribution' in Kenny Tang (ed), The Finance of Climate Change: A Guide for Governments, Corporations and Investors (2005) 367. Myles Allen, 'The Spectre of Liability: Part 2-Implications' in Kenny Tang (ed), The Finance of Climate Change: A Guide for Governments, Corporations and Investors (2005) 381. 32 Joseph Smith and David Shearman, Climate Change Litigation: Analysing the Law, Scientific Evidence and Impacts on the Environment, Health and Property (2006). 33 Ibid, xxi. 34 J Robinson et al, Climate Change Law: Emissions Trading in the EU and the UK (2007) London, Cameron May. 35 Michael B. Gerrard (ed), Global Climate Change and U.S. Law (2007) Chicago, American Bar Association.
44 to regulate greenhouse gas emissions.36 Policy issues associated with the risk of liability of other Australian public authorities are considered in the work of McDonald 37 while litigation as a general policy response to climate change is considered in the work of Peel. 38 Other works include an overview of public and private responses to climate change in Australia by Lyster,39 and the regulation of greenhouse gases, in the existing environmental regulatory context, by Fisher. 40
C Identified Gap in the Literature
The gap in the existing literature is significant. No legal analysis has been identified in the existing literature which addresses the implementation of an effective integrated legal response to climate change, via the international and domestic sphere, in the context of utilising effective regulatory, liability and market mechanisms. As the above review illustrates, there is limited legal analysis that comprehensively critiques the rules, processes and institutional characteristics of the international climate regime. Moreover, the regulation of climate change is in a constant state of flux and much of the published literature, preceding 2007, no longer represents an accurate assessment of the current international and domestic regimes. The literature also frequently omits to consider the implementation of the regime, from the global to the local, and the interaction between the emerging legal rules and carbon markets.
Furthermore, much of the existing Australian legal climate change literature addresses only discrete areas of climate change regulation from a singular
36 Tim Bonyhady and Peter Christoff (eds), Climate Law in Australia (2007) Sydney, The Federation Press. 37 Jan McDonald, 'A Risky Climate for Decision-Making: The liability of development authorities for climate change impacts' (2007) 24(6) Environmental and Planning Law Journal 405. 38 Jacqueline Peel, 'The Role of Climate Change Litigation in Australia's Response to Global Warming' (2007) 24 Environmental and Planning Law Journal 90. 39 Rosemary Lyster, 'Chasing Down the Climate Change Footprint: Forces Converge' (2007) 24(4) Environmental and Planning Law Journal 281; Rosemary Lyster, 'Chasing Down the Climate Change Footprint: Forces Converge-Part II' (2007) 24(6) Environmental and Planning Law Journal 450. 40 Douglas E Fisher, 'The Statutory Relevance of Greenhouse Gas Emissions in Environmental Regulation' (2007) 24(3) Environmental and Planning Law Journal 210.
45 jurisdictional perspective. The practical implications of the national regulation of greenhouse gas emissions and the establishment of a functional carbon markets, in a manner compatible with the international climate change regime, is also generally overlooked in such works.
SCOPE OF THIS RESEARCH STUDY
The purpose of this thesis is to address this identified gap in the existing literature. This thesis will analyse and evaluate the emerging legal rules and frameworks, both international and Australian, required for the effective regulation of greenhouse gas emissions to address climate change in the context of the urgent and deep emission reductions required to minimise the adverse impacts of climate change. It will do so through the parameters of the emerging regulatory, liability and market responses to climate change.
This thesis will focus on the role of law in responding to climate change through the international and domestic jurisdictions. Given the breadth of legal issues in the regulation of the impacts of climate change, only one domestic jurisdiction has been chosen as the primary subject for analysis. This thesis analyses the domestic implementation of the climate change regime and regulation of greenhouse gas emissions through the parameters of the Australian regulatory environment. Accordingly, it will focus primarily on international and Australian climate change related laws with a few key comparative examples from other developed common law countries which have recently considered legal initiatives to address climate change, such as the United Kingdom, New Zealand, Canada and the United States of America (with reference to the European Union in the context of the United Kingdom).
46 Australia is representative of the inherent tension between the emergent international climate change science and global ‘consensus’ to reduce emissions, on the one hand, and, on the other, the political and economic resistance to the imposition of strict environmental protection standards which may adversely affect domestic economies. The legal response to climate change, in such a political environment, places even greater emphasis on the effectiveness of the role of law in overcoming such resistance to achieve actual reductions in greenhouse gas emissions.
An analytical approach has been adopted in this research and reference has been made to published treaties, legislation, caselaw and government policy and to reports containing collated data regarding the science of climate change, status of national emissions and operation of the carbon market mechanisms. Accordingly, this assessment is based on publicly available data, that had been collated and reported, with an appreciation of the dynamic nature of the subject. Given the difficulties in accessing and collating data, at a national and an international level, empirical data has not been collected.
The primary focus of this thesis is the effectiveness of the existing legal framework for responding to the implications of climate change and the potential role for the law, in terms of regulation, liability and markets, in achieving rapid reductions in greenhouse gas emissions at the global and national scales. Such an analysis requires an understanding of the key issues relating to the science, the economics and the politics of climate change. However, this thesis does not purport to critique the climate change science and the required level of emission reductions; the economic impacts of climate change and the introduction of emissions trading; or the political influences behind the regulation of greenhouse gas emissions. In addition, it does not purport to analyse the ethical, social or cultural dimensions to the development and implementation of any legal responses.
47 The thesis has been written in a highly dynamic political and legal environment. Consequently, although this thesis evaluates and critiques currently available materials regarding the emerging legal response to climate change, the findings of this thesis have been deliberately presented with an emphasis on the creation of broad guiding principles. These principles are intended to be of a more enduring nature to assist in the creation of a more effective future response to this continuing global issue.
STRUCTURE OF THIS THESIS
To respond effectively to climate change on a global scale, the international community must obtain full political cooperation to the establishment of compatible international and national legal responses to greenhouse gas emissions and the impacts of climate change. This thesis analyses critically the current approach of the law to greenhouse gas emissions including the duties and principles established under the international climate change regime and the national implementation of those duties through domestic legal responses in Australia. In examining the current status of the law in responding to climate change, internationally and nationally, one would expect to encounter a range of legal instruments including some form of regulatory duty to reduce emissions; liability provisions to import responsibility for unauthorised emissions; and some form of market mechanism to incentivise emission reductions and promote technological innovation within the private sphere. Moreover, there would be an expectation that the legal relationships between those regulatory, liability and market approaches would be integrated to create a complementary, holistic, and effective legal framework to address the challenges of climate change.
The thesis commences with a critical assessment of the contextual background to the international climate change regime in Chapter Two. It does so via an analysis of the science of climate change; the economics; and the law. All of which influenced the ultimate regulatory design of the international regime. The momentum towards reducing greenhouse gas emissions and addressing climate
48 change was driven from a global level, in response to international scientific reports. The consensus adoption of the UNFCCC, and later, the Kyoto Protocol was in response to global concern regarding the phenomenon of climate change from global greenhouse gas emissions. Scientific reports identifying the causes of climate change, and the predicted impacts, influenced the political negotiation and adoption of specific emissions reduction duties. This included the presence of high levels of scientific uncertainty which resulted in an emphasis on flexibility and cost-effectiveness in achieving the relatively modest emission reduction targets under the Kyoto Protocol. The legal framework of the Kyoto Protocol was also based, in part, on two dominant ‘success stories’ of modern
environmental governance, namely, the tradeable instruments of the US SO 2 trading scheme and the compliance mechanisms of the international ozone regime. 41 However, the faith placed in the combined experience of a tradeable emission scheme within a single domestic jurisdiction, and successful compliance with an individual international environmental agreement appears excessive. As a result, the agreed climate change regime does not appear to embody the critical regulatory components required to reduce global greenhouse gas emissions successfully and avoid the adverse impacts of climate change.
Chapter Three analyses the key features of regulatory design considered necessary for the international climate change regime to respond effectively to climate change. This chapter analyses critically the effectiveness of the existing regulatory institutions, rules, liabilities and markets established under the climate change regime. The climate change regime represents an ambitious attempt to achieve global behavioural adjustments in the face of society’s historic, and ongoing, dependence on fossil fuels and emitting activities. This chapter concludes that the regulatory design of this regime appears to be innovative, sophisticated and complex but it is fragmented and weak with limited powers in relation to the achievement of emission reductions. The complex myriad of
41 Title IV of the Clean Air Act , enacted as part of the Clean Air Act Amendments of 1990, Pub. L. No. 101-549, 104 Stat. 2399 (1990); Clean Air Act , 401 et seq.; 42 United States Congress 7651 et seq.; Montreal, 16 September 1987, 26 International Law Materials 1550 (1987) (entered into force 1 January 1989).
49 institutional bodies and rules established through this regime lack any solid regulatory core to drive substantial changes in national emitting behaviour. There is an absence of strict, universal, duty to reduce emissions by sufficient amounts, and within the necessary timeframes, to avoid the adverse impacts of climate change. Moreover, the sanctions for non-compliance are lacking in any clear deterrent value which will prevent the essential global behavioural shift from occurring.
This thesis analyses the domestic implementation of the climate change regime and regulation of greenhouse gas emissions through the Australian regulatory environment. The Australian government had, until recently, affirmed and reaffirmed its commitment to achieving Australia’s allocated domestic emission reduction target under the Kyoto Protocol but would not ratify the agreement. Against this background of economic, scientific and social tension, the Australian government had purported to comply with the spirit and text of its international obligations through the domestic regulation of greenhouse gas emissions. That political position changed in late 2007. Australia is now a ratified party to the Kyoto Protocol and is obliged to comply with its international duties including meeting its emission reduction obligations from 2008 to 2012. In this context, Chapter Four analyses the domestic legal response to the consequences of climate change in Australia and considers the compatibility of that approach with the objectives and duties of the UNFCCC and Kyoto Protocol. The chapter concludes that there have been limited regulatory initiatives implemented in Australia to address climate change effectively and the emphasis on voluntary, ad hoc, programs has had little substantive legal effect on business as usual greenhouse gas emissions.
In the absence of the comprehensive regulation of Australia’s greenhouse gas emissions, it is necessary to consider the surrogate legal mechanisms that may operate within the Australian legal system to respond to the impacts of climate change. The range of federal, state and local environmental protection and
50 planning regulations have the potential to play a significant role through the evaluation of major projects, minimisation of greenhouse gas emissions and avoidance of environmental harm. Such a role falls well within the scope and purpose of these regimes which include the objectives of achieving the principles of ecologically sustainable development (ESD). Embedded within the principles of ESD are the critical concepts of the precautionary principle and inter- generational equity. Thus, environmental sustainability seeks to manage society’s use of the Earth’s natural energy sources and sinks and to maintain optimal and sustainable ecological systems for the benefit of present and future generations.
Under an effective regulatory environment, such principles would operate to minimise emissions and the adverse impacts of climate change. However, this outcome is far from evident in the analysis of the current Australian approach to environmental protection and planning regulation presented in Chapter Five. A critical analysis of the current treatment of significant greenhouse gas emissions from major projects concludes that the multiple federal, state-based and local council policies, rules and decision-making principles are legally discordant and predominantly ineffective. The presented case studies highlight the prevailing dichotomy between the interpretation of laws to avoid environmental harm, in theory, and their application, in practice, to permit continuing emissions from Australia’s major industries. This regulatory approach is yet another manifestation of the inadequacy of the domestic Australian legal response to the serious implications of climate change.
The absence of any significant mitigation and adaptation scheme in Australia, in conjunction with the inertia of the international community towards the adoption and achievement of deep emission reductions, means that some adverse climate change impacts are now inevitable. Indeed, society has already begun to experience the harm and losses of climate change through the increased incidences of heatwaves, droughts, storms and flooding. As the costs associated
51 with these losses continue to mount, there is an important question to be asked. Who is responsible for the harm? The international climate change regime is silent on the allocation of responsibility for climate change harm. In the absence of sanctions through domestic regulation, it will fall to the Australian common law to act as a distributive mechanism for such liabilities. In this context, Chapter Six examines the practical application of the existing common law principles of negligence and nuisance to a series of hypothetical ‘climate suits’ in Australia. In particular, this chapter addresses the significant legal issues to be addressed in the successful establishment of a causative link between the emission of greenhouse gases, resulting climatic changes, and eventual localised harm or loss. This chapter concludes that current Australian tort law principles are poorly equipped to accommodate the unique temporal and spatial issues presented by climate change torts. Accordingly, statutory intervention will be necessary to create an appropriate test for establishing causation, incorporating the scientific uncertainty of post-normal climate change science and embracing the precautionary principle, in order to fairly distribute responsibility for the harm caused by the impacts of climate change.
The traditional regulatory mechanisms of the law reside in command and control regulation based in statute and backed by the operation of the principles of the common law. However, there is also a range of innovative regulatory tools at the disposal of the legislature to address novel legal concerns. This includes the innovation of harnessing the financial incentives of the market through the creation of tradeable emission instruments, to achieve global greenhouse gas emission reductions at the location at which it is most cost-effective to do so. This innovation was adopted in the international climate change regime and has acted as a catalyst for the design and implementation of a mosaic of emerging domestic, regional and global markets, both voluntary and mandatory, which are intended to link into a multi-national global carbon market.
52 The purpose of Chapter Seven is to analyse critically the legal characteristics of these emerging tradeable emission instruments; their potential effectiveness as a regulatory tool to reduce emissions and the essential elements for an effective legal framework to facilitate the future Australian and multi-national, global, carbon market. This chapter concludes that the emerging global carbon market is a disparate collection of immature, legally incompatible, regulated and voluntary trading schemes at international, regional and domestic levels which, if merged, would create only a legally dysfunctional and ineffective market system. To achieve the objectives of the international climate change regime of reducing emissions in the most flexible, cost-effective manner, these regimes must be manipulated to evolve into a compatible and effective carbon trading market. The central legal feature in all of these regimes must be a strict, enforceable and deep emission reduction set in accordance with the recommendations of the IPCC. In addition, these tradeable emission instruments have been arbitrarily fused onto existing domestic legal systems with little regard for their impact on, and interaction with, existing laws and property law principles. Consequently, traditional concepts of property rights must be transformed radically to accommodate these new artificial rights in relation to the sequestration, storage and emission of greenhouse gases.
In concluding this thesis, Chapter Eight provides a synthesis of the key findings of this thesis regarding the existing role of law, internationally and domestically, in restricting greenhouse gas emissions and responding to the global impacts of climate change. A series of recommendations is also presented for the realisation of a more effective role for the law in responding to this unique, urgent, global phenomenon though the integration of effective regulatory, liability and market measures.
53 Chapter Two – Climate Change in Context:
Science, Economics and Law 1
INTRODUCTION
The regulation of the consequences of climate change is driven, at an international level, by the United Nations Framework Convention on Climate
Change (UNFCCC) and the Kyoto Protocol . 2 Together, these international agreements make up the international climate change regime. The global objectives, legal principles and regulatory mechanisms adopted in that regime were influenced by a number of scientific, economic and legal parameters. The purpose of this chapter is to identify those relevant scientific, economic and legal factors and how these factors might influence the ultimate design, scope and character of the international and national regimes to regulate greenhouse gas emissions. Chapter Three will then analyse critically, in detail, the operation of the established rules and mechanisms of the international climate change regime.
This chapter commences with a discussion of the phenomenon of climate change and a brief overview of the scientific predictions of the impacts of climate change. This is followed by an introduction to the key features of the international climate change regime including the use of tradeable market mechanisms. This chapter then considers two earlier legal regimes for protecting the atmospheric commons which influenced the regulatory design of the climate change regime, namely, the international convention to protect the ozone and the United States of America
1 A short summary of the analysis of the scientific and economic predictions in this chapter was published in Nicola Durrant, 'The Science and Economics of Climate Change: An Update' (2007) Summer 2006(Issue 4) National Environmental Law Review 39. 2 United Nations Framework Convention on Climate Change , opened for signature on 4 June 1992, 31 ILM 849 (entered into force on 21 March 1994); Kyoto Protocol to the United Nations Framework Convention on Climate Change , opened for signature 16 March 1998 (entered into force on 16 February 2005)(together the Climate Change Regime).
54 3 (US) SO 2 trading scheme. Finally, this chapter examines the key principles to be taken into consideration in the design of an effective legal regime to respond to the impacts of climate change.
THE PHENOMENON OF CLIMATE CHANGE
The Earth possesses a natural greenhouse effect which is enhanced by human emissions of greenhouse gases. Figure One depicts these interactions which result in the enhanced greenhouse effect. Naturally occurring greenhouse gases, principally water vapour, carbon dioxide, and ozone, absorb thermal from the Earth and atmosphere. 4 As a result, the atmosphere is warmed and the mean temperature of the Earth is approximately 33 degrees Celsius higher than it would be without this atmospheric absorption and re-radiation of infrared energy. 5 This warms the Earth sufficiently for it to be habitable by humans. 6 However, the activities of our industrialised society, including the combustion of fossil fuels, agriculture, desertification and deforestation, have contributed to increased concentrations of atmospheric greenhouse gases in the atmosphere.
These greenhouse gases include: carbon dioxide (CO 2); methane (CH 4); nitrous
oxide (N 2O); hydrofluorocarbons (HFCs); perfluorocarbons (PFCs); and sulphur
hexafluoride (SF 6) (the greenhouse gases). The significant increase in concentrations of these gases has led to an enhanced greenhouse effect which itself has led to global warming and climate change impacts. Carbon dioxide has markedly increased over the industrial period and has risen in the atmosphere
3 Vienna Convention for the Protection of the Ozone Layer (the Vienna Convention) Vienna, 22 March 1985, 26 International Law Materials 1529 (1987),(entered into force 22 September 1988). Montreal Protocol on Substances that Deplete the Ozone Layer (the Montreal Protocol) Montreal, 16 September 1987, 26 International Law Materials 1550 (1987) (entered into force 1 January 1989); Title IV of the Clean Air Act , enacted as part of the Clean Air Act Amendments of 1990, Pub. L. No. 101-549, 104 Stat. 2399 (1990); Clean Air Act , 401 et seq.; 42 United States Congress 7651 et seq. 4 IPCC, WMO and UNEP, 'Climate Change: The IPCC Scientific Assessment, Report Prepared for Intergovernmental Panel on Climate Change by Working Group I' (Cambridge University Press, 1990) at xiii. 5 Ibid, xix. Tamara S. Ledley et al, 'Climate Change and Greenhouse Gases' (1999) 80(39) Eos Transactions American Geophysical Union Electronic Supplement 453 http://www.agu.org/eos_elec/99148e.html at 11 June 2008. 6 IPCC, WMO and UNEP, n4, xiv.
55 from approximately 280 parts per million (ppm) in the 1700s to 364 ppm in 1997 and approximately 380 ppm in 2005. 7 And that emissions growth rate is continuing to rise. 8 Moreover, carbon dioxide, chlorofluorocarbons and nitrous oxide are long life gases and may take from decades to centuries to fully dissipate from the atmosphere. 9 In 1990, it was predicted that if all human-made emissions of carbon dioxide were immediately ceased then half of all human induced carbon dioxide concentrations would still remain in the atmosphere by 2100. 10 Accordingly, it is now inevitable that some changes in climate will result from these atmospheric concentrations of greenhouse gases.
Figure 1: UNEP/GRID-Arendal, 'Greenhouse Effect' (2002) UNEP/GRID-Arendal Maps and Graphics Library at: http://maps.grida.no/go/graphic/greenhouse_effect accessed 11 June 2008.
7 Michael R. Raupach et al, 'Global and regional drivers of accelerating CO2 emissions' (2007) Proceedings of the National Academy of Sciences http://www.pnas.org/cgi/content/full/104/24/10288 at 11 June 2008. 8 Ibid. 9 IPCC, WMO and UNEP, n4, xvii. 10 Ibid.
56 CLIMATE CHANGE IMPACT PREDICTIONS
The possible adverse impacts of climate change have presented an inherent tension between achieving reductions in greenhouse gases and ensuring the continuation of economic growth and development in both developed and developing nations. This tension prompted intense global debate regarding the accuracy of those climatic predictions, the level of reductions required and the likely impacts on economic growth from emission mitigation compared to responsive adaptation.
It was predicted, as early as 1896, that carbon dioxide released to the atmosphere would cause radiative effects and lead to a warming of the Earth’s surface. 11 From 1958, Dr Keeling measured the atmospheric carbon dioxide concentrations in Hawaii which demonstrated, through the now infamous Keeling curve, the continual increase in the earth’s carbon dioxide concentrations (see Figure Two). 12
Figure 2: Atmospheric concentrations of CO 2 from Manua Loa, Hawaii. C.D. Keeling and NOAA.
11 S Arrhenius, 'On the Influence of Carbonic Acid in the Air upon the Temperature of the Ground' (1896) 5(251) Philosophers Magazine 237. 12 Daniel Bodansky, 'The History of the Global Climate Change Regime' in Urs Luterbacher and Detlef F. Sprinz (eds), International Relations and Global Climate Change (2001) Cambridge, The MIT Press, 201 at 205.
57 The Declaration of the United Nations Conference on the Human Environment , in 1972, includes the common conviction that the discharge of substances at such concentrations that exceed the capacity of the environment to render them harmless must be halted to ensure that serious or irreversible damage is not inflicted upon ecosystems. 13
The concept of human induced climate change, and the potential for humans to cause adverse environmental impacts, was considered in the international principles addressing weather modification in 1978:
States shall in good faith and in the spirit of good neighbourliness give adequate and timely notification of prospective major weather modification activities……[and]…shall take all reasonable steps to ensure that weather modification activities under their jurisdiction or control do not cause adverse environmental effects in areas outside their national jurisdiction. 14
Parties to the first World Climate Conference , held in 1979, expressed concern that the ‘continued expansion of man’s activities on earth may cause significant extended regional and even global changes of climate’.15 Accordingly, the World Climate Conference called for the prevention of ‘potential man-made changes in climate that might be adverse to the well-being of humanity’. 16
Almost a decade later, in 1988, the Intergovernmental Panel on Climate Change (IPCC) was created by the World Meteorological Organization (WMO) and United Nations Environment Programme (UNEP) to provide independent
13 Adopted at Stockholm, 16 June 1972, Principle 6. 14 WMO/UNEP, 'Informal Meeting of Experts on Legal Aspects of Weather Modification: Draft Principles of Conduct for the Guidance of States Concerning Weather Modification' (1978) Digest of US Practice in International Law 1204 Principles IV-VI. 15 IPCC, 16 Years of Scientific Assessment in Support of the Climate Convention (2004) http://www.ipcc.ch/pdf/10th-anniversary/anniversary-brochure.pdf at 11 June 2008 at 2. 16 Ibid.
58 scientific advice regarding human-induced climate change through the peer review and assessment of existing scientific information. 17
At the same time, the United Nations General Assembly resolved that climate change was a ‘common concern of humankind, since climate is an essential condition which sustains life on earth’ 18 and called for necessary and timely action to deal with climate change within a global framework. 19 That same year, participants at the Toronto Conference on the Changing Atmosphere called for a ‘comprehensive international framework that can address the interrelated problems of the global atmosphere’ and recommended the reduction of carbon dioxide emissions by 20 per cent below 1998 levels by 2005. 20 The Australian government agreed to this aspirational target but did not back this with policy or legislation to achieve such substantive changes. 21
A The First IPCC Assessment Report
The First Assessment Report of the IPCC was released in 1990 and confirmed that emissions resulting from human activities were substantially increasing the atmospheric concentrations of greenhouse gases which would enhance the greenhouse effect and lead to additional warming of the Earth’s surface. 22 The report concluded that carbon dioxide was responsible for over half of the enhanced greenhouse effect. 23 It also concluded that atmospheric levels of certain gases, including carbon dioxide and nitrous oxide, will adjust slowly
17 Ibid. 18 UN General Assembly, 1988 Resolution A/RES/43/53:‘Protection of global climate for present and future generations of mankind’. http://www.un.org/documents/ga/res/43/a43r053.htm at 11 June 2008. 19 Ibid. 20 Daniel Bodansky, 'The History of the Global Climate Change Regime' in Urs Luterbacher and Detlef F. Sprinz (eds), International Relations and Global Climate Change (2001) Cambridge, The MIT Press, 201 at 25. 21 Tim Bonyhady and Peter Christoff, 'Introduction' in Tim Bonyhady and Peter Christoff (eds), Climate Law in Australia (2007) Sydney, The Federation Press, 1 at 1-2. 22 IPCC, WMO and UNEP, n4, Policymakers’ Summary, xi. 23 Ibid.
59 committing society to increased concentrations for centuries ahead. 24 The First Assessment Report asserted that immediate reductions in emissions of long lived gases of over 60 per cent was necessary to stabilise the concentrations of greenhouse gases in the atmosphere at 1990 levels. 25 The report also predicted that the impacts of continued business as usual emissions would include an increase in global mean temperature during the 21st century of approximately 0.3 degrees Celsius per decade. 26 This could result in increases in global mean temperatures of approximately 1 degree Celsius above 1990 levels by 2025 and 3 degrees Celsius by 2099. 27 This would be higher than the global mean temperatures of the previous 150,000 years. 28 Sea levels were also predicted to rise by 20 centimetres by 2030 and 65 centimetres by 2099 and the report asserted that: ‘even if greenhouse forcing increased no further, there would still be a commitment to a continuing sea level rise for many decades and even centuries, due to delays in climate, ocean and ice mass responses’. 29
Other predicted impacts included diminution of the agricultural resource base, ecosystem biodiversity loss, water resource problems, adverse health impacts, spread of infection, threats to low lying islands and coastal zones with population displacement, regional shifts in marine organisms and productive fisheries zones and substantial reductions in seasonal snow cover, permafrost and ice. 30 The release of these serious predictions acted as a catalyst for the initiation of international negotiations to the terms of an international convention to reduce emissions and avoid these predicted adverse impacts of climate change.
24 Ibid. 25 Ibid. 26 Ibid. 27 Ibid. 28 Ibid, xxviii. 29 Ibid, xxx. 30 IPCC, 'Policymakers' Summary of the Potential Impacts of Climate Change, Report from Working Group II to the Intergovernmental Panel on Climate Change' (Australian Government Publishing Service, 1990) at 2-4.
60 B The Second IPCC Assessment report
The Second Assessment Report of the IPCC, released in 1995, concluded that atmospheric concentrations of greenhouse gases including carbon dioxide, methane and nitrous oxide had continued to increase significantly, by approximately 30 per cent, 145 per cent, and 15 per cent, respectively. 31 Furthermore, the assessment concluded that these trends could be attributed largely to human activities, mostly fossil-fuel use, land-use change and agriculture. 32 In this respect, the report stated, ‘the balance of evidence suggests…a discernible human influence on global climate’.33 The report further submitted that if carbon dioxide emissions were maintained at 1994 levels, they would lead to a nearly constant rate of increase in atmospheric concentrations for at least two centuries, reaching approximately 500 ppm by the end of the 21st century. 34 As a result of these increasing greenhouse gas concentrations in the atmosphere, the assessment found that the temperature of the Earth had increased between 0.3 and 0.6 degrees Celsius during the previous one hundred and fifty years. 35 That temperature increase was stated as being largely responsible for the rise in global sea levels of between 10 and 25 centimetres over the previous one hundred years. 36
C The Third IPCC Assessment Report
The Third Assessment Report of the IPCC, released in 2001, revised its previous estimates of likely global average surface temperature increases and concluded that these were likely to increase by 1.4 to 5.8 degrees Celsius between 1990 and 2100. 37 The assessment further asserted that ‘there is new and stronger evidence
31 Working Group I to the Second Assessment of the Intergovernmental Panel on Climate Change, 'Second Assessment Report: Climate Change 1995; Climate Change 1995: The Science of Climate Change - Summary for Policy-Makers' (Cambridge University Press, 1995) Section 1. 32 Ibid. 33 Ibid, Section 4. 34 Ibid, Section 1. 35 Ibid, Section 3. 36 Ibid. 37 IPCC, 'Climate Change 2001: Synthesis Report to the Third Assessment Report of the Intergovernmental Panel on Climate Change' (Cambridge University Press, 2001) at 8.
61 that most of the warming observed over the last 50 years is attributable to human activities’. 38
In relation to the effects of this warming, the assessment stated that changes in sea level, snow cover, ice extent, and precipitation ‘are consistent with a warming climate near the Earth’s surface’ including:
a more active hydrological cycle with more heavy precipitation events and shifts in precipitation, widespread retreat of non-polar glaciers, increases in sea level and ocean-heat content, and decreases in snow cover and sea-ice extent and thickness. 39
The climatic effects from this warming were predicted to include sea-level rises, precipitation changes, more intense storms, increased intensity of droughts and floods and loss of farming productivity. 40 The assessment further stated that ecological productivity and biodiversity will be altered by climate change and sea level rise, with an increased risk of extinction of some vulnerable species. 41 These increased risks would result from significant disruptions of ecosystems from disturbances such as fire, drought, pest infestation, invasion of species, storms, and coral bleaching events. 42 Impacts on human health would include direct impacts such as reduced cold stress in temperate countries and increased heat stress, loss of life in floods and storms and indirect impacts from changes in the ranges of disease vectors, water-borne pathogens, water quality, air quality, and food availability and quality. 43 Moreover, the assessment stated that populations that inhabit small islands and low-lying coastal areas would be at particular risk of severe social and economic effects from sea-level rise and storm surges:
38 Ibid, 5. 39 Ibid, 6. 40 Ibid, 3. 41 Ibid, 9. 42 Ibid, 9, 12. 43 Ibid, 9.
62 many human settlements will face increased risk of coastal flooding and erosion, and tens of millions of people living in deltas, in low-lying coastal areas, and on small islands will face risk of displacement. Resources critical to island and coastal populations such as beaches, freshwater, fisheries, coral reefs and atolls, and wildlife habitat would also be at risk. 44
The Third IPCC Assessment Report considered three global emissions reduction scenarios: stabilisation at 450 ppm; stabilisation at 650 ppm; and stabilisation at 1,000 ppm. All of these scenarios would require emissions to be reduced below 1990 levels. 45 The IPCC predicted temperature increases from stabilisation at 450 ppm of 1.5 to 3.9 degrees Celsius above 1990 levels and increases of 3.5 to 8.7 degrees Celsius for stabilisation at 1,000 ppm. 46 Therefore, even at 450 ppm some temperature increase would occur with resulting climatic impacts. The report stated that even if carbon dioxide emissions were reduced and atmospheric concentrations stabilised, the Earth’s surface air temperature would continue to rise slowly for a century or more due to the inertia of the climate system. 47 Accordingly, it was evident that some anthropogenic climate change was inevitable.
D The Fourth IPCC Assessment Report
The Fourth IPCC Assessment Report was released in February 2007 and made a number of strong findings regarding emerging and future changes in the climate system. 48 The report stated that its findings were based on increased scientific certainty regarding the science of climate change compared to previous IPCC assessment reports.
44 Ibid, 12. 45 Ibid, 19. 46 Ibid, 21. 47 Ibid, 17. 48 IPCC, 'Climate Change 2007: The Physical Science Basis: Summary for Policy Makers, Contribution of Working Group I to the Fourth Assessment report of the Intergovernmental Panel on Climate Change' (IPCC Secretariat Geneva, 2007).
63 In relation to climate warming, the IPCC concluded that:
warming of the climate system is unequivocal, as is now evident from observations of increases in global average air and ocean temperatures, widespread melting of snow and ice, and rising global mean sea level. 49
The IPCC found that the linear warming trend over the previous 50 years had been approximately 0.13 degrees Celsius per decade, nearly twice that for the previous one hundred years. 50 Eleven of the previous twelve years ranked as the twelve warmest years on record. 51 The report further predicted a warming of approximately 0.2 degrees Celsius per decade for the next two decades with a warming of approximately 1.8 to 4 degrees Celsius by 2099. 52
The IPCC identified a clear link between temperature increases and greenhouse gas emissions and concluded that:
most of the observed increase in globally average temperatures since the mid-20 th century is very likely due to the observed increase in anthropogenic greenhouse gas concentrations. 53
The IPCC estimated that sea levels had risen by 0.17 metres during the 20th century. 54 Those sea levels were predicted to rise again between 0.18 metres to 0.59 metres by 2099. 55
49 Ibid, 4. 50 Ibid. 51 Ibid. Records commenced in 1850. 52 Compared to 1999. Ibid, 10-11. 53 Ibid, 8. 54 Ibid, 5. 55 Compared to 1999. Ibid, 11.
64 According to the IPCC, mountain glaciers and snow cover had declined with decreases in glaciers and ice caps contributing to sea level rise. 56 The Greenland and Antarctica ice sheets were also experiencing increased mass losses. 57 Long- term changes identified in the climate system included changes in Arctic temperatures and ice, widespread precipitation amounts, ocean salinity, wind patterns and aspects of extreme weather including droughts, heavy precipitation, heat waves and intensity of tropical cyclones. 58
The predictions of adverse impacts did not stop there. The IPCC concluded that continued emissions at or above current rates would, very likely, cause further warming and induce larger changes in the climate system than those observed during the 20th century. 59 Moreover, past and future emissions were predicted to continue to contribute to warming and sea level rises for more than a millennium to come due to the timescales required to remove the gases from the atmosphere. 60
It is now inevitable that humankind will experience some adverse impacts of climate change. Previously, political debate has centred on whether stringent reductions in emissions should be adopted to limit global warming to less than 2 degrees Celsius above pre-industrial levels. According to the IPCC report in 2007, that was no longer an option:
achieving a target of 2°C (above the pre-industrial level), at equilibrium, is already outside the range of scenarios considered….whilst a target of 3°C (above the pre- industrial level) would imply stringent mitigation scenarios, with emissions peaking within 10 years. 61
56 Ibid, 5. 57 Ibid. 58 Ibid. 59 Ibid, 10. 60 Ibid, 13. 61 B.S. Fisher et al, 'Issues related to mitigation in the long term context' in B. Metz et al (eds), Climate Change 2007: Mitigation. Contribution of Working Group III to the Fourth Assessment Report of the Inter-governmental Panel on Climate Change (2007) Cambridge, Cambridge University Press at 173.
65 Accordingly, the IPCC report made the following strong statements regarding the magnitude and timescale for achieving the necessary reductions in global greenhouse gas emissions:
using the ‘best estimate’ assumption of climate sensitivity, the most stringent scenarios (stabilizing at 445–490 ppmv CO2-equivalent) could limit global mean temperature increases to 2–2.4°C above the pre-industrial level, at equilibrium, requiring emissions to peak before 2015 and to be around 50% of current levels by 2050. Scenarios stabilizing at 535–590 ppmv CO2-equivalent could limit the increase to 2.8–3.2°C above the pre-industrial level and those at 590–710 CO2- equivalent to 3.2–4°C, requiring emissions to peak within the next 25 and 55 years, respectively (high agreement, medium evidence) (emphasis added) .62
Moreover, the IPCC warned the international community that:
decisions to delay emission reductions seriously constrain opportunities to achieve low stabilization targets (e.g. stabilizing concentrations from 445–535 ppmv CO2- equivalent), and raise the risk of progressively more severe climate change impacts and key vulnerabilities occurring. 63
It should be noted that the IPCC predictions are based on those scientific parameters that have met the threshold of consensus agreement within the IPCC scientific community resulting in quite conservative predictions. Moreover, these predictions do not incorporate the implications of a number of events which have the potential to trigger much more drastic and abrupt changes in the climate system. These potential occurrences include:
abrupt changes in ocean circulation patterns including changes in the gulf stream;
significant increases in methane emissions from melting permafrost;
62 Ibid. 63 Ibid.
66 significant and sudden sea level rises from the break-up of polar ice caps such as the West Atlantic Ice Shelf; and
other carbon feedback responses. 64
E Regional Projections and the Climate Change Impacts for Australia
A number of regionally specific climate change predictions have been undertaken for Australia including the Australia State of the Environment Report 2006 (SoE 2006) 65 and the CSIRO and Australia Bureau of Meteorology, Climate Change in Australia: Technical Report 2007 (Technical Report).66
SoE 2006 made the following blunt statements in relation to the existence of climate change; ‘climate change has always been a reality …. the question, then, is not ‘if’ but ‘how much’.67 And:
climate change is undoubtedly a threat to Australia’s environment. Although Australia’s climate is so variable that the extent of change is uncertain, there is clear evidence for some warming and changes to rainfall distribution. 68
Reports suggest that Australia is experiencing the impacts of climate change at a slightly elevated level to the rest of the world. According to the Garnaut Review Interim Report , Australia’s climate is ‘hot, dry and variable’ making Australia more exposed to the impacts of climate change than other developed countries. 69
64 Donald A. Brown, 'The Precautionary Principle as a Guide to Environmental Impact Analysis: Lessons Learned from Global Warming' in Joel A. Tickner (ed), Precaution, Environmental Science, and Preventive Public Policy (2003) Washington, Island Press, 141 at 146. 65 RSJ (Bob) Beeton et al, 'Australia State of the Environment 2006: Independent Report to the Australian Government Minister for the Environment and Heritage, Department of the Environment and Heritage, Canberra' (Australia State of the Environment Committee, 2006), http://www.environment.gov.au/soe/2006/index.html at 11 June 2008. 66 CSIRO and Australia Bureau of Meteorology, 'Climate Change in Australia: Technical Report 2007' (Commonwealth Scientific and Industrial Research Organisation, 2007). 67 SoE 2006, n65, 31. 68 Ibid, 19. 69 Garnaut Climate Change Review, 'Interim Report to the Commonwealth, State and Territory Governments of Australia' (2008) at 22.
67 According to the IPCC the Australian climate of the 21st century is virtually certain to be warmer, with changes in extreme events and:
heatwaves and fires are virtually certain to increase in intensity and frequency;
floods, landslides, droughts and storm surges are very likely to become more frequent and intense;
snow and frost are very likely to become less frequent;
large areas of mainland Australia are likely to have less soil moisture;
as a result of reduced precipitation and increased evaporation, water security problems are projected to intensify by 2030 in southern and eastern Australia;
ongoing coastal development and population growth is projected to exacerbate risks from sea-level rise and increases in the severity and frequency of storms and coastal flooding by 2050;
risks to major infrastructure are likely to increase. By 2030, design criteria for extreme events are very likely to be exceeded more frequently. Risks to infrastructure include failure of floodplain protection and urban drainage and sewerage, increased storm and fire damage, and more heatwaves, causing more deaths and more blackouts;
production from agriculture and forestry is projected to decline by 2030 over much of southern and eastern Australia; and
significant loss of biodiversity is projected to occur by 2020 in some ecologically rich sites, including the Great Barrier Reef and Queensland Wet Tropics.70
70 IPCC, 'Climate Change 2007: Impacts, Adaptation and Vulnerability, Contribution of Working Group II to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change' (IPCC Secretariat, 2007) at 509.
68 The IPCC 2007 described Australia’s adaptive capacity to climate change as follows:
the region has well-developed economies, extensive scientific and technical capabilities, disaster mitigation strategies, and biosecurity measures. However, there are likely to be considerable cost and institutional constraints to the implementation of adaptation options...Indigenous communities have low adaptive capacity...Water security and coastal communities are the most vulnerable sectors ... Natural systems have limited adaptive capacity.. Projected rates of climate change are very likely to exceed rates of evolutionary adaptation in many species. Habitat loss and fragmentation are very likely to limit species migration in response to shifting climatic zones. 71
Reports have shown that Australian temperatures are already increasing and are doing so at a more rapid rate than the global average. 72 According to SoE 2006, the average temperature across Australia rose by 0.82 degrees Celsius between 1910 and 2004. 73 Since 1950, that temperature increase was almost 0.2 degrees Celsius per decade. 74
Since 1950, the east coast, Victoria and south-west Australia have all experienced ‘substantial rainfall decline’. 75 According to the Technical Report, Australian average temperatures have increased by 0.9 degrees Celsius since 1950. 76 This has exacerbated the recent Australian droughts ‘where warming increases water demand and surface water loss’. 77
71 Ibid. 72 SoE 2006, n65, 27. 73 Ibid, 25. According to the Australian Bureau of Meteorology Annual Australian Climate Statement 2006, issued 3 January 2007, Australian annual mean temperatures have now increased by approximately 0.9°C since 1910, http://www.bom.gov.au/announcements/media_releases/climate/change/20070103.shtml at 11 June 2008. 74 SoE 2006, n65, 27. 75 CSIRO and Australia Bureau of Meteorology, n66, 6. 76 Ibid, 6. 77 Ibid, 8.
69 Sea surface temperatures have also risen by up to 0.28 degrees Celsius since 1950. 78 Future increases in ocean acidity are predicted in the Australian region. 79 Over the period 1920-2000, Australian sea levels have risen by an estimated 1.2mm per year and there is potential for ‘significant increases in inundation due to higher mean sea level and more intense weather systems’. 80
The Technical Report also estimated that annual warming over Australia by 2030, compared to 1990, would be approximately 1 degree Celsius with warmings of 0.7 to 0.9 degrees Celsius in coastal areas and 1 to 1.2 degrees Celsius inland. 81 Projected warming for Australia by 2050 and 2070 respectively are approximately 1.2 and 1.8 degrees Celsius under a low emissions scenario and 2.2 and 3.4 degrees Celsius under a high emissions scenario. 82 The Technical Report identified a 30 per cent probability of warming above 4 degrees Celsius for inland Australia, in 2070, under a high emissions scenario. 83
According to the Garnaut Review Interim Report ‘the challenge of climate change will be severe for Australia’. 84 As noted, the predicted physical and economic losses from climate change could include loss of homes; livestock and other property; damage to public infrastructure and to coastal settlements; impaired agricultural yields; loss of livelihoods; and population displacement. Accordingly, the impacts of climate change pose a significant and immediate risk to the Australian community.
78 SoE 2006, n65, 31. 79 CSIRO and Australia Bureau of Meteorology, n66, 12. 80 Ibid, 7, 11. Especially along the Victorian and Queensland coasts where storm surge studies were undertaken. 81 Ibid, 9. 82 Ibid. 83 Ibid. 84 Garnaut Review, n69, 26.
70 F The Impacts of Climate Change on the Economy
The economic costs of unabated climate change have been made clear. The Stern Review on the Economics of Climate Change was released in October 2006. 85 The terms of reference of that review included an examination of the evidence on the economic, social and environmental consequences of climate change and the costs and benefits of actions to reduce the net global balance of greenhouse gas emissions.
The Stern Review asserted that ‘climate change..is the greatest and widest- ranging market failure ever seen’. 86 The Stern Review concluded that the stocks of greenhouse gases in the atmosphere were rising and that this was the result of human activity. 87 Levels of greenhouse gases in the atmosphere were estimated to be around 430 ppm carbon dioxide equivalent. 88 The Stern Review estimated that concentrations of 550 ppm, double pre-industrial levels, could be reached by as early as 2035. 89 At that level, the Stern Review concluded that there was at least a 77 per cent chance, and up to a 99 per cent chance, of a global average temperature rise exceeding 2 degrees Celsius. 90
Some of the predicted impacts of that warming are rising sea levels, increased incidences of floods and declining crop yields. The Stern Review estimated that up to 200 million people could become displaced by the middle of the century due to climatic impacts. 91 The economic cost of warming of 2-3 degrees Celsius was predicted to be 3 per cent of global world output. 92 With 5-6 degrees Celsius
85 Nicholas Stern ‘The Economics of Climate Change: The Stern Review’ (Cabinet Office, HM Treasury 2006), http://www.hm- treasury.gov.uk/independent_reviews/stern_review_economics_climate_change/sternreview_index.cf m, at 11 June 2008. 86 Ibid, i. 87 Ibid, iii. 88 Ibid. 89 Ibid. 90 Ibid. 91 Ibid, vi. 92 Ibid, ix.
71 warming, that cost could be up to 10 per cent of global gross domestic product (GDP) and could involve reductions of up to 20 per cent in consumption per head. 93
The Stern Review estimated that to stabilise greenhouse gases at 550 ppm, emissions would be need to be reduced by 25 per cent below current levels by 2050. 94 The Stern Review predicted that the annual cost of emissions reductions consistent with a trajectory leading to stabilisation at 550 ppm would be approximately 1 per cent of GDP by 2050. 95 In comparison, the social cost of carbon emitted today, if society remained on the business as usual trajectory, was estimated to be approximately US$85 per tonne of carbon dioxide. 96 Moreover, the Stern Review concluded that shifting to a lower emissions trajectory would have global net benefits of around US$2.5 trillion. 97 It further estimated that markets for low-carbon energy products are likely to be worth at least US$500 billion per year by 2050. 98
93 Ibid. 94 Ibid, xi. Sir Nicholas Stern has since stated that effective action to respond to climate change requires ‘global emissions to fall by at least 50% relative to 1990 levels by 2050…[and] agreement by developed countries to take on immediate and binding national targets of 20% to 40% by 2020, and to commit to reductions of at least 80% by 2050’ with an expectation that developing countries would take on binding national targets by 2020. Nicholas Stern, 'Key Elements of a Global Deal on Climate Change' (London School of Economics and Political Science, 2008) at 5-6. 95 Ibid, xiii. 96 Ibid. 97 Ibid, xvii. 98 Ibid, xvi.
72 INTERNATIONAL RESPONSES TO THE IMPACTS OF CLIMATE CHANGE
A General Obligations under the UNFCCC
The UNFCCC was adopted at the Rio Earth Summit on 9 May 1992 and acknowledged that ‘change in the Earth’s climate and its adverse effects are a common concern of humankind…’ and determined to ‘protect the climate system for present and future generations’. 99
The Preamble acknowledged that human activities had been substantially increasing atmospheric concentrations of greenhouse gases and that the largest share of historical emissions originated in developed countries. It further recognised the need for developed countries to take immediate action, in a flexible manner, based on relevant scientific, technical and economic considerations. The Preamble specifically affirmed the need for climate change responses to be integrated so as to avoid any adverse impacts on social and economic development.
The UNFCCC was the first binding, international legal instrument to address the issue of climate change and it has established the overarching principles and institutional arrangements for a regime to address climate change. There are currently 192 parties to the UNFCCC including Australia and the US. 100 The ultimate objective of the UNFCCC is the:
stabilisation of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system . Such a level should be achieved within a time-frame sufficient to allow ecosystems to adapt naturally to climate change , to ensure that food production is not threatened
99 UNFCCC, n2, Preamble. 100 United Nations Climate Change Secretariat, http://unfccc.int/essential_background/convention/status_of_ratification/items/2631.php as at 11 June 2008.
73 and to enable economic development to proceed in a sustainable manner ( emphasis added ). 101
Greenhouse gases are defined in the convention as ’those gaseous constituents of the atmosphere, both natural and anthropogenic, that absorb and re-emit infrared radiation’ 102 whilst the UNFCCC defines climate change itself as:
a change of climate which is attributed directly or indirectly to human activity that alters the composition of the global atmosphere and which is in addition to human activity that alters the composition of the global atmosphere and which is in addition to natural climate variability observed over comparable time periods. 103
The term global atmosphere is not defined in the convention while the climate system is described as the ‘totality of the atmosphere, hydrosphere, biosphere and geosphere and their interactions’. 104
The UNFCCC requires parties to adopt precautionary measures to prevent or minimise the causes of climate change and to mitigate its adverse effects. 105 These obligations specifically recognise the common but differentiated responsibilities and capacities of the parties to the UNFCCC and greater mitigation responsibilities are imposed on those developed country parties. 106 The UNFCCC includes the duty imposed on all developed countries to take measures to reduce their greenhouse gas emissions to 1990 levels by the year 2000. 107 That commitment was not met by the parties and no enforcement action was taken. This was largely due to the renegotiation of precise, quantitative
101 UNFCCC, n2, Article 2. 102 Ibid, Article 1(5). 103 Ibid, Article 1(2). 104 Ibid, Article 1(3). 105 Ibid, Article 3. 106 Ibid, Article 3. 107 Ibid, Articles 4(2)(a), 4(2)(b).
74 mitigation obligations for developed countries through the Kyoto Protocol to the UNFCCC in 1997.
In terms of the economic costs of the general duty to reduce emissions, the UNFCCC states that polices and measures which address climate change should:
be cost-effective so as to ensure global benefits at the lowest possible cost. To achieve this, such policies and measures should take into account different socio- economic contexts, be comprehensive, cover all relevant sources, sinks and reservoirs of greenhouse gases and adaptation, and comprise all economic sectors. 108
Furthermore, the UNFCCC states that parties ‘have a right to, and should, promote sustainable development;’ that ‘economic development is essential for adopting measures to address climate change;’ and that parties should promote an ‘open international economic system that would lead to sustainable economic growth and development’.109
There are only two particular references to the requirement for domestic emissions reductions policies in the text of the UNFCCC. The UNFCCC requires all parties to formulate programmes containing measures to mitigate climate change by addressing anthropogenic emissions by sources and removals by sinks of all greenhouse gases. 110 The UNFCCC also requires all developed country parties listed in Annex 1 of the UNFCCC (Annex-1 parties) to adopt national policies and take corresponding measures on the mitigation of climate change, by limiting their anthropogenic emissions of greenhouse gases and protecting and enhancing their greenhouse gas sinks and reservoirs. 111
108 Ibid, Article 3(3). 109 Ibid, Articles 3(4), 3(5). 110 Ibid, Article 4(1)(3). 111 Ibid, Article 4(2).
75 The decision-making powers of the parties reside in the Conference of the Parties (COP) which meets annually to discuss implementation issues relating to the UNFCCC. The UNFCCC also establishes a United Nations secretariat to support the administration of the climate change regime (UNFCCC Secretariat). 112 Progress towards the objectives of the UNFCCC is monitored through the regular submission of national greenhouse gas inventories and progress reports on policies and measures, known as National Communications, to the COP which are reviewed and made publicly available. 113 Developing countries are provided with the agreed full costs of incurred in providing this national information. 114
The UNFCCC further commits the parties to the development and transfer of technologies, practices and processes that reduce greenhouse gas emissions. 115 In addition, and in conformity with the notion of common but differentiated responsibilities, developed country parties are responsible for the provision of financial resources, environmentally sound technological and adaptation assistance to participating developing countries. 116
B Specific Emission Reduction Obligations under the Kyoto Protocol
At the First Conference of the Parties to the UNFCCC (COP 1), in 1995, the parties launched negotiations to agree on stricter, specific, greenhouse gas emissions reduction commitments for industrialised countries. These were contained in the Kyoto Protocol to the UNFCCC which was adopted unanimously on 11 December 1997. 117 The Kyoto Protocol came into force on 16 February 2005, 118 following intense international debate as to the economic
112 These institutional arrangements are discussed in Chapter Three. 113 UNFCCC, n2, Articles 12, 4(1)(a), 4(2)(a), (2)(b). 114 Ibid, Article 4(3). 115 Ibid, Article 4(1)(c). 116 Ibid, Article 4(3). 117 Kyoto Protocol, n2. 118 Following ratification by the Russian Federation in November 2004.
76 costs and benefits of the agreement. 119 The Kyoto Protocol has currently been ratified by 181 countries and one regional economic integration organisation. 120 Australia is now a party to, and bound by, the UNFCCC and the Kyoto Protocol. 121 The US is a party to the UNFCCC and is bound by its general obligations to reduce global greenhouse gas emissions. However, the US is not a party to the Kyoto Protocol and is not obliged to comply with the quantitative emissions reduction commitments under that agreement. 122
The first Commitment Period, under the Kyoto Protocol, will run from 2008 to 2012. 123 The Kyoto Protocol contemplates additional commitment periods
beyond 2012. Those remain under negotiation by the parties. 124 Annex-1 parties are allocated emissions reductions targets during the first commitment period. The targets for the first commitment period vary from 92 per cent to 110 per cent of reported 1990 greenhouse gas emission levels according to the circumstances negotiated by each Annex-1 party. 125 Overall, the Kyoto Protocol seeks to achieve a minimum global emissions reduction of 5 per cent below 1990 levels by 2012. Parties were obliged to make demonstrable progress towards their targets by 2005 although this duty was not enforced. 126
119 Vincent Cusack, 'Perceived Costs versus Benefits of Meeting the Kyoto Target for Greenhouse Gas Emission Reduction: the Australian Perspective' (1999) 16(1) Environmental and Planning Law Journal 53 at 54-55. 120 UNFCCC, ‘Status of Ratification - as at 13 May’ 2008 http://unfccc.int/kyoto_protocol/background/status_of_ratification/items/2613.php at 11 June 2008. 121 Australia signed the Kyoto Protocol on 29 April 1998. Following the change of government in 2007, the instrument of ratification was deposited with the UNFCCC Secretariat on 12 December 2007 and entered into force on 11 March 2008. 122 The US signed the Kyoto Protocol on 12 November 1998 but did not ratify the agreement. http://unfccc.int/files/kyoto_protocol/status_of_ratification/application/pdf/kp_ratification.pdf at 11 June 2008. As a non-party, the US is also not able to use the flexibility mechanisms under the Kyoto Protocol to assist it in meeting the general emissions reduction obligation under the UNFCCC. 123 Kyoto Protocol, n2, Articles 3.1 and 3.7. 124 In order to commence in 2012, it is envisaged that parties will reach agreement on the terms of the Post 2012 agreement by the end of 2009. 125 Ibid, Annex B. Australia, for example, was allocated a target of 110 per cent of 1990 levels whilst the EU Bubble must achieve 92 per cent. The targets are therefore based primarily on political bargaining rather than on a mathematical calculation of required emissions reductions. 126 Ibid, Article 3.2.
77 C The Creation of Flexibility Mechanisms: Engaging the Market
The Kyoto Protocol contains a range of innovative policy tools which are aimed at assisting parties to meet flexibly their emission reduction obligations at the least economic cost. Known as the flexibility mechanisms, these elective measures encompass, emissions trading, the Clean Development Mechanism (CDM) and Joint Implementation (JI).
At the beginning of the first commitment period, each Annex-1 party will be assigned a number of Assigned Amount Units (AAUs) calculated in accordance with its permitted level of emissions for the commitment period. Each AAU represents a permit to emit one tonne of carbon dioxide equivalent. Eligible Annex-1 parties may then buy or sell their AAUs through emissions trading. 127 Parties may also create additional allowances through the implementation of eligible emissions reductions projects in developing countries under the CDM. 128 Furthermore, Annex-1 parties may chose to implement such emission reduction projects in other developed party countries, such as the economies in transition, in return for allowances (JI). 129
The use of these mechanisms is limited to the extent that the Kyoto Protocol rules require that domestic actions constitute a ‘significant element’ of the efforts made by each parties to meet its target under the Kyoto Protocol. 130 ‘Significant element’ is not yet defined although parties must demonstrate in their national communications how their use of the mechanisms is supplemental to domestic action. 131
127 Ibid, Article 17. 128 Ibid, Article 12. 129 Ibid, Article 6. 130 UNFCCC, Decision 15/CP 7 'The Marrakesh Accords' (FCCC/CP/2001/13/Add.2). 131 Kyoto Protocol, n2, Articles 5,7,8.
78 COMPARATIVE MODELS OF ATMOSPHERIC REGULATION
Some components of the international climate change regime were based on existing international and domestic models of atmospheric regulation. In particular, the compliance model of the climate change regime was based on an existing international agreement to regulate the atmosphere. The concept of tradeable instruments as a regulatory mechanism was also derived from
experiences in the US SO 2 Trading Scheme. Given this, it is beneficial to analyse the features and effectiveness of those models prior to an analysis of the effectiveness of the overall climate change regime.
A The International Compliance Model: Protection of the Atmospheric Commons
The template for the compliance regime to the Kyoto Protocol was based on the compliance model established for another international environmental regime: namely, the 1985 Vienna Convention for the Protection of the Ozone Layer (the Vienna Convention) 132 and the 1987 Montreal Protocol on Substances that Deplete the Ozone Layer (the Montreal Protocol). 133
The aim of the Montreal Protocol was to achieve the global phase-out of the production of certain substances harmful to the ozone layer including chlorofluorocarbons and halons. Similar to the UNFCCC, the Vienna Convention contained the overarching principles and administrative structure for the regime which led to the negotiation of substantive obligations in a subsequent
132 Vienna Convention for the Protection of the Ozone Layer (the Vienna Convention ) Vienna, 22 March 1985, 26 International Law Materials 1529 (1987),(entered into force 22 September 1988). 133 Montreal Protocol on Substances that Deplete the Ozone Layer (the Montreal Protocol) Montreal, 16 September 1987, 26 International Law Materials 1550 (1987) (entered into force 1 January 1989).
79 Protocol. 134 The specific target requirements for the phase-out of harmful substances were contained in the Montreal Protocol in the form of calculated levels of consumption and production of ozone-depleting substances. 135 Similar to the Kyoto Protocol, the means for achieving the level of reductions was left to
the discretion of each party. 136 Unlike the Kyoto Protocol, the Montreal Protocol also included a provision for the acceleration of those targets during a commitment period without the full consensus of the parties. 137
Interestingly, the Montreal Protocol also included a ban on trade between parties and non-parties to the treaty for the import and export of ozone-depleting substances and products containing, or made with, ozone depleting substances. 138 This provision was designed to overcome concerns regarding free-riders and the potential export of production to non-signatory countries. 139 It is unfortunate that a similar provision was not included in the climate change regime as this has resulted in a loophole whereby non-parties may benefit from the production and sale of high emissions intensity goods and services.
The Montreal Protocol made special provision for the treatment of developing countries by providing a ten year grace period where the calculated level of consumption was less than 0.2 kilograms per capita. 140 Implementation of the elimination of harmful substances, by developing countries, was then linked to
134 191 countries ratified the Vienna Convention and Montreal Protocol. United Nations Environment Programme Ozone Secretariat, ‘Status of Ratification’, http://ozone.unep.org/Ratification_status/ at 11 June 2008. 135 Montreal Protocol, n133, Articles 2 and 3. 136 The similarities and differences between the Montreal Protocol and the Kyoto Protocol are discussed further at page 81 of this thesis. 137 Montreal Protocol, n133, Article 2(9). Where consensus has failed the decision may be taken by two thirds of the parties present and voting where 50 per cent of total consumption is represented. Meinhard Doelle, From Hot Air to Action? Climate Change, Compliance and the Future of International Environmental Law (2005) Toronto, Thomson Canada at 14. 138 Duncan Brack, 'The Use of Trade Measures in the Montreal Protocol' in Phillipe G. Le Prestre, John D. Reid and E. Thomas Morehouse Jr (eds), Protecting the Ozone Layer: Lessons, Models and Prospects (1998) Boston, Kluwer Academic Publishers, 99 at 100. However, due to the practicalities of detection, the ban on products made with ozone-depleting substances was not implemented. 139 Ibid, 101. 140 1990 Amendment to the Montreal Protocol (entered into force 7 March 1991), Article 5(1).
80 the provision of financial co-operation and the transfer of best available, environmentally safe, substitutes and technologies. 141 Accordingly, the Montreal Protocol was universal in that it imposed elimination obligations on all nations. The same cannot be said of the Kyoto Protocol.
The financial mechanism introduced in the 1990 Amendments to the Montreal Protocol established a Multilateral Fund to meet, on a grant or concessional basis, all agreed incremental costs of those parties operating under Article 5(1) of the Montreal Protocol. 142 This Multilateral Fund was financed by contributions from non-Article 5(1) parties to the Montreal Protocol. This was the first time that an international environmental agreement had linked pollution reduction commitments by developing countries with the provision of financial aid and technology transfers from developed nations. 143 This incentive-based approach was subsequently adopted in both the UNFCCC and Kyoto Protocol.
The compliance mechanisms established under the Montreal Protocol were considered the most sophisticated to-date and were regarded as a success due to their achievement of the environmental objectives of the regime in ‘an effective, coordinated and timely manner’. 144 The regime included requirements for the regular reporting of implementation progress including baseline and annual data on production, imports and exports of each controlled substance. 145 The unique features of this pioneering regime also included the creation of an Implementation Committee to assist in the identification and rectification of non- compliance in a non-confrontational manner. 146 The Implementation Committee
141 Ibid, Article 5(5). 142 Ibid, Article 10. 143 Philippe Sands, Principles of International Environmental Law 1: Frameworks, Standards and Implementation, Studies in International Law (1995) Manchester, Manchester University Press at 269. 144 Meinhard Doelle, n137, 13 ;Patrick Szell, 'The Montreal Protocol: A New Legal Model for Compliance Control' in Phillipe G. Le Prestre, John D. Reid and E. Thomas Morehouse Jr (eds), Protecting the Ozone Layer: Lessons, Models and Prospects (1998) Boston, Kluwer Academic Publishers, 93 at 93. 145 Montreal Protocol, n133, Article 7. 146 David G. Victor, 'The Operation and Effectiveness of the Montreal Protocol's Non-Compliance Procedure' in David G. Victor, Kal Raustiala and Eugene B. Skolnikoff (eds), The Implementation
81 may receive submissions from the parties themselves regarding implementation issues and potential non-compliances and all decisions of non-compliance were made public. This facilitative model of compliance management was incorporated into the Kyoto Protocol compliance regime.
The overall effectiveness of the ozone regime is well demonstrated by the achievement of the phase-out of ozone-depleting substances by the parties. 147 The initial success of the Montreal Protocol was reaffirmed in the four subsequent adjustments and reductions of production and consumption of the controlled substances listed in the Annexes of the Montreal Protocol. 148 It is reported that, by 2005, the parties to the Montreal Protocol had phased out the production and consumption of over 95 per cent of all of the chemicals controlled by the Protocol. 149 Furthermore, it is estimated that, with implementation of the environmental agreement, the ozone layer should return to pre-1980 levels by 2050 to 2075. 150
The effectiveness of the Montreal Protocol also enhances the global achievement of greenhouse gas emissions reductions. Ozone-depleting substances are also greenhouse gases that contribute to the radiative forcing of climate change. 151 In
and Effectiveness of International Commitments: Theory and Practice (1998) Cambridge, The MIT Press, 137 at 137. 147 Ibid, 147. 148 The 1990 Amendment to the Montreal Protocol (the London Amendment); the 1992 Copenhagen Amendment to the Montreal Protocol (the Copenhagen Amendment); the 1997 Amendment to the Montreal Protocol (the Montreal Amendment) and the 1999 Amendment to the Montreal Protocol (the Beijing Amendment). These adjustments entered into force on 7 March 1991, 23 September 1993, 5 August 1996, 4 June 1998 and 28 July 2000, respectively. United Nations Environment Programme Ozone Secretariat, ‘Evolution of the Montreal Protocol’ http://ozone.unep.org/Ratification_status/evolution_of_mp.shtml at 11 June 2008. 149 United Nations Environment Programme, 'Key Achievements of the Montreal Protocol To Date' (UNEP, 2007), http://ozone.unep.org/Publications/MP_Key_Achievements-E.pdf at 11 June 2008. See also United Nations Environment Programme, 'A Success in the Making: The Montreal Protocol on Substances that Deplete the Ozone Layer' (UNEP, 2007). 150 Ibid. 151 GJM Velders et al, 'The Importance of the Montreal Protocol in Protecting Climate' (2007) 104(12) Proceedings of the National Academy of Science 4814, http://www.mnp.nl/en/publications/2007/The_importance_of_the_Montreal_Protocol_in_protecting_ climate.html at 11 June 2008.
82 addition, in 2007, the parties agreed to the accelerated phase out of hydrochlorflurocarbons under the Montreal Protocol as part of twin efforts to address climate change and to eliminate ozone depleting substances. 152
So what is the relevance of the Montreal Protocol to the likely effectiveness of the climate change regime? As outlined above, a number of the key features of the Montreal Protocol have been utilised in the Kyoto Protocol model. However, it should be noted that the success of the Montreal Protocol will not necessarily be replicated in the climate change regime. There are a number of key political differences between the ozone regime and the climate change regime. The first relates to the clarity of scientific evidence present at the time of the implementation, if not the adoption, of the Montreal Protocol which provided a much clearer link between the use of identified substances and the deterioration of the ozone layer. This scientific clarity has been absent during much of the negotiation of the Kyoto Protocol and appears to have hindered the adoption of more stringent emission reduction obligations. The second difference relates to the availability of cost-effective substitutes for ozone-depleting substances which were identified through public-private partnerships and provided net savings to the companies involved. 153 Accordingly, the elimination objectives of the Montreal Protocol were realistically achievable as substitute materials were reasonably available to the parties. In contrast, cost-effective technological substitutes for greenhouse gas emissions are still being developed for commercial deployment which will have significant implications on the success of the climate change regime.
152 United Nations Environment Programme, ‘Combating Climate Change Given Big Confidence Boost in Canada’ (Montreal/Nairobi, 22 September 2007), http://new.unep.org/Documents.Multilingual/Default.asp?DocumentID=517&ArticleID=5671&l=en at 11 June 2008. 153 Maryanne Macleod, The Regulatory Process and Linkages Between the Montreal Process and the Kyoto Protocol, Ozone, UV and Climate (2006)
83 B The Domestic Market Model: Tradeable Emission Instruments and Atmospheric Pollution
The emissions trading mechanism, under the Kyoto Protocol, has been modelled on the sulphur dioxide cap and trade scheme under Title IV to the US Clean Air 154 Act (SO 2 Scheme) . The US has demonstrated experience in implementing cap and trade initiatives since the 1970s. 155
The Clean Air Act amendment was part of the US Acid Rain Programme aimed at reducing the cost of curbing sulphur dioxide emissions whilst requiring the power sector to reduce sulphur dioxide emissions by 50 per cent over 15 years to 8.95 million tonnes per year. 156 The Acid Rain Programme was enacted through Federal legislation and implemented by State-based environmental agencies.
Phase 1 of the SO 2 Scheme ran from 1995 to 1999 with Phase 2 running from
2000 onwards. Phase 1 addressed the largest SO 2 emitting sources with further 157 units added in Phase 2. Small emitters were able to opt-in to the SO 2 Scheme. 158
The SO 2 Scheme was based on a cap and trade system with an allocated, absolute 159 emissions ceiling. The cap and trade system created a market in tradeable SO 2 emissions instruments with an imposed limit on the total permitted emissions based on the desired environmental outcome. The use of a cap and trade system
154 Title IV of the Clean Air Act , enacted as part of the Clean Air Act Amendments of 1990, Pub. L. No. 101-549, 104 Stat. 2399 (1990); Clean Air Act , 401 et seq.; 42 United States Congress 7651 et seq. Stephen Harper, 'Tradeable Permits: Practical Lessons from the U.S. Experience' in Akihiro Amano et al (eds), Climate Change: Policy Instruments and their Implications, Proceedings of the Tsukuba Workshop of the Intergovernmental Panel on Climate Change Working Group III, Tsukuba (1994) Tsukuba, World Meteorological Organization/United Nations Environmental Programme, 132. 155 LECG Economics Finance, 'Emissions Trading Market Study: Report to the Ontario Ministry of Environment' (2003) at 66. 156 International Energy Agency, International Emission Trading: From Concept to Reality (2001) France, Organisation for Economic Development/ International Energy Agency at 30. 157 LECG, n155, 10. 158 Ibid, 10. 159 Markus W. Gehring and Charlotte Streck, 'Emissions Trading: Lessons from SO x and NO x Emissions Allowance and Credit Systems Legal Nature, Title, Transfer, and Taxation of Emission Allowances and Credits' (2005) 35(4) Environmental Law Reporter 10219 at 10220.
84 was intended to provide entities with a financial incentive to reduce emissions by permitting those who had modified their practices, and reduced emissions, to sell their excess instruments to those entities that had not met their emission reduction obligations.
Under the SO 2 Scheme, each utility received a number of free allowances based on a legislative formula although the number of allowances could be adjusted by Congress. 160 Additional allowances were able to be purchased through an annual 161 auction held by the US Environmental Protection Agency (US EPA). The SO 2 Scheme permitted unrestricted emissions trading and allowances were valued equally regardless of location. 162 Allowances were able to be traded nationally with no requirements for prior approval or restrictions on the type of purchaser provided that they were registered. 163 Trades were recorded by the US EPA through an Allowance Tracking System with each allowance identified through a unique serial number. 164
Allowances were specifically defined as a ‘limited authorization to emit sulphur dioxide’ with the proviso that ‘such allowance does not constitute a property right’. 165 This specification was included to overcome claims for compensation under the ‘takings’ provision of the US Constitution for loss of property rights in the event of a reduction in permitted emissions levels. 166 For the sake of completeness, the rather lengthy provision further states that ‘nothing in this subchapter or in any other provision of law shall be construed to limit the
160 LECG, n155, 10. 161 Ibid, 10. 162 A. Denny Ellerman et al, Markets for Clean Air: The U.S. Acid Rain Program (2000) Cambridge, Cambridge University Press at 130. 163 Ibid, 167. 164 LECG, n155, 11. 165 1990 Amendments to the Clean Air Act, n154, section 403 (f). 166 United States Environmental Protection Agency, Tools of the Trade: a Guide to Designing and Operating a Cap and Trade Program for Pollution Control (2003) http://www.epa.gov/airmarkets/resource/docs/tools.pdf at 11 June 2008 at 3-23. The Fifth Amendment of the US Constitution prevents the taking of private property without just compensation.
85 authority of the US to terminate or limit such authorization’. 167 This is characteristic of the general difficulties in defining the rights and duties associated with tradeable allowances in circumstances in which the status of the environment will vary over short and long timescales. Whether these allowances do, in fact, possess property rights characteristics has been the subject of some 168 debate. SO 2 allowances were able to be ‘received, held and temporarily or permanently transferred in accordance with this subchapter and the regulations’. 169 Accordingly, the holder of those allowances was, subject to the legislation, able to exercise certain property rights in respect of the allowances.
The compliance regime to the SO 2 Scheme included the compulsory installation of Continuous Emissions Monitoring Systems (CEMS) at emissions sources to 170 record hourly emissions. Emission of excess SO 2 resulted in a penalty liability of US$2000 per tonne, adjusted annually for inflation, plus an obligation to submit an equal number of allowances to cover the excess emissions. Similarly, the Kyoto Protocol requires excess allowances to be surrendered to rectify the non-compliance. However, no financial penalty is imposed under the Kyoto Protocol. The operation of this penalty scheme remained largely untested due to the high level of compliance with the scheme by participants. 171 For the initial three year period in Phase 1, it was reported that all required allowances were surrendered with no violations or exemptions from the Title IV requirements. 172 Moreover, there was over 7.6 million tonnes of aggregate over-compliance by Phase 1 participants. 173 The high level of compliance with this regime may be
explained by the availability of cost-effective alternatives to address SO 2 emissions. Sources had the option of switching to a fuel with reduced sulphur content or installing scrubbers both of which required lower than anticipated
167 1990 Amendments to the Clean Air Act, n154, section 403 (f). 168 Markus W. Gehring and Charlotte Streck, 'Emissions Trading: Lessons from SO x and NO x Emissions Allowance and Credit Systems Legal Nature, Title, Transfer, and Taxation of Emission Allowances and Credits' (2005) 35(4) Environmental Law Reporter 10219 at 10222, 10223. Cf Ormet Corp v Ohio Power Co 98 F.3d 799, 27 ELR 20302 (4 th Cir. 1996). 169 1990 Amendments to the Clean Air Act, n154, section 403 (f). 170 US EPA, n166, 3-13. 171 LECG, n155, 11. 172 A. Denny Ellerman et al, n162, 109. 173 Ibid, 110.
86 capital investment. 174 In particular, the deregulation of the railroads allowed for the competition of low-sulphur coal from the Powder River Basin which was provided at a lower cost and became more economically attractive than the high- sulphur fuel. 175
The United Nations Conference on Trade and Development , in 1999, described
the SO 2 Scheme as ‘the largest and most successful emissions cap and allowance trading programme in the world’ and the US EPA reported emission reductions at compliance costs of less than half of those predicted prior to the commencement of the regime. 176 An in-depth economic study of the market established as a result of the Clean Air Act estimated that the cost savings from the use of a trading programme, rather than a regulatory programme without trade, was US$358 million per year during Phase 1 and US$2,282 million during Phase 2. 177 The overall performance of the trading scheme was summarised as follows:
the allowance market has been characterized by transparent prices, ease of price discovery, low transaction costs, and substantial trading volumes since mid-1994. 178
It must be noted, though, that the initial performance of the market in allowances was subject to criticism due to its lack of cost-effectiveness. 179 This was largely blamed on the ‘bubble policy’ under the trading scheme which allowed those large firms with multiple emission points to be subject to a single, overall,
174 Ibid, 88. 175 Ibid, 319. 176 Tom Tietenberg et al, 'International Rules for Greenhouse Gas Emissions Trading: Defining the principles, modalities, rules and guidelines for verification, reporting and accountability' (UNCTAD/GDS/GFSB?Misc.6, United Nations Conference on Trade and Development, 1999) at 27; US EPA, n166, 1-3. See also Richard B Stewart and Phillipe Sands, 'The Legal and Institutional Framework for a Plurilateral Greenhouse Gas Emissions Trading System' in Greenhouse Gas Market Perspectives Trade and Investment Implications of the Climate Change Regime: Recent Research on Institutional and Economic Aspects of Carbon Trading , UNCTAD/DITC/TED/Misc.9 (2001) United Nations, 5 at 14. 177 A. Denny Ellerman et al, n162, 282, Table 10.4. 178 Ibid, 255. 179 A. Denny Ellerman, Paul L Joskow and David Harrison Jr, 'Emissions Trading in the U.S.: Experience, Lessons and Consideration for Greenhouse Gases' (Pew Center for Global Climate Change, 2003) at 32.
87 emissions limit. 180 This resulted in a significant number of internal trades within large corporations and few actual trades on the market. 181 The bubble approach has also been adopted in the Kyoto Protocol and the members of the European Union have elected to be subject to a single emissions target.
So what is the relevance of the design and implementation of the US SO 2
Scheme to the likely effectiveness of the climate change regime? The US SO 2 Scheme is significant given its role as a model for the establishment of the trading system under the Kyoto Protocol. Accordingly, it is important to be
cognisant of both the framework for the SO 2 Scheme and discussions of its financial and environmental successes. However, beyond this, the successes or failures of this US-based trading scheme are of little relevance to the global Kyoto Protocol trading market. There are fundamental differences between the domestic establishment and implementation of a trading initiative in a single pollutant and the creation of a linked multi-national regime of global proportions. The latter is unique. Indeed, it is unchartered territory. The climate change regime will ultimately succeed, or fail, on its own merits regardless of the success of its ‘template’ predecessors. Given the ambitious nature of this endeavour, it is therefore crucial to identify the design elements necessary for the successful creation and implementation of the climate change regime. These fundamental concepts are discussed in the following paragraphs.
180 Stephen Harper, 'Tradeable Permits: Practical Lessons from the U.S. Experience' in Akihiro Amano et al (eds), Climate Change: Policy Instruments and their Implications, Proceedings of the Tsukuba Workshop of the Intergovernmental Panel on Climate Change Working Group III, Tsukuba (1994) Tsukuba, World Meteorological Organization/United Nations Environmental Programme, 132 at 133. 181 Scott Atkinson and Tom Tietenberg, 'Market Failure in Incentive Based Regulation: The Case of Emissions Trading' (1991) 21(1) Journal of Environmental Economics and Management 17 at 18.
88 KEY PRINCIPLES FOR AN EFFECTIVE LEGAL REGIME
This thesis seeks to analyse the effectiveness of the existing legal response to climate change and to identify aspects for enhancement or reform. To do so, it is necessary to identify those key principles of effectiveness against which these emerging legal approaches may be critiqued.
The effective legal response to the global environmental problem of climate change will require the adoption of a series of cohesive legal instruments and mechanisms, internationally and nationally, to create legal rights and duties (regulation); penalise non-compliance and other unlawful acts (liability); and promote innovation to minimise global greenhouse gas emissions (market mechanisms). Furthermore, the legal framework must be developed to ensure the proper integration of these three mechanisms within the legal regime in order to achieve consistency and effectiveness in the implementation of these measures.
A Regulation
Since the 1970s, regulators have relied upon direct regulation, or command and control, to respond to instances of environmental degradation by prohibiting or
placing restrictions on the carrying out of environmentally harmful activities. 182 Given the urgency of the need to respond to climate change, and achieve significant domestic reductions in emissions, direct regulation has a critical role to play in any effective legal regime. An effective regulatory approach should impose environmental standards, or emission targets, on liable emitting entities as well as using land use controls and environmental impact assessment to assess and minimise significant emissions from proposed development and other
182 Neil Gunningham, Peter Grabosky, and Darren Sinclair, Smart Regulation: Designing Environmental Policy (1998) Oxford, Clarendon Press at 38.
89 activities. 183 To be effective, such regulation must establish clear and direct, legally enforceable, duties to restrict emissions in conjunction with a system for
the accurate monitoring and supervision of actual levels of emissions. 184 As noted by one commentator, ‘laws on the book are one thing. Laws implemented and
enforced are another’. 185
The creation of broad guiding directions falls within the role of the legislature while the creation of more specific standards and responsibility for implementation falls within the realm of the executive. As commented:
much of the legal work in moving beyond the carbon economy falls on national legislatures and their designated agents in the executive branch...The judiciary also has a role to play. 186
Such a regulatory system must be implemented by an independent executive authority with sufficient legal powers and adequate resourcing and technical expertise to address the complexities of climate change issues and the inevitable resistance from within the corporate community.
B Liability
An effective legal regime to respond to climate change must also provide a series of civil and criminal liability provisions to penalise unlawful emissions and allocate responsibility for the harmful impacts of greenhouse gas emissions. With respect to present day emissions, graded sanctions must be provided for identified instances of non-compliance with emission restrictions which are able to be varied in severity according to the level of inadvertence or recklessness of
183 Ibid, 39. 184 These regulatory issues are considered in further detail throughout this thesis. 185 Donald N Zillman et al, 'Overview and Conclusion' in Donald N Zillman et al (eds), Beyond the Carbon Economy: Energy Law in Transition (2008) Oxford, Oxford University Press, 543 at 551 186 Ibid, 550.
90 the wrongdoing. 187 The effective interpretation of the law, and imposition of these liabilities, will generally fall within the realm of the domestic judiciary. The judicial interpretation and application of these regulations and liability provisions will play a significant role in the ultimate effectiveness of these regimes in promoting the reduction of emissions and responding to the impacts of climate change. Accordingly, those judicial determinations may be a help or a hindrance to the implementation of the overall legal regime:
typically the courts take legislative or executive enactments and give them a broad interpretation to allow the consideration of carbon issues. Less optimistic perspectives on the judiciary come from authors..who question the independence of courts especially in their inability to force members of the bureaucracy to comply with what the legislature has written down. 188
In the context of climate change, financial liabilities must also accrue for the past emission of greenhouse gases. Until recently, the emission of greenhouse gases into the atmosphere was largely unfettered and, given the cumulative nature of atmospheric concentrations, these emissions contributed to the emergent adverse impacts of climate change.
The polluter pays principle emphasises the responsibility of polluters for the full environmental and social cost of their polluting activities. Moreover:
forcing those who create environmental risks to bear the costs of damage can create incentives for efficient precaution. 189
187 Ian Ayres and John Braithwaite, Responsive Regulation: Transcending the Deregulation Debate (1992) New York, Oxford University Press; Clifford S Russell, 'Environmental Enforcement' in Tom Tietenberg (ed), Innovation in Environmental Policy: Economic and Legal Aspects of Recent Developments in Environmental Enforcement and Liability (1992) Hants, Edward Elgar, 215. 188 Zillman et al, n185, at 550. 189 Tom Tietenberg, 'Introduction and Overview' in Tom Tietenberg (ed), Innovation in Environmental Policy: Economic and Legal Aspects of Recent Developments in Environmental Enforcement and Liability (1992) Hants, Edward Elgar, 1 at 5.
91 Accordingly, a fair and equitable system of legal principles should be implemented to address the distribution of liability for the loss or harm incurred as a result of climate change. This would traditionally fall within the realm of the
common law of tort. 190 However, the complexity and scientific uncertainty associated with this unique environmental pollution will challenge the operation of the traditional principles of tort law in identifying the existence of a causal link
between emissions and harm suffered. 191 Given this unpredictability of the common law as an effective deterrent mechanism, statutory intervention may be preferable to provide clarity, certainty and transparency in the treatment of such
private liabilities. 192
C Market Mechanisms
It must be accepted that there is no single legal instrument which will be effective in addressing all environmental concerns in all contexts. As noted:
despite decades of experimentation, the holy grail of optimal environmental regulation has continued to elude policy makers and regulatory theorists…neither traditional command and control regulation nor the free market provide satisfactory answers to the increasingly complex and serious environmental problems which confront the world. This has led to a search for alternatives more capable of addressing the environmental challenge and, in particular, to the exploration of a broader range of policy tools such as economic instruments, self-regulation and information-based strategies. 193
Regulation alone is not necessarily the most effective tool by which to address urgent international environmental concerns. Indeed, in some circumstances it
190 Although, ‘in recent years there has been a remarkable convergence of tort law and statutory law in the environmental…area’, Susan Rose-Ackerman, 'Environmental Liability Law' in Tom Tietenberg (ed), Innovation in Environmental Policy: Economic and Legal Aspects of Recent Developments in Environmental Enforcement and Liability (1992) Hants, Edward Elgar 223 at 223. 191 The application of tortious principles to climate change related harm is discussed further in Chapter Six. 192 See Donald Dewees, 'Tort Law and the Deterrence of Environmental Pollution' in Tom Tietenberg (ed), Innovation in Environmental Policy: Economic and Legal Aspects of Recent Developments in Environmental Enforcement and Liability (1992) Hants, Edward Elgar, 139. 193 Neil Gunningham, Peter Grabosky, and Darren Sinclair, n182, 37.
92 can be counterproductive, inefficient and ‘innovation stifling’ .194 Responding to the threat of climate change requires rapid and urgent transformations in the selection of energy sources, energy use and treatment of emissions across the global community. Achieving such behavioural transformations requires that, in the first instance, new energy sources and clean energy technologies are readily
available for uptake. 195 An effective regulatory and liability system, alone, will not be sufficient to promote the levels of private engagement required globally to achieve such rapid innovation. Consequently, a portfolio of complementary measures will be necessary including the creation of some catalytic mechanism to stimulate engagement and promote the development and deployment of new energy sources and technologies to facilitate the pathway to a low carbon society.
The legal instrument selected by the international community to achieve such innovation is the tradeable emission instrument within an optimal carbon trading market. Accordingly:
the economic rationale for creating an artificial market for pollution permits is to effectively exploit differences in the marginal cost of abatement. 196
However, for these tradeable emission instruments to be effective in promoting the objectives of the climate change regime, and assisting the community to respond to climate change, the market mechanisms must be supported by an effective legal framework. The objective of the climate change regime is to reduce emissions to such levels, and within necessary timeframes, so as to avoid adverse anthropogenic interference with the climate system. To be effective in achieving this objective, the legal framework for these market mechanisms must
194 David M Driesen, The Economic Dynamics of Environmental Law (2003) Cambridge, Massachusetts, The MIT Press at 49,53; Gerry Bates, 'Legal Perspectives' in Stephen Dovers and Su Wild River (eds), Managing Australia's Environment (2003) Sydney, The Federation Press, 255 at 295. 195 Of course, technological innovation alone will not be sufficient without strong drivers for change in community preferences to promote the use of the technology. David M Driesen, ibid, 89-90. 196 Neil Gunningham, Peter Grabosky, and Darren Sinclair, n182, 72. See also David M Driesen, The Economic Dynamics of Environmental Law (2003) Cambridge, Massachusetts, The MIT Press at 54- 55.
93 include strong duties to reduce emissions, within a capped market, and the
selected cap must accord with scientific recommendations. 197 In this respect, a strong regulatory approach is able to serve as the backbone to the optimal operation of the carbon market system and, together, these mechanisms may complement one another in reaching common environmental, economic and legal goals.
Consequently, an effective legal response to the challenging global environmental problem of climate change will require a deliberate selection of a combination of legal instruments including a mix of direct regulation and economic instruments to lower the cost of achieving the common environmental goal. Cohesiveness in the regulatory design of such a legal approach will be critical to its ultimate effectiveness and efficiency:
sometimes, mixes of instruments..are invoked, but often with little awareness of the need for conscious regulatory design. Far worse, some mixes, put together with insufficient thought as to their likely consequences or undesirable side effects, are likely to be counterproductive or dysfunctional. 198
To achieve the effective operation of the carbon market mechanisms, a number
of key features must also be included in the design of the legal system. 199 These can be synthesised into the following guiding principles of effectiveness:
clear, transparent and consistent rules and duties for participants in the carbon market; 200
197 A stringent cap is also necessary to create demand, and promote trade, in the market system. Driesen, ibid, 59. 198 Neil Gunningham, Peter Grabosky, and Darren Sinclair, n182, 90. 199 These features are discussed in detail in Chapter Seven. 200 Richard F. Kosobud, 'Emissions Trading Emerges from the Shadows' in Richard F. Kosobud (ed), Emissions Trading: Environmental Policy's New Approach (2000) New York, John Wiley and Sons, 3 at 29; Robert Stavins, 'What Do We Really Know About Market-Based Approaches to Environmental Policy? Lessons from Twenty-Five Years of Experience' in Richard F. Kosobud (ed), Emissions Trading: Environmental Policy's New Approach (2000) New York, John Wiley and Sons, 49 at 55.
94 clear definition of the legal nature of the tradeable emission instruments with the provision of appropriate legal protections under domestic legal systems; 201
an open access market with minimal restrictions on trade and an open flow of information to the market; 202
compatible design and implementation of international, regional and domestic carbon markets in all participating jurisdictions; 203 and
appropriate legal powers and instruments for the effective implementation, administration and enforcement of the legal regime (including stringent monitoring and verification processes and appropriate enforcement mechanisms).
201 Richard B Stewart and Phillipe Sands, 'The Legal and Institutional Framework for a Plurilateral Greenhouse Gas Emissions Trading System' in Greenhouse Gas Market Perspectives Trade and Investment Implications of the Climate Change Regime: Recent Research on Institutional and Economic Aspects of Carbon Trading , UNCTAD/DITC/TED/Misc.9 (2001) United Nations, 5 at 10 and Tom Tietenberg 'Implementation Issues: A General Survey' in United Nations Conference on Trade and Development (ed), Combating Global Warming: study on a global system of tradeable carbon emission entitlements (1992) New York, United Nations, 127 at 133. See also Joe Motha, 'Tradeable Permits: Terms and Taxonomy' in Bureau of Transport Economics (ed), Trading Greenhouse Emissions: Some Australian Perspectives (1998) Canberra, Bureau of Transport Economics, 25; Zhong Xiang Zhang, 'The Design and Implementation of an International Trading Scheme for Greenhouse Gas Emissions' (2002) 39(4) Peace Research Abstracts 459 and Kjell Roland, 'From Offsets to Tradeable Entitlements' in United Nations Conference on Trade and Development (ed), Combating Global Warming: study on a global system of tradeable carbon emission entitlements (1992) New York, United Nations, 23. 202 Richard F. Kosobud, n200, 25. 203 Richard Baron and Stephen Bygrave, 'Towards International Emissions Trading: Design Implications for Linkages' (OECD, IEA, 2002) at 38-39 and 58. Erik Haites, 'Harmonisation Between National and International Tradable Permit Schemes' (Paper presented at the OECD Global Forum on Sustainable Development: Emissions Trading 17-18 March 2003 Paris, Greenhouse Gas Emissions Trading and Project Based Mechanisms, Paris, 2003) at 108.
95 CONCLUDING COMMENTS
The purpose of this chapter was to provide an essential contextual background to the design and implementation of the current climate change regime. The climate change regime was strongly influenced by the prevailing scientific, economic and legal influences which existed at the time of the negotiation of these international agreements. The phenomenon of climate change is global in scope yet appears to be regional in the frequency and severity of its impacts. The result is a situation in which the magnitude of greenhouse gas emissions, and experiences of the impacts of climate change, is not necessarily proportionate. Vulnerable communities are more at risk from the threat of climate change caused by these global concentrations of greenhouse gases in the atmosphere yet the majority of emissions have originated historically in less vulnerable, developed nations. This differs to other environmental pollution problems whereby emissions, even through primarily causing transboundary harm, nevertheless do have some direct, localised, adverse impact.
This absence of a negative feedback loop for large scale emitters appears to have been a significant factor in negotiations as to the specific levels of emission reductions imposed under the Kyoto Protocol. In addition, the global nature of climate change was harnessed to provide justification for the use of tradeable emission instruments as a primary tool for achieving global reductions in emissions. The promise that these market mechanisms would achieve the avoidance of adverse climate change, at the least economic cost, also played a significant role. The regulatory design of the climate change regime was driven by the need to facilitate the operation of these flexible market mechanisms. The publicised success of the US SO 2 Scheme in using these tradeable instruments, combined with the stories of success of the compliance regime to the Montreal Protocol, were together regarded as an optimal regulatory framework for achieving necessary emission reductions at a global level. Such optimism prevented the negotiating parties from looking beyond the commercial gimmick
96 and potential dollar value of the future carbon market to consider whether sufficient duties, obligations and enforcement mechanisms were in place to achieve the ambitious reductions actually required to avoid adverse anthropogenic climate change. The optimism of negotiators also appears to have prevented the parties from considering whether an effective framework had been created, between the UNFCCC and the Kyoto Protocol, to optimise the operation of the carbon markets within an effective legal framework for the implementation, operation and enforcement of the emission reduction duties.
97 Chapter Three - The Architecture of the Climate Change Regime: an Analysis and Critique of the International Regulation of
Greenhouse Gas Emissions 1
INTRODUCTION
The architecture of the international climate change regime has been designed to address the environmental and social concerns of adverse climate change through the imposition of obligations to lower global greenhouse gas emission levels. The United Nations (UN) Framework Convention on Climate Change (the
UNFCCC) 2 was the first binding international legal instrument to address the issues of climate change. The ultimate objective of the UNFCCC, and any related legal instrument adopted by the parties, is the ‘stabilisation of greenhouse gas concentrations, in the atmosphere, at a level that would prevent dangerous anthropogenic interference with the climate system’.3
At the first Conference of the Parties (COP) to the UNFCCC, in 1995, the parties launched negotiations to agree on specific greenhouse gas emissions reduction
commitments for industrialised countries. The Kyoto Protocol to the UNFCCC 4 was later adopted on 11 December 1997 and came into force on 16 February 2005 following worldwide debate as to the global economic implications of
1 This chapter expands upon previous analysis of the international climate change regime researched and written by this author in the following papers: Nicola Durrant and Rowena Maguire, ‘An Integrated Legal Approach to Global Environmental Governance: Combating Climate Change, Drought and Deforestation’, (2007) Volume 9: Special Edition on Global Governance, Canberra Law Review 65; Donald Feaver and Nicola Durrant, ‘Architectures of International Regulation’(2007) Working Paper, Queensland University of Technology; Brisbane and Donald Feaver and Nicola Durrant, ‘A Regulatory Analysis of International Climate Change Regulation’ (forthcoming 2008) Special Issue on Global Warming, Law & Policy Journal . 2 United Nations Framework Convention on Climate Change , opened for signature on 4 June 1992, 31 ILM 849 (entered into force on 21 March 1994) (the UNFCCC). 3UNFCCC, n2, Article 2. 4 Kyoto Protocol to the United Nations Framework Convention on Climate Change , opened for signature 16 March 1998 (entered into force on 16 February 2005) (the Kyoto Protocol).
98 mitigating greenhouse gas emissions. 5 The Kyoto Protocol contains specific greenhouse gas emissions reduction commitments for industrialised countries for the first commitment period from 2008 to 2012.
The UNFCCC and Kyoto Protocol are both international agreements, reached through international consensus, that are aimed at reducing anthropogenic greenhouse gas emissions to avoid or reduce the adverse effects of climate change (together the climate change regime). These agreements recognised that climate change is an international environmental concern and requires cooperative global efforts to minimise its adverse effects. Although global, the problem is not homogeneous. Consequently, the regime is based on an understanding of the differing social, economic and environmental circumstances of each country including differences in their contributions to the global warming problem. The climate change regime adopts a principle of ‘common but differentiated responsibilities’, in line with equitable principles, and imposes customised emission reduction obligations on the various developed country parties. It also recognises that policies and measures to protect the climate system against climate change should be appropriate for the specific conditions of each party and does not dictate the specific method of domestic attainment of those emission reductions targets. 6 Parties are able to choose which of the greenhouse gases, from the collection of six regulated gases, they will emphasise in their domestic mitigation activities. Parties may also elect to manage domestic land use management practices and carbon sinks to control net national
emissions. 7 This provides parties with a significant range of choice and flexibility regarding the nature and extent of domestic behavioural modification whilst acknowledging the inherent sovereignty of nation States.
5 William D Nordhaus, 'To Slow or Not to Slow: the Economics of the Greenhouse Effect' (1991) 101 (July 1991) The Economic Journal 920; Alan Manne and Richard Richels, Buying Greenhouse Insurance: The Economic Costs of Carbon Dioxide Emission Limits (1992) Cambridge, England, The MIT Press; Samuel Frankhauser, Valuing Climate Change: The Economics of the Greenhouse (1995) London, Earthscan Publications. 6 UNFCCC, n2, Article 3(4). 7 Kyoto Protocol, n4, Article 3(3).
99 The Kyoto Protocol also contains a range of innovative policy tools which are aimed at assisting parties to meet their emission reduction obligations flexibly at the least economic cost. Known as the flexibility mechanisms, these elective measures encompass international emissions trading, the Clean Development Mechanism (CDM) and Joint Implementation (JI). The mechanism of emissions trading has been described as the cornerstone of the Kyoto Protocol and is intended to facilitate the abatement of emissions in the most cost-effective manner. 8 The climate change regime is designed to harness financial instruments to address the inherent tension between the immediate priorities of society in its use of goods and services that use fossil fuels, and generate greenhouse gas emissions, and the long-term imperatives of maintaining a sustainable environment to support humankind. As noted by one commentator:
the Kyoto Protocol is both innovative and groundbreaking. There is no other treaty which defines a new international commodity; sets the rules on how this commodity can be created, transferred, used; harnesses market forces by creating supply and demand through binding targets; and finally involves the private sector in the implementation of the Mechanism. The Kyoto Protocol makes us embark on an international market experiment. 9
Accordingly, the overriding objectives of the climate change regime are to achieve actual reductions in the greenhouse gas emissions of the State parties but to do so in the most cost-effective manner by harnessing the innovation of the global carbon market. For these objectives to be attainable, the design and implementation of the climate change regime must incorporate the appropriate regulatory architecture, legal rules, liabilities and trading instruments to facilitate an effective regulatory response to climate change. In this context, the purpose of this chapter is to assess and critique the effectiveness of the current regulatory
8 Benjamin Richardson, 'Climate Law and Economic Policy Instruments: A New Field of Environmental Law' (2004) [2004](1) Environmental Liability 19 at 22; Annie Petsonk, Daniel J Dudek and Jospeh Goffman, 'Market Mechanisms and Global Climate Change: An Analysis of Policy Instruments' (Paper presented at the Trans-Atlantic Dialogues on Market Mechanisms: Bonn 23 October 1998 and Paris, 27 October 1998, 1998) at 3. 9 Charlotte Streck, 'The Governance of the Clean Development Mechanism: The case for strength and stability' (2007) 2(Special Issue: The Kyoto Protocol and Carbon Finance) Environmental Liability 91 at 91.
100 approach to the control of greenhouse gas emissions under the international climate change regime.
The chapter analyses and critiques the architecture of the international climate change regime. It does so through a critical assessment of the regulatory objectives, structure and composition of the climate change regime in terms of its jurisdictional scope, discretionary depth, rule-making, adjudication and enforcement functions. Potential grounds for liability for unrestricted greenhouse gas emissions, under international law, are also considered briefly in respect of state responsibility for transboundary harm and international human rights principles. This analysis concludes that the architecture of the climate change regime is extraordinarily complex. Institutionally and instrumentally, it is a myriad of institutional structures and procedural rules. However, upon closer examination, it becomes clear that these institutions are primarily designed to facilitate the implementation of the market mechanisms and little substantive powers have been provided with respect to the core function of the regime, namely, the enforcement of duties to reduce greenhouse gas emissions. Ultimately, this weak regulatory structure is fundamentally disconnected from its primary purpose of reducing global emissions by sufficient levels to avoid adverse anthropogenic interference with the climate system .
THE OBJECTIVES OF THE REGIME: AVOIDING ADVERSE CLIMATE CHANGE
At the time of creation of the UNFCCC, in 1992, there was significant scientific and political doubt that climate change was a threat to modern society. In the face of this uncertainty, the UNFCCC established broad, overarching principles and institutional arrangements for the climate change regime. Accordingly, the parties
101 to the climate change regime are bound by the ultimate objective of achieving the:
stabilisation of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system . Such a level should be achieved within a time-frame sufficient to allow ecosystems to adapt naturally to climate change , to ensure that food production is not threatened and to enable economic development to proceed in a sustainable manner ( emphasis added ). 10
Little definition is given for this broad and ambitious environmental objective. Greenhouse gases are defined in the convention as ’those gaseous constituents of the atmosphere, both natural and anthropogenic, that absorb and re-emit infrared radiation’ 11 whilst climate change is defined as:
a change of climate which is attributed directly or indirectly to human activity that alters the composition of the global atmosphere and which is in addition to human activity that alters the composition of the global atmosphere and which is in addition to natural climate variability observed over comparable time periods. 12
Moreover, no threshold is given for what constitutes ‘adverse’ climate change. The term global atmosphere, referred to in the above definition, is also not defined in the convention. However, climate system is described as the ‘totality of the atmosphere, hydrosphere, biosphere and geosphere and their interactions.’ 13
The Preamble to the UNFCCC specifically acknowledges that human activities have been substantially increasing atmospheric concentrations of greenhouse gases and that the largest share of historical emissions originated in developed
10 UNFCCC, n2, Article 2. 11 UNFCCC, n2, Article 1(5). 12 UNFCCC, n2, Article 1(2). 13 UNFCCC, n2, Article 1(3).
102 countries. 14 The UNFCCC acknowledges that ‘change in the Earth’s climate and its adverse effects are a common concern of humankind’ and states that the parties were determined to ‘protect the climate system for present and future generations.’ 15 It further recognises the need for developed countries to take immediate action , in a flexible manner, based on relevant scientific, technical and economic considerations whilst ensuring that responses are integrated so as to avoid any adverse impacts on social and economic development. In terms of the economic costs of the general mitigation obligation, the UNFCCC states that polices and measures which address climate change should:
be cost-effective so as to ensure global benefits at the lowest possible cost. To achieve this, such policies and measures should take into account different socio- economic contexts, be comprehensive, cover all relevant sources, sinks and reservoirs of greenhouse gases and adaptation, and comprise all economic sectors. 16
Furthermore, the UNFCCC states that parties ‘have a right to, and should, promote sustainable development’ that ‘economic development is essential for adopting measures to address climate change’ and that parties should promote an ‘open international economic system that would lead to sustainable economic growth and development’. 17 The UNFCCC also commits the parties to the development and transfer of technologies, practices and processes that reduce greenhouse gas emissions. 18 In addition, and in conformance with the notion of common but differentiated responsibilities, developed country parties are responsible for the provision of financial resources, environmentally sound technology and adaptation assistance to participating developing countries. 19
Through the UNFCCC and, more significantly, the Kyoto Protocol the parties have agreed to a fetter on their sovereign rights to emit greenhouse gases. As a
14 UNFCCC, n2, Preamble. 15 UNFCCC, n2, Preamble. 16 UNFCCC, n2, Article 3(3). 17 UNFCCC, n2, Article 3(4), Article 3(5). 18 UNFCCC, n2, Article 4(1)(c). 19 UNFCCC, n2, Article 4(3).
103 result, the climate regime imposes restrictions on the actions of nations within their territorial jurisdictions by imposing limits on the amount of emissions which can be created during a set time period. In furtherance of its objectives, the UNFCCC requires parties to adopt precautionary measures to prevent or minimise the causes of climate change and to mitigate its adverse effects. 20 These obligations specifically recognise the common but differentiated responsibilities and capacities of the parties to the UNFCCC and greater mitigation responsibilities are imposed on those developed countries parties. 21 The UNFCCC includes the agreed aim that all developed countries will take measures to reduce their greenhouse gas emissions to 1990 levels by the year 2000. 22 However, that commitment was not met by the parties and no enforcement action was taken. This was largely because of the agreement to precise, quantitative mitigation obligations adopted in the Kyoto Protocol to the UNFCCC in 1997.
In terms of domestic activities, the UNFCCC requires all parties to formulate programmes containing measures to mitigate climate change by addressing anthropogenic emissions by sources and removals by sinks of all greenhouse
gases as well as measures to facilitate adequate adaptation to climate change. 23 Annex-1 parties are further obliged to adopt national policies and take corresponding measures on the mitigation of climate change, by limiting anthropogenic emissions of greenhouse gases and protecting and enhancing
greenhouse gas sinks and reservoirs. 24
As it became apparent that the general emission reduction obligations of the parties were not being met, the parties agreed to establish more specific targets for each Annex-1 party under the Kyoto Protocol. The Kyoto Protocol to the
20 UNFCCC, n2, Article 3. 21 Ibid. 22 UNFCCC, n2, Article 4(2)(a), Article 4(2)(b). 23 UNFCCC, n2, Article 4(1)(b). 24 UNFCCC, n2, Article 4(2).
104 UNFCCC aims to achieve the global reduction of greenhouse gas emissions through committing Annex-1 parties to individual binding targets to limit or reduce their greenhouse gas emissions. The targets for the first commitment period from 2008 to 2012 vary from 92 per cent to 110 per cent of reported 1990 greenhouse gas emission levels according to the circumstances negotiated by each party. 25 Therefore the Kyoto Protocol imposes an obligation on those parties to:
individually or jointly, ensure that their aggregate anthropogenic carbon dioxide equivalent emissions of the greenhouse gases listed...do not exceed their assigned amounts…with a view to reducing their overall emissions of such gases by at least 5% below 1990 levels in the commitment period 2008 to 2012. 26
Surprisingly, the Kyoto Protocol does not specify the manner in which the emission reductions targets must be achieved by the parties. It acknowledges the unique characteristics which are present in each nation State and permits the parties to achieve their emission obligations in the manner which best fits their national circumstances. Therefore, the Kyoto Protocol is silent on the method of reduction beyond broad references to sustainable development and the implementation of certain policies and measures according to the national circumstances of each party. 27 Accordingly, the Kyoto Protocol provides flexibility in the achievement of the emission reductions through the imposition of a country-wide target and the creation of adaptable mechanisms aimed at achieving cost-effective global reduction in emissions. The target itself applies to a group of six greenhouse gases, including carbon dioxide, and provides the parties with a choice regarding the combination of gases to be lowered by domestic mitigation. This is a significant feature of the climate change regime in terms of the broad range of mitigation options made available to the States in conjunction with a ‘firm obligation’ to achieve a set environmental target.
25 Kyoto Protocol, n4, Annex B. Australia, for example, was allocated a target of 110 per cent of 1990 levels whilst the EU Bubble must achieve 92 per cent. The targets are therefore based primarily on political bargaining rather than on a mathematical calculation of required emission reductions. 26 Kyoto Protocol, n4, Article 3(1). The Kyoto Protocol contemplates additional commitment periods beyond 2012. However, those remain under negotiation by the parties. 27 Kyoto Protocol, n4 Article 2(1)(a).
105
Parties to the Kyoto Protocol were concerned about the potential negative impacts, on their national economies and international competitiveness, from the imposition of emission reduction duties. As a concession to address these concerns, the Kyoto Protocol established market mechanisms to enable the flexible implementation of emissions reduction projects, in return for the transfer of carbon credits, and international trade in those credits. The potential value of these credits is intended to act as a financial ‘carrot’ to government actors and private business to encourage the creation of low-carbon technologies and implementation of emission reduction projects. 28 The resulting global regulatory model is intended to reduce net global greenhouse gas emissions through this combination of cooperative governance and market based incentives.
Accordingly, the Kyoto Protocol has adopted a unique and innovative regulatory approach in its international creation of the flexibility mechanisms and use of tradeable emission instruments. At the beginning of the first commitment period, parties are allocated a number of tradeable emission instruments, known as Assigned Amount Units (AAUs), which are able to be transferred between eligible parties. Parties may also create additional credits through the implementation of emission reduction projects in developing countries (CDM) or they can convert credits from implementing projects in other Annex-1 countries (JI). These mechanisms together allow parties to elect as to the proportion of domestic mitigation which they will implement compared to international
abatement activities. 29
28 Tom Tietenberg, 'Economic Instruments for Environmental Regulation' (1990) 6(1) Oxford Review of Economic Policy 17; Peter H Sand, 'International Economic Instruments for Sustainable Development: Sticks, Carrots and Games' in Daniel Bodansky and David Freestone (eds), Transnational Environmental Law: Lessons in Global Change , International Environmental Law and Policy Series (1999) London, Kluwer Law International, vol 53, 331. 29 This choice is somewhat limited to the extent that domestic actions must constitute a ‘significant element’ of the efforts made by a party to meet its emission reduction obligations but this concept is, as yet, undefined and untested; UNFCCC, Decision 15/CP 7 'The Marrakesh Accords' (FCCC/CP/2001/13/Add.2).
106 THE REGULATORY APPROACH OF THE CLIMATE CHANGE REGIME
For the international climate change regime to be effective in reducing global greenhouse emissions and addressing climate change, it must achieve a number of differing objectives including environmental effectiveness in solving the environmental problem; market effectiveness in achieving economic efficiency; and institutional effectiveness with respect to the optimal combination of legal, normative and political feasibility outcomes. Accordingly, the climate change regime should incorporate:
a problem-solving approach to the environmental problem of human- induced climate change;
a legal approach to achieve compliance with the regime and achievement of the regime objectives through valid delegations, rule- making processes and enforcement protocols;
an economic approach to achieve emissions reductions in accordance with the principles of economic efficiency;
the creation of normative principles to create an environment for the global adherence to, and achievement of, the agreed environmental values; and
the political feasibility approach to achieve such outcomes, through behavioural adjustments and ongoing agreement to restrain emitting behaviours, within accepted methods of global governance. 30
30 Oran R Young and Marc A Levy, 'The Effectiveness of International Environmental Regimes' in Oran R Young (ed), The Effectiveness of International Environmental Regimes: Causal Connections and Behavioral Mechanisms (1999) Cambridge, The MIT Press, 1 at 4-6; see also Alina Averchenko, Factors of Effectiveness of the International Climate Change Regime (PhD Thesis, University of Bath, 2004) at 73.
107 An effective legal regime to manage climate change should integrate all of the legal components necessary to enable the effective implementation, administration and enforcement of a legally enforceable international regime including clear duties and liabilities, mechanisms to facilitate trade, stringent monitoring and verification processes and appropriate enforcement mechanisms. 31 If properly designed and implemented, the institutions of the climate change regime should function effectively to achieve its global
objectives. 32 To be effective in achieving its regulatory objectives, the international climate change regime must possess a sound regulatory scheme
with sufficient regulatory coherence. 33 An effective regulatory scheme is dependent on the choice of appropriate institutional structures, procedural and managerial systems and legal instruments to be used in achieving the regulatory
goals of the climate change regime. 34 Accordingly, an assessment of the presence, or absence, of such regulatory coherence requires an analysis of the institutional structure, regulatory composition, procedural systems and legal
instruments adopted under the climate change regime. 35 The regulatory structure and composition of the regime will be critiqued in terms of the scope and depth of the substantive rule-making, adjudication and enforcement powers of the established institutions.
31 See, for example, Sonja Peterson, 'Monitoring, Accounting and Enforcement in Emissions Trading Regimes' (Paper presented at the OECD Global Forum on Sustainable Development: Emissions Trading 17-18 March 2003 Paris, Greenhouse Gas Emissions Trading and Project Based Mechanisms, Paris, 2003);Gregory Rose, 'A Compliance System for the Kyoto Protocol' (2001) 7(2) New South Wales Law Journal 37. 32 See Barbara Koremenos, Charles Lipson and Duncan Snidal, 'The Rational Design of International Institutions' (2001) 55(4) International Organization 761. 33 For a discussion of structural coherence generally and legal coherence more specifically see Joseph Raz, 'The Relevance of Coherence' (1992) 72 Buffalo University Law Review 273 and Jack Balkin, 'Understanding Legal Understanding: The Legal Subject and the Problem of Legal Coherence' (1993) 103 Yale Law Journal 105 respectively. 34 In the domestic regulatory context see Anthony Ogus, 'Comparing Regulatory Systems: Institutions, Process and Legal Forms in Industrialised Countries' (Centre on Regulation and Competition Working Paper Series No. 35, 2002) at 1. 35 Owing to word restrictions, the theories of international regulation and global governance are not described in this chapter. This theoretical approach is discussed in detail in Donald Feaver and Nicola Durrant, ‘Architectures of International Regulation’(2007) Working Paper, Queensland University of Technology and Donald Feaver and Nicola Durrant, ‘A Regulatory Analysis of International Climate Change Regulation’ (forthcoming 2008) Special Issue on Global Warming, Law & Policy Journal .
108 THE STRUCTURE OF THE CLIMATE CHANGE REGIME
The two primary regulatory bodies to the climate change regime are the Conference of the Parties to the UNFCCC (COP) and the Meeting of the Parties to the Kyoto Protocol (MOP). The climate change regime is characterised by a fragmented series of multiple, upward, delegations from the parties to a number of different regulatory bodies. The regulatory bodies to the climate change regime include the:
COP
MOP
Executive Board to the Clean Development Mechanism (CDM);
Joint Implementation (JI) Supervisory Committee; and
Compliance Committee. 36
The sources of power for the bodies to the climate change regime are derived from the provisions of the UNFCCC and the Kyoto Protocol to the UNFCCC. The architecture of the climate change regime is depicted in Figure Three below. Under this model, the primary transfer of power takes place through the pooling of sovereign authority from the parties to the COP and MOP. Those bodies maintain ultimate decision-making functions over the climate change regime. However, multiple delegations of regulatory functions also take place. Clear regulatory powers are transferred to the Executive Board of the CDM and Joint Implementation Supervisory Committee to facilitate the use of the flexibility mechanisms. Authority is also divested to the Compliance Committee to address issues in implementation and non-compliance.
36 This functions through a Plenary, Bureau, Facilitative Branch and an Enforcement Branch.
109
The institutional bodies of the UNFCCC and Kyoto Protocol are serviced by the UNFCCC Secretariat which is institutionally linked to the UN system but is not fully integrated into the work programme or management structure of any UN department. 37 Limited administrative functions, but not discretions, are allocated to the established UNFCCC Secretariat. The UNFCCC Secretariat is responsible for, inter alia, the International Transaction Log (ITL) and the national registries for international emissions trading. Under the UN headquarter’s agreement, the Secretariat has legal capacity to contract, acquire and dispose of property and institute legal proceedings in fulfilment of those duties. 38 The UNFCCC Secretariat utilises UN resources and, as part of the UN system, is required to report to the UN Secretary General. However, the Secretariat does possess a level of independence from the UN system and is bound, ultimately, to promote and uphold the objectives of the climate change regime. 39
37 UNFCCC, Decision 22/CP 5 ' Institutional Linkage of the Convention Secretariat to the United Nations' (FCCC/CP/1999/6/Add 1). 38 Farhana Yamin and Joanna Depledge, The International Climate Change Regime: A Guide to Rules, Institutions and Procedures (2004) Cambridge, Cambridge University Press at 501, 505. 39 Ibid.
110
ITL CDM National Executive Registries Board
UNFCCC Compliance Secretariat JI Supervisory Committee Committee
UNFCCC Kyoto Protocol (General Duties ) (Specific Targets) COP MOP (Regulator) (Regulator)
Nation Nation Nation Nation
Domestic Regulator (optional)
Domestic Jurisidiction
Private Entities/Individuals
Figure 3: Feaver and Durrant, ‘The Regulatory Architecture of the Climate Change Regime’ (2008).40
40 This figure created by this author. Modified version published in Donald Feaver and Nicola Durrant, ‘A Regulatory Analysis of International Climate Change Regulation’ (forthcoming 2008) Special Issue on Global Warming, Law & Policy Journal .
111 CRITICAL ANALYSIS OF THE COMPOSITION OF THE CLIMATE CHANGE REGIME
A Jurisdictional Scope of the COP/MOP
The urgency and scope of the global problem of climate change requires an unprecedented depth and breadth of global cooperation to avoid the adverse impacts of climate change that has not been previously observed in the
environmental arena. 41 Nations may elect to respond to a global problem through the pooling of their sovereign authority in an institutional agent which regulates
participants through consensus-based decision making and rule setting. 42 Consequently, the authority of the climate change regime is established through the legal fiction of the sovereignty of nations through which the States agree to a particular international regime. Under the UNFCCC, the core body of pooled authority is the COP, an association of representatives from all parties to the convention. The COP is the primary decision making body, the ‘supreme body of the convention’ and, officially, remains the ultimate authority under the Convention. 43
Accordingly, Article 7 of the UNFCCC states that:
the Conference of the Parties, an association of representatives of the members to the treaty, shall keep under regular review the implementation of the Convention and any related legal instruments that the Conference of the Parties may adopt, and shall make, within its mandate, the decisions necessary to promote the effective implementation of the Convention.
41 Heleen de Coninck, 'Designing Institutions for Climate Change: Why rational design involves technology' (Paper presented at the Amsterdam Conference on Human Dimensions of Global Environmental Change, Amsterdam, May 2007) at 7. 42 See, for example, Mancur Olson, The Logic of Collective Action: Political goods and the theory of groups (1965) Cambridge, Harvard University Press. 43 UNFCCC, n2, Article 7(2).
112 Membership of the Kyoto Protocol does not include all of the members of the UNFCCC. Accordingly, the Kyoto Protocol establishes the MOP but states that the COP shall serve as the MOP and any non-parties to the COP will participate as observers for the purposes of the Kyoto Protocol. 44 Therefore, the climate change regime has two core regulators, each with authority over their respective agreements and each with the power to establish and enforce new rules against the respective parties. In practical terms, the COP and MOP meet concurrently to reach decisions in respect of the UNFCCC and Kyoto Protocol.
The ultimate purpose of the UNFCCC is to achieve the stabilisation of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system. That purpose is translated into specific emission reduction targets in the Kyoto Protocol. The COP and MOP bodies are collective decision-making bodies comprised of representatives of the parties to these international agreements. They are empowered with the broad mandate to review and promote the effective implementation of the UNFCCC and Kyoto Protocol respectively. 45
Accordingly, the COP and MOP is mandated to:
keep under regular review the implementation of the [UNFCCC/Kyoto Protocol] and any related legal instruments …., and shall make, within its mandate, the decisions necessary to promote the effective implementation of the [UNFCCC/Kyoto Protocol] .. and may .. exercise such other functions as are required for the achievement of the objective of the [UNFCCC/Kyoto Protocol]. 46
44 Kyoto Protocol, n4 Article 13.1. 45 UNFCCC, n2, Article 7. Kyoto Protocol, n4, Article 13. 46 UNFCCC, n2, Article 7. Article 13 of the Kyoto Protocol, n4, is similarly worded.
113 The jurisdiction of the COP and MOP relates to the performance of regulatory functions regarding the relatively broad subject-matter of ‘climate change’. This includes the functions under the Kyoto Protocol of:
monitoring domestic mitigation programmes and climate related initiatives;
monitoring and approving emission reduction projects implemented within domestic jurisdictions by State and private entities;
monitoring and approving market transactions in tradeable emission instruments by State and private entities; and
imposition of the agreed sanctions for non-compliance.
Accordingly, the MOP appears to have been granted a broad discretionary power in respect of the implementation of the climate change regime.
B Discretionary Depth of the COP/MOP
The specific delegations of power to the COP and MOP can be found in Article 7(2) of the UNFCCC and Article 13(4) of the Kyoto Protocol. The UNFCCC states that the COP shall:
(e) assess… the implementation of the Convention by the Parties [and] the overall effects of measures taken pursuant to the Convention, in particular environmental, economic and social effects;
(g) make recommendations on any matters necessary for the implementation of the Convention;
(i) establish such subsidiary bodies as are deemed necessary for the implementation of the Convention;
(k) agree upon and adopt, by consensus, rules of procedure.. for itself and for any subsidiary bodies;
114 (m) exercise such other functions as are required for the achievement of the objective of the Convention.
The mandate of the MOP is cast in similar terms including that the MOP shall keep under regular review the implementation of the Kyoto Protocol and shall make, within its mandate, any decisions necessary to promote its effective implementation. 47 Accordingly, the MOP maintains a high level regulatory function in respect of the implementation of the international components of the climate change regime. However, many of the technical functions of the MOP are delegated to the subsidiary regulatory bodies as illustrated in Figure Three. Those bodies are responsible for the direct day-to-day supervision of the flexibility mechanisms. As a result, these bodies have a high level of regulatory involvement in the abatement projects and other activities of private entities and private individuals.
C Rule Making Discretion of the COP/MOP
The UNFCCC and Kyoto Protocol both impose greenhouse gas emission mitigation obligations on the parties. 48 However, the UNFCCC and the Kyoto Protocol contain only the bare bones of the climate change regime. The MOP has been empowered to develop and expand upon the rules, modalities and procedures required for the practical implementation of the regime. This has been achieved through the establishment of multiple ‘subject specific’ subsidiary bodies which develop and apply the necessary rules, in an ad-hoc basis, and recommend them to the MOP for adoption. Consequently, the climate change regime has created relatively autonomous institutional arrangements which are empowered to create and enforce rules against the parties without the immediate need for the full consensus agreement of all the parties to the regime.
47 Kyoto Protocol, n4 Article 13(4). The Kyoto Protocol contains an additional Article 8(6) ‘The MOP .. shall take decisions on any matter required for the implementation of this Protocol’. 48 UNFCCC, n2, Article 4(2)(a); Kyoto Protocol, n4, Article 3.
115
The subject matter of the regime, climate change, is itself wide ranging in scope and extends beyond the broad range of ‘environmental’ concerns to issues of trade and development, human health, food security, energy security, access to technologies and financial aid. Decisions regarding climate change mitigation will also impact on a wide range of environmental sustainability issues. Therefore, in principle, the COP and MOP hold a wide discretion to establish policy directions, create new environmental rules and standards required for the ‘achievement of the objectives’ of the regime and make adjudicative decisions affecting sovereign rights and interests. This rule-making discretion of the climate change regime extends to the domestic sphere and to private individuals and firms. Private individuals and firms may elect, following initial authorisation from their State, to participate in the market mechanisms as project developers, carbon traders and accredited experts. 49 Where this occurs, those participants become subject to the jurisdiction of the regulatory bodies under this global regime. Accordingly, the MOP and its subsidiary bodies may reach decisions affecting private interests and can enforce the rules of the regime against those private interests without any nation State involvement in that process.
Decisions of the COP and MOP are considered to be legally binding and in certain instances could amount to an agreement modifying or supplementing the text of the UNFCCC and Kyoto Protocol. 50 However, it is questionable whether decisions which are inconsistent with the text of the treaty are able to vary the original agreement without adherence to the specified processes for amendment contained within that treaty. Whether the COP and MOP possess a separate legal personality is also a matter of some contention. Some commentators conclude that the COP possesses a separate legal personality and is a self governing
49 For CDM, Kyoto Protocol, n4, Article 12(9). For JI, Kyoto Protocol, n4, Article 6(3). For Emissions Trading, UNFCCC, ‘Decision 11/CMP 1: Modalities, Rules and Guidelines for Emissions Trading under Article 17 of the Kyoto Protocol, Annex: Modalities, Rules and Guidelines for Emissions Trading under Article 17 of the Kyoto Protocol’, (FCCC/KP/CMP/2005/8/Add 2) at [5]. 50 Farhana Yamin and Joanna Depledge, n38, 404-405.
116 autonomous body heading the UNFCCC hierarchy. 51 However, according to UNOLA, the COP and MOP have not been duly vested with a clear juridical personality on the international plane. 52
D Subsidiary Bodies within the Climate Change Regime
In addition to the COP and MOP, the UNFCCC and Kyoto Protocol establish a number of subsidiary bodies and expert groups to assist with the implementation of the climate change regime. These bodies do not sit within the UNFCCC Secretariat and are directly accountable to the COP and MOP.
The UNFCCC establishes two permanent advisory bodies known as the Subsidiary Body for Implementation (SBI) and the Subsidiary Body for Scientific and Technological Advice (SBSTA) to provide advice as requested. The SBSTA provides the COP with advice on scientific, technological and methodological matters. This includes advice regarding the development and transfer of technologies and improvement of the guidelines for preparing national communications and emission inventories. 53 SBSTA also acts as a line of communication between expert bodies, including the Intergovernmental Panel on Climate Change (IPCC), and the COP. The SBI advises to the COP on matters concerning the implementation of the UNFCCC and undertakes examinations of national communications and emission inventories submitted by parties in order to assess the overall effectiveness of the UNFCCC. 54 The SBI also advises the COP on the provision of financial assistance to non Annex-1 parties and on budgetary and administrative matters. A range of temporary bodies and expert groups have also been established to assist with the implementation of the Convention.
51 Ibid, 400, 404. 52 UNOLA (1995) cited in Yamin and Depledge, n38, 403. 53 UNFCCC (2006) Essential Background: Convention Bodies , http://unfccc.int/essential_background/convention/convention_bodies/items/2629.php at 11 June 2008. 54 Ibid.
117
In addition, the Kyoto Protocol necessitated the establishment of a range of bodies to facilitate the operation of the flexibility mechanisms. Significantly, these include the Executive Board to the CDM and the JI Supervisory Committee. International emissions trading is managed through the creation of national registries to hold allowances and through the control of transactions via the ITL managed by the UNFCCC Secretariat. These subsidiary bodies are able to exercise public power in relation to the domestic activities of nation States and private entities but are ‘not directly subject to the control of national governments
or national legal systems’. 55
Unlike the bodies to the UNFCCC, these institutions have received a level of delegated power to enable them to administer the Kyoto Protocol without constant approval from the MOP. This direct upwards delegation enables these bodies to create their own rule-making processes, to reach decisions regarding the rights and liabilities of the parties and third party individuals and to police the level of compliance with the rules of the regime. These bodies act under the direction of the MOP but have been allocated decision-making power and are able to issue binding decisions on the parties. Accordingly, they have been delegated procedural functions with respect to the monitoring and supervision of the CDM/JI projects as well as substantive decision making, rule-making and approval or adjudicative functions in respect of those projects.
55 Streck, n9, 96.
118 FRAGMENTED REGULATION OF THE FLEXIBILTY MECHANISMS
A Operation of the CDM
Developed country parties listed in Annex-1 can create additional credits by implementing eligible emission reductions projects in developing countries under the CDM. This mechanism is intended to assist parties to reach their emission reduction targets in a cost-effective manner whilst assisting developing nations to achieve sustainable development. Participation in the CDM must be voluntary and the project must demonstrate not only that it achieves ‘real, measurable and long-term benefits’ related to climate change mitigation but also that the reductions in emissions are additional to those that would have occurred in the absence of the project. 56
Article 12(4) of the Kyoto Protocol states that:
the clean development mechanism shall be subject to the authority and guidance of the Conference of the Parties serving as the meeting of the Parties and be supervised by an executive board of the clean development mechanism.
Accordingly, the CDM Mechanism is supervised by the CDM Executive Board (Executive Board) and the Executive Board acts under the authority and guidance of the MOP and remains fully accountable to that association. 57 In relation to the supervision of the CDM, the MOP is specifically empowered to:
elaborate modalities and guidelines with the objective of ensuring transparency, efficiency and accountability through independent auditing and verification of project activities. 58
56 Kyoto Protocol, n4, Article 12.5. 57 UNFCCC, ‘Decision 3/CMP.1: Modalities and Procedures for a Clean Development Mechanism as Defined in Article 12 of the Kyoto Protocol. Annex: Modalities and Procedures for a Clean Development Mechanism’, (FCCC/KP/CMP/2005/8/Add 1) section C at [5]. 58 Kyoto Protocol, n4, Article 12(7).
119 The primary role of the Executive Board is to recommend modalities and procedures for the operation of the CDM for approval by the MOP and to address issues of non-observance of those modalities and procedures by project participants or operational entities. 59 Those modalities include rules and requirements for the approval of new methodologies for CDM project baselines, registration and approval of project designs, approval and implementation of monitoring plans, verification and issue of credits and the accreditation of operational entities. 60
The Executive Board appears to have been granted a high level of autonomy and is able to create and apply new modalities and procedures to proposed emission reduction projects. This is designed to allow the practical, commercial application of the flexibility mechanisms without the impracticability and delay of reverting to the MOP for approval. Accordingly, the Executive Board determines the appropriate policy direction, creates the necessary rules, and reaches decisions regarding compliance with those rules prior to recommending the adoption of these rules to the subsequent meeting of the MOP.
However, the ability of the Executive Board to ‘elaborate’ on the rules of the climate change regime has resulted in a complex system heavy in rules and requirements. As noted by one commentator:
the designers of the Kyoto Protocol..and..the..subsequent decisions..have built into the CDM’s project cycle an impressive, but so far mostly untested, set of institutions and safeguards designed to ensure clear and consistent standards for calculating the environmental additionality of CDM projects, processes for encouraging technical assessments, transparency and public scrutiny of CDM operations, and mechanisms for rejecting or discounting CERs when problems emerge. 61
59 UNFCCC, ‘Decision 3/CMP.1’, n57, section C at [5](a),(n). 60 Ibid, section C at [5](d),(f). 61 Ernestine Meijer and Jacob Werksman, 'CDM - Concepts, Requirements and Project Cycle' (2007) 2(Special Issue: The Kyoto Protocol and Carbon Finance) Environmental Liability 81 at 83.
120
The Executive Board is comprised of ten members from the parties to the Kyoto Protocol including one from each of the five UN regional groups, two from Annex-1 parties, two members from non-Annex-1 parties and one representative from the small island developing States. 62 These members act on the Executive Board in their personal capacity and must take an Oath of Service which states that they will provide their function impartially and conscientiously. 63 The Oath further requires that the members have no financial interest in any aspect of the CDM and that confidential information transferred to the Executive Board is maintained.64
The Executive Board may also establish subsidiary committees, panels or working groups to assist it in the performance of its functions. To-date, the Executive Board has established three panels and two working groups. The Accreditation Panel was established to assist in preparing the Executive Board for its decisions regarding the accreditation of designated operational entities. 65 The Methodologies Panel was established to develop recommendations to the Executive Board on guidelines for methodologies for baselines and monitoring plans and on submitted proposals for new baseline and monitoring methodologies. The Small-Scale Panel was also operational during 2002 and recommended draft simplified modalities and procedures for small-scale CDM project activities. The Executive Board has also established the working group on afforestation and reforestation for CDM project activities and the small scale working group CDM small scale project activities.
In terms of the principles of due process, decisions made by the Executive Board are deemed final unless a request for review is made regarding issues associated
62 UNFCCC, ‘Decision 3/CMP.1’, n57, section C, [7]. 63 Ibid, section C, [8](e). 64 Ibid, section C, [10] (2). 65 UNFCCC, ‘CDM: Panels: Working Groups’, http://cdm.unfccc.int/Panels at 11 June 2008.
121 with the validation requirements. That request for review is limited and may only be made by the project participants or the members of the Executive Board. 66 Although interested stakeholders are able to be present at the review hearing, they can only provide information if requested by the Executive Board. Moreover, the climate change regime does not articulate an avenue of recourse from a decision of the Executive Board to the MOP (although in practical terms this is likely to occur where a nation State has been aggrieved). The Executive Board has been criticised for the tardiness and unpredictability of its decisions and some commentators have called for the appointment of a professional regulatory body with more appropriate resourcing and technical expertise to
manage the increasing complexities of the CDM. 67 The use of the CDM mechanism itself has also been criticised for the emerging geographical bias by which project developers appear to be favouring Asia, and China in particular, as host countries for their projects to the exclusion of other more vulnerable developing countries.68 The technological and economic outcomes of the CDM process have also been described as follows:
the CDM in its current form is not able to generate or absorb the financial and technological flows needed under a ‘global deal’………….. Moreover, the….nature of the CDM, and the measurement of emission reductions against an unobservable, project- specific, baseline impose substantial transaction costs in terms of validation, verification and independent scrutiny. 69
66 UNFCCC, ‘Decision 4/CMP 1: Guidance to the Executive Board of the Clean Development Mechanism. Annex 2: Procedures for Review as Referred to in Paragraph 41 of the Clean Development Mechanism Modalities and Procedures’ (FCCC/KP/CMP/2005/8/Add 1), section A at [2]. 67 Streck, n9, 97,100. 68 Armin Sandhoevel and Ingo Ramming, 'Joint Implementation - A Catalyst for Change' in David Lunsford (ed), Greenhouse Gas Market 2007 Building Upon A Solid Foundation: The Emergence of a Global Emissions Trading System (2007) Geneva, International Emissions Trading Association, 92 at 92. 69 Nicholas Stern, 'Key Elements of a Global Deal on Climate Change' (London School of Economics and Political Science, 2008) at 15.
122 B Operation of the JI Mechanism
Emission reduction projects may also be implemented by developed parties, in other developed party countries, under the JI mechanism. 70 In return for the implementation of projects, the host country may transfer a proportion of its AAUs to the project developer. JI projects are overseen by the JI Supervisory Committee which, like the Executive Board, is responsible for the establishment of new modalities and procedures for the implementation of projects. 71 However, the powers of this body are more limited than those of the Executive Board.
The JI mechanism is implemented through similar procedures to the CDM. Indeed, many of the modalities and procedures are modified from those established under the CDM. The key difference is that, in certain specified circumstances, the local host country is permitted to take full responsibility for approving eligible projects and for verifying the level of reductions achieved by the project without recourse to the JI Supervisory Committee (Track 1 JI). 72 Those requirements include the establishment of: a designated focal point;
national system for the estimation of national emissions and a national registry. 73 In such circumstances, the approval of the JI Supervisory Committee is not required. 74 Where these pre-requisites are not met, emission reductions are
reviewed and verified by an independent entity (Track II JI).75 The JI Supervisory Committee supervises the certification of credits generated by project activities
70 Kyoto Protocol, n4, Article 6. 71 UNFCCC, ‘Decision 9/CMP.1: Guidelines for the Implementation of Article 6 of the Kyoto Protocol. Annex: Guidelines for the Implementation of Article 6 of the Kyoto Protocol’, (FCCC/KP/CMP/2005/8/Add 2), Section C. The JI Supervisory Committee was established in 2006. 72 Ibid. 73 Ibid. 74 Ibid. 75 Ibid. Australia is not currently eligible to utilise the flexibility mechanisms under Articles 6, 12 and 17 of the Kyoto Protocol. It is estimated by the UNFCCC Secretariat that Australia will become eligible to utilise these mechanisms in July 2009. Whether Australia is eligible to use Track 1/Track 2 will depend upon the progress made during that time in establishing the necessary monitoring and supervisory processes within Australia. Enforcement Branch, ‘Eligibility of Annex I Parties to participate in the mechanisms under Articles 6, 12 and 17’, http://unfccc.int/files/kyoto_protocol/compliance/enforcement_branch/application/pdf/eligibility_list_ 080422.pdf at 11 June 2008.
123 and is responsible for, inter alia, the elaboration of any rules of procedure for consideration by the MOP. 76
The creation of Track I JI is intended to result in a faster approval process for abatement projects. However, Track I may also introduce increased transaction costs and risks for project developers who must contend with the particular eccentricities of each national JI legal framework rather than the more familiar
UN approval system. 77 There are also significant resourcing concerns regarding the expertise of host countries in approving these projects and verifying that the
emission reductions have actually occurred. 78 A trend may eventuate in which elements of Track I approval processes are merged with the independent
verification process under Track II JI.79 In addition, it should be noted that AAUs can be transferred ‘through less cumbersome options’ outside of the JI
mechanism including green investment schemes (GIS).80
The most likely locations for JI projects are the Ukraine and the Russian Federation given their status as economies in transition and the resulting excess supply of AAUs. JI approval procedures have been adopted by a number of
countries including both the Ukraine and the Russian Federation. 81 The Ukraine introduced its approval processes in 2006 and began to approve JI projects in mid
2007. 82 Project developers must obtain a Letter of Endorsement from the
76 Ibid, section C. 77 Dane Ratliff, 'Joint Implementation: Tracking Recent Developments' (2007) 2(Special Issue: The Kyoto Protocol and Carbon Finance) Environmental Liability 56 at 58. 78 Ibid. 79 Jane Ebinger and Jari Vayrynen, 'The Greening of AAUs and the Interface with Joint Implementation' (2007) 2(Special Issue: The Kyoto Protocol and Carbon Finance) Environmental Liability 73 at 79. 80 These could also potentially result in more sustainable outcomes. See Ratliff, n77, 63. 81 UNFCCC, ‘JI: Parties Involved in JI Projects’ http://ji.unfccc.int/JI_Parties/index.html at 11 June 2008. The Ukraine is expected to become eligible to use the flexibility mechanisms at the end of April 2008 while the Russian Federation is expected to become eligible in June 2008 see http://unfccc.int/files/kyoto_protocol/compliance/enforcement_branch/application/pdf/eligibility_list_ 080422.pdf at 11 June 2008. 82 Anna Korppoo, 'Briefing Paper: JI Approval System in Ukraine: Outline and Experiences' (Climate Strategies, 2007) at 1; Tatiana Boldyreva and Dmitriy Timofeev, 'JI Approval Procedures in Russia and Ukraine' in David Lunsford (ed), Greenhouse Gas Market 2007 Building Upon A Solid
124 Ukrainian government prior to the development of a project. The documentation required as part of the application process for such endorsement:
is intended to show that the activity of the project does not contradict Ukrainian or international law, and that the project will not cause adverse local environmental impacts, as well as describing the investment measures leading to emissions reductions. 83
Projects must comply with Ukrainian Environmental Impact Assessment
requirements and public consultation must be undertaken. 84 To obtain a Letter of Approval to proceed with the project, a full application must be submitted
complete with a verification report from an accredited independent verifier. 85 In relation to the financial aspects of project, the application must demonstrate that:
ERUs from those projects which fulfil the investment requirements of the company without ERUs must be sold at a price not less than 50 per cent of the price in the EU emissions trading scheme; and
the revenue from ERUs must cover at least 10 per cent of the project
investment. 86
Initial difficulties with the Ukrainian JI include delays in the approval system and the ongoing absence of legislation to clarify the legal processes for ‘transferring ERUs, on how AAUs can be converted into ERUs or on how ERUs should be deal with in taxation’. 87 Obviously, such legal mechanisms are critical to create
Foundation: The Emergence of a Global Emissions Trading System (2007) Geneva, International Emissions Trading Association, 102. Cabinet of Ministers of Ukraine. 2006, Resolution dated February 22, 2006 #206 ‘On Approval of the Procedure for Consideration, Approval and Implementation of Projects Aimed at Anthropogenic Emissions Reduction or Greenhouse Gas Absorption Increase Pursuant to Kyoto Protocol to the United Nation Framework Convention on Climate Change’. 83 Korppoo, n82, 3-4. 84 Ibid, 5. 85 Ibid,3. 86 Ibid, 5. 87 Ibid,8.
125 legal certainty regarding the rights of ownership and the ability to transfer ownership in these tradeable emission instruments.
Russia has also established a JI approval processes. The emerging requirements appear to be more complicated than the Ukrainian approach.88 The Ministry for Economic Development and Trade of the Russian Federation is responsible for receipt of applications for JI Projects in Russia and applications are approved by the Commission and the national government. 89 Enacting legislation was passed in mid 2007 and general guidelines for approval and other administrative orders were issued in late 2007 and early 2008. 90 The Russian government has indicated that it will be working on ‘a principle of rejection’ in considering applications for
JI projects in Russia. 91
Other economies in transition that form part of the EU may have less capacity to host JI projects as a result of the lower baseline resulting from emission restrictions under the acquis communautaire and EU emissions trading
directives. 92 Furthermore, an additional compliance stage will apply to the implementation of a JI project, in an EU nation, as the nation is also responsible
for ensuring that the project complies with all EU law.93
88 Tatiana Boldyreva and Dmitriy Timofeev, 'JI Approval Procedures in Russia and Ukraine' in David Lunsford (ed), Greenhouse Gas Market 2007 Building Upon A Solid Foundation: The Emergence of a Global Emissions Trading System (2007) Geneva, International Emissions Trading Association, 102 at 105. There are difficulties in accessing information on the Russian approval procedures. For example, no English translation of the national procedures document is included on the UNFCCC website. No additional information is included on the website for the Russian Ministry for Economic Development and Trade. 89 Denton Wilde Sapte, ‘Russian Legal Update: Kyoto: Russia ready to start realisation of Joint Implementation Projects (JI Projects)’ (March 2008) http://www.dentonwildesapte.com/assets/2/20306.pdf at 11 June 2008. 90 Ibid. 91 Simon Shuster, 'Russia Says Will be Strict Approving Kyoto Projects', Planet Ark 14 March 2008. 92 Ebinger and Vayrynen, n79, 63. 93 Leonardo Massai, 'Joint Implementation In an Enlarged EU: Recent Developments and Outstanding Legal Issues' (2007) 2(Special Issue: The Kyoto Protocol and Carbon Finance) Environmental Liability 65 at 69-70.
126 C The Role of the Host Country
In the interests of global engagement, the Kyoto Protocol defines a role for local host countries in relation to the implementation of emission reduction projects. The creation of a formal decision-making function for the host country is a direct acknowledgment of the sovereign rights of nations to regulate development within their national territory according to their particular national priorities. Consequently, projects implemented under the CDM and JI are subject to approval locally in the country where the emission reduction projects are to be implemented. In the case of the CDM, this is done through the designation of a nationally established body known as the Designated National Authority (DNA). 94 Project participants must undertake an environmental impact assessment in accordance with the procedures required by the host party.95 Prior to validation, all of the parties must provide written approval of voluntary participation in the project and confirmation must be provided from the host party that the project activity assists the nation in achieving sustainable development. 96 These project participants are also required to comply with all applicable national laws. In the case of each nation proposing to host JI projects, the Annex-1 party must establish a Designated Focal Point (DFP) for approving projects pursuant to Article 6 of the Kyoto Protocol.97
Consequently, the DNA or DFP for the host country of the CDM or JI project plays a significant decision making role in the selection of projects for approval, specification of the level of environmental assessment required and in determining whether the principles of sustainable development have been met. This allows the host country to deal with projects within its national territory as it chooses and according to its own set of priorities. This is particularly significant in developing countries under the CDM. However, it appears that these provisions were drafted with the perception that these host nations would have
94 UNFCCC, ‘Decision 3/CMP.1’, n57, section F, [29]. 95 Ibid, section G, [37](c). 96 Ibid, section G, [40](a). 97 UNFCCC, ‘Decision 9/CMP.1’, n71, section D at [20].
127 their own systems in place to assess adequately the environmental outcomes of a proposed project. In practice this is not always the case and no provision is made for the situation in which there are no local laws on environmental impact
assessment.98
In terms of consultation with local communities, the project design documents must identify that local consultation has been carried out. 99 Regretfully, the project design requirements are silent on the actual level of consultation required and the extent to which submissions must be addressed by the project proponents. 100 In this respect, the climate change regime is quite deficient in establishing processes, including the approval or modification of project specifications, without the full engagement of those directly affected by those decisions such as host country institutions and local communities. In response to these deficiencies, some project participants and CER purchasers may elect to use the CDM Gold Standard, developed by non-governmental organisations, which applies additional criteria to ensure that meaningful consultation with local stakeholders is carried out and that projects assist in achieving sustainable development in developing nations. 101
The operation of these mechanisms to-date have demonstrated the difficulties of achieving the objectives of the CDM where developing hosts lack the necessary institutional, financial and other capabilities to fulfil their role in the decision- making process. The critical need for new infrastructure in these developing
98 Ernestine Meijer and Jacob Werksman, 'CDM - Concepts, Requirements and Project Cycle' (2007) 2(Special Issue: The Kyoto Protocol and Carbon Finance) Environmental Liability 81 at 84. 99 Institute for Global Environmental Strategies and Japan Ministry of the Environment, CDM and JI in Charts (4 ed, 2005) Japan, Ministry of the Environment Attachment 1: Contents of the Project Design Documents (v3) at section F (regarding the processes required to be undertaken according to host country requirements). 100 This deficiency raises issues of adequacy of host country consultation and local community involvement in the project development process. 101 Only project activities involving renewable energy and energy efficiency measures which promote sustainable development are eligible for accreditation under the CDM Gold Standard. The Gold Standard, 'The Gold Standard: Manual for CDM Project Developers' (2006 (version 3)) at 9, 11; www.cdmgoldstandard.org at 11 June 2008.
128 countries is also often a key factor in host-country decision-making rather than the result of objective environmental analysis. Moreover, the type of emission reduction projects which are mobilised and presented to the host country for approval have themselves been filtered on the basis of global investment priorities. The investment policies of the World Bank, for example, may significantly affect the choice of location and type of emission reduction projects which are planned and implemented under the CDM.
The UNFCCC created an expectation that all parties to the Convention would have enacted appropriate environmental legislation at the domestic level. 102 However, this deference to national sovereignty diminishes the ability of the parties and the UN to ensure that the climate change regime leads to the enhancement of environmental sustainability whilst achieving envisaged emission reductions. Indeed, the UNFCCC states that parties should promote
sustainable development. 103 However, measuring the level of compliance with this provision is virtually impossible. The provision of greater guidance, as to the notion of sustainability in practical terms, would enhance implementation given ambiguity of the elements needed to achieve sustainable development.
D The Role of Private Verifiers
The CDM and JI mechanisms both create a role for accredited private expert advisors who are responsible for the review and verification of projects submitted under the CDM and JI mechanisms. 104 The accredited entity under the CDM is known as the Designated Operational Entity (DOE). The independent entity for Track II JI is known as the Accredited Independent Entity (AIE). These accredited entities can be either a domestic legal entity or an international organization accredited and designated by the Executive Board or JI Supervisory Committee. These entities are responsible for the validation and subsequent
102 UNFCCC, n2, Article 2 (10). 103 Ibid, Article 4.1(b). 104 Kyoto Protocol, n4, Article 12(5); UNFCCC, ‘Decision 9/CMP.1’, n71, section D, [20].
129 request for registration of a proposed project activity and the verification of emission reduction of a registered project activity, certification and request for the issue of CERs or ERUs.105 The DOE is accountable to the MOP through the Executive Board and is required to comply with all approved modalities and procedures issued by the Board. The AIE is accountable to the MOP through the JI Supervisory Committee. 106
The Executive Board and JI Supervisory Committee have power to suspend or
remove the accreditation of an independent entity. 107 If an accredited private expert is found to have verified credits in excess of those created by the project, be it through fraud, malfeasance or incompetence, then the expert is held liable for this error and must acquire credits from the market equivalent to the excess and surrender these to the Secretariat. 108 Unusually, this penalty holds private experts accountable for the real ramifications from their failure to perform their duties properly by requiring the purchase of credits at market rates, which are subsequently cancelled from the market, rather than simply requiring the payment of financial compensation. This is another remarkable feature of the climate change regime, in the empowerment of subsidiary bodies to impose sanctions directly against private entities without prior recourse to the State.
E International Regulation of Private Entities
All of the flexibility mechanisms provided in the Kyoto Protocol are able to be utilised by the parties at a State level. State parties may also provide consent for domestic private entities to engage in these mechanisms independently of the State.109 Therefore, approved private entities may implement emission reduction projects in other countries and engage in international emissions trading without
105 Ibid, Article 12(5). 106 The MOP provides guidance regarding the implementation of the JI and exercises authority over the JI Supervisory Committee. UNFCCC, ‘Decision 9/CMP.1’, n68, section B. 107 Ibid,[42]-[43]. 108 UNFCCC, Decision 3/CMP.1, n57, section D, [22]. 109 Kyoto Protocol, n4, Articles 12(9) and 6(3).
130 the ongoing supervision of their national government. Consequently, the climate change regime creates incentives, for both public and private entities, to participate in the research and development of innovative emission reduction technologies and to gain from the potential rewards of tradeable credits from those technologies. To properly supervise these initiatives, the adjudicative discretion of the approval bodies to the CDM and JI mechanisms must span public and private interfaces as well as international and domestic spheres. As noted by one commentator, ‘there are very few other examples of mechanisms where private entities come into such intimate contact with the sphere of
international law’. 110 In particular, the CDM is presented as an example of ‘the increase of global administrative law, which is characterised by a vast increase in
the reach and form of transgovernmental regulation’. 111
The climate change regime is quite unique in its use of direct State commitments, combined with the flexibility mechanisms, which enable private entities to elect to assist in the implementation of emission reduction activities. In addition, by creating tradeable rights in emissions, the regime provides financial incentives for greater public and private engagement in achieving the emission reduction objectives of the climate change regime. The regime is by no means perfect and there are several key areas in which improvements can be made. Moreover, given the multi-layers of regulation of these projects, the use of the CDM and JI are not without their risks. These projects must be successfully navigated through a time consuming and potentially costly process prior to the actual
implementation of the project and ultimate issue of credits. 112 There is also little protection offered to private entities against the making of adverse decisions with serious financial repercussions.
110 Streck, n9, 95. 111 Ibid, 96. 112 Ernestine Meijer and Jacob Werksman, 'CDM - Concepts, Requirements and Project Cycle' (2007) 2(Special Issue: The Kyoto Protocol and Carbon Finance) Environmental Liability 81 at 86-87.
131 Consequently, improvements are needed in relation to the streamlining of approval process and provision of rights of appeal from decisions for private entities and in enhancing the quality of community participation in the decision- making process. Nevertheless, this regime does set the groundwork for future, enhanced, environmental models which utilise complementary public/private expertise and resources and benefit from market mechanisms acting as a catalyst for technology diffusion and behavioural modification. 113
F International Trade in Emission Instruments
Through their agreement to the UNFCCC and the Kyoto Protocol, the parties have exercised their sovereign rights to create a regulatory system to respond to climate change and, in doing so, they have accepted a fetter on their prior sovereign right to emit an unspecified quantity of greenhouse gas emissions into the atmosphere. In return for this restriction, they also agreed to the creation and allocation of tradeable emission instruments with inherent economic value to incentivise the achievement of global emission reductions. The parties also agreed to the establishment of an artificial international market framework to enable public and private trade in these emission instruments.
To implement a system of such an innovative and novel scale required the creation of additional supervisory bodies. These bodies were created to establish rules of procedure and to exercise administrative powers in relation to the establishment of projects and the issuance of these tradeable emission instruments. The creation of tradeable mechanisms also necessitated the creation of an international entity to monitor the operation of this new global climate market and to act as a ‘check and balance’ to ensure legitimacy in the system.
113 See Thorstern Benner, Wolfgang Reinicke and Jan Martin Witte, 'Multiple Networks in Global Governance: Towards a Pluralistic System of Accountability' (2004) 39(2) Government and Opposition 191 at 193 and 197. Those authors promote the emergence of new forms of governance along the public-private frontier which harness the transfer and use of knowledge and resources.
132 This function is fulfilled by the UNFCCC Secretariat through the creation of national and individual registries in conjunction with an ITL.
At an international level, each party is allocated an electronic national registry which holds its AAUs. Credits created through the CDM mechanism are issued through the CDM Registry and later transferred to the national registry. Credits issued through the JI mechanism are issued through the national registry of the host country and transferred directly in the national registry of the transacting party. The ability to engage in international emissions trading is dependant on the party meeting certain eligibility requirements. These include requirements to have in place a national system for the estimation of emissions; to submit annual estimates of emissions and to maintain a specified level of reserve emission instruments within the party’s national registry. 114 The Kyoto Protocol permits the trade of emission instruments by private entities where they are authorised to trade on behalf of a State. 115 In this case, the State remains ultimately responsible for compliance with its obligations and with the pre-requisites for eligibility to trade. 116
Whether a party is eligible to trade is determined by the Facilitative Branch of the Compliance Committee and is communicated to the UNFCCC Secretariat. In the event of a proposed private or public transaction of allowances between registries, the ITL verifies the validity of the transactions prior to allowing them
114 The requirements specify that ‘each Party included in Annex I shall maintain, in its national registry, a commitment period reserve which should not drop below 90 per cent of the Party’s assigned amount calculated pursuant to Article 3, paragraphs 7 and 8, of the Kyoto Protocol, or 100 per cent of five times its most recently reviewed inventory, whichever is lowest….The commitment period reserve shall consist of holdings of ERUs, CERs, AAUs and/or RMUs for the relevant commitment period which have not been cancelled in accordance with decision 13/CMP.1.’ This restriction does not apply to the transfer of ERUs for JI projects under Article 6 of the Kyoto Protocol. UNFCCC ‘Decision 11/CMP 1: Modalities, Rules and Guidelines for Emissions Trading under Article 17 of the Kyoto Protocol, Annex: Modalities, Rules and Guidelines for Emissions Trading under Article 17 of the Kyoto Protocol’, (FCCC/KP/CMP/2005/8/Add 2) at [6]-[11]. 115 UNFCCC, ‘Decision 3/CMP.1’, n57, [2]. 116 UNFCCC, Decision 11/CMP.1, n114, [5].
133 to proceed. 117 The ITL is an automated system which checks for discrepancies in the transaction including, for example, checking whether the selling party is eligible to trade on the market. In the event of an identified discrepancy by this automated system, such as the ineligibility of a State to trade, the transaction will be cancelled. 118 Any resulting losses to transacting parties, from the cancellation, will prima facie lie where they fall and affected entities will have to rely on contractual provisions and national administrative law principles to
address any resulting inequities. 119
A great deal of faith appears to have been placed in the infallibility of this software to detect discrepancies and to prevent ineligible transactions from proceeding. 120 Once the confirmation message has been sent from the ITL to the national registry, all processes will be considered final. 121 No directions have been issued as to the financial consequences from server faults or other failures of this system and these matters will have to be addressed on a case by case basis.
The international climate regime has adopted an umbrella arrangement and superimposed an emissions trading market above the existing domestic legal systems. In this approach, the climate change regime does not directly regulate at a local level, no role is established for local scheme administration and domestic laws remain unaffected. However, the international carbon market has acted as a catalyst for the emergence of a range of domestic and regional carbon trading schemes. To achieve the optimal performance of the international climate market,
117 UNFCCC, ‘Decision 13/CMP.1: Modalities for the Accounting of Assigned Amounts under Article 7, paragraph 4, of the Kyoto Protocol: Annex II: Registry Requirements’ (FCCC/KP/CMP/2005/8/Add.2), section D [38]. 118 Ibid, Section D [43]. 119 The lack of definition regarding liability places great emphasis on the drafting of appropriate warranties and indemnities in the contractual agreements to avoid reliance on local laws to resolve liability issues. 120 Such servers will be subject to the same risks and weaknesses as other online servers including, for example, risks of fraud and unauthorised access. 121 Anthony Hobley and Peter Hawkes, 'GHG Emissions Trading Registries' in David Freestone and Charlotte Streck (eds), Legal Aspects of Implementing the Kyoto Protocol Mechanisms: Making Kyoto Work (2005) Oxford, Oxford University Press, 127 at 140.
134 there should be a large number of players and volumes of trade. Accordingly, it was envisaged that these emerging trading schemes would establish linkages to form a compatible and optimally efficient multi-national, global, carbon market. However, not all of these emerging carbon trading schemes are compatible with the key design features of the climate market and the climate change regime fails to dictate the form and content of those domestic market systems.
The weakness of this regulatory approach lies in the absence of clear and consistent regulation, across domestic jurisdictions, in imposing individual duties to reduce emissions and individual rights to trade in compatible emission instruments. Ironically, it is this flexibility in domestic implementation that will ultimately undermine the operation of the climate change regime. Consequently, the effectiveness of the international climate market, and its ultimate evolution into a multi-national carbon market, will succeed or fail on the basis of those
domestic legal systems. 122
DEFICIENCIES IN THE MONITORING AND ENFORCEMENT OF THE INTERNATIONAL REGIME
Compliance and enforcement is an essential part of ensuring the environmental integrity and credibility of international environmental agreements and for securing ongoing player confidence in the international climate market. 123 The Vienna Convention on the Law of Treaties expresses the international maxim pacta sunt servanda , that is that each treaty in force is binding upon the parties
122 Legal issues in the operation of the multi-national global carbon market are assessed in Chapter Seven. 123 Tom Tietenberg et al, 'International Rules for Greenhouse Gas Emissions Trading: Defining the principles, modalities, rules and guidelines for verification, reporting and accountability' (UNCTAD/GDS/GFSB/Misc.6, United Nations Conference on Trade and Development, 1999) at 84.
135 and must be performed by them in good faith . 124 International treaties present unique problems for regulators in ensuring compliance as they must ‘balance the need to respect sovereignty with the need to promote compliance.’ 125 The now infamous quote of Professor Henkin describes the compliance behaviours of nation States as follows ‘almost all nations observe almost all principles of international law and almost all of their obligations almost all of the time.’126 However, this statement has been criticised by one commentator who submits that estimations of compliance are systematically overstated and that Henkin’s comment is ‘surely premature and probably exaggerated’. 127
A number of factors have been identified as impacting on the potential compliance of a State party to international agreements and conventions. These include State financial, administrative and technological capacities as well as differing interpretations as to the meaning of treaty obligations. 128 Ambiguity in the provisions of the treaty is also a prime concern in impeding cohesive implementation, exacerbating transaction costs associated with compliance and in making allegations of violation more difficult to prove. 129 As commented:
the incertitude and indeterminacy of most treaty texts is notorious and frequently deliberate - consensus often being attainable only at the price of ‘constructive ambiguity’. 130
124 Vienna Convention on the Law of Treaties , U.K.T.S. 58 (1980); (1969) 63 A.J.I.L. 875 (opened for signature 22 May 1969)(entered into force 1980). Accession by Australia 13 Jun 1974. Article 26. 125 Tietenberg et al, n123, 91. 126 Louis Henkin, How Nations Behave: Law and Foreign Policy (2 ed, 1979) New York, Praeger at 47. 127 Peter M. Haas, 'Choosing to Comply: Theorizing from International Relations and Comparative Politics' in Dinah Shelton (ed), Commitment and Compliance: The Role of Non-Binding Norms in the International Legal System (2000) New York, Oxford University Press, 43 at 44. 128 Ronald B. Mitchell, 'Compliance Theory: an Overview' in James Cameron, Jacob Werksman and Peter Roderick (eds), Improving Compliance with International Environmental Law (1996) London, Earthscan Publications, 3 at 12-13. 129 Peter H Sand, 'Institution-building to Assist Compliance with International Environmental Law: Perspectives 56(3) Heidelberg Journal of International Law 774 (1996)' in Durwood Zaelke, Donald Kaniaru and Eva Kruzikova (eds), Making Law Work: Environmental Compliance and Sustainable Development: Volume 1 (2005) London, Cameron May, 209 at 333. 130 Ibid.
136 This is particularly so under the UNFCCC which contains a very broad obligation to stabilise emissions at an unspecified level, namely, the level which will prevent dangerous anthropogenic interference with the climate system. No definition was given to assist in identifying the threshold for non-compliance with this duty. The COP is empowered to review the implementation of the UNFCCC but it has not been empowered to enforce its implementation. 131 Parties in dispute regarding the interpretation or application of the UNFCCC can merely request the creation of a conciliation commission to make a recommendatory award. 132
In contrast, the Kyoto Protocol does establish a relatively sophisticated process for monitoring compliance with the rules and obligations by nation States participating in the regime. The monitoring and enforcement mechanisms under the Kyoto Protocol have built upon the model established under the Montreal Protocol on Substances that Deplete the Ozone Layer. 133 The Compliance Committee under the Kyoto Protocol functions through a Plenary, a Bureau, a Facilitative Branch and an Enforcement Branch. 134
Under Article 18 of the Kyoto Protocol, the MOP is empowered to approve appropriate and effective procedures and mechanisms to determine and address cases of non-compliance including through the development of an indicative list of consequences taking into account the cause, type, degree and frequency of non-compliance.
131 Parties were able to elect, at the time of deposit of the instrument of ratification, to recognise the compulsory jurisdiction of the ICJ under Article 14.2 of the UNFCCC, n2. 132 UNFCCC, n2, Article 14.6. 133 Agreed at Montreal, 16 September 1987, 26 International Law Materials 1550 (1987) (entered into force 1 January 1989). The features of that international regime are discussed in Chapter Two. 134 UNFCCC, ‘Decision 27/CMP. 1: Procedures and Mechanisms Relating to Compliance under the Kyoto Protocol, Annex: Procedures and Mechanisms Relating to Compliance under the Kyoto Protocol’, (FCCC/KP/CMP/2005/8/Add 3) section 2 at [2].
137 Parties are required to establish national systems for estimating their greenhouse gas emissions and removals by sinks and must submit regular National Communications outlining those estimates. 135 The submission of these reports is a pre-requisite to engaging in trade in the international climate market under the Kyoto Protocol. It is also used to demonstrate progress in achieving the implementation of the emission reduction obligations, and other duties, under the climate change regime. The effectiveness of the reporting obligations, as part of the monitoring and enforcement of the regime, is dependent on the quality and timeliness of the submission of national communications by the parties. The plenary to the Compliance Committee has noted with concern that a significant number of national communications have not been submitted in a timely manner
with some being more than twenty months overdue. 136 The powers of the
Compliance Committee in relation to such tardiness are unclear. 137 The review of national communications by expert teams is also crucial to the monitoring
process. 138 However, the Compliance Committee has warned the parties that reduced resourcing and lack of proper expertise and training of experts, will all
undermine the effective functioning of that monitoring process. 139
The Facilitative Branch of the Compliance Committee is responsible for providing advice and facilitation to parties in implementing the Kyoto Protocol and for promoting compliance by the parties. 140 The role of the Facilitative Branch is to act as an early warning system and to assist parties which have the potential to be in non-compliance with their obligations. This body is specifically aimed at addressing non-compliance through inadvertence resulting from lack of institutional or financial capacities and to provide clarification regarding the
135 Kyoto Protocol, n4, Articles 5 and 7. 136 UNFCCC, 'Compliance Committee Facilitative Branch: Fifth Meeting: Report on the Meeting' (6 September 2007, Bonn)(CC/FB/5/2007/2), Other Matters. UNFCCC, 'CMP 3: Annual Report of the Compliance Committee to the Conference of the Parties Serving as the Meeting of the Parties to the Kyoto Protocol' (FCCC/KP/CMP/2007/6, 26 September 2007), at III, [22]. See also UNFCCC, 'Decision 5/CMP. 3: Compliance under the Kyoto Protocol'(FCCC/KP/CMP/2007/9/Add.1). 137 UNFCCC, 'CMP 3’, n136, [22]. 138 Kyoto Protocol, n4, Article 8. 139 UNFCCC, 'CMP 3’, n136, [23]. 140 UNFCCC, ‘Decision 27/CMP. 1’, n134, section 4 at [4].
138 interpretation and application of treaty principles. 141 The MOP recently noted that there has been a decrease in the total reported aggregate greenhouse gas emissions of Annex-1 parties to the Kyoto Protocol but noted with concern that this decrease had mainly resulted from decreases in emissions by parties with economies in transition while emissions from other Annex-1 parties have continued to increase above their base year or target. 142 In the event that the emissions of the parties are not sufficiently reduced by 2012, then these parties
will fall into non-compliance with the regime. 143 The parties have agreed to a strict liability penalty to be applied by the Enforcement Branch in the event of any identified non-compliance of the parties with their emission reduction duties.144 The automatic penalty comprises of the following components:
deduction from the party’s assigned amount for the second commitment period of a number of tonnes equal to 1.3 times the amount in tonnes of excess emissions;
development of a compliance action plan; and
suspension of the eligibility to make transfers under Article 17 of the Kyoto Protocol until the party is reinstated.145
141 Ibid, section 4. Jacob Werksman, 'Designing a Compliance System for the UN Framework Convention on Climate Change' in James Cameron, Jacob Werksman and Peter Roderick (eds), Improving Compliance with International Environmental Law (1996) London, Earthscan Publications, 85 at 93-94. 142 Based on reported emissions for 2003/2004 compared to 1990 levels (or the base year as adjusted for the economies in transition). UNFCCC, 'Decision 7/CMP. 3: Demonstration of progress in achieving commitments under the Kyoto Protocol by Parties included in Annex I to the Convention' (FCCC/KP/CMP/2007/9/Add.1). 143 Parties may also acquire credits from the market to submit in compliance provided that the use of such mechanisms is supplementary to domestic reductions in emissions. At the end of the first commitment period, Annex I parties are granted 100 days following the completion of the expert review of their final annual emissions inventory to make-up any shortfall in compliance through the purchase of additional emission instruments. 144 For other instances of non-compliance, the consequences of non-compliance applied by the Enforcement Branch must be ‘aimed at the restoration of compliance to ensure environmental integrity, and shall provide for an incentive to comply’. UNFCCC, ‘Decision 27/CMP. 1’, n134, section 5, [6]. 145 UNFCCC, ‘Decision 27/CMP.1’, n134, section 15,[5]. Accordingly, the deterrence effect of these provisions is based on the assumption that the non-compliant nation will choose to continue to be a party to the Kyoto Protocol for the second commitment period.
139 This determinative mechanism was designed to minimise the discretion of the compliance body to determine the non-compliance ramifications for each party. In reality, a certain level of discretion is involved in determining whether a party is, in fact, non-compliant with its obligations. This determination will rely, to a large extent, on the analysis of information provided by the parties in their national reports. These reports are based predominantly on indirect estimates of emissions by sources and each of those estimates will be subject to varying levels of scientific uncertainty. The presence of significant rates of scientific uncertainty in these estimates will play a significant part in any determination of non-compliance especially given that the required emission reductions are themselves only 6-8 per cent of reported 1990 emissions. Accordingly, the Enforcement Branch will possess some discretion in determining the level of non-compliance and the actual tonnage of carbon dioxide equivalent repayable by the non-compliant party. This strict liability approach means that the Kyoto Protocol does not provide graded sanctions to address varying types of non- compliance. 146 Non-compliance may vary from deliberate and reckless non- compliance to inadvertent non-compliance resulting from, for example, natural disasters, Acts of God and other force majeure events which may, in fact, be caused by the impacts of climate change. Despite the agreement of the parties to these penalties, this failure to import discretionary considerations of reasonableness and fairness, into the determination of penalties for non- compliance, has the potential to emerge as a major point of contention with non- compliant parties.
The Kyoto Protocol is exceptional in applying strict penal mechanisms to States for non-compliance with an international environmental agreement. Unfortunately, those penalty provisions have been undermined by the failure of the MOP to comply with its own agreed amendment procedures. The Kyoto Protocol required these penalty provisions to be adopted through an ordinary session of the MOP and the deposit of instruments of acceptance of the
146 See Edith Brown Weiss, 'Conclusions: Understanding Compliance with Soft Law' in Dinah Shelton (ed), Commitment and Compliance: The Role of Non-Binding Norms in the International Legal System (2000) New York, Oxford University Press, 535 at 544 where the author emphasises the importance of graduated sanctions.
140 amendment from at least three quarters of the parties to the Protocol. 147 Instead, they were simply adopted by a decision of the parties. 148 Consequently, there are concerns that these provisions are not legally binding on the parties and could become a significant issue of contention as the Enforcement Branch seeks to enforce these provisions. 149 One commentator also asserts that the imposition of this compliance mechanism will, in fact, have a greater adverse welfare affect on compliant countries that it will on the non-compliant party due to the impact on the international price of greenhouse gas emission allowances.150 Finally, the regime fails to impose any deterrent on parties discontinuing their membership to the regime. Accordingly, a non-compliant party may simply elect to withdraw from the Kyoto Protocol or UNFCCC or both, after providing one year’s notice, without incurring any penalty. 151
On an objective reading, the normative value of the climate change regime is highly questionable. The emission reduction provisions of the UNFCCC are deliberately drafted in broad, ambiguous terms with heavy emphasis on duties ‘to consider’, ‘take into account’ and ‘be guided by’ certain principles. In particular, identifying the threshold for non-compliance with the overriding obligation of the UNFCCC is problematic. The threshold for dangerous anthropogenic interference with the climate system is largely indeterminate and the subject of ongoing political and scientific debate. The obligations of the Kyoto Protocol are worded in slightly stricter terms, with agreed repercussions for non-compliance, and appear to have greater normative value. However, the small quantum of specified emission reductions in the treaty actually acts to undermine any argument that, under the UNFCCC, States must significantly reduce their
147 Kyoto Protocol, n4, Article 20. 148 Article 18 of the Kyoto Protocol, n4, provides that measures with binding consequences may only be adopted through an amendment to the Protocol itself. 149 Yamin and Depledge, n38, 397; Jon Hovi, Olav Schram Stokke and Geir Ulfstein, 'Introduction and Main Findings' in Olav Schram Stokke, Jon Hovi and Geir Ulfstein (eds), Implementing the Climate Regime: International Compliance (2005) London, Earthscan, London, Earthscan at 5. 150 Jon Hovi, Olav Schram Stokke and Geir Ulfstein, 'Introduction and Main Findings' in Olav Schram Stokke, Jon Hovi and Geir Ulfstein (eds), Implementing the Climate Regime: International Compliance (2005) London, Earthscan, London, Earthscan at 5. 151 UNFCCC, n2, Article 25. Kyoto Protocol, n4, Article 27. This provision applies three years from the date on which the UNFCCC or Kyoto Protocol, respectively, entered into force. A party cannot withdraw from the UNFCCC and remain a party to the Kyoto Protocol.
141 emissions in order achieve the objective of avoiding adverse anthropogenic interference with the climate system.
The Vienna Convention on the Law of Treaties contains a number of principles that apply to the interpretation of international agreements and provides that:
a treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose. 152
However, these provisions are unlikely to provide much clarification or certainty in the climate change context. Even if this difficulty were not present, there are no specific provisions addressing non-compliance within the UNFCCC. As a result, enforcement of the UNFCCC falls under general international law principles. Under Article 60 of the Vienna Convention on the Law of Treaties , a material breach of a multilateral treaty by one party, entitles the other parties, by unanimous agreement, to suspend the operation of the treaty in whole or in part or to terminate it. 153 However, this provision is of little assistance in relation to climate change where the overriding objective is to keep the treaty on foot and to achieve actual emission reductions. The breach of a multilateral treaty by a State party constitutes a legal injury, that is an injury to a collective legal right or interest, to all other State parties and redress for may be found before the International Court of Justice (ICJ). 154 This is subject to establishing a
152 Vienna Convention on the Law of Treaties, n124, Article 31.1. Recourse may be had to the supplementary means of interpretation including the preparatory work of the treaty when the meaning is ambiguous or obscure or leads to a result that is manifestly absurd or unreasonable, Article 32. 153 Ibid, Article 60(2). A material breach of a treaty includes a repudiation of the treaty not sanctioned by the present Convention or the violation of a provision essential to the accomplishment of the object or purpose of the treaty. Article 60(3). 154 Barcelona Traction Case , Barcelona Traction and Light and Power Co , ICJ Reports (1970) 3 at 32. Jonathan Charney, 'Third State Remedies for Environmental Damage to the World's Common Spaces' in Francesco Francioni and Tullio Scovazzi (eds), International Responsibility for Environmental Harm (1991) London, Graham & Trotman, 149 at 152.
142 sufficiently tangible injury to establish standing and assert a claim before the ICJ and to seek reparation for the harm done. 155
Consequently, despite the ratification of these obligations under both the UNFCCC and the Kyoto Protocol by most nations, customary State practice appears to affirm the global acceptance of continued, unabated greenhouse gas emissions which continue to elevate year by year without the instigation of any enforcement action by other nations.
A Due Process and Non-Compliant State Parties
In the event of an unresolved dispute regarding the implementation or interpretation of the UNFCCC and Kyoto Protocol, the climate change regime provides that, at the time of ratification, parties may declare whether they recognise the jurisdiction of the ICJ and/or arbitration in accordance with procedures adopted by the COP. 156 The jurisdiction of the ICJ was not recognised in any instruments of ratification to the climate change regime but a handful of States did recognise the procedures of arbitration to be developed by the COP. 157 The COP and MOP are yet to approve such dispute resolution procedures but it is anticipated that the parties will eventually adopt procedures which refer to the Permanent Court of Arbitration; Environmental Arbitration and Conciliation Rules.
The Kyoto Protocol seeks to provide procedural protection, similar to due process in domestic judicial hearings, for those parties who may be found to be
155 Jonathan Charney, 'Third State Remedies for Environmental Damage to the World's Common Spaces' in Francesco Francioni and Tullio Scovazzi (eds), International Responsibility for Environmental Harm (1991) London, Graham & Trotman, 149 at 159. 156 UNFCCC, n2, Article 14, Kyoto Protocol, n4, Article 19. 157 UNFCCC ‘Status of Ratification’, http://unfccc.int/files/essential_background/convention/status_of_ratification/application/pdf/unfccc_ conv_rat.pdf at 11 June 2008.
143 non-compliant under the Protocol.158 As noted, where a party falls into non- compliance with the Kyoto Protocol, the Compliance Branch is responsible for applying the consequences of non-compliance. State parties are also able to approach the Enforcement Branch to consider the potential non-compliance of other State parties. The potentially non-compliant party has a right to be represented before a hearing of the Enforcement Branch and to have access to and respond to information provided by others. 159
The Enforcement Branch is composed of members from parties to the Kyoto Protocol including one member from each of the five regional groups of the United Nations, one member from the small island developing States, two developed country members (Annex-1) and two developing country members (non-Annex-1). 160 Each member of the Enforcement Branch must serve in his or her individual capacity and must act in an independent and impartial manner. 161 In reaching its decision, the Enforcement Branch must seek to reach consensus. If this does not occur then it may reach a decision by a three-quarters majority of those members present and voting provided that decision amounts to a double majority of both Annex-1 and non Annex-1 members. 162
In 2008, Greece was found to be in non-compliance with its obligations under the Kyoto Protocol. 163 The non-compliance related to the requirement to have in place a national system for the estimation and reporting of emissions under
158 Jon Hovi, Olav Schram Stokke and Geir Ulfstein, 'Introduction and Main Findings' in Olav Schram Stokke, Jon Hovi and Geir Ulfstein (eds), Implementing the Climate Regime: International Compliance (2005) London, Earthscan, at 3. 159 UNFCCC, Decision 27/CMP. 1' n134, Section 9. UNFCCC, Decision 4/CMP.2: ‘Compliance Committee, Annex: Rules and Procedures of the Compliance Committee of the Kyoto Protocol’ (FCCC/KP/CMP/2006/10/Add.1), section 10. 160 UNFCCC, Decision 27/CMP. 1' n134, section 5, [1]. In electing members of the Enforcement Branch, the MOP must be satisfied that the members have ‘legal experience’. This is not expanded upon. 161 UNFCCC, Decision 4/CMP.2, n159, Section 3. This obligation of impartiality applies to all members of the Compliance Committee including the Facilitative and Enforcement Branches. 162 UNFCCC, Decision 27/CMP. 1 ', n134, Section 2, [9]. 163 UNFCCC, 'Enforcement Branch of the Compliance Committee: Final Decision' (17 April 2008, CC-2007-1-8/Greece/EB) at [18].
144 Article 5 of the Kyoto Protocol and issues regarding the maintenance of institutional and procedural arrangements; arrangements for the technical competence of staff; and the capacity for timely performance of the national system. 164 The question of implementation was referred to the Enforcement Branch by the UNFCCC Secretariat following the receipt of a report from the expert review team. 165 The hearing of the matter was held as part of the meeting of the Enforcement Branch and comprised of submissions from Greece and expert evidence from two experts who formed part of the expert review team and two experts from the UNFCCC roster. 166
Following the hearing and written submissions by Greece, during which Greece presented information on its transition to a new national system, the Enforcement Branch of the Compliance Committee noted that the information submitted and presented had not been sufficient for the Enforcement Branch to conclude that the question of implementation had been fully resolved and indicated that additional information was required. 167 It also noted that ‘a further in-country review of Greece’s new national system, in conjunction with a review of an annual inventory report generated by this national system, is required for the enforcement branch to assess present compliance with the guidelines’. 168 Despite this absence of adequate information on which to make a determination, following deliberations in private, the branch made an interim decision that Greece was in non-compliance with its obligations.
Further submissions were made by Greece which asserted that: Greece had not been treated consistently by the in-country expert review teams; other national systems had identified deficiencies yet no questions of implementation had been raised by those expert review teams; and the EU system (of which Greece is a
164 Ibid, [5], [17]. 165 Ibid, [1]. 166 Ibid, [7]. 167 Ibid, [16]. 168 Ibid.
145 part) had been found to be in compliance and able to produce reliable
inventories.169 Greece also noted the inconsistency between the statement of the Enforcement Branch that an in-country review was necessary to determine whether Greece was compliant and the immediate decision of the Branch that
Greece was, in fact, non-compliant. 170
A subsequent meeting of the Enforcement Branch made a final decision declaring Greece to be non-compliant. No reference was made in the decision to Greece’s allegations of inequitable treatment by the expert review teams. The Enforcement Branch directed Greece to prepare a compliance action plan that demonstrated measures to ensure the maintenance of the national system through transitions and support an in-country review of the new national system by the expert review team.171 Until such time as the Enforcement Branch deemed this question of implementation to have been properly resolved, Greece would not be eligible to participate in the flexibility mechanisms under the Kyoto Protocol. 172
This initial application of the adjudicative authority of the climate change regime demonstrates the tensions which will emerge regarding the roles of the regime in facilitating the use of the market mechanisms to achieve emission reductions and regulating to ensure the environmental integrity of these instruments and the processes for monitoring and enforcement of the regime. In its current form, the emphasis of the parties appears to be placed on the former role of the regime rather than the latter which will undermine the deterrent effect of the enforcement provisions. This, in turn, requires a strong, independent, well-resourced enforcement body to counter such lethargy and to resolve instances of non- compliance with well-informed and considered directions to the parties. In its
169 UNFCCC, 'Enforcement Branch of the Compliance Committee: Further Submission of Greece Under Section X, Decision 27/CMP1' (9 April 2008, CC-2007-1-7/Greece/EB) at 1,3,4,5. 170 This raises questions regarding the standard of proof to be applied in these proceedings and who bears the burden of proving guilt or innocence. Ibid, 1. 171 No reference was made in the decision regarding whether the same experts would serve on this ‘in country’ review team. UNFCCC, 'Enforcement Branch of the Compliance Committee: Final Decision' (17 April 2008, CC-2007-1-8/Greece/EB) at [18]. 172 Ibid.
146 current context, it is not clear that the Enforcement Branch can meet that standard. Moreover, the Enforcement Branch is not the ultimate adjudicative authority under the current climate change regime. Recourse is permitted from a decision of the Enforcement Branch back to the MOP. If it is shown that due process has not been followed by the hearing of the Enforcement Branch, the MOP can act as an appeal body and override the decision of the Enforcement Branch provided it obtains a three-quarters majority vote. 173 Under the rules of procedure, the MOP must not reach a decision on the merits of the matter but it may agree to return the matter to the Enforcement Branch for a new determination. 174 Even a cursory review of these provisions reveals that these so- called appeal processes are fraught with legal difficulties, particularly given that the MOP is not an independent, impartial arbitrator and there appears to be no requirement to alter the constitution of the Enforcement Branch between the initial and subsequent adjudicative determinations.
B The Treatment of Private Participants
In terms of the protection of procedural rights, the climate change regime acknowledges the rights to due process of State parties in a reasonably comprehensive manner. A critical flaw in the decision-making and appeal processes is found in the climate change regime’s treatment of non-State entities. No dispute resolution mechanisms are provided for those private individuals and entities aggrieved by decisions made under the regime. These persons could potentially include private participants authorised to participate in CDM or JI activities, non-party investors, DOEs, AIEs, legal entities involved in the transfer of allowances and persons directly or indirectly affected by the implementation of projects within host countries. These private entities do not have the protection and support of ‘the intermediation of their national governments’ nor
173 . An appeal must be lodged within 45 days of receipt of the decision of the Enforcement Branch and will be considered at the following MOP (usually held annually). If an appeal is granted by the MOP, the initial decision will stand pending that appeal. Consequently, a party could potentially be held in non-compliance, and unable to trade, for a considerable period of time. UNFCCC, Decision 27/CMP. 1’ n134, section 11 174 Ibid.
147 do they have the protection of constitutional or administrative law rights present
in a domestic setting. 175 This lack of regulatory and legal certainty regarding rights of fairness and due process will undermine private player confidence in the market mechanisms of the climate change regime and prevent its effective
operation. 176 Currently, it will be necessary for private persons and entities to seek relief in domestic courts outside of the climate change regime which could potentially result in a range of inconsistent interpretations and judicial determinations, at a national level, regarding the operation of the international
legal regime. 177 Consequently, it is critical that the regime is reformed to provide private entities engaged in the flexibility mechanisms with the same rights of redress as those of State parties under the climate change regime.
INTERNATIONAL STATE RESPONSIBILITY AND CLIMATE HARM
The UNFCCC and Kyoto Protocol do not address liability issues from climate- related damage so, by default, this will be governed by existing international law principles. However, the application of this doctrine of international law principles to the complexities of attributing responsibility for climate change harm is uncertain.
A State may be liable for transboundary damage where it has acted without due care or diligence, in breach of a treaty or contrary to some prohibition on its activities. 178 This principle of State responsibility for transboundary harm was first articulated in the now infamous Trail Smelter case which addressed a
175 Streck, n9, 95. 176 Ibid. 177 Ibid, 98. 178 Alan Boyle, 'Globalising Environmental Liability: The Interplay of National and International Law' (2005) 17(1) Journal of Environmental Law 3 at 3.
148 Canadian smelting operation in Canada which caused injury to land and crops in America. 179 The Tribunal held that:
no State has the right to use or permit the use of its territory in such a manner as to cause injury by fumes in or to the territory of another or the properties of persons therein, when the case is of serious consequence and the injury is established by clear and convincing evidence. 180
This principle has been the subject of little judicial exposition. In the Corfu Channel case , Albania was found responsible for the harm caused from British warships being struck by mines in Albanian waters. 181 The ICJ identified a due diligence obligation of nations States and commented that it is ‘every State’s obligation not to allow knowingly its territory to be used for acts contrary to the rights of other States’.182 These principles were affirmed in the Lac Lanoux case which addressed the use of an international watercourse. 183 The tribunal commented that a State must give sufficient consideration to the interests of all affected States when undertaking activities. 184
The principle of sic utere tuo ut alienum non laedas is another established principle of international customary law 185 and is incorporated within treaties and international declarations including Principle 21 of the 1972 Stockholm Declaration which states that:
179 Trail Smelter Arbitration, United States v Canada (1931-1941) 3 RIAA 1905; (1939) 33 AJIL 182; (1941) 35 AHIL 716. 180 Trail Smelter Arbitration , ibid, 1965. 181 Corfu Channel case , Great Britain v Albania , ICJ, Reports (1949) 3. 182 Corfu Channel case , ibid, 22. 183 Lac Lanoux case , Spain v France, UNRIAA, XII, 281; 24 ILR 101 (English version). 184 Lac Lanoux case , ibid, 315-317. 185 Riccardo Pisillo-Mazzeschi, 'Forms of International Responsibility for Environmental Harm' in Francesco Francioni and Tullio Scovazzi (eds), International Responsbility for Environmental Harm , International Environmental Law and Policy (1991) London, Graham & Trotman, 15 at 15; Jonathan Charney, 'Third State Remedies for Environmental Damage to the World's Common Spaces' in Francesco Francioni and Tullio Scovazzi (eds), International Responsibility for Environmental Harm (1991) London, Graham & Trotman, 149 at 175; compare Karl Zemanek, 'State Responsibility and Liability' in W. Lang, H. Neuhold and K. Zemanek (eds), Environmental Protection and International Law (1991) London, Graham & Trotman, 187 at 187 who disputes the customary law status of this principle.
149 States have, in accordance with the Charter of the United Nations and the principles of international law, the sovereign right to exploit their own natural resources pursuant to their own environmental policies and the responsibility to ensure that activities within their jurisdiction or control do not cause damage to the environment of other states or of areas beyond the limits of national jurisdiction. 186
Accordingly, it is now part of the corpus of international law relating to the environment that each State must prevent harm to its neighbours and the global commons and must take appropriate steps to minimise the risk of foreseeable harm. 187 The standard of due diligence required to reduce or minimise the harm is not clearly defined in international law. 188 With respect to climate change, reasonable due diligence measures could be interpreted to extend to the mitigation of greenhouse gas emissions and increases in the capacity of domestic carbon sinks. 189 This obligation to take steps to reduce or minimise the risk of climate change harm would apply to all nations regardless of whether or not they are parties to the UNFCCC or the Kyoto Protocol. If climate change related harm does occur, then the State at fault should be required to compensate the other nations for their resulting losses. Recoverable environmental damages from a material injury can extend from the loss of resources of assessable economic value to resources of intrinsic value such as biological diversity and ecosystem function. 190
186 United Nations Conference on the Human Environment, 'Declaration of the United Nations Conference on the Human Environment (UN Doc A/CONF.48/14)' (16 June 1972), Principle 21. 187 Advisory Opinion on the Threat or Use of Nuclear Weapons, (1996) International Court of Justice Reports 226 at 241 [29]. 188 Alan Boyle, n178, 7. 189 Roda Verheyen, Climate Change Damage and International Law: Prevention Duties and State Responsibility, Developments in International Law: Volume 54 (2005) Leiden, Martinus Nijhoff Publishers at 315. 190 However, the injured State must be able to establish a causative link between the acts of the responsible nation and the losses suffered. Alan Boyle, 'Reparation for Environmental Damage in International Law: Some Preliminary Problems' in Michael Bowman and Alan Boyle (eds), Environmental Damage in International and Comparative Law (2002) Oxford, Oxford University Press, 17 at 20. See also Michael Bowman, 'Biodiversity, Intrinsic Value and the Definition and Valuation of Environmental Harm' in Michael Bowman and Alan Boyle (eds), Environmental Damage in International and Comparative Law: Problems of Definition and Valuation (2002) Oxford, Oxford University Press, 41 and Louise de La Fayette, 'The Concept of Environmental Damage in International Liability Regimes' in Michael Bowman and Alan Boyle (eds), Environmental Damage in International and Comparative Law (2002) Oxford, Oxford University Press, 149 .
150
Accordingly, the practical operation of these international principles to the issue of climate change remains unclear and it cannot be asserted that ‘states are fully responsible in international law for damage to neighbouring states.’ 191 Indeed, it has been commented that reliance on State responsibility to resolve environmental degradation ‘has serious deficiencies’ 192 and should be ‘no more than residual sources of redress’. 193 Moreover, a detailed consideration of the application of these principles to climate change harm concluded that, given the uncertainty in the application of these principles, States should instead negotiate a comprehensive scheme covering ‘the costs of adaptation to the impacts of climate change and any claims for residual damage occurring as a result of climate change’. 194 Consequently, the practical application of these principles in the context of transboundary harm caused by historic greenhouse gas emissions and global warming is highly problematic. Any such action for transboundary harm must address the following challenging legal and evidentiary issues:
identifying the responsible wrongdoer for the injury caused by their greenhouse gas emissions and adverse impacts of climate change;
emissions accumulate in the atmosphere until the sink capacity of the Earth’s atmosphere is exceeded and climatic changes occur. 195 It will be necessary to identify the point in time at which the cumulative emitting acts of the defendant State amounted to a wrongful act. It is of some assistance that the State is a long-term legal fiction and can be held accountable for wrongful acts within its entire lifespan; 196
191 Alan Boyle, n178, 6. 192 Jonas Ebbesson, Compatibility of International and National Environmental Law (1996) London, Kluwer Law International at 37. 193 Alan Boyle, n178, 8. 194 Roda Verheyen, n189, 364. 195 IPCC, WMO and UNEP, 'Climate Change: The IPCC Scientific Assessment, Report Prepared for Intergovernmental Panel on Climate Change by Working Group I' (Cambridge University Press, 1990) at xi. 196 Alexandre Kiss, 'Present Limits to the Enforcement of State Responsibility for Environmental Damage' in Francesco Francioni and Tullio Scovazzi (eds), International Responsibility for Environmental Harm , International Environmental Law and Policy (1991) London, Graham & Trotman, 3 at 5.
151 establishing fault ; 197 establishing harm or damage ; 198 and establishing a causative link between the wrongful acts of the State and the injury suffered; 199
issues of jurisdiction and the need for all indispensable parties to submit to the jurisdiction of the ICJ before the matter may be heard; 200 and
adequacy of available remedies to provide redress for the continuing injury of greenhouse gas emissions and the impacts of climate change.
In an effort to provide greater certainty and consensus to international liability, the Draft Articles on the Responsibility of States for Internationally Wrongful Acts (Draft Articles) were adopted by the International Law Commission in August 2001. 201 Although not a source of international law, these principles re- state much of the law on State responsibility and provide a forum for further discussion of the potential for climate change liability. 202 These principles assert that ‘every intentionally wrongful act of a state entails the international responsibility of that state’. 203 The wrongful act must be carried out by an organ or agent of the State not by a private entity. A wrongful act occurs when conduct consisting of an action or omission that is attributable to the State under international law; and constitutes a breach of an international obligation of the State. 204
197 Alan Boyle, n178, 3. 198 Jonas Ebbesson, n192 , 36. 199 The challenges in establishing causation are considered in Chapter Six. 200 Monetary Gold Removed From Rome (Italy v France, Great Britain, USA) 1954 International Court of Justice Reports 19 at 32 F; East Timor (Portugal v Australia) 1995 International Court of Justice Reports 90 at 102; Statute of the International Court of Justice (United Nations Charter), Article 47. 201 Draft Articles on the Responsibility of States for Internationally Wrongful Acts 2001, Article 1. The General Assembly, in resolution 56/83 of 12 December 2001 and 59/35 of 2 December 2004 took note of the articles on responsibility of States for internationally wrongful acts and commended them to the attention of Governments without prejudice to the question of their future adoption or other appropriate action. 202 For a comprehensive discussion of these principles see Roda Verheyen, n189, 234. 203 Draft Articles on the Responsibility of States for Internationally Wrongful Acts , n201, Article 1. 204 Ibid, Article 2.
152 There is a breach of an international obligation by a State when an act of that State is not in conformity with what is required of it by that obligation, regardless of its origin or character. 205 However, an act of a State does not constitute a breach of an international obligation unless the State is bound by the obligation in question at the time the act occurs. 206 Accordingly, the point in time for determining whether there was an obligation for establishing State responsibility is the time at which the greenhouse gas emitting activities took place rather than when the harm occurred. 207 The question will be whether the State was in compliance with international law at the point in time at which the greenhouse gas emitting activity took place.
The status of international law principles regarding liability for injurious acts that conform to international law is uncertain. 208 It is possible that the parties to the climate change regime would be able to rely on their compliance with their emission reduction obligations under those agreements in defending any claims against them. Consequently, a key issue will be whether the State was strictly in compliance with its obligations under the UNFCCC to avoid dangerous anthropogenic interference with the climate system.
In addition, the Draft Articles make provision for injury caused as a result of force majeure or necessity. Force Majeure is addressed as follows:
1. The wrongfulness of an act of a State not in conformity with an international obligation of that State is precluded if the act is due to force majeure, that is the occurrence of an irresistible force or of an unforeseen event, beyond the control of the State , making it materially impossible in the circumstances to perform the obligation.
205 Ibid, Article 12. 206 Ibid, Article 13. 207 Roda Verheyen, n189, 235. 208 Riccardo Pisillo-Mazzeschi, 'Forms of International Responsibility for Environmental Harm' in Francesco Francioni and Tullio Scovazzi (eds), International Responsbility for Environmental Harm , International Environmental Law and Policy (1991) London, Graham & Trotman, 15 at 31.
153 2. Paragraph 1 does not apply if:
(a) The situation of force majeure is due, either alone or in combination with other factors, to the conduct of the State invoking it; or
(b) The State has assumed the risk of that situation occurring (emphasis added). 209
It is possible that a State could argue that global warming and climate change are themselves natural phenomenon, an irresistible force or unforseen event, that acted to prevent them from avoiding dangerous anthropogenic climate change as required under the UNFCCC. However, the obligation relates primarily to the reduction of emissions which could be undertaken by the State regardless of this natural phenomenon. The excuse of necessity would also provide little assistance to States in excusing their failure to reduce emissions. With respect to acts of necessity, the Draft Articles state that necessity may not be invoked by a State as a ground for precluding the wrongfulness of an act not in conformity with an international obligation unless the act:
is the only way for the State to safeguard an essential interest against a grave and imminent peril; and
does not seriously impair an essential interest of the State(s) towards which the obligation exists, or of the international community as a whole. 210
However, this defence may be relevant if the State takes steps to adapt or mitigate the effects of climate change, to safeguard an essential interest against a grave and imminent peril, and in doing so, causes injury to another State.
An injured State may demand that there be cessation of the wrongful acts of the State.211 This is an absolute obligation with no embedded flexibility for the
209 Draft Articles on the Responsibility of States for Internationally Wrongful Acts , n201, Article 23. 210 Ibid, Article 25. 211 Ibid, Article 30.
154 manner and timing of cessation. 212 This may cause difficulties where the wrongful act is the continued emission of greenhouse gases as States are unlikely to possess the technological means to immediately cease all uses of fossil fuels and all emissions from within its national boundaries.
The injured State may be able to take countermeasures to induce another State to comply with its international obligations. 213 Where a causal link is established, States are required to provide full reparation for the injury caused (whether material or moral) by the internationally wrongful act including the provision of restitution, compensation and satisfaction. 214 In the determination of reparation, account shall be taken of the contribution to the injury by wilful or negligent action or omission of the injured State.215 Accordingly, the injured State’s own historic greenhouse gas emissions may play a significant role in the determination. Restitution requires the re-establishment of the situation that existed before the wrongful act was committed. 216 This principle of reparation for environmental damage is articulated in the Chorzow Factory case although it appears practically impossible for full reparation to be obtained in the case of greenhouse gas emissions and climate change.217 Under the Draft Articles the State is under an obligation to provide compensation to cover any ‘financially assessable damage including loss of profits insofar as it is established’. 218 A State may also be required to provide satisfaction in the form of an acknowledgement of the breach, an expression of regret or formal apology. 219
212 Roda Verheyen, n189, 242. 213 Draft Articles on the Responsibility of States for Internationally Wrongful Acts , n201, Part II. 214 Ibid, Articles 31 and 34. 215 Ibid, Article 39. 216 Ibid, Article 35. 217 Chorzow Factory Case , Permanent Court of International Justice Ser. A. No. 13 at 47. Alan Boyle, 'Reparation for Environmental Damage in International Law: Some Preliminary Problems' in Michael Bowman and Alan Boyle (eds), Environmental Damage in International and Comparative Law (2002) Oxford, Oxford University Press, 17 at 21-22. 218 Draft Articles on the Responsibility of States for Internationally Wrongful Acts , n201, Article 36. 219 Ibid, Article 37.
155 The application of these remedies to climate change related harm is highly uncertain. There are significant challenges in establishing a specific causal link between the emissions of the accused State and the harm suffered by the injured State as a result of the impacts of climate change. Moreover, the financial ramifications of climate change are potentially unlimited and could result in a windfall gain for the injured State. Accordingly, as the incidences of climate change harm increase, international agreement to specific legal principles regarding the causative linkages and distribution of responsibility for damage caused by the emission of greenhouse gases will become critical to resolving growing international tensions regarding this issue.
CLIMATE CHANGE IMPACTS AND HUMAN RIGHTS PRINCIPLES
In addition to liabilities under the principles of State responsibility, nation States with large-scale unabated greenhouse gas emissions may be in breach of international principles relating to the protection of human rights. The inter- relationship between climate change and the well being of humankind was noted by the UN General Assembly in 1988 as follows:
climate change is a common concern of humankind, since climate is an essential condition, which sustains life on earth. 220
The international community has acknowledged the following basic premises of human rights in the context of the environment:
the right to a healthy and productive life is.. an integral component of the concept of sustainable development:
220 United Nations General Assembly Resolution, ‘Protection of Global Climate for Present and Future Generations of Mankind’ 70 th Plenary Meeting, 6 December 1988 (A/RES/43/53/).
156 human beings are at the centre of concerns for sustainable development. They are entitled to a healthy and productive life in harmony with nature. 221
every State is responsible for guaranteeing the right to life:
the right to live is the right from which all other rights stem. Guaranteeing this right is the paramount duty of those in charge of all States throughout the world. 222
Universal respect for the rights of humans are specifically acknowledged in the United Nations Charter as follows:
with a view to the creation of conditions of stability and well-being which are necessary for peaceful and friendly relations among nations based on respect for the principle of equal rights and self-determination of peoples, the United Nations shall promote:
a. higher standards of living, full employment, and conditions of economic and social progress and development;
b. solutions of international economic, social, health, and related problems; and international cultural and educational cooperation; and
c. universal respect for, and observance of, human rights and fundamental freedoms for all without distinction as to race, sex, language, or religion. 223
Implied in this, is the protection of the fundamental right to an environment capable of supporting human society and the full enjoyment of human rights. 224
221 UNCED, 'United Nations Conference on Environment and Development: The Rio Declaration' ((1992) 31 ILM 874), Principle 1. 222 The Hague Declaration on the Environment , 11 March 1989, The Hague, 28 I.L.M 1308 (1989). 223 Charter of the United Nations (opened for signature 26 June 1945, San Francisco)(entry into force 24 October 1945), Chapter IX, Article 55. 224 Universal Declaration of Human Rights 1948, adopted and proclaimed by General Assembly resolution 217 A (III) of 10 December 1948.
157 The Universal Declaration of Human Rights recognises a range of rights of humans which could be undermined by the adverse effects of climate change from global greenhouse gas emissions. These include:
the right to life; 225
the right to own property and not be arbitrarily deprived of such property; 226
the right to a standard of living adequate for health and wellbeing including food, clothing, housing, medical care and necessary social services; 227
the right to realization of economic, social and cultural rights indispensable for the dignity and personality of a member of society; 228 and
the right to freely participate in the cultural life of the community.229
These are reflected in the International Covenant on Economic, Social and Cultural Rights 1966 230 and the International Covenant on Civil and Political Rights 1966 231 including:
recognition that every human being has the inherent right to life; 232
recognition of the right of everyone to the enjoyment of the highest attainable standard of physical and mental health including taking steps necessary for:
225 Ibid, Article 3. 226 Ibid, Article 17. 227 Ibid, Article 25. 228 Ibid, Article 22. 229 Ibid, Article 27. 230 International Covenant on Economic, Social and Cultural Rights 1966, 993 U.N.T.S. 3; U.K.T.S. 6 (1977), Cmnd. 6702; (1967) 6 I.L.M. 360. 231 International Covenant on Civil and Political Rights 1966, 999 U.N.T.S. 171; U.K.T.S. 6 (1977), Cmnd. 6702; (1967) 61 A.J.I.L. 870. 232 Ibid, Article 6.
158 - the reduction of infant mortality and for the healthy development of the child;
- the improvement of all aspects of environmental and industrial hygiene;
- the prevention, treatment and control of epidemic, endemic, occupational and other diseases. 233
the right to self-determination, the right to freely pursue their economic, social and cultural development and the right to take part in cultural life.234
The overriding imperative of protecting the right to life contrasts sharply with the substantial risk to human life posed by the adverse impacts of climate change. The predicted impacts of climate change include droughts, storms, flooding, loss of crops, lack of fresh water and food shortages as well as increased surface
temperatures, sea level rises and the spread of disease. 235 Developing nations are the most vulnerable to the effects of adverse climate change. Climate change is likely to have an adverse impact on their local infrastructure and traditional industry, and may deplete available fresh water, fish, crops and other food supplies, and impact upon the local social and cultural practices and
livelihoods. 236 This could lead to widespread humanitarian disasters, famine and massive population displacement resulting in an influx of ‘climate refugees’ to developed nations. Small island, low-lying coastal, and atoll States are also particularly vulnerable to climate change and are likely to be adversely affected by alterations in ecosystems, changes in precipitation, rising sea-levels and
233 International Covenant on Economic, Social and Cultural Rights , n230, Article 12. 234 International Covenant on Civil and Political Rights ,n231, Article 1; International Covenant on Economic, Social and Cultural Rights , n230, Article 15. 235 IPCC, 'Policymakers' Summary of the Potential Impacts of Climate Change, Report from Working Group II to the Intergovernmental Panel on Climate Change' (Australian Government Publishing Service, 1990) at 2-4; IPCC, 'Climate Change 2001: Synthesis Report to the Third Assessment Report of the Intergovernmental Panel on Climate Change' (Cambridge University Press, 2001) at 3,9. 236 IPCC, 'Climate Change 2001: Synthesis Report to the Third Assessment Report of the Intergovernmental Panel on Climate Change' (Cambridge University Press, 2001) at 12.
159 increased incidence of natural disasters. 237 Indeed, the sheer magnitude of the threat of climate change to the well-being of humankind has been described by one international conference as follows:
humanity is conducting an unintended, uncontrolled, globally pervasive experiment whose ultimate consequences could be second only to a global nuclear war. 238
The nation of Tuvalu in the South Pacific is one of the first islands to commence evacuation owing to sea level rises. The collection of islands has an average height of only 2 metres above sea level. 239 The land floods with each high tide
and its 11,000 residents will be evacuated by 2010. 240 For the Tuvalu community, climate change threatens a number of recognised human rights including the right to a means of subsistence; the right to an adequate standard of living; and the right to take part in cultural life. 241 The seriousness of the threat of climate change to the human rights of small island developing States led to the release of the Male’ Declaration on the Human Dimensions of Global Climate Change of the Small Island Developing States . That declaration expressed the following concern of the representatives as follows:
climate change has clear and immediate implications for the full enjoyment of human rights including inter alia the right to life, the right to take part in cultural life, the right to use and enjoy property, the right to an adequate standard of living, the right to food, and the right to the highest attainable standard of physical and mental health. 242
237 Ibid, 12. Small Island Developing States, ‘Male’ Declaration on the Human Dimensions of Global Climate Change’, Adopted at Male’ 13-14 November 2007. 238 World Conference on the Changing Atmosphere: Implications for Global Security, Toronto, Canada 27-30 June 1988 (World Meteorological Organization, 1988). 239 Apisai Lelemia Prime Minister of Tuvalu, 'A Threat To Our Human Rights: Tuvalu's Perspective On Climate Change', UN Chronicle Volume 2 2007. 240 Ibid. 241 Professor Jon Barnett, 'Climate Change and Human Rights', The Jakarta Post.com (Bali), 10 December 2007. 242 Small Island Developing States, ‘Male’ Declaration on the Human Dimensions of Global Climate Change’, Adopted at Male’ 13-14 November 2007.
160 Small developing countries affected by the adverse impacts of climate change are beginning to seek recourse against developed nations of the world. The most likely defendants are the United States of America (US) and Australia who have historically refused to acknowledge the threat of climate change and ratify the Kyoto Protocol. An example of one such claim is that of the Inuit population filed in the Inter-American Commission on Human Rights in 2005. The petition sought relief for violations of their rights resulting from global warming caused by US greenhouse gas emissions. They have asserted that the global warming impacts on the Arctic have undermined their culture and economy and thus breached their human rights.
The Inuits claim that global warming has resulted in less snow, thinner ice, less ice, later freezes and earlier, more sudden thaws in the Arctic.243 It has also resulted in:
erosion, storms, flooding…damaged Inuit property, forcing relocation in some cases and requiring many communities to develop relocation contingency plans. In addition, these impacts have contributed to decreased water levels in rivers and lakes, affecting natural sources of drinking water, and habitat for fish, plants, and game on which Inuit depend. 244
The Inuits claim that ‘the culture, economy and identity of the Inuit as an indigenous people depend upon the ice and snow’. 245 The Inuits have submitted that this has breached their fundamental human rights including:
rights to the benefits of culture, to property, to the preservation of health, life, physical integrity, security, and a means of subsistence, and to residence, movement, and inviolability of the home. 246
243 Sheila Watt-Cloutier with the support of the Inuit Circumpolar Conference on behalf of all Inuit of the Arctic Regions of the United States and Canada, 'Petition to the Inter American Commission on Human Rights Seeking Relief From Violations Resulting From Global Warming Caused By Acts and Omissions of the United States' (2005) at 2. 244 Ibid, 3. 245 Ibid, 1. 246 Ibid, 5.
161
There will be significant evidentiary and procedural issues to be overcome in successfully establishing State liability for breaches of human rights based on historic greenhouse gas emissions and the resulting impacts of climate change. These include jurisdictional issues with respect to large scale emitters, such as the US, as well as issues regarding the enforceability of any judicial declaration against such nations. An analysis of the prospects of success of such actions requires a detailed analysis of the operation of international law principles which lies outside the scope of this research. However, it is clear that the intensifying impacts of climate change are adversely impacting on these fundamental international principles regarding the sanctity and protection of the rights of humankind.
Although it would be, from a practical perspective, almost impossible to attribute responsibility for such human rights breaches to any one particular nation, these claims do raise awareness of the urgency required in the international community’s response to the threat of climate change and the need to create distributive mechanisms to address liabilities associated with this emerging climate change harm. This leads to the conclusion that the international climate change regime has not adopted sufficiently stringent obligations for all nations to urgently achieve the significant reductions in greenhouse gas emissions required to cease such human rights abuses. Nor has it created fair and equitable mechanisms to allocating liability for such harm. This is clearly contrary to the spirit and objectives of international cooperation in responding to the risks posed to humankind.
162 THE FUTURE INTERNATIONAL REGULATION OF CLIMATE CHANGE
The climate change regime has been created with a wide discretionary scope for future evolution and expansion beyond its original regulatory blueprint. The UNFCCC and Kyoto Protocol provide the COP and MOP with broad powers to ‘exercise such other functions as are required for the achievement of the
objective of the [Convention/Protocol]’.247 This provides the COP and MOP with significant scope in setting future policy directions and in evolving the scope of the regime beyond its original agreement to adapt to changing environmental, economic and social circumstances. In addition, the UNFCCC permits the COP to amend its own rules of procedure, through consensus decision-making, which
provides a wide flexibility in responding to climate change under the regime. 248
Since its initial creation, the climate change regime has also continued to evolve through the further decisions of both the parties to the UNFCCC and the parties to the Kyoto Protocol (COP/MOP). In the decade since the Kyoto Protocol was concluded, the parties have continued to make additions to the existing institutional and regulatory structures as new implementation issues and policy objectives have been identified. This ad hoc approach to the evolution of the climate change regime has, at times, aggravated an already complex and convoluted approach to international regulation. Although not ideal from the perspective of optimal regulatory models, these decisions of the COP/MOP have enabled the parties to seek continual improvement in the regime and to attempt to resolve issues in the approval and implementation of the flexibility
mechanisms. 249
247 UNFCCC, n2, Article 7(2)(m) and Kyoto Protocol, n4, Article 13(4)(j). 248 UNFCCC, n2, Article 7(2)(k). 249 However, the constant expansion of decisions, obligations and rules by the multiple regulators may lead to a lack of transparency and clarity. It now appears necessary for the regime to consolidate these unwieldy rules into a single, clear and unambiguous format.
163 The parties to the climate change regime have also agreed to commence dialogues on longer term climate change commitments, post-2012, and these discussions will affect the future features of the climate change regime. As required under the Kyoto Protocol, the parties have initiated discussions with respect to emission reduction commitments under the Kyoto Protocol for future commitment periods.250 In addition, parties to the UNFCCC agreed to engage in an open and non-binding dialogue to analyse strategic options for long-term cooperative action to address climate change. 251 This two-year dialogue considered advancing development goals in a sustainable manner, addressing action on adaptation, and realising the full potential of technology and market-
based opportunities. 252
In 2007, the parties agreed to a ‘roadmap’ for future negotiations to urgently enhance the implementation of the UNFCCC in order to achieve its ultimate objective. 253 The so-called Bali Action Plan agreed to enable the full, effective and sustained implementation of the UNFCCC through long-term cooperative action, both now and beyond 2012, and decided to reach an agreed outcome
addressing inter alia : 254
(a) a long-term global goal for emission reductions to achieve the ultimate objective of the Convention in accordance with, inter alia, the principle of common but differentiated responsibilities and respective capabilities;
(b) enhanced national/international action on mitigation of climate change, including consideration of:
(i) measurable, reportable and verifiable nationally appropriate mitigation commitments or actions including quantified emission limitation and reduction objectives by all developed country parties; and
250 Kyoto Protocol, n4, Article 3.9 . UNFCCC, 2005, Decision 1/CMP.1‘Consideration of commitments for subsequent periods for Parties included in Annex 1 to the Convention under Article 3, paragraph 9 of the Kyoto Protocol’ (FCCC/KP/CMP/2005/8/Add.1). 251 UNFCCC, 2005, Decision 1/ CP.1l, ‘Dialogue on long-term cooperative action to address climate change by enhancing implementation of the Convention’ (FCCC/CP/2005/5/Add.1). The first meeting took place on 15-26 May 2006. 252 Ibid. 253 UNFCCC, ‘Decision 1/CP 13: Bali Action Plan’ (December 1, FCCC/CP/2007/6/Add.1) at 1. 254 Ibid, 1-2.
164 (ii) measurable, reportable and verifiable nationally appropriate mitigation actions by developing country parties, in the context of sustainable development, supported and enabled by technology, financing and capacity- building;
(v) various approaches, including opportunities for using markets, to enhance the cost-effectiveness of, and to promote, mitigation actions;
(vii) ways to strengthen the catalytic role of the Convention in encouraging multilateral bodies, the public and private sectors and civil society, building on synergies among activities and processes, as a means to support mitigation in a coherent and integrated manner;
(c) enhanced action on adaptation, including consideration of:
(i) international cooperation to support urgent implementation of adaptation actions, including ways to enable climate-resilient development and reduce vulnerability of all parties, taking into account the urgent and immediate needs of developing countries that are particularly vulnerable to the adverse effects of climate change;
(ii) risk management and risk reduction strategies, including risk sharing and transfer mechanisms such as insurance;
(iii) disaster reduction strategies and means to address loss and damage associated with climate change impacts in developing countries; and
(d) enhanced action on technology development and transfer to support action on mitigation and adaptation including consideration of ways to accelerate deployment, diffusion and transfer of affordable environmentally sound technologies.
The parties have determined to reach an agreed outcome to be adopted by the
parties at the end of 2009. 255 To maintain continuity in the climate change regime, such amendments would need to be ratified by the parties prior to the end of the first commitment period in 2012.
255 At COP 15. Ibid, 1, 3.
165 In addition to this consensus-based evolution of a regime to respond to climate change, as the symptoms of adverse climate change become more intense it will create increasing tensions between nation States in terms of conflicting resource use and economic impacts. The UN Chief recently stated that climate change poses as much danger to the world as war and noted that:
the danger posed by war to all of humanity and to our planet is at least matched by the climate crisis and global warming. 256
In 2007, for the first time, the UN Security Council considered the relationship between energy, security and climate change as part of its responsibility for the maintenance of international peace and security. 257 An EU report on the implications of climate change on international security noted that existing conflicts in relation to the ‘reduction of arable land, widespread shortage of water, diminishing food and fish stocks, increased flooding and prolonged droughts’ will be intensified as a result of climate change.258 There will also be intensified competition over energy resources and:
because much of the world's hydrocarbon reserves are in regions vulnerable to the impacts of climate change and because many oil and gas producing states already face significant social economic and demographic challenges, instability is likely to increase (emphasis added). 259
Further conflict is also likely to arise over energy resources in the Polar regions ‘which will become exploitable as a consequence of global warming’. 260
256 UN Secretary General Ban Ki-moon, BBC News Online, UN chief warns on climate change (2007) http://news.bbc.co.uk/2/hi/in_depth/6410305.stm at 11 June 2008. 257 United Nations Charter, n223, Article 24(1). United Nations Security Council, ‘Security Council 5663 rd Meeting: Security Council Holds First-Ever Debate on Impact of Climate Change on Peace, Security , Hearing Over 50 Speakers, Some Delegations Raise Doubts Regarding Council’s Role on Issue, While Others, Particularly Small Island States, Welcome Council’s Consideration’ (17 April 2007, SC/9000) http://www.un.org/News/Press/docs/2007/sc9000.doc.htm at 11 June 2008. 258 European Council, 'Climate Change and International Security: Paper from the High Representative and the European Commission to the European Council' (Brussels 3 March 2008, 7249/08) at 3. 259 Ibid, 4. 260 Ibid.
166 In this context, and in the absence of a strong regulatory response under the climate change regime, it is not far-fetched to envisage that the UN Security Council may well govern the ‘threat to peace and security’ posed by the impacts of climate change and the associated threats to human health, property, food, water and energy supply. Should the UN Security Council choose to intervene it has very strong powers at its disposal to control emissions and human responses to the impacts of climate change including the use of armed forces with powers of shoot to kill for non-compliance with the directions of the Security Council. 261
THE STRENGTHS AND DEFICIENCIES OF THE CLIMATE CHANGE REGIME
The architecture of the climate change regime has been heralded as being innovative, ground-breaking and the most sophisticated example of an international environmental regime to-date. 262 Through a complex web of fragmented delegations from the sovereign parties, the climate change regime has created a myriad of bodies, committees and other institutions responsible for the implementation and operation of the regime. However, such innovation brings with it significant challenges in implementation and raises a number of questions regarding the effectiveness of such a regulatory model. Some of the key strengths and weaknesses of this international regime are highlighted in the following paragraphs.
261 United Nations Charter, n223, Chapter VII. 262 Inter alia, Suzi Kerr, 'Additional Compliance Issues arising from Trading' in Suzi Kerr (ed), Global Emissions Trading; Key Issues for Industrialized Countries , New Horizons in Environmental Economics (2000) Cheltenham, UK, Edward Elgar, 85 at 90 and Streck, n9, 91.
167 A The Flexibility Mechanisms
Through the creation of the flexibility mechanisms, the climate change regime intends to harness the innovation and cost-effectiveness of the domestic ‘cap and trade’ market model to achieve global emission reductions and address the impacts of climate change. A great deal of emphasis has been placed on the curative abilities of the international climate market in facilitating cost-effective reductions in global greenhouse gas emissions. However, this optimism is not supported by any actual evidence of the success of similar regulatory approaches at the international level. It is not known how effective the market mechanisms will actually be in achieving these emission reductions nor the timescales required for the market to achieve optimal operation and performance. Moreover, the creation of the international climate market has focused, primarily, on the ‘trade’ aspects of the flexibility mechanisms and omitted to consider properly the integral role of the ‘cap’ within that market system. This deficiency means that these market mechanisms are unlikely to achieve their complementary goals of redistribution and reduction under the climate change regime.
The long negotiation period, between the agreement of the text of the Kyoto Protocol and the beginning of the first commitment period, has resulted in the ad- hoc addition of new regulators and rules to the regime without due regard for the impact of those additions on the effectiveness of the overall institutional structure. The result is a model of international regulation with multiple, fragmented, limited delegations to the regulatory bodies. Although superficially the regulatory structure may appear innovative and sophisticated, in reality, many of the regulatory bodies are little more than empty shells. The solution to rectify these deficiencies will not be simple but appears to demand the return to a strong, centralised, regulatory model, post-2012, with sufficient delegation of power to regulate this broad global issue of climate change.
168 The establishment of multiple, regulatory subsidiary bodies has resulted in a fragmented governance structure, heavy in complex rules and procedures, which over-regulates the CDM/JI mechanisms without facilitating the emission reduction objectives of the climate change regime. Furthermore, the CDM and JI supervisory bodies currently suffer from insufficient resourcing, personnel and technical expertise to carry out their complex regulatory functions. These supervisory bodies should, as a minimum, be merged into a single professional body to regulate all emission reduction projects in a more streamlined fashion. Indeed, it is recommended that governance of all of the Kyoto Protocol legal instruments be regulated by a single climate change regulatory authority, such as an enhanced UNFCCC Secretariat, in order to minimise the potential for overlap, competition and inconsistencies between the various regulators. It would also enable the strong regulation of emission reduction projects to ensure that, in practice, they do assist in the global promotion of the principles of ecologically sustainable development (ESD).
B The Emission Reduction Duties
The climate change regime has been clearly undermined by a lack of consensus regarding the likelihood of, and impacts from, climate change and a lack of political consensus regarding the adoption of stringent and rapid emission reduction obligations. The climate change regime was established at a time when the realities of adverse climate change were not fully acknowledged by the international community. As a result, the model was designed with an emphasis on flexibility of implementation rather than on the establishment of a strong regulatory model. The model places great emphasis on competition within the international climate market and uses financial incentives to encourage nations and private industry to play a role in achieving emission reductions. However, this excessive reliance on markets, incentives and flexibility, without a strong disciplining force to drive emission reductions, results in an overly flexible regime that can be criticised as being little more than ‘smoke and mirrors’.
169 Ultimately, the UNFCCC and Kyoto Protocol are together aimed at avoiding the adverse effects of climate change through the reduction of greenhouse gas emissions. However, the attainment of those objectives will be undermined by the adoption of weak regulatory instruments within the international climate change regime. The climate change regime will be instrumentally incoherent where the choice of institutions and rules does not correspond with the underlying policy goals of the regime. There appears to be ongoing tension in the international community between growing scientific and community support for strong action on the serious threat of climate change and political resistance to the adoption of a strong regulatory approach to reduce global greenhouse gas emissions. The UNFCCC does not specify the level, and timing, of abatement to achieve its objectives. Moreover, the specific targets of the Kyoto Protocol are clearly inadequate to avoid adverse climate change and will achieve no more than a five per cent reduction in the greenhouse gas emissions of some developed nations, compared to 1990 levels, by the end of the first commitment period in 2012. Consequently, the climate change regime will be hindered by this fundamental disconnect between the need for significant and rapid reductions in emissions and the absence of consensus to a regime with a strong disciplining force. Until such time as international consensus is achieved to a significant quantum of emission reductions within a rapid timeframe , the regime will continue to be ineffective in achieving its true objective of avoiding the adverse impacts of climate change.
C Interaction with Domestic Responses to Climate Change
The overriding obligations of the regime relate to broad emission reductions with no specific requirements for domestic abatement activities. Whilst this enables parties to cater their policies according to their local emitting behaviours and economic backgrounds this availability of choice also undermines the strength and effectiveness of the regime. 263
263 P E Morthorst, 'National Environmental Targets and International Emission Reduction Instruments' (2003) 31(1) Energy Policy 73.
170
The success of the climate change regime in achieving reductions in greenhouse gas emissions is dependent on the sum of all the State parties’ national undertakings which, accordingly, requires that the national measures of each
State are compatible with the international regime. 264 Many factors will influence the choice of domestic activities including the stringency and normative structure of the international agreements as well as the ‘political climate, public opinion,
economic and social circumstances and the state of the environment’. 265 Accordingly:
the effectiveness of international regimes is not a one-way relationship from an international institution to domestic policy implementation. It is better understood as an interactive process that includes domestic policy ideas and trajectories interacting with international negotiations and institutions. 266
The potential scope of potential domestic activities to respond to climate change is broad and extends beyond mere energy use to policies regarding research and development; renewable energy subsidies; regulation of the resources industries including electricity, natural gas and mining, agriculture and land management practices; forest management; energy efficiency in the design of buildings and appliances; and management of the transport and aviation industries. Furthermore, the creation of a global market in carbon credits, at an international level, has led to the domestic development of emission abatement schemes combined with trading markets. Many of these markets have been designed with the intention of forging future linkages with the international market. However, the absence of any direction regarding the optimal design of these markets has resulted in a myriad of models which may not, ultimately, be compatible with the design of the climate change regime.
264 Jonas Ebbesson, n192, xix. 265 Ibid, 16. See also Alina Averchenko, Factors of Effectiveness of the International Climate Change Regime (PhD Thesis, University of Bath, 2004) at 78. 266 Alina Averchenko, n265, 78.
171 Addressing climate change requires an effective international regime with the strength to regulate across global, national and local spheres and influence the decisions of governments, private investors and individuals alike. To achieve this, the regime must be empowered with a portfolio of strong incentives and disincentives, utilising regulatory, liability and market approaches, to promote a rapid transformation in behavioural choices regarding energy use and energy efficiency. A stronger international climate change regime is required with greater powers to issue directions regarding the domestic policies and emitting activities of parties to the regime. This may include the imposition of duties on nation States to promote research and development, energy efficiency and other policies to modify social behaviour.
D Treatment of Non-Compliance with the Regime
There is a visible absence of repercussions for non-compliance with emission reduction duties under the climate change regime. In the case of the UNFCCC, there is only a general obligation to reduce emissions by an undefined amount at an undefined point in time. There are no stated repercussions in the treaty for addressing non-compliance with that obligation. In the case of the Kyoto Protocol, the emission reduction targets are limited and apply only to a selection of developed nations. Moreover, the stated enforcement provisions of the Kyoto Protocol were not properly ratified and are not legally binding on the parties. To further compound this issue, the parties may withdraw from these agreements, at any time, without penalty. The result is an international culture of non- compliance with little or no repercussions for business as usual emissions. Such lethargy must be counteracted by the creation of a strong enforcement regime. The effective implementation of a strong regime with duties to restrict emissions must also be actively supported by all participating members of the international community. Substantive non-compliance must be condoned, not ignored, and those non-compliant parties should be treated accordingly at the negotiating table to any post-2012 regime.
172 CONCLUSION
Responding to the phenomenon of climate change requires a strong global regime with embedded flexibility to enable adaptation to emerging scientific and technological opinion regarding the avoidance of adverse climate change. 267 Climate change is a complex, multi-faceted, global issue that affects a range of State actors, private firms, expert advisors and private individuals across domestic jurisdictions and requires new regulatory approaches to engage and regulate these actors worldwide and across public and private spheres. 268 Accordingly, addressing climate change requires effective regulation across a range of spheres from the global to the national, Federal, state and local, and is dependent upon the ability to influence the decisions of governments, private entities and individuals alike. This unique context requires a regulatory regime with strong incentives to promote an urgent shift in established behavioural patterns towards improved energy efficiency and the utilisation of low carbon energy sources.
The above analysis indicates that the international community’s unconditional trust in the curative abilities of the carbon market has taken place at the expense of a well-designed command and control regulatory approach to climate change. The combined effect of all of the identified dysfunctional features of the climate change regime is a weak international regime, lacking in regulatory coherence and strong disciplining force to achieve the significant short-term behavioural changes required to respond adequately to the threat of climate change.
267 See Axel Michaelowa, 'Flexible Instruments of Climate Policy' in Axel Michaelowa and Michael Dutschke (eds), Climate Policy and Development: Flexible Instruments and Developing Countries (2000) Cheltenham, UK, Edward Elgar, 1. 268 Benner, Reinicke and Martin Witte, n113; Patrizia Nanz and Jens Steffek, 'Global Governance, Participation and the Public Sphere' (2004) 39(2) Government and Opposition 314; Benjamin Richardson, 'Enlisting Institutional Investors in Environmental Regulation: Some Comparative Theoretical Perspectives' (2002) 28(2) North Carolina Journal of International Law and Commercial Regulation 247.
173 It is imperative that the international community acknowledges that the innovation of using the flexibility mechanisms is merely a global experiment in new approaches to environmental regulation rather than the panacea for society’s addiction to the use of fossil fuels. Accordingly, the design of a framework for the climate change regime, post-2012, must learn from the mistakes of its predecessor. Post-2012, any regime to respond to climate change must incorporate a strict and universal emission reduction duty for all nations that is linked to the scientific consensus regarding the magnitude and timescale of necessary emission reductions. The legal mechanisms of that regime must include a harmonious portfolio of regulatory, liability and market instruments and be supported by a well resourced regulatory authority with strong powers to implement and supervise those instruments. The international climate change regulator must be empowered to direct nations, perhaps through the establishment of a national counterpart, with respect to their method of achievement of the emission reduction duties and the design of compatible domestic carbon markets. Furthermore, given the inevitability that some adverse climate change will now occur, and the inadequacy of existing international law principles in addressing such damages, the jurisdiction of this climate change authority should also extend to the activities of nations in adapting to the impacts of climate change and to the distribution of responsibility for climate harms within society.
The potential benefits of the carbon market have captured international attention and acted as a catalyst for the development of regional and national emission trading schemes. Accordingly, it appears inevitable that the flexibility mechanisms will continue to be harnessed as regulatory tools in the post-2012 regulatory framework. However, these mechanisms must be reformed and refined to ensure that they promote the environmental integrity of the regime rather than bringing it into question. Moreover, to operate effectively, these market mechanisms must be supported by the compatible and harmonious treatment of tradeable emission instruments within the legal systems of participating domestic jurisdictions.
174 Chapter Four - The Australian Legal Response to Climate Change
INTRODUCTION
The purpose of this chapter is to analyse critically the current role of Australian law in directly regulating greenhouse gas emissions and mitigating the impacts of climate change. The Australian government repeatedly confirmed its commitment to reducing Australia’s emissions in accordance with the allocated
target under the Kyoto Protocol. 1 Accordingly, in analysing the legal response to climate change in Australia one would expect to encounter some form of regulatory duty to restrict emissions, with associated liability provisions, and some semblance of a functional carbon market system. However, this is not to be the case. The premise of this chapter is that the regulation of the impacts of climate change in Australia is characterised by an acute absence of effective regulatory, liability and market approaches to respond directly to the issues of climate change. Indeed, this chapter concludes that effective Australian laws to regulate greenhouse gas emissions are conspicuous in their absence. A deliberate political decision to focus on voluntary policies and initiatives, rather than enforceable systems of regulations, liabilities and market mechanisms, is symptomatic of the presence of political resistance to the creation of a legal response which could undermine economic growth and competitiveness. The result is a regulatory environment with no coherent legal framework to facilitate the now urgent and significant reductions in Australia’s emission levels required to avoid the adverse impacts of climate change.
1 Department of the Environment and Heritage, 'Tracking to the Kyoto Target 2006: Australia's Greenhouse Emissions Trends 1990 to 2008-2012 and 2020' (Australian Greenhouse Office, 2006) at 3.
175 THE REGULATORY CONTEXT IN AUSTRALIA
On a per capita basis, Australia is the third highest emitter of greenhouse gases. 2 Australia contributes 1.43 per cent of the world’s carbon emissions and
comprises 0.32 per cent of the global population. 3 Australia’s largest and fastest growing source of emissions comes from energy use and consumption levels are
rising along with Australia’s rate of economic growth. 4 Emissions from the energy sector comprised approximately 69 per cent of national emissions in
2004. 5 The majority of Australia’s electricity is fuelled by non-renewable fuels such as coal and gas with approximately 10 per cent of electricity sourced from
renewable energy including hydro-electric plants. 6 The agriculture sector is responsible for 16.5 per cent of Australia’s net emissions and a further 6.3 per cent of net emissions comes from the land use, land use change and forestry
sector. 7 This sector includes land clearing which, in the 1990s, was a major
source of Australia’s greenhouse gas emissions. 8 There are now strict controls on
widespread land clearing across Australia.9
2 United Nations Development Programme, 'Human Development Report 2007/2008 Fighting Climate Change: Human Solidarity in a Divided World' (UNDP, 2007), ‘carbon dioxide emissions and stocks’ http://hdrstats.undp.org/indicators/237.html at 14 June 2008. C. Hamilton, 'Comparison Of Emission Sources and Emission Trends Among OECD Countries' (Australia Institute, 1994). 3 Michael R. Raupach et al, 'Global and regional drivers of accelerating CO2 emissions' (2007) Proceedings of the National Academy of Sciences
176 Australia has an energy intensive economy and exports two thirds of its primary energy production with approximately AU$24 million in exports a year,
primarily from the sale of coal. 10 Moreover, Australia’s population and economy are both continuing to grow. Without emissions reductions initiatives, and excluding land use change, Australia’s emissions have been predicted to grow by 28 per cent from 1990 to 2010 with an increase of 40 per cent in energy sector
emissions. 11
Australia is a party to the United Nations Framework Convention on Climate
Change (UNFCCC). 12 The objective of the UNFCCC is the ‘stabilisation of greenhouse gas concentrations in the atmosphere at a level that would prevent
dangerous anthropogenic interference with the climate system’. 13 Australia also ratified the Kyoto Protocol to the UNFCCC in December 2007 and is now obliged to achieve its allocated emissions reduction target for the commitment
period 2008 to 2012. 14 Australia was one of only three nations granted an increase in its greenhouse gas emissions in the first commitment period of the Kyoto Protocol and was allocated a target of maintaining emissions at 108 per
cent of 1990 levels. 15 All Annex-1 parties, including Australia, are also able to account for national ‘human induced land use change and forestry activities’,
since 1990, in calculating their national emissions under the Kyoto Protocol. 16
10 Australian Government Energy Task Force, 'Securing Australia's Energy Future' (Department of the Prime Minister and Cabinet, 2004) at 2; John Wright, 'Towards An Australian Hydrogen Economy' (2006) 63(6) International Journal of Environmental Studies 837 at 837; R John Samdeman Oam, 'A Critique of Present Australian Energy Policy' (2006) 63(6) International Journal of Environmental Studies 719 at 720. 11 Australian Government, 'The National Greenhouse Strategy: Strategic Framework for Advancing Australia's Greenhouse Response' (Australian Government, 1998) at vii. 12 United Nations Framework Convention on Climate Change , opened for signature on 4 June 1992, 31 ILM 849 (entered into force on 21 March 1994) (UNFCCC). 13 Ibid, Article 2. 14 Kyoto Protocol to the United Nations Framework Convention on Climate Change , opened for signature 16 March 1998 (entered into force on 16 February 2005)(Kyoto Protocol)(together the Kyoto Protocol and UNFCCC are referred to as the climate change regime). Australia signed the Kyoto Protocol on 29 April 1998. Following the change of government in 2007, the instrument of ratification was deposited with the UNFCCC Secretariat on 12 December 2007 and entered into force on 11 March 2008. 15 The other nations granted an increase were Norway and Iceland. 16 This includes afforestation, reforestation and deforestation activities that have been measured as verifiable changes in carbon stocks. Kyoto Protocol, n14, Article 3.3.
177 Australia agreed to its emissions reduction target at Kyoto in December 1997. In June 2001, the United States of America (US) withdrew from the Kyoto Protocol process and, in 2002, the Australian government announced that it would not ratify any agreement to restrict greenhouse gas emissions which excluded
developing countries and the US. 17
Australia’s ongoing political position remained that it would not ratify the Kyoto Protocol unless, and until, it was in the national interest to do so. The then Prime Minister asserted that, due to Australia’s special position as an emissions intensive economy , the Kyoto Protocol would cost jobs and damage Australian
industry. 18 The impacts on the Australian economy from the use of emissions caps were described by the Australian Greenhouse Office as follows:
compliance with our international greenhouse gas emission commitments will require a degree of structural adjustment within the economy and, as relatively emissions-intensive economy... would involve real economic costs for Australia. 19
…….
the imposition of an emissions cap is likely to reduce opportunities for growth and increased income. 20
Despite the governmental decision to not ratify the Kyoto Protocol, the Federal government continually reaffirmed its commitment to meet the 108 per cent
target under the Kyoto Protocol on a voluntary basis. 21 Following the change in government, on 11 March 2008, Australia became a party to the Kyoto Protocol and became bound by the emission reduction targets within that agreement.
17 Planet Ark, ‘World’s Biggest Coal Exporter Australia Dumps Kyoto’ (6 June 2002, Australia), http://www.planetark.org/dailynewsstory.cfm/newsid/16298/story.htm at 15 June 2008. 18 Prime Minister John Howard, Representatives, 5 June 2002, Answers to Questions Without Notice, 3163 19 Australian Greenhouse Office, June 1999, National Emissions Trading, Issuing the Permits , Discussion Paper No.2, chapter 5 at 45. 20 Ibid, chapter 4 at 39. 21 Department of the Environment and Heritage, n1, 3. SoE 2006, n4, 27.
178 NATIONAL RESPONSES TO CLIMATE CHANGE
Until 2008, the Australian government focused primarily on the use of voluntary initiatives and policies to address climate change and meet its international climate change obligations. Accordingly, there is currently no comprehensive regulation of greenhouse gas emissions in Australia. In recent years, the climate change debate has shifted to the benefits and risks of establishing an emissions trading system for Australia. The effect of this has been the absence of regulatory drivers in Australia to promote changes in emitting behaviours and encourage investment in the development and deployment of alternative energy sources.
Australia’s climate change policy approach has been based on a ‘no-regrets’ approach with the Federal government implementing only those measures which had other net benefits, or no net costs, besides limiting greenhouse emissions or
conserving or enhancing greenhouse sinks. 22 In response to community concerns about the prospect of climate change, the Federal government established a
National Greenhouse Advisory Committee (NGAC) in 1989. 23 In December 1992, the Council of Australian Governments (COAG) endorsed the National Greenhouse Response Strategy which established the framework for Australian action on greenhouse issues. Five years later, in November 1997, the Prime Minister announced an AU$180 million package Safeguarding the Future: Australia's Response to Climate Change , aimed at reducing Australia’s greenhouse emissions in line with its commitments under the climate change
regime. 24 This package of measures included the creation of the Australian
22 Rory Sullivan, Rethinking Voluntary Approaches in Environmental Policy (2005) Cheltenham, UK Northampton, MA, at 104; Rory Sullivan, 'Greenhouse Challenge Plus: a new departure or more of the same?' (2006) 23(1) Environmental and Planning Law Journal 60 at 61; Australian Greenhouse Office, The National Greenhouse Strategy (Australian Greenhouse Office, 1998). 23 Australian Government Bureau of Meteorology, 'Climate Activities in Australia 2003' (BOM, 2003) at 16. 24 Ibid.
179 Greenhouse Office (AGO) to provide a ‘whole of government approach’ to
greenhouse matters. 25
Following review and refinement of the National Greenhouse Response Strategy,
the National Greenhouse Strategy was released in November 1998. 26 The strategy was intended to act as the primary mechanism through which Australia’s international commitments would be met and included abatement strategies for
all of the key sectors that both produce and sequester greenhouse gases. 27
The AGO is responsible for the coordination of domestic climate change policy
and the delivery of Commonwealth programs. 28 Those include the imposition of
technical standards for energy generation 29 and voluntary incentive schemes such as the Greenhouse Gas Abatement Program (GGAP), Renewable Energy Commercialisation Program (RECP) and Renewable Energy Showcase
Program. 30
GGAP was intended to leverage private sector investment in activities or technologies through the funding of projects that are likely to result in substantial emissions reductions or activities to offset greenhouse emissions. The AGO predicted that GGAP would deliver an abatement of 5 million tonnes of carbon
dioxide equivalent in 2010. 31 Projects funded by GCAP included co-generation
25 Ibid. 26 Australian Government, 'The National Greenhouse Strategy: Strategic Framework for Advancing Australia's Greenhouse Response' (Australian Government, 1998). 27 Ibid, iii. 28 Ibid, 107. 29 For example, Generator Efficiency Standards (GES) were introduced from 1 July 2000 and were intended to ‘achieve movement towards best practice in the efficiency of fossil-fuelled electricity generation, and to deliver reductions in the greenhouse gas intensity of energy supply.’ See AGO, ‘Generator Efficiency Standards’, http://www.greenhouse.gov.au/ges/index.html at 15 June 2008. 30 Australian Greenhouse Office, 'Renewable Energy Commercialisation in Australia' (AGO, 2003) at viii. 31 Australian Greenhouse Office, ‘Greenhouse Gas Abatement Program (GGAP)’, http://www.greenhouse.gov.au/ggap/index.html at 15 June 2008.
180 of power from waste, energy efficiency, coal mine gas technologies and
alternative fuel sources. 32
The Renewable Energy Showcase Program was launched in 1998 and offered
funding to renewable energy projects following a competitive tender process. 33 This was followed by the launch of the Renewable Energy Commercialisation Program (RECP) in 1999, a five-year competitive grants program that provided financial support for ‘strategically important renewable energy technology
initiatives that have strong commercial potential.’ 34 The Renewable Energy
Industry Program (REIP) was also integrated into the RECP. 35
The Australian Government relied heavily on voluntary cooperative partnerships between industry and government to reduce emissions. From 1995 to 2005, the Greenhouse Challenge was ‘the centrepiece of the Australian government’s efforts to encourage business to take action on greenhouse gas emissions and
climate change’. 36 The Greenhouse Challenge Plus programme commenced on 1 July 2005 and was also a cooperative partnership between industry and the government to reduce emissions, accelerate the uptake of energy efficiency, integrate greenhouse issues into business decision-making, and provide
consistent reporting of greenhouse gas emissions. 37 Participants were required to measure and report annually on their greenhouse gas emissions, deliver the maximum practicable greenhouse gas abatement, continuously improve the management of greenhouse gas emissions and sinks and work towards the
milestones set out in their agreements. 38 From 1 July 2006, participation in
32 Ibid. 33 Australian Greenhouse Office, 'Renewable Energy Commercialisation in Australia' (AGO, 2003) at viii. 34 Ibid. 35 Ibid. 36 Rory Sullivan, 'Greenhouse Challenge Plus: a new departure or more of the same?' (2006) 23(1) Environmental and Planning Law Journal 60 at 60. 37 Australian Greenhouse Office, 'Greenhouse Challenge Plus: Programme Framework 2005' (AGO, 2005) at 1. 38 Ibid, 3.
181 Greenhouse Challenge Plus was mandatory for all Australian companies
receiving fuel excise credits of more than AU$3 million in a financial year. 39 To become a member of Greenhouse Challenge Plus, businesses were required to establish an agreement with the Australian Government to manage and reduce greenhouse gas emissions. Approved abatement Greenhouse Friendly projects could be used by Greenhouse Challenge Plus members to offset their emissions.
The Greenhouse Friendly initiative was launched in 2001 and now forms part of
the Australian Government's Greenhouse Challenge Plus program. 40 Greenhouse Friendly was a voluntary initiative that aimed to provide businesses with the opportunity to market greenhouse neutral products and services and consumers
with greater purchasing choices. 41 The Greenhouse Friendly program certified
and independently verified voluntary abatement projects in Australia. 42 Approved abatement projects included energy efficiency initiatives, waste diversion and recycling, land fill gas capture and flaring, renewable energy generation, and tree
planting and avoided deforestation projects. 43 Projects were required to demonstrate that the abatement was additional to ‘business as usual’ practices
and that reductions were permanent and verifiable .44
The Federal government also introduced a number of measures to encourage energy efficiency for businesses. For example, the Energy Efficiencies Opportunities Act 2006 (Cth) required corporate groups that used more than 0.5 petajoules of energy in 2005-2006 to assess their energy use, identify and
39 Australian Taxation Office, ‘Fuel Tax Credit and the Greenhouse Challenge Plus Programme’ (ATO, 2007); http://www.ato.gov.au/businesses/content.asp?doc=/content/76476.htm at 15 June 2008; Australian Greenhouse Office, ‘Fuel Tax Credits and Greenhouse Challenge Plus Membership’ http://www.greenhouse.gov.au/challenge/members/fueltaxcredits.html at 15 June 2008. 40 Australian Greenhouse Office, 'Greenhouse Friendly Guidelines' (AGO, 2006) at 1. 41 Ibid. 42 Ibid. 43 Australian Greenhouse Office, ‘Abatement Projects’ http://www.greenhouse.gov.au/greenhousefriendly/abatement/projects.html at 15 June 2008. 44 Australian Greenhouse Office, 'Greenhouse Friendly Guidelines' (AGO, 2006) at 19.
182 implement energy efficiency opportunities and report publicly on their
assessments. 45
However, despite this expanse of ad hoc voluntary programs, the Federal government continued to decline to directly regulate or restrict Australia’s greenhouse gas emissions. This political resistance is exemplified by the following comments by the then Prime Minister in April 2007:
to say that climate change is the overwhelming moral challenge for this generation of Australians is misguided at best and misleading at worst. It de-legitimises other challenges over which we do have significant and immediate control, other challenges with moral dimensions just as real and pressing as those that surround climate change. It also obscures the need for balance in government decision making. It feeds ideological demands for knee-jerk policy reactions that would destroy jobs and the living standards of ordinary Australians. 46
In an election year, the Australian community began to question the absence of action to address the predicted adverse impacts of climate change. By July 2007, the Prime Minister had adopted a different perspective and acknowledged that:
over time, the scientific evidence that the climate is warming has become quite compelling and the link between emissions of greenhouse gases from human activity and higher temperatures is also convincing. 47
The Federal government accepted that some response to climate change was required and introduced a national greenhouse gas emissions reporting system that was intended to operate in conjunction with the then proposed national
45 Energy Efficiencies Opportunities Act 2006 (Cth) Parts 3, 5, 6, 7. 46 Australian Broadcasting Corporation, ‘Climate change issue attracting too much attention: PM’ (23 April 2007, Interview with Prime Minister John Howard, Reporter Michael Brissenden) http://www.abc.net.au/7.30/content/2007/s1904781.htm at 16 June 2008. 47 Prime Minister John Howard, ‘Address to the Melbourne Press Club’ (23 July 2007, Melbourne) http://www.egovmonitor.com/node/13024 at 14 June 2008.
183 emissions trading system. 48 The National Greenhouse and Energy Reporting Act 2007 (Cth) requires corporations that emitted above specified threshold levels to report on their greenhouse gas emissions and energy use through a national register. 49 The obligation to report commenced on 1 July 2008 with the first report due in October 2009. The data is intended to be made publicly available following each reporting period. 50 This Act is largely administrative in nature and merely requires the submission of reports on levels of emissions. There was no substantive duty created by this legislation to require, for example, that steps are to be taken to reduce these reported emissions.
Following the change in Federal government in late 2007, and the subsequent ratification of the Kyoto Protocol, a significant shift in governmental climate change policy and regulation was now expected to occur. The current Federal Government has committed to a target of reducing Australia’s greenhouse gas emissions by 60 per cent by 2050. 51 However, this target has not yet been embedded in legislation and the portfolio of measures for achieving the reductions has not yet been determined. 52 It appears that significant emphasis will be placed on a Federal emissions trading scheme as the primary means for regulating greenhouse gases in Australia.
48 Prime Ministerial Task Group on Emissions Trading, 'Report of the Task Group on Emissions Trading' (The Department of the Prime Minister and Cabinet, 2007). 49 The thresholds are set out in the National Greenhouse and Energy Reporting Act 2007 (Cth), s13. 50 AGO, ‘National Greenhouse and Energy Reporting Act 2007: Fact Sheet’ (October 2007) http://www.greenhouse.gov.au/reporting/publications/pubs/nger-fs.pdf at 15 June 2008. 51 Australian Government, 'Media Release: Government Announces Detailed Timetable on Emissions Trading' (Senator the Hon Penny Wong, Minister for Climate Change and Water, PW 35/08, 17 March, 2008). 52 Ibid.
184 STATE-BASED RESPONSES TO CLIMATE CHANGE
Under Australia’s Federal system of government, it is perhaps inevitable that a piecemeal and variable regulatory approach will be taken across the state jurisdictions. However, the absence of clear guiding objectives at a national level has exacerbated this inconsistency in policy approaches to climate change in each jurisdiction, resulting in a largely fragmented and ineffective regulatory response.
In the absence of Federal legislation to restrict greenhouse gas emissions, some state governments have adopted emissions reduction targets for their jurisdictions. In South Australia, the state government has enacted a statute for
the reduction of emissions and promotion of renewable energy. 53
The objects of the Climate Change and Greenhouse Emissions Reduction Act 2007 (SA) are:
(a) to assist in the achievement of ecologically sustainable development in the State by addressing issues associated with climate change and, in particular—
(i) by setting a target (the SA target ) to reduce by 31 December 2050 greenhouse gas emissions within the State by at least 60% to an amount that is equal to or less than 40% of 1990 levels as part of a national and international response to climate change; and
(ii) by setting related targets (the renewable electricity targets )—
(A) to increase the proportion of renewable electricity generated so that it comprises at least 20% of electricity generated in the State by 31 December 2014;
(B) to increase the proportion of renewable electricity consumed so that it comprises at least 20% of electricity consumed in the State by 31 December 2014.
53 These targets were adopted as part of the Government of South Australia Strategic Plan 2007, http://www.stateplan.sa.gov.au/ , at 15 June 2008, Target T3.5.
185 With respect to policy developments, the SA Act states that the Minister should seek to develop government policies that will assist in:
(i) reducing or limiting climate change or greenhouse gas emissions, or mitigating the effects of climate change or greenhouse gas emissions; and
(ii) promoting or implementing measures to facilitate adaptation to circumstances that will inevitably be caused by climate change. 54
The Minister is able to set interim targets, sector specific targets and community
wide targets to reduce emissions. 55 However, no interim targets have been adopted and the language of this Act has been criticised for being largely
hortatory.56 This may be contrasted with the approach in the United Kingdom which imposes a statutory duty on the government to achieve a reduction of at least 60 per cent below 1990 levels by 2050. If the target is not met then this duty may potentially be enforced through civil enforcement orders against the
State. 57
Other Australian states and territories are yet to adopt legislative emission reduction targets. In Western Australia, the Premier has indicated that the state government will implement legislation in the future to adopt an emissions reduction target of 60 per cent below 2000 levels by 2050 in accordance with the
target adopted at the Council of Australia Governments (COAG) in April 2007. 58
54 Climate Change and Greenhouse Emissions Reduction Act 2007 (SA), section 14(1)(a). 55 Climate Change and Greenhouse Emissions Reduction Act 2007 (SA), ss 5(3), 5(5). The Minister may also set baselines and methods for calculating greenhouse gas emissions ss 5(3),5(4). 56 Rob Fowler, 'Emissions Reduction Targets Legislation' in Tim Bonyhady and Peter Christoff (eds), Climate Law in Australia (2007) Sydney, The Federation Press, 103 at 115. 57 Climate Change Bill [HL] 2007-2008 (UK) section 1(1). Ibid, 118. The Bill was introduced into the House of Lords on 14 November 2007 and completed its passage through the House of Lords on 31 March 2008. It received its second reading in the House of Commons on 9 June 2008. It is expected to receive Royal Assent in 2008. 58 Government of Western Australia, 'Making Decisions for the Future: Climate Change' (May 2007) at 9.
186 EXISTING EMISSIONS TRADING INITIATIVES
For many years, the previous Australian Federal Government remained firm on its objection to emissions trading in Australia. As stated in the White Paper Securing Australia’s Energy Future :
Australia will not impose significant new economy-wide costs, such as emissions trading, in its greenhouse response at this stage. Such action is premature, in the absence of effective longer-term global action on climate change, and given Australia is on track to meet its Kyoto 108 per cent target. Pursuing this path in advance of an effective global response would harm Australia's competitiveness and growth with no certain climate change benefits. 59
As a result, there are only limited examples of regulatory emissions trading systems operating in Australia. The key market regimes in Australia were the Mandatory Renewable Energy Target Scheme (MRETS),60 New South Wales (NSW) and Australian Capital Territory (ACT) Greenhouse Gas Abatement Scheme (GGAS) 61 and the Victorian Renewable Energy Target Scheme.62 These systems were based on ‘baseline and credit’ models with tradeable certificates, rather than on ‘cap and trade’ market systems, and would not be compatible with the international carbon market.
MRETS placed a legal liability on wholesale purchasers of electricity to contribute towards the generation of an additional 9,500 gigawatt hours of new
renewable energy by 2010, continuing through to 2020. 63 MRETS required wholesale purchasers of electricity and large consumers to source a certain
59 Australian Government Energy Task Force, 'Securing Australia's Energy Future' (Department of the Prime Minister and Cabinet, 2004) at 25. 60 Renewable Energy (Electricity) Act 2000 (Cth). 61 Electricity Supply Act 1995 (NSW). 62 Victorian Renewable Energy Act 2006 (Vic). 63 Australian Greenhouse Office, 'Renewable Energy Commercialisation in Australia' (AGO, 2003) at vii.
187 amount of their electricity from renewable energy sources through the annual
surrender of renewable energy certificates (RECs). 64 Renewable energy certificates were created by accredited generators for each whole megawatt hour of electricity generated from eligible renewable sources in excess of the
prescribed baseline. 65 Eligible sources included hydro, biomass, wind, solar and
co-firing of biomass in large coal-fired power stations. 66 Any shortfall in submitted annual RECS resulted in the imposition of a penalty of AU$40 per
excess megawatt hour.67
Some Australian states also introduced schemes which required electricity retailers to contribute to a reduction in greenhouse gas emissions. The New South Wales Greenhouse Gas Abatement Scheme (GGAS) commenced on 1 January 2003 and was described as ‘the most significant jurisdictional
environmental regulation on climate change to date in Australia.’ 68 The GGAS imposed mandatory greenhouse gas emissions reductions benchmarks on licensed electricity retailers and certain consumers and required them to surrender a prescribed quantity of NSW Greenhouse Gas Abatement Certificates
(NGACs), or RECs, each year. 69 A mirror scheme was in operation in the ACT. 70
NGACS were created by accredited abatement certificate providers for eligible projects and represented one tonne of carbon dioxide equivalent of abated
greenhouse gas emissions. 71 Eligible projects included low-emission generation of electricity, demand-side abatement, carbon sequestration in forests and large-
64 Renewable Energy (Electricity) Act 2000 (Cth), ss35,36. 65 Renewable Energy (Electricity) Act 2000 (Cth), Part 2, Division 4. 66 Iain MacGill, Hugh Outhred and Karel Nolles, 'Some design lessons from market-based greenhouse gas regulation in the restructured Australian electricity industry' (2006) 34(1) Energy Policy 11 at 16. 67 Carmody, Josh and Willis, Monique, 'Emissions Trading Schemes in Australia' in David Freestone and Charlotte Streck (eds), Legal Aspects of Implementing the Kyoto Protocol Mechanisms: Making Kyoto Work (2005) 475 at 479; Ibid, 17. 68 Macgill et al, n66, 18. 69 Electricity Supply Act 1995 (NSW) section 97A. 70 Under the Electricity (Greenhouse Gas Emissions) Act 2004 (ACT). 71 Electricity Supply Act 1995 (NSW), Part 8A and section 97EA.
188 user abatement. 72 GGAS was criticised for its lack of demonstrated additionality, or actual reductions in emissions, as numerous NGACs were created for installations and operational changes implemented prior to the scheme
commencement. 73 The NGACs were also intended to be compatible with the Kyoto Protocol allowances but key differences in the long-term treatment of
carbon sinks would prevent fungibility between these instruments. 74
A similar initiative was introduced under the Victorian Renewable Energy Target
Scheme from January 2007. 75 The regime mandated that the consumption of electricity generated from renewable sources in Victoria must be 10 per cent by
2016. 76 Under the scheme, all electricity retailers and wholesale purchasers of electricity in Victoria had a legal liability to contribute towards the generation of additional renewable energy by acquiring Victorian renewable energy certificates
(VRECs). 77 VRECs were able to be created by accredited renewable energy
power stations and small generation unit owners. 78
The Queensland government also introduced, from January 2005, the 13 per cent Gas Scheme which required electricity retailers to source at least 13 per cent of
their electricity from gas-fired electricity. 79 The Queensland 13 per cent Gas Scheme (or 18 per cent by 2020) required electricity retailers to surrender gas-
fired electricity certificates (GECs) to the regulator. 80 GECs were issued by
72 GGAS, ‘Abatement Certificate Providers: Overview’, http://www.greenhousegas.nsw.gov.au/acp/acp_overview.asp at 15 June 2008; Electricity Supply Act 1995 (NSW), Part 8A and Section 97DA. 73 Regina Betz and Iain MacGill, 'Emissions Trading for Australia: Design, Transition and Linking Options' (Centre for Energy and Environmental Markets, 2005) at 19. 74 Ibid, 28. 75 Essential Services Commission, ‘Victorian Renewable Energy Target Scheme’, http://www.esc.vic.gov.au/public/VRET/ at 15 June 2008. 76 Ibid. Victorian Renewable Energy Act 2006 (Vic) section 66. 77 Victorian Renewable Energy Act 2006 (Vic), Part 4, Division 1. 78 Victorian Renewable Energy Act 2006 (Vic), Part 2, Division 4. 79 Electricity Act 1994 (Qld). . 80 Queensland Government ‘13% Gas Scheme’, http://www.dme.qld.gov.au/Energy/13percentgas.cfm at 15 June 2008; Macgill et al, n66, 20.
189 accredited eligible gas-fired electricity generators with each GEC representing
one mega watt of eligible gas generation. 81
EMISSIONS TRADING PROPOSALS FOR AUSTRALIA
Emissions trading has gained greater political approval in recent years and a national emissions trading system for Australia now appears imminent. In 2004, the National Emissions Trading Taskforce (NETT) initially proposed a national,
state-based, emissions trading system. 82 The proposal was supported by all state and territory governments and Federal support was sought for the implementation of the program. However, the Federal government opposed the proposal and the Australian states and territories announced that they would commence the NETT model, by the end of 2010, if the Federal government failed to implement its own
system. 83
In December 2006, the then Prime Minister established a Task Group on Emissions Trading to consider a proposal for Australia to establish a workable global emissions trading system in which Australia would participate. The Task Group issued its report in May 2007 in which it made recommendations for the implementation of an Australian domestic emissions trading scheme which might
link to other trading schemes in the future. 84 Those recommendations were adopted by the Prime Minister. Emissions reduction liabilities were to be
81 Ibid. 82 http://www.cabinet.nsw.gov.au/greenhouse/emissionstrading at 15 June 2008. A discussion paper outlining the proposed scheme was released in August 2006. 83 Council for the Australian Federation, ‘Communique: 7 February 2007 Sydney’ at http://www.emissionstrading.org.au/__data/assets/pdf_file/0016/6343/CAF_communique_9feb07.pdf at 15 June 2008. 84 Prime Ministerial Task Group on Emissions Trading, 'Report of the Task Group on Emissions Trading' (The Department of the Prime Minister and Cabinet, 2007) at 9, 85.
190 imposed on large scale users of fossil fuels and fossil fuel distributors and the system was intended to become operational by the end of 2011.
The key features of the emissions trading scheme were to be announced in mid-
2008 including the long term emissions reduction target for the market. 85 Whatever form this scheme may have ultimately taken, it suffered from a potentially fatal flaw by being designed prior to the adoption of an appropriate emissions reduction target for Australia. Accordingly, the design of the scheme was focused primarily on the avoidance of negative impacts on Australia’s global competitiveness rather than on the adoption of strict emission reduction obligations to avoid the impacts of climate change.
The change of Federal government in November 2007 ceased further development of the emissions trading scheme. Announcements by the current government indicate that a Federal emissions trading system is likely to become
operational in Australia in 2010. 86 For this to occur, the trading initiatives discussed above will, where feasible, need to be transitioned into the new regime
and ultimately decommissioned. 87 For now, there is no national regulation of our greenhouse gas emissions and the formal design of any such market based system
is still being devised. 88 From a policy perspective, this is far from ideal and it does not provide Australian businesses with sufficient information to guide their short and long term business planning and risk management approaches.
85 Ibid, 144. 86 Draft emissions trading legislation is expected to be released for comment at the end of 2008. Australian Government, 'Media Release: Government Announces Detailed Timetable on Emissions Trading' (Senator the Hon Penny Wong, Minister for Climate Change and Water, PW 35/08, 17 March, 2008). Prime Minister Kevin Rudd has committed to the adoption of a long term target for Australia of reducing emissions by 60 per cent on 2000 levels by 2050 with interim targets to be established. Prime Minister Kevin Rudd, ‘Ratifying the Kyoto Protocol’ (3 December 2007, Media Statement) http://www.alp.org.au/media/1207/mspm030.php at 15 June 2008. It is unclear the extent to which this scheme will build upon the design work of the previous Prime Ministerial Task Group on Emissions Trading. 87 There will significant issues in attempting to merge these trading schemes into a national carbon trading market with their variances in the creation and treatment of tradeable instruments. See, for example, State of New South Wales, 'Transitional Arrangements for the NSW Greenhouse Gas Reduction Scheme' (New South Wales Department of Water and Energy, 2008). 88 The future Australian emission trading system is examined in Chapter Seven.
191
The absence of initiatives to restrict Australia’s rising levels of emissions poses an even greater challenge in establishing an effective legal response to climate change. The Intergovernmental Panel on Climate Change (IPCC) recommends that the international community take action to reduce global atmospheric concentrations of emissions to around 450 ppm in order to limit increases in global temperatures to 2-2.4 degrees Celsius above pre-industrial levels which would require global emission to peak by 2015 and be reduced by 50 per cent ,
below current levels, by 2050. 89 However, given the lack of progress in Australia’s emission reduction initiatives, the corresponding Australian target
would have to be in the realms of 90 per cent below 2000 levels by 2050. 90
Consequently, the absence of an effective legal response to climate change means that any future legislative scheme must be capable of mandating the significant, urgent and deep reductions in greenhouse gas emissions required to address the threat of climate change. In such a regulatory context, market instruments alone are unlikely to be adequate to achieve such broad behavioural adjustments and will need to be complemented by strict duties to reduce emissions as well as a portfolio of other measures to promote the research and development of low carbon technologies and mandate the use of alternative energy sources.
89 B.S. Fisher et al, 'Issues related to mitigation in the long term context' in B. Metz et al (eds), Climate Change 2007: Mitigation. Contribution of Working Group III to the Fourth Assessment Report of the Inter-governmental Panel on Climate Change (2007) Cambridge, Cambridge University Press at 173. 90 Garnaut Climate Change Review, 'Interim Report to the Commonwealth, State and Territory Governments of Australia' (2008) at 39.
192 THE REGULATION OF ENERGY SOURCES IN AUSTRALIA
Australia relies heavily on coal for the domestic generation of electricity and this is a significant source of national greenhouse gas emissions. Given the significant reductions in emissions required to avoid the adverse impacts of climate change, any regime to address climate change in Australia will need to promote the uptake of low carbon or ‘clean’ technologies and mandate the use of
renewable energy sources within the Australian community. 91 There are a range of potential renewable energy sources in Australia which are at varying levels of
development and deployment. 92 The purpose of the following paragraphs is to provide a brief overview of the key policy issues in the development of those alternative energy sources as part of the Australian regulatory response to climate change.
Large hydro schemes currently produce the largest amount of electricity
generated from renewable energy sources in Australia. 93 However, the popularity of hydro power has been significantly affected by precipitation changes in Australia and water shortages which make it difficult to maintain adequate flows
in the Murray, Murrumbidgee and Snowy Rivers. 94 Australia also has an area of
potentially exploitable tidal energy in the Kimberley in Western Australia. 95 However, initial studies indicated that the project would not be economically
viable owing to the remoteness of the region. 96 Australia also has a potential
91 The current Prime Minister has committed to ensuring that at least 20 per cent of Australia's electricity supply is generated from renewable sources by 2020. This is yet to be legislatively mandated. Prime Minister Kevin Rudd, ‘Ratifying the Kyoto Protocol’ (3 December 2007, Media Statement) http://www.alp.org.au/media/1207/mspm030.php at 15 June 2008. 92 See Mark Diesendorf, Greenhouse Solutions with Sustainable Energy (2007) Sydney, University of New South Wales Press. 93 David Harries et al, 'Hydro, Tidal and Wave Energy in Australia' (2006) 63(6) International Journal of Environmental Studies 803 at 803. 94 R John Samdeman Oam, 'A Critique of Present Australian Energy Policy' (2006) 63(6) International Journal of Environmental Studies 719 at 725. 95 Harries et al, n93, 806. 96 Ibid, 806-808.
193 source of wave energy along the southern coastline and this technology is
currently in the research and development phase. 97
It has been commented that wind power is ‘one of the least expensive and most environmentally sound of the “new” renewable sources of electricity’ and has the potential to provide at least 20 per cent of Australia’s electricity within a few
decades. 98 The barriers to the development of wind power in Australia include its reputation as an ‘intermittent’ rather than reliable source of power; conflict with competing land uses; and the perceived local environmental and aesthetic
impacts of the wind farms themselves. 99
Although Australia possesses the ‘highest average solar radiation resource of any of the world’s continents’ the market response has been limited with
approximately five per cent market penetration of solar water heaters. 100 Geothermal energy, although not strictly renewable, is also a potential major
energy source for Australia. 101 The Cooper Basin has the world’s largest known concentration of hot fractured granite suitable for heat extraction and is reported to have the capacity to supply all of Australia’s energy needs for the next 70
years. 102 However, these resources are currently largely unexploited due to the
remoteness of the geothermal resources from major electricity load centres. 103
There has been significant debate in Australia regarding the benefits and risks associated with nuclear energy including the safety of nuclear reactors and the
97 Ibid, 808-809. 98 Mark Diesendorf, 'Wind Power in Australia' (2006) 63(6) International Journal of Environmental Studies 765 at 774. 99 Ibid. 100 Keith Lovegrove and Mike Dennis, 'Solar Thermal Energy Systems in Australia' (2006) 63(6) International Journal of Environmental Studies 791 at 800-801. 101 David Harries et al, 'Geothermal Energy in Australia' (2006) 63(6) International Journal of Environmental Studies 815 at 817-820. 102 Samdeman Oam, n94, 725. 103 David Harries et al, n101, 820.
194 treatment and disposal of nuclear waste. 104 Those in favour of nuclear power have commented that it ‘shows considerable promise for the production of large
amounts of reliable, low carbon electricity.’ 105 The Prime Minister’s Nuclear Energy Taskforce considered these issues and issued its report in December
2006. 106 The report concluded that reducing Australia’s greenhouse gas emissions requires a full spectrum of initiatives and its goals cannot be met by nuclear
power alone .107 The report estimates that the emissions reductions from nuclear
power could be 8 to 17 per cent of national emissions in 2050. 108 The report also notes that nuclear power is likely to be between 20 and 50 per cent more costly to
produce than power from a new coal-fired plant at current fossil fuel prices. 109 The Taskforce concluded that for nuclear power and renewable energy sources to become competitive in Australia, the costs of greenhouse gas emissions must be
an explicit cost of production .110 Potential mechanisms identified to achieve this, and properly price greenhouse gas emissions, included carbon taxes, permit
trading and emissions charges. 111
It appears that the regulation of greenhouse gases in Australia will require a full portfolio of policies and measures that incentivise and mandate a range of renewable energy solutions as well as imposing strict legally enforceable obligations to reduce annual greenhouse gas emissions. The maturity of these renewable energy technologies will inevitably influence political deliberations regarding the stringency of mandates to uptake renewable energy in the near term. The commercial competitiveness of these alternative energy sources will also
104 For example, see Martin Sevior, 'Considerations for Nuclear Power in Australia' (2006) 63(6) International Journal of Environmental Studies 859 at 869-871; Jim Falk, Jim Green and Gavin Mudd, 'Australia, Uranium and Nuclear Power' (2006) 63(6) International Journal of Environmental Studies ; Geoffrey N. Taylor, 'Australia: Host for a Nuclear Waste Storage Site?' (2006) 63(6) International Journal of Environmental Studies 873. 105 Sevior, n104, 871. 106 Commonwealth of Australia 2006, Uranium Mining, Processing and Nuclear Energy — Opportunities for Australia? , Report to the Prime Minister by the Uranium Mining, Processing and Nuclear Energy Review Taskforce, December 2006. 107 Ibid, 2. 108 Ibid. 109 Ibid. 110 Ibid. 111 Nuclear Energy Taskforce, n106, 61.
195 play a significant role in their rate of mobilisation and uptake. Therefore, the development and deployment of these technologies will need to be assisted through additional subsidies and grants from the government. As commented:
it is clear that there is substantial potential for a range of renewable energy technologies to play a part in Australia’s future energy mix. But, even wind power, the most mature, is still over twice as expensive as Australian coal-fired electricity generators. 112
Consequently, the Australian government must adopt a portfolio approach which provides adequate regulatory and economic drivers to enhance the commercial viability of renewable energy technologies and promote the diffusion and uptake of these alternative energy sources within the community. Such transformations in traditional energy supply and use will be essential components in achieving the rapid and large scale reductions in greenhouse gas emissions required within Australia.
THE RESPONSE OF THE ASIA PACIFIC PARTNERSHIP TO CLIMATE CHANGE
In addition to its obligations under the UNFCCC and the Kyoto Protocol Australia also formed a number of other multilateral and plurilateral agreements. The most significant of these is the Asia-Pacific Partnership on Clean Development and Climate (AP6), initiated in 2005. Unlike the climate change regime, this international cooperative agreement is focused on the development and deployment of improved technologies to address energy security and combat
112 Sevior, n104, 864.
196 climate change rather than the imposition of absolute emission reduction
targets. 113
The partnership, known as the AP6, comprises Australia, the United States,
China, India, Canada, Japan and the Republic of Korea. 114 AP6 aims to establish international public-private collaboration to address increased energy needs and associated challenges, including those related to air pollution, energy security, and greenhouse gas intensities, in accordance with national circumstances, through the development, deployment and transfer of cost-effective cleaner
technologies. 115 It intends to achieve this whilst ensuring ongoing economic
growth and development. 116
A Objectives of the AP6
AP6 devised a Charter, Communiqué and Work Plan at its inaugural meeting in Sydney in January 2006. Under the Charter, the purpose of the partnership is to create a voluntary, non-legally binding, framework for international
cooperation. 117 AP6 is intended to create an enabling environment for the exchange of information, implementation of bilateral and multilateral activities
and engagement of the private sector. 118
113 Harro van Asselt, 'From UN-ity to Diversity? The UNFCCC, the Asia-Pacific Partnership and the Future of International Law on Climate Change' (2007) 1 Carbon and Climate Law Review 17 at 17- 18. 114 Canada joined AP6 in October 2007. Asia-Pacific Partnership on Clean Development and Climate http://www.asiapacificpartnership.org/ at 15 June 2008. 115 Asia-Pacific Partnership on Clean Development and Climate, 'Charter' (Adopted, Inaugural Ministerial Meeting, Sydney, 11-13 January 2006, Amended, Second Ministerial Meeting, New Delhi, 14-15 October 2007), http://www.asiapacificpartnership.org/charter.pdf at 15 June 2008. Principles 1.1 and 2.1. 116 Charter, ibid, Annex I ‘Vision Statement of Australia, China, India, Japan, the Republic of Korea, and the United States of America for a New Asia-Pacific Partnership on Clean Development and Climate 28 July 2005’ at 5. 117 Ibid, Preambles and Principle 2.1.1. 118 Ibid, Principles 2 and 3.
197 It is also intended to:
serve as a framework for supporting agile, constructive, and productive international cooperation among the Partners to meet our development, energy, environment, and climate change objectives. 119
The AP6 Policy and Implementation Committee is responsible for the overall framework, policies, and procedures of the AP6 and will periodically review the progress of collaboration, and provide direction to the Administrative Support
Group. 120 The Administrative Support Group serves as the principal coordinator
of the AP6’s communications and activities. 121
Under the AP6’s agreed Work Plan, 122 eight public-private task forces were created which focus on power generation and distribution and on key industry sectors. These task forces were intended to draw on the expertise of private sectors, research communities and governments to consider the following areas:
cleaner fossil energy;
renewable energy and distributed generation;
power generation and transmission;
steel;
aluminium;
cement;
coal mining; and
buildings and appliances.
119 Ibid, Preambles at 1. 120 Ibid, Principle 4.2. Any Partner may terminate its membership upon written notice 90 days prior to the anticipated termination, Charter, Principle 8.1. 121 Ibid, Principle 4.3. 122 Asia-Pacific Partnership on Clean Development and Climate, 'Work Plan' (Inaugural Ministerial Meeting, Sydney, Australia, 11-12 January 2006) http://www.asiapacificpartnership.org/workplan.pdf at 24 June 2008.
198 Each task force was directed to define the current state of technology in terms of cost, performance, market share and barriers and to devise action plans for their
sector. 123 The actions plans for each sector were endorsed by the Policy and Implementation Committee in October 2006. The aim of these task forces was to improve energy efficiency, promote best practice, and develop new low-
emissions solutions. 124 In particular, task forces were able to designate flagship projects and activities, as part of their action plans, that, collectively, exemplified
the vision and objectives of AP6. 125 Sector based emission reduction targets were not set.
In 2006, Australia’s Prime Minister announced a pledge to invest AU$100 million over five years to support Australia’s involvement in clean development
projects, capacity building activities and its role in the AP6. 126 The Work Plan for the Cleaner Fossil Energy Task Force, led by the Australian Government, specifically acknowledges that coal and gas will remain critical fuels for the AP6 but that advanced technologies, including carbon dioxide capture and storage (CCS), have the potential to reduce greenhouse gas emission levels and other
environmental impacts. 127 The development of post combustion capture technologies was also specifically included in the action plan for the Cleaner
Fossil Energy Task Force. 128
123 Ibid, 1. 124 Asia-Pacific Partnership on Clean Development and Climate, ‘Second Ministerial Meeting Communiqué’, (New Delhi, India 15 October 2007) http://www.asiapacificpartnership.org/DelhiCommunique.pdf at 15 June 2008. 125 Asia-Pacific Partnership on Clean Development and Climate, ‘Flagship Guidelines, http://www.asiapacificpartnership.org/Flagshipguidelines.pdf at 15 June 2008. 126 Prime Minister of Australia, Asia-Pacific Partnership Sets New Path To Address Climate Change , Press Release No 1743 (12 January 2006). 127 Cleaner Fossil Energy Task Force, http://www.asiapacificpartnership.org/FossilEnergyTF.htm at 15 June 2008. The development of post combustion capture technologies was part of the action plan for the Cleaner Fossil Energy Task Force, 128 Asia-Pacific Partnership on Clean Development and Climate, ‘Executive Summary of Task Force Action Plans’ http://www.asiapacificpartnership.org/APP%20Action%20Plans/ExecutiveSummary%20_31%20Oct %2006_%20_2_.pdf at 15 June 2008.
199 CCS or geosequestration has been promoted ‘by government and industry as a viable solution to help Australia achieve a widespread reduction in greenhouse gas emissions’ and a number of demonstration projects are in the design and
implementation stages. 129 However, it has been commented that:
without meaningful and mandatory limitations being imposed on [greenhouse gas] emissions in Australia, it seems unlikely that geosequestration could become commercially viable in the near future. 130
This dependence on the saving graces of CCS to offset emissions from energy intensive industries, rather than the imposition of strict emission reduction obligations, is once again symptomatic of the generally dysfunctional approach to climate change regulation in Australia. This over-emphasis on so-called clean coal technology to protect Australia’s competitiveness and growth from stringent emission reductions fails to appreciate that it is the very phenomenon of climate change which is the real threat to Australia’s future economic, environmental and social well-being.
B AP6 and the International Response to Climate Change
The UNFCCC requires parties to promote the development and diffusion of technologies, practices and processes which control or reduce greenhouse gas
emissions. 131 Similar obligations are contained within the terms of the Kyoto
Protocol. 132 Australia’s membership of the AP6 does not necessarily offend these
provisions of the international climate change regime. 133 The AP6 Sydney Communiqué specifically acknowledges that the establishment of the partnership
129 AM Warburton et al, 'Geosequestration Law in Australia' in Tim Bonyhady and Peter Christoff (eds), Climate Law in Australia (2007) Sydney, The Federation Press, 142 at 142, 159. The legal issues in implementing these CCS projects in Australia are considered in Chapter Seven. 130 Ibid,160. 131 UNFCCC, n12, Article 4. 132 Kyoto Protocol, n14, Article 2. 133 Cf. Peter Christoff and Robyn Eckersley, 'Kyoto and the Asia-Pacific Partnership on Clean Development and Climate' in Tim Bonyhady and Peter Christoff (eds), Climate Law in Australia (2007) Sydney, The Federation Press, 32 at 37,42.
200 is consistent with efforts under the UNFCCC and would complement, but not
replace, the Kyoto Protocol. 134
This is reiterated in the AP6 Charter as follows:
bearing in mind that the purposes of the Partnership are consistent with the principles of the United Nations Framework Convention on Climate Change and other relevant international instruments, and are intended to complement but not replace the Kyoto Protocol. 135
It appears unlikely that the AP6 will have any substantive effect on the international and national response to greenhouse gas emissions and climate change. The AP6 is not an international treaty; the terms of the agreement are
not binding on its members; and it is not legally enforceable. 136 As noted by one commentator, ‘the degree of precision of commitments under the AP6 is rather low, which makes it difficult to see how the agreement could have any legal
effects’. 137 Accordingly, the AP6 does not possess the normative value to mandate the domestic imposition of restrictions on national greenhouse gas emissions. At most, it may complement the international climate change regime and domestic initiatives by facilitating additional information exchanges and the diffusion of less emissions-intensive technologies. However, even this is dependent upon the effectiveness of the AP6 in obtaining adequate funding from its members, on a voluntary basis, to enable the implementation of the various task force work plans.
134 Asia-Pacific Partnership on Clean Development and Climate, ‘Inaugural Ministerial Meeting Communiqué' (Sydney, Australia, 11-12 January 2006) http://www.asiapacificpartnership.org/Communique.pdf at 15 June 2008. This was reaffirmed in the New Delhi Communiqué. 135 Charter, n115, 1. 136 van Asselt, n113, 20. 137 Ibid.
201 THE POTENTIAL IMPACT OF AUSTRALIAN REGULATION ON NATIONAL EMISSIONS
A number of reports have assessed Australia’s national levels of greenhouse gas
emissions. The 2006 Australia State of the Environment Report 138 noted, with
concern, the increase in net greenhouse gas emissions in Australia. 139 According to the report, Australia’s emissions increased by 2.3 per cent to 564.7 million
tonnes of carbon dioxide equivalent from 1990 to 2004. 140 The largest source of those greenhouse gas emissions was attributed to the energy sector and, primarily,
to the stationary energy and transportation sub-sectors. 141
Australia’s greenhouse gas emissions were also assessed in the government report Tracking to the Kyoto Target 2006: Australia’s Greenhouse Emissions
Trends 1990 to 2008-2012 and 2020 . 142 The previous Federal government continually reaffirmed its commitment to meeting Australia’s emissions
reduction target under the Kyoto Protocol.143 However, this report, released in late 2006, predicted that ‘business as usual’ emissions would reach 125 per cent
of 1990 levels by 2010 and 151 percent of 1990 levels by 2020. 144 This would be in clear breach of Australia’s duty, under the Kyoto Protocol, to reduce national emissions to 108 per cent of 1990 levels by 2012.
With the incorporation of the effects of unspecified ‘greenhouse measures’ this government report estimated Australia’s emissions would be 109 per cent of
1990 levels in 2010. 145 The exact nature of those greenhouse measures were not
138 SoE 2006, n4. 139 Ibid, 27. 140 Ibid. 141 Ibid. 142 Department of the Environment and Heritage, n1. 143 Ibid, 3. 144 Ibid, 1,19. 145 Ibid, 16.
202 made clear but the report referred to existing government initiatives including the Greenhouse Gas Abatement Programme, Challenge Plus-Industry Partnerships, Mandatory Renewable Energy Target and the NSW Greenhouse Gas Abatement
Scheme. 146 The report also referred to examples of government funding of low
emissions technologies and renewable energy. 147 However, even with those greenhouse measures, the report concluded that emissions would rise to 127 per
cent of 1990 levels by 2020. 148
A further report presented by the Australian Bureau of Agriculture and Resource Economics to AP6, in 2006, concluded that the global diffusion of energy efficient technologies resulting from AP6 could lead to 23 per cent lower
greenhouse gas emissions by 2050 compared to projected levels. 149 Those projections were that global greenhouse gas emission levels would almost triple
between 2001 and 2050. 150 Based on this report, and taking into account the predicted reductions from AP6 initiatives, this would nevertheless result in a doubling of emissions by 2050 compared to the reductions required under the Kyoto Protocol. Accordingly, on the basis of these reports, the direct legal response to climate change in Australia has clearly been ineffective given the level and rate of emissions reductions now required to not only meet the conservative targets under the Kyoto Protocol but also to reduce emissions in order to avoid adverse anthropogenic interference with the climate system .
146 Ibid, 17. 147 Ibid, 19. 148 Ibid, 1,19. 149 Brian Fisher et al, 'Technological Development and Economic Growth' (ABARE Research Report 06.1, Australian Bureau of Agriculture and Resource Economics, 2006) at 34. 150 Ibid, 14.
203 COMPARATIVE DOMESTIC REGULATORY APPROACHES
The lack of restrictions on the emission of greenhouse gases in Australia, over the last decade, sits in stark contrast to those existing and emerging approaches in other domestic jurisdictions. Numerous nations, states and regions around the world have not only embraced the need to actively meet the targets of the Kyoto Protocol but have gone beyond this to adopt more stringent short and longer term emission reduction obligations, backed by regulatory regimes, aimed at achieving
the objectives of the UNFCCC. 151 Some noteworthy examples of other domestic and regional regulatory approaches are detailed in the following paragraphs. All of these countries have highly developed western economies, democratic systems of governance, effective law making and enforcement regimes and high standards of living. Accordingly, all of these countries possess similar features to Australia and, despite this, have determined to implement initiatives at national or state levels to reduce emissions and respond to the threat of climate change.
A The European Union
The member states of the European Union (EU) elected to fulfil their commitments under the Kyoto Protocol as an ‘EU Bubble’ and have a collective commitment to achieve an eight per cent reduction in greenhouse gas
emissions. 152 The EU commenced an EU-wide emissions trading scheme, from January 2005, as one of the key policy measures to achieve greenhouse gas emission reductions and to assist EU member states to meet their target under the
Kyoto Protocol. 153 Each member state was obliged to implement the EU scheme through the passing of national legislation consistent with the directives of the
151 The current Australian Prime Minister has committed to the adoption of a long term target for Australia of reducing emissions by 60 per cent on 2000 levels by 2050 with interim targets to be established in late 2008. Prime Minister Kevin Rudd, ‘Ratifying the Kyoto Protocol’ (3 December 2007, Media Statement) http://www.alp.org.au/media/1207/mspm030.php at 15 June 2008. 152 This is permitted under Article 4.1 of the Kyoto Protocol, n14. 153 European Union (2005) ‘Greenhouse Gas Emission Allowance Trading Scheme’ at http://europa.eu/scadplus/leg/en/lvb/l28012.htm at 15 June 2008. EU Directive 2003/87/EC (entry into force 25.10.2003) published in OJL of the 25.10.2003.
204 EU Parliament. The trading scheme imposes caps on the national carbon dioxide emissions of all member states which must then be translated into national plans
with allocations for the various domestic sectors. 154
The EU has advocated that to achieve the objectives of the climate change regime, and avoid adverse climate change, surface temperature increases should be limited to a 2 degrees Celsius increase compared to pre-industrial levels. 155 The EU asserts that this would require that global greenhouse gas emissions are reduced to at least 50 per cent below 1990 levels by 2050. 156 In March 2007, the EU resolved to reduce greenhouse gas emissions by at least 20 per cent below 1990 levels by 2020 and challenged the world to follow suit. 157 The EU also adopted targets of a 20 per cent increase in energy efficiency; 20 per cent increase in the share of renewable energy in the EU’s overall energy use; and a minimum 10 per cent share for biofuels in petrol and diesel by 2020 .158 A common EU energy plan to implement these targets is currently in the process of development and consultation with member states.159
154 The operation of this emissions trading scheme is discussed in Chapter Seven. 155 Commission of European Communities, ‘Proposal for a Decision of the European Parliament and of the Council on the effort of Member States to reduce their greenhouse gas emissions to meet the Community’s greenhouse gas emission reduction commitments up to 2020 (the "Effort Sharing" Decision)’ (Brussels, 23 January 2008)(COM (2008) 17 final; 2008/0014 (COD)); http://eur- lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2008:0017:FIN:EN:PDF at 15 June 2008; Explanatory Memorandum. 156 Ibid. 157 European Council, March 2007. The EU resolved to increase that target to 30 per cent below 1990 levels if the rest of the world adopts similar targets through an international agreement. Commission of the European Communities, ‘Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: 20 20 by 2020 Europe's Climate Change Opportunity’ (Brussels, 23 January 2008) (COM(2008) 30 final), http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2008:0030:FIN:EN:PDF at 15 June 2008. 158 EU Commission, ‘Memo on the Renewable Energy and Climate Change Package (Memo/08/33)’ (Brussels, 23 January 2008) http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/08/33&format=HTML&aged=0&la nguage=EN&guiLanguage=en at 15 June 2008. 159 The EU Commission adopted a legislative package of proposals to address climate change in the ‘Climate Action and Renewable Energy Package’ on 23 January 2008. The package is intended to be adopted by the EU members by the end of 2008, http://ec.europa.eu/environment/climat/climate_action.htm at 15 June 2008.
205 B The United Kingdom
In addition to the EU targets, the United Kingdom (UK) has adopted a long term target of at least 60 per cent reductions in carbon dioxide emissions, below 1990 levels, by 2050 and 26 to 32 per cent below 1990 levels by 2020. 160 This will be achieved through the adoption of 5 year carbon budgets. 161 The creation of a UK trading scheme, with wider sectoral coverage than that of the EU scheme, is also envisaged. 162 Uniquely, the Climate Change Act will impose a statutory duty on the Secretary of State to ensure that the emission reduction targets are met. 163
C Canada
In April 2007, the government of Canada adopted a short term target of 20 per cent reductions in emissions, below 2006 levels, by 2050. 164 In March 2008, the government announced the regulatory framework for meeting this target which included the imposition of obligations on all covered industrial sectors to reduce their emissions intensity from 2006 levels by 18 per cent by 2010, with 2 per cent continuous improvement every year after that. 165 Industries may elect to reduce emissions or obtain sufficient credits via a number of flexible compliance mechanisms. 166 Proposed greenhouse gas regulations are to be published in late 2008 and will come into force on 1 January 2010. 167 The Alberta government of
160 The Committee on Climate Change, to be established under Part 2 of the Bill, will consider whether this long term target should be 80 per cent below 1990 levels. Climate Change Bill [HL] 2007-2008 (UK). The Bill was introduced into the House of Lords on 14 November 2007 and completed its passage through the House of Lords on 31 March 2008. It received its second reading in the House of Commons on 9 June 2008. It is expected to receive Royal Assent in 2008. DEFRA, ‘UK Legislation: taking the Climate Change Bill forward-progress’ (18 February 2008) http://www.defra.gov.uk/Environment/climatechange/uk/legislation/index.htm at 15 June 2008. 161 Climate Change Bill [HL] 2007-2008 (UK), section 4. 162 Climate Change Bill [HL] 2007-2008 (UK), Part 3. 163 Climate Change Bill [HL] 2007-2008 (UK), section 1(1). DEFRA, ‘UK Legislation: taking the Climate Change Bill forward-progress’ (18 February 2008) http://www.defra.gov.uk/Environment/climatechange/uk/legislation/index.htm at 16 June 2008. 164 Government of Canada, ‘Turning the Corner: Regulatory Framework for Industrial Greenhouse Gas Emissions’ (Minister of Environment, March 2008) at iii-iv. 165 Ibid. 166 Ibid. These compliance mechanisms include obtaining credits from: domestic offsets; the CDM of the Kyoto Protocol; the early action program; and payments into a technology fund. 167 Environment Canada, ‘Government Delivers Details of Greenhouse Gas Regulatory Framework’ (Ottawa, 10 March 2008), http://www.ec.gc.ca/default.asp?lang=En&n=714D9AAE- 1&news=B2B42466-B768-424C-9A5B-6D59C2AE1C36 at 15 June 2008.
206 Canada has independently adopted a target of equal to or less than 50 per cent of 1990 levels, relative to Gross Domestic Product, by 31 December 2020.168
D The United States of America
Despite the decision of the Federal US government to not ratify the Kyoto Protocol, a number of states and regions in the US have also adopted measures to reduce their greenhouse gas emissions. 169 For example, the US state of New Jersey has adopted a short term target of 1990 levels by 2020 and a long term target of 80 per cent below 2006 levels by 2050. 170 Connecticut has adopted a short term target of 1990 levels by 2010, a mid term target of 10 per cent below 1990 by 2020 and a long term target of 75 to 85 per cent below 2001 levels. 171 California has also adopted ambitious targets of reducing greenhouse gas emissions to 2000 levels by 2010; to 1990 levels by 2020; and to 80 per cent below 1990 levels by 2050. 172 To assist in meeting these targets, the California State Air Resources Board is required to adopt regulations, on or before 1 January 2010, that ‘achieve the maximum technologically feasible and cost- effective greenhouse gas emission reductions from sources or categories of sources’.173
168 Alberta Government, Climate Change and Emissions Management Act 2003 , section 3(1). Net emissions intensity limits are imposed on large facilities under Part 2 of the Climate Change and Emissions Management Act: Specified Gas Emitters Regulation (Alberta Regulation 139/2007). 169 For a summary see Pew Center on Global Climate Change ‘A Look at Emissions Targets’ http://www.pewclimate.org/what_s_being_done/targets/ at 16 June 2008. 170 Executive Order No. 54 , State of New Jersey Office of the Governor, ‘Press Release: Governor Corzine Calls for Sweeping Reduction of Greenhouse Gas Emissions in New Jersey’ (New Jersey, 13 February 2007) http://newjersey.gov/governor/news/news/approved/20070213a.html at 16 June 2008. 171 Connecticut Climate Change Action Plan 2005 ; Connecticut Climate Change Act 2004 (Connecticut Public Act No. 04-252). 172 Governor’s Executive Order S-3-05 (1 June 2005); the target of 1990 levels by 2020 is given statutory status by the California Global Warming Solutions Act 2006 (AB 32). 173 California Global Warming Solutions Act 2006 (AB 32), Part 4.
207 E New Zealand
Finally it should be noted that New Zealand (NZ) is also a ratified party to the Kyoto Protocol and has actively implemented programs aimed at meeting its target and reducing its greenhouse gas emissions to 1990 levels over the period
2008-2012. 174 Meeting this target poses particular challenges for NZ given that, in 1990, almost 80 per cent of total electricity generation in NZ came from
renewable energy sources including hydro, geothermal and wind. 175 Furthermore, a significant amount of NZ national emissions come from the agriculture industry including methane from ruminant animals (30 per cent of national emissions) and
nitrous oxide emissions (18 per cent of national emissions). 176 The technical
solutions for methane, in particular, are quite problematic. 177 Accordingly, although the adopted target is not as ambitious as that of the EU or the UK, for example, the efforts of the NZ government appear quite respectable when
compared to the disappointing Australian response to its less onerous target. 178
CONCLUDING COMMENTS
The climate change regime is dependent on domestic legislation, policies and other emissions reduction initiatives to achieve global reductions in greenhouse gas emissions in order to avoid the adverse impacts of climate change. However, the climate change regime does not impose direct obligations on nation parties to implement such initiatives, instead providing parties with a broad discretion as to
174 These include engagement in the market mechanisms of the Kyoto Protocol, implementation of the Climate Change Response Act 2002 (NZ), designing an emissions trading scheme, establishment of energy efficiency and sustainability strategies and the creation of the Sustainable Land Management and Climate Change Plan of Action. New Zealand Ministry for the Environment, ‘Major Climate Change Policies and Strategies’ http://www.mfe.govt.nz/issues/climate/policies-initiatives/policies- strategies.html at 15 June 2008. 175 New Zealand Government, 'New Zealand's Climate Change Solutions: an overview' (2007) at 5. 176 Ibid, 8. 177 Ibid. 178 That is, reductions in national emissions to 108 per cent of reported 1990 levels.
208 the choice and manner of implementation of domestic reduction initiatives. Where this results in a complete absence of direct regulatory initiatives to reduce emissions, as in the case of Australia, this deliberate exercise of discretion has the effect of undermining the international regime in achieving its global environmental objectives.
The purpose of this chapter was to analyse critically the direct regulatory approaches to greenhouse gas emissions and climate change in Australia. The brevity of this chapter is due entirely to the complete absence of direct domestic regulation aimed at minimising emissions or responding to climate change. This is despite Australia’s clear international duties to do so. The approach of the Federal government has been based, primarily, on ad hoc voluntary schemes which have provided little incentive for the Australian community to alter its emitting behaviour or for industry to make significant investments in less energy intensive technologies or alternative energy sources. Indeed, the current Australian legal approach presents as a prime example of an inadequate, legally dysfunctional, and ultimately ineffective, response to the challenges of climate change. As a result, the design of any future legal regime to reduce emissions rapidly will have to contend with this lack of progress within the Australian community. In such circumstances, the use of market incentives alone will not be sufficient to achieve the substantial, and abrupt, emission reductions now required not only to comply with Australia’s international obligations but also to avoid the adverse impacts of climate change. A portfolio of legal responses is required including direct regulation with strict duties to reduce emissions; market mechanisms to promote private engagement; and other measures to promote the development and deployment of new technologies and use of alternative energy sources. All of these measures will be critical in order to establish an effective regime to achieve such a radical transformation in the Australian psyche.
209 In the meantime, the absence of comprehensive regulation in Australia to address climate change makes it necessary to review the surrogate legal mechanisms that might operate to require, indirectly, reductions in greenhouse gas emissions and respond to the impacts of climate change. The following two complementary chapters consider the operation of existing Australian environmental and planning regimes and the common law of torts respectively. The former chapter presents a critical analysis of the current and potential role of environmental and planning regulation, in Australia, in imposing obligations to minimise emissions and adapt to the impacts of climate change. The latter chapter presents a critical examination of the role of the Australian common law of torts as a mechanism to distribute responsibility for the harmful effects of greenhouse gas emissions resulting from the impacts of climate change.
210 Chapter Five - The Role of Environmental Regulation, in
Australia, in Responding to the Impacts of Climate Change1
INTRODUCTION
The regulation of humankind’s impacts on the environment is based upon a sophisticated collection of guiding environmental principles and strict legal rules that are formulated across international, national, regional and local levels. The overarching purpose of environmental regulation is to resolve tensions between a kaleidoscope of conflicting short term economic priorities, social interests and the long term requirements for a sustainable environment. The phenomenon of climate change is an environmental problem for which strong regulation is required to address conflicting short term economic imperatives and long term social impacts and environmental degradation. This tension is exacerbated by the prevailing misunderstanding and doubt regarding the science of climate change and the causal impacts of greenhouse gas emissions. At an international level, climate change is regulated through a relatively weak international regulatory regime with limited emission reduction obligations and weak enforcement mechanisms. Nations are provided with a vast discretion as to the manner of domestic regulation of greenhouse gas emissions. In the case of Australia, that discretion has been exercised to facilitate business as usual and discourage the restriction of emissions from Australia’s major industries.
1 The analysis of the Xstrata case contained in this chapter was published in Nicola Durrant, 'The Xstrata Coal Mine Challenge: Objections, Judicial Determinations and Natural Justice' (2007) Issue 60 Queensland Environmental Practice Reporter 125. The analysis of adaptation to climate change and leasing/sale of land contracts contained in this chapter was included in a conference paper entitled 'Addressing Climate Liabilities in Common Transactional Documents' presented at the National Environmental Law Association The Law of Climate Change Conference , Freemantle Western Australia, 27-28 March 2008.
211 In the absence of specific national regulation of greenhouse gas emissions in Australia, the regulation of emissions as ‘air pollution’ likely to cause ‘environmental harm’ will fall to be regulated under existing Australian environmental protection and environmental impact assessment regimes. Even if Federal legislation is implemented in the future to restrict the rate of greenhouse gas emissions, these environmental and planning regimes will continue to play a critical role in regulating the physical impacts of climate change. Consequently, the purpose of this chapter is to critically assess the current scope of Australian environmental law and its ability to regulate emissions and minimise the harmful impacts of climate change. This chapter presents an analysis of the law in theory and case studies of the law in practice. This chapter concludes that the current operation of these environmental regimes is suboptimal and characterised by a serious dichotomy between the law as written and its practical interpretation and application by Australian determining authorities. Given the urgency and significance of the threat of climate change there is very limited jurisprudence in this area. Moreover, the majority of judicial considerations display a fundamental misconception regarding the proper role of the principles of ecologically sustainable development (ESD) in the application of the law; a serious misunderstanding as to the nature of climate change; and lingering doubt regarding the accuracy of the scientific predictions of the impacts of climate change.
ADDRESSING CLIMATE CHANGE AND THE PROMOTION OF SUSTAINABLE DEVELOPMENT: INTERNATIONAL PRINCIPLES
Society has long acknowledged the inherent tension between continued economic growth, development and the degradation of the Earth’s natural resources. The report of the World Conference on Environment and Development ‘Our Common
212 Future’ crystallised a new aspirational goal for society called sustainable
development.2 Sustainable development was defined as ‘the ability of humanity to ensure that development meets the needs of the present without compromising
the ability of future generations to meet their own needs’. 3
Sustainable development is comprised of three independent pillars of
sustainability, namely, environmental, economic and social sustainability. 4 Actions to address sustainability are clearly interconnected with the global goal of avoiding adverse climate change. The overriding objective of the United Nations Framework Convention on Climate Change (UNFCCC) is to achieve the ‘stabilization of greenhouse gas concentrations in the atmosphere at a level that
would prevent dangerous anthropogenic interference with the climate system’. 5
The ‘adverse effects’ of climate change are described as follows:
changes in the physical environment or biota resulting from climate change which have significant deleterious effects on the composition, resilience or productivity of natural and managed ecosystems or on the operation of socio-economic systems or on human health and welfare. 6
Accordingly, climate change has been described as the archetypal environmental issue with its supranational impacts that ‘disrupt sea levels, ocean currents and the constituent gases of the atmosphere’ and impacts that are spatially and
temporally removed from the point of emissions. 7
2 G. Bruntland, (ed) 'Report of the World Commission on Environment and Development: Our Common Future (The Bruntland Report)' (Oxford University Press, 1987). 3 Ibid, 43. 4 Jennifer A. Elliott, An Introduction to Sustainable Development (3 ed, 2006) London, New York, Routledge at 11. 5 United Nations Framework Convention on Climate Change , opened for signature on 4 June 1992, 31 ILM 849 (entered into force on 21 March 1994)(UNFCCC), Article 2. 6 UNFCCC, n5, Definitions. 7 Jennifer Elliott, n4, 72-73, 77.
213 The UNFCCC states that ‘the Parties have a right to, and should , promote
sustainable development’.8 The Kyoto Protocol to the UNFCCC also requires parties to promote sustainable development in the achievement of their emissions
reduction obligations (or targets). 9
Avoiding adverse climate change requires the effective regulation of a range of uncertain ecological effects from a broad scope of human activities at global,
regional and local levels. 10 In particular, to promote sustainable resource, there is a need to assess and manage, within an effective legal framework, the political, social, cultural and economic dimensions of human uses of the Earth’s resources:
poverty eradication, changing consumption and production patterns, and protecting and managing the natural resource base for economic and social development are overarching objectives of, and essential requirements for, sustainable development. 11
Climate change is an obvious example of an environmental problem that has the potential to affect adversely both current and future generations. The UNFCCC states that the parties to the convention are ‘determined to protect the climate
system for present and future generations’ 12 and that:
the Parties should protect the climate system for the benefit of present and future generations of humankind, on the basis of equity and in accordance with their common but differentiated responsibilities and respective capabilities. 13
8 UNFCCC, n5, Article 3(4). 9 Kyoto Protocol to the United Nations Framework Convention on Climate Change , opened for signature 16 March 1998 (entered into force on 16 February 2005)(Kyoto Protocol), Article 2(1). 10 Joyeeta Gupta, 'Glocalization: The Precautionary Principle and Public Participation with special reference to the UN Framework Convention on Climate Change' in David Freestone and Ellen Hey (eds), The Precautionary Principle and International Law (1996) The Netherlands, Kluwer Law International, 231 at 231. 11 World Summit on Sustainable Development, 'Johannesburg Declaration on Sustainable Development' (2002) at [11]. 12 UNFCCC, n5, Preamble. 13 Ibid, Principle 1.
214 Acknowledgement and protection of the rights and interests of future generations
is a key component in the promotion of sustainable development. 14 The Stockholm Declaration first expressed this principle of inter-generational equity as:
man….bears a solemn responsibility to protect and improve the environment for present and future generation. 15 The natural resources of the earth…must be safeguarded for the benefit of present and future generations.16
The nature of the rights of future generations is a controversial issue. It has been described by one commentator as:
the right to those natural resources which are necessary to guarantee basic economic, social and cultural rights over an indefinite period of time…and the conservation of the conditions, including conservation of biological diversity, which are necessary to ensure their attainment. 17
Entrenched in the principles of sustainable development and inter-generational equity is the obligation to adopt a precautionary approach to risks in environmental management and decision-making processes. Therefore, the precautionary principle is concerned with the identification and management of risks of environmental and social harm through a process of ‘institutionalised
caution’. 18 This principle was first expressed in the Rio Declaration which states that:
in order to protect the environment, the precautionary approach shall be widely applied by States according to their capabilities. Where there are threats of serious or irreversible damage, lack of full scientific certainty should not be used as a
14 Alexandre Kiss, 'The Rights and Interests of Future Generations and the Precautionary Principle' in David Freestone and Ellen Hey (eds), The Precautionary Principle and International Law (1996) The Netherlands, Kluwer Law International, 19 at 23. 15 United Nations Conference on the Human Environment, 'Declaration of the United Nations Conference on the Human Environment' (1972), Principle 1. 16 Ibid, Principle 2. 17 Alexandre Kiss, n14, 24. 18 C.J Barrow, Environmental Management for Sustainable Development (2 ed, 2006) New York, Routledge at 33.
215 reason for postponing cost-effective measures to prevent environmental degradation. 19
The precautionary principle was also adopted in the UNFCCC and is described in the following terms:
the Parties should take precautionary measures to anticipate, prevent or minimize the causes of climate change and mitigate its adverse effects. Where there are threats of serious or irreversible damage, lack of full scientific certainty should not be used as a reason for postponing such measures, taking into account that policies and measures to deal with climate change should be cost-effective so as to ensure global benefits at the lowest possible cost. 20
The effect of the precautionary principle is, inter alia, to lower the threshold at which decision-makers must acknowledge that a reasonable risk to the
environment exists. 21 It also requires an element of mitigation of the risk of harm and has been described as ‘the most developed form of the general [r]ule
imposing an obligation to prevent harm to the environment’.22
ENVIRONMENTAL PROTECTION AND AVOIDANCE OF HARM: NATIONAL PRINCIPLES IN AUSTRALIA
The Australian Federal system of government has resulted in separate environment protection regimes being created by the Commonwealth and the various states. Little reference is made to the environment in the Australian
19 UNCED, 'United Nations Conference on Environment and Development: The Rio Declaration' ((1992) 31 ILM 874), Principle 15. 20 UNFCCC, n5, Principle 3. 21 Nicolas De Sadeleer, Environmental Principles: From Political Slogans to Legal Rules (2002) New York, Oxford University Press at 160. 22 Alexandre Kiss, n14, 27.
216 Constitution and the regulation of environmental matters resides primarily with
the states and territories. 23 However, the Commonwealth government has relied on a range of heads of power in the Constitution, including the corporations power, the trade and commerce power and the external affairs power, to enact
Commonwealth environmental laws. 24 The end result is a nation with a range of differing legislation, policies and approaches to environmental protection across the federal, state and territory jurisdictions.
There are a number of instruments that have been adopted and endorsed by the Commonwealth, states and territories, which provide guiding principles for the protection of the environment and promotion of environmental sustainability in Australia.
Firstly, the National Strategy for Ecologically Sustainable Development (NSESD) was endorsed by the Council of Australian Governments in December 1992. The policy defines ecologically sustainable development (ESD) as ‘development which aims to meet the needs of Australians today, while conserving our
ecosystems for the benefit of future generations’.25 And, ‘using, conserving and enhancing the community's resources so that ecological processes, on which life depends, are maintained, and the total quality of life, now and in the future, can
be increased’.26
23 Other than section 100 Commonwealth of Australian Constitution Act which states that ‘the Commonwealth shall not, by any law or regulation of trade or commerce, abridge the right of a State or of the residents therein to the reasonable use of the waters of rivers for conservation or irrigation.’ 24 Commonwealth of Australian Constitution Act ss 51(xx), 51(i), 51 (xxix). Stewart Smith, 'New Commonwealth and State Government Environment Relationships: Briefing Paper No 18/99' (1999) at 3-4. 25 Ecologically Sustainable Development Steering Committee, 'National Strategy for Ecologically Sustainable Development' (Australian Government, 1992), Part 1. 26 Ibid.
217 The guiding principles of the NSESD include an acknowledgement of the need to
consider the global dimension of environmental impacts of actions and policies 27 and the adoption of the precautionary principle in the following terms:
where there are threats of serious or irreversible environmental damage, lack of full scientific certainty should not be used as a reason for postponing measures to prevent environmental degradation. 28
Further, NSESD states that cost-effective and flexible policy instruments should
be adopted, such as improved valuation, pricing and incentive mechanisms. 29
The Intergovernmental Agreement on the Environment 1992 (IGAE) addresses the responsibilities of the various levels of government in Australia in regulating environmental concerns. IGAE endorses the incorporation of the precautionary principle into decision making and states that:
in the application of the precautionary principle, public and private decisions should be guided by:
careful evaluation to avoid, wherever practicable, serious or irreversible damage to the environment; and
an assessment of the risk-weighted consequences of various options. 30
The IGAE also commits to ensuring that environmental issues associated with a proposed project are taken into consideration and that there is a proper
examination of matters which significantly affect the environment. 31 Accordingly, these guiding instruments are unequivocal in their support for the implementation and incorporation of the principles of ESD, including the principle of inter-
27 Ibid, Part 1, Principle 3. 28 Ibid, Part 1, Principle 2. 29 Ibid, Part 1, Principle 6. 30 Australian Government, 'Intergovernmental Agreement on the Environment' (1992), 3.5.1. 31 Ibid, 3.4.
218 generational equity and the precautionary principle, into the decision-making process. The following sections will analyse the extent to which these principles are being implemented in relation to significant greenhouse gas emissions and climate change.
DOMESTIC REGULATION UNDER THE CLIMATE CHANGE REGIME: DUTIES AND DISCRETION
The UNFCCC and Kyoto Protocol are both international agreements, reached through international consensus, that are aimed at reducing anthropogenic greenhouse gas emissions to avoid or reduce the adverse effects of climate
change. 32 Climate change is an international environmental concern and it requires cooperative global efforts to minimise its adverse effects. Although global, the problem is not homogeneous. The regime is based on an understanding of the differing social, economic and environmental circumstances of each country including differences in their contributions to the global warming problem. Accordingly, the climate change regime adopts a principle of ‘common but differentiated responsibilities’, in line with equitable principles, and imposes customised emissions reduction obligations on each party. It recognises that policies and measures to protect the climate system against climate change should be appropriate for the specific conditions of each nation and does not
dictate the specific method of attainment of those emissions reductions. 33
Parties are able to choose which greenhouse gases, from a collection of six gases, will be the focus of their mitigation activities. Parties may also manage domestic land use management practices and carbon sinks to control net national
32 UNFCCC, n5, Article 2. 33 Ibid, Article 3(4).
219 emissions. 34 This provides parties with ample discretion regarding the nature and extent of domestic behavioural modification whilst acknowledging the inherent sovereignty of nation States. This flexibility ethos is replicated in the Kyoto Protocol which also creates flexible implementation mechanisms that may be
utilised, at will, by the parties to the Protocol. 35 Consequently, the UNFCCC and Kyoto Protocol outline, in broad terms, the types of policies that should be considered at a national level to implement the duty to reduce domestic greenhouse gas emissions. However, for the most part, the international regime leaves the method of implementation to the discretion of the parties.
This is a common approach for international environmental agreements whereby:
the agreement on protective measures is international, but the implementation with regard to each polluter is generally left to each state. As indicated by the phrase “think globally, act locally”, the assumption is that the objectives of international agreements shall be realized by the sum of all the state parties’ national undertakings. It is therefore a prerequisite that the measures of each state are compatible with the international accord. 36
Accordingly, a criticism levelled at international law is equally pertinent to the climate change regime:
hardly any guidance is provided as to the design and proportion of legal, administrative or other measures for pollution control; no criteria are given on what constitutes a compatible control system (emphasis added). 37
34 All Annex-1 parties are able to account for national ‘human induced land use change and forestry activities’, since 1990, in calculating their national emissions under the Kyoto Protocol. This is limited to afforestation, reforestation and deforestation activities that have been measured as verifiable changes in carbon stocks. Kyoto Protocol, n9, Article 3.3. 35 These flexible mechanisms include the Clean Development Mechanism, Joint Implementation and international emissions trading. 36 Jonas Ebbesson, Compatibility of International and National Environmental Law (1996) London, Kluwer Law International at xix. 37 Ibid, 113.
220 There are a number of provisions in the UNFCCC and Kyoto Protocol which generally require the implementation of policies and programmes to address climate change at a national level. First and foremost, each party must develop a national inventory of its anthropogenic greenhouse gas emissions and removals
by sinks and must submit these to the UNFCCC Secretariat.38 Parties are also required to formulate and regularly update national and, where appropriate, regional programmes containing measures to mitigate climate change concerning,
inter alia, the energy, transport, industry, agriculture, forestry and waste sectors. 39
In particular, developed Annex-1 countries 40 , including Australia, must adopt national policies and take corresponding measures on the mitigation of climate change, by limiting their anthropogenic emissions of greenhouse gases and
protecting and enhancing their greenhouse gas sinks and reservoirs. 41 They must also identify and periodically review policies and practices which encourage activities that lead to greater levels of anthropogenic emissions of greenhouse
gases. 42
All parties to the UNFCCC must also promote sustainable management, and promote and cooperate in the conservation and enhancement, as appropriate, of
sinks and reservoirs of all greenhouse gases. 43 Critically, as a party to the UNFCCC, Australia has agreed to take climate change considerations into account in relevant social, economic and environmental policies and actions, and to employ appropriate methods, including impact assessments, formulated and determined nationally, with a view to minimising the adverse effects of measures
undertaken to mitigate or adapt to climate change. 44
38 UNFCCC, n5, Article 4(1)(a); Kyoto Protocol, n9,Article 5(1). 39 UNFCCC, n5, Article 4(1)(b). 40 That is, those developed nations listed in Annex 1 to the Kyoto Protocol, n9. 41 UNFCCC, n5, Article 4(2)(a); Kyoto Protocol, n9, Articles 2(1);10. 42 UNFCCC, n5, Article 4(2)(e). 43 Ibid, Article 4(1)(d). 44 Ibid, Article 4(1)(f).
221 GREENHOUSE GASES, CLIMATE CHANGE AND HARM: THE SCIENTIFIC FINDINGS
In the context of the legal response to the consequences of climate change, the fundamental role of science has been described as ‘to provide “credible evidence” that particular proposed or ongoing human activities cross some
threshold of harm, triggering precautionary action’. 45 However, once a risk of likely environmental harm has been identified, complete scientific certainty is not
required prior to a decision to restrict such actions. 46
A detailed summary of the existing scientific evidence regarding the causes and impacts of climate change is presented in Chapter Two. For completeness, the key findings in respect of greenhouse gases, climate change and environmental harm are summarised below:
In relation to the link between the activities of humans and increased atmospheric concentrations of greenhouse gases the Intergovernmental Panel on Climate Change (IPCC) states that:
global atmospheric concentrations of carbon dioxide, methane and nitrous oxide have increased markedly as a result of human activities since 1750 and now far exceed pre-industrial values determined from ice cores spanning many thousands of years. The global increases in carbon dioxide concentration are due primarily to fossil fuel use and land use change, while those of methane and nitrous oxide are primarily due to agriculture. 47
45 Mary O'Brien, 'Science in the Service of Good: The Precautionary Principle and Positive Goals' in Joel A. Tickner (ed), Precaution, Environmental Science, and Preventive Public Policy (2003) Washington, Island Press, 279 at 279. 46 David Freestone and Ellen Hey, 'Origins and Development of the Precautionary Principle' in David Freestone and Ellen Hey (eds), The Precautionary Principle and International Law (1996) The Netherlands, Kluwer Law International, 3 at 13. 47 IPCC, 'Climate Change 2007: The Physical Science Basis: Summary for Policy Makers, Contribution of Working Group I to the Fourth Assessment report of the Intergovernmental Panel on Climate Change' (IPCC Secretariat Geneva, 2007) at 2.
222 In relation to the emission of greenhouse gases and increases in global temperatures, the IPCC concludes that:
most of the observed increase in globally average temperatures since the mid-20 th century is very likely due to the observed increase in anthropogenic greenhouse gas concentrations. 48
In relation to the resulting impacts of climate change, the IPCC concludes that:
warming of the climate system is unequivocal, as is now evident from observations of increases in global average air and ocean temperatures, widespread melting of snow and ice, and rising global mean sea level. 49
REGIMES TO PROTECT THE ENVIRONMENT: THE THEORETICAL REGULATION OF EMISSIONS
Chapter Four concluded that there is currently no national regulatory scheme in Australia that regulates, holistically, greenhouse gas emissions from domestic
sources.50 The absence of a clear regulatory framework at a Federal level raises questions regarding the suitability and flexibility of existing principles of environmental protection to reduce our greenhouse gas emissions. There have been many calls for specific Australian legislation, to restrict national greenhouse gas emissions. However, strictly speaking, there is not a need for new legislation
48 Ibid, 8. ‘Very likely’, in this context, refers to above 99 per cent scientific certainty. 49 Ibid, 4. 50 There are Federal government proposals to implement a national emissions trading system in conjunction with a greenhouse gas emissions reporting system with trade commencing in 2010. The trading scheme will impose liabilities on certain sectors to reduce their greenhouse gas emissions. This trading mechanism is intended to operate in conjunction with the mosaic of existing and emerging environmental regimes at both Federal and State levels. Australian Government, 'Media Release: Government Announces Detailed Timetable on Emissions Trading' (Senator the Hon Penny Wong, Minister for Climate Change and Water, PW 35/08, 17 March, 2008).
223 in order to achieve this. Under the current wording of environmental protection legislation, in Australia, it is open to the environmental regulatory authorities to regulate emissions and to prosecute for failure to take steps to minimise our emissions. In addition, the approval of new industrial projects with large scale greenhouse gas emissions, such as coal mines and coal fired power plants, will be assessed under existing environmental protection and planning legislation at state, territory and Commonwealth levels (as applicable).
The decisions of regulators under environmental protection and planning legislation in Australia will play a crucial role in influencing the outcomes regarding greenhouse gas emissions and climatic changes. Regulation of major projects in Australia is guided by the precepts of sustainability, inter-generational equity and precaution. Environmental protection legislation in Australia seeks to maintain the long-term quality of the local environment through the regulation of pollution and environmental harm. The principles of ESD have been adopted
into many Australian national and state environmental policies and statutes. 51 References to the precautionary principle range from the express to the oblique including direct obligations ‘to take into account’, general obligations to ‘have regard to’ and statutory objectives of acting ‘in accordance with’ a precautionary
approach. 52 Accordingly, the majority of environmental protection statutes have adopted the principles of environmental sustainability and the precautionary
principle in some form. 53
In South Australia (SA), where a specific greenhouse emission reduction target
has been adopted 54 , the object of the Environmental Protection Act 1993 (SA
51 Jacqueline Peel, The Precautionary Principle in Practice: Environmental Decision-Making and Scientific Uncertainty (2005) Sydney, The Federation Press at 19. 52 Ibid, 20. 53 For a detailed discussion of the environmental protection legislation in each Australian jurisdiction see Douglas E Fisher, 'The Statutory Relevance of Greenhouse Gas Emissions in Environmental Regulation' (2007) 24(3) Environmental and Planning Law Journal 210. 54 As discussed in Chapter Four.
224 EPA) is to promote the principles of ecologically sustainable development including:
(A) sustaining the potential of natural and physical resources to meet the reasonably foreseeable needs of future generations;
(B) safeguarding the life-supporting capacity of air, water, land and ecosystems; and
(C) avoiding, remedying or mitigating any adverse effects of activities on the environment. 55
The SA EPA states that proper weight should be given to both long and short term economic, environmental, social and equity considerations in deciding all matters relating to environmental protection and that a precautionary approach
should be taken to the assessment of the risk of environmental harm. 56 Finally, the objects refer to the incorporation of both the precautionary and polluter pays
principles into the exercise of decision-making functions. 57
The SA EPA imposes a general environmental duty requiring persons not to undertake activity that might pollute the environment unless all reasonable and
practical measures have been taken to minimise any environmental harm. 58 A pollutant includes any solid, liquid or gas and would include the emission of
greenhouse gases to the atmosphere. 59 The SA Act prohibits the undertaking of a prescribed activity of environmental significance except as authorised under a
licence. 60 This includes development activities. 61
55 Environmental Protection Act 1993 (SA), section 10(1)(a)(i). 56 Environmental Protection Act 1993 (SA), section 10(1)(a)(ii). 57 Environmental Protection Act 1993 (SA), section 10(1)(b)(iv)-(vi). 58 Environmental Protection Act 1993 (SA), section 25(2). 59 Environmental Protection Act 1993 (SA), section 3(1). 60 Environmental Protection Act 1993 (SA), section 36. Schedule 1. The Act does not apply to authorised activities under the Mining Act 1971 (SA), Environmental Protection Act 1993 (SA), section 7(4). 61 Environmental Protection Act 1993 (SA), section 57.
225 As in the majority of Australian state and territory jurisdictions, it is an offence to cause serious environmental harm, material environmental harm and
environmental nuisance. 62 Environmental harm is defined to mean any harm (including risk of harm or future harm) to the environment of whatever degree or duration while environment includes the land, air, water, organisms and
ecosystems and includes the amenity values of an area. 63 The Act applies to the coastal waters of the state and the air above and land beneath those waters. In addition, the Act has extra-territorial application and if a person causes environmental harm within the state they will be liable as if the conduct were
engaged in within the state. 64
It is useful to compare the approach to environmental protection in SA with other state jurisdictions that have not adopted a legislative greenhouse gas emissions reduction target.
The objectives of the Queensland Environmental Protection Act 1994 (QLD EPA)
are to protect Queensland’s environment while allowing for ESD.65 There is a general duty to avoid environmental harm and it is an offence to cause unlawful environmental harm, that is causing serious or material environmental harm or
environmental nuisance. 66
Environmental Harm is defined under the QLD EPA as:
any adverse effect, or potential adverse effect (whether temporary or permanent and of whatever magnitude, duration or frequency) on an environmental value, and includes environmental nuisance. 67
62 Environmental Protection Act 1993 (SA), ss 79,80,82. 63 Environmental Protection Act 1993 (SA), ss3(1), 5(1). 64 Environmental Protection Act 1993 (SA), section 9. 65 Environmental Protection Act 1994 (Qld), section 3. 66 Environmental Protection Act 1994 (Qld), ss 436, 437, 438, 440. 67 Environmental Protection Act 1994 (Qld), section 14(1).
226 Environmental value is defined as ‘a quality or physical characteristic of the
environment that is conducive to ecological health or public amenity or safety’. 68 The environment is itself defined under the Act to include ‘all ecosystems, all natural and physical resources, and the qualities and characteristics of locations,
places and areas’. 69
The QLD EPA specifies that environmental harm may be caused whether the harm is a direct or indirect result of the activity; or whether the harm results from the activity alone or from the combined effects of the activity and other
activities or factors. 70 The language and scope of these principles is clearly sufficiently wide to encompass the emission of greenhouse gases to the atmosphere and the resulting impacts on both the ‘environment’ and ‘environmental values’.
Finally, it should be noted that there is also a prohibition against the release of a
prescribed contaminant into the environment. 71 Although not yet a ‘ prescribed contaminant’, as gases, greenhouse gases would be treated as contaminants and could be prescribed in the future.
Similarly, in New South Wales (NSW), harm to the environment includes the direct or indirect alteration of the environment and includes any act or emission
that results in pollution. 72 Any air impurity, which includes gases, fulfils the
definitions of ‘air pollution’ and ‘harm’. 73 There is a general duty to notify of
pollution incidents that threaten material environmental harm. 74 In addition, possible pollution is required to be taken into account by the regulator in the
68 Environmental Protection Act 1994 (Qld), section 9. 69 Environmental Protection Act 1994 (Qld), section 8. 70 Environmental Protection Act 1994 (Qld), section 14(2). 71 Environmental Protection Act 1994 (Qld), section 442. 72 Protection of the Environment Operations Act 1997 (NSW), Dictionary. 73 Protection of the Environment Operations Act 1997 (NSW), Dictionary. 74 Protection of the Environment Operations Act 1997 (NSW), section 148.
227 licensing of activities. 75 Liability may be incurred where air pollution is caused from a plant provided that the pollution is due to a failure to maintain the plant in
an efficient condition, or operate the plant in a proper and efficient manner. 76
It is also an offence to wilfully or negligently dispose of waste in a manner that is
likely to harm the environment. 77 Waste refers to ‘any substance’ whether solid, liquid or gaseous that is emitted into the environment in such volume,
constituency or manner as to cause an alteration in the environment. 78 Some jurisdictions, such as Western Australia, also prohibit the discharge of
hydrocarbons into the environment. 79 Methane is a natural greenhouse gas and a
hydrocarbon and could be prohibited under these provisions. 80
In New Zealand, it is also an offence to discharge contaminants into the
environment unless authorised under a regional plan or resource consent. 81 However, in that jurisdiction, the definition of contaminants has been interpreted and applied by the regulators to extend to the discharge of greenhouse gases:
Contaminant includes any substance (including gases, odorous compounds, liquids, solids, and micro-organisms) or energy (excluding noise) or heat, that either by itself or in combination with the same, similar, or other substances, energy, or heat—
(a) When discharged into water, changes or is likely to change the physical, chemical, or biological condition of water; or
(b) When discharged onto or into land or into air, changes or is likely to change the physical, chemical, or biological condition of the land or air onto or into which it is discharged. 82
75 Protection of the Environment Operations Act 1997 (NSW), section 45. 76 Protection of the Environment Operations Act 1997 (NSW), section 124. 77 Protection of the Environment Operations Act 1997 (NSW), section 115. This is a tier 1 offence. 78 Protection of the Environment Operations Act 1997 (NSW), Dictionary. 79 Environmental Protection (Unauthorised Discharges) Regulations 2004 (WA). 80 Environmental Protection (Unauthorised Discharges) Regulations 2004 (WA) section 3. The discharge of a scheduled material from a commercial activity is prohibited in Western Australia. Schedule 1 lists ‘petrol diesel or other hydrocarbon’. 81 Resource Management Act 1991 No. 69 (NZ), ss15, 15B. 82 Resource Management Act 1991 No. 69 (NZ), section 2(1).
228 Consequently, environmental harm from cumulative greenhouse gas emissions does currently fall within the scope of Australian legislation to protect the environment from contamination. Moreover, the discharge of emissions into the atmosphere is able to be regulated in Australia without the need for any new legislation or amendments to the current statutes. This raises the question: why are the greenhouse gas emissions from these projects not regulated under existing environmental protection laws? This disinclination to apply the principles of environmental protection to avert the impacts of climate change appears to be the result of political and economic influences on the regulator. The previous Federal government’s resistance to the ratification of the Kyoto Protocol, and the adoption of strict targets for the reduction of emissions, also appear to have played a key role in this disinclination.
The imposition of an express statutory duty on Australian regulators to specifically require them to take into account, and address, the causal impacts from relevant greenhouse gas emissions may be necessary to address this culture of administrative oversight. In New Zealand, for example, there are positive obligations imposed on the environmental regulator to have particular regard to; the ethic of stewardship, the efficient use of resources, the efficiency of the end use of energy, the effects of climate change and the benefits to be derived from
the use of renewable energy. 83 Moreover in the United Kingdom, a statutory duty is imposed on the Secretary of State to ensure that the net UK carbon account for
the year 2050 is at least 60 per cent below 1990 levels. 84
83 Resource Management Act 1991 (NZ), section 7. New Zealand is a party to the UNFCCC and the Kyoto Protocol. 84 Climate Change Bill [HL] 2007-2008 (UK), section 1(1). The Bill was introduced into the House of Lords on 14 November 2007 and completed its passage through the House of Lords on 31 March 2008. It received its second reading in the House of Commons on 9 June 2008. It is expected to receive Royal Assent in 2008. DEFRA, ‘UK Legislation: taking the Climate Change Bill forward- progress’ (18 February 2008) http://www.defra.gov.uk/Environment/climatechange/uk/legislation/index.htm at 15 June 2008.
229 In the United States of America (US), a collection of states and cities brought a suit against the EPA for its failure to regulate carbon dioxide emissions under the US Clean Air Act . The Clean Air Act requires the EPA to set emission standards for:
any air pollutant from any class of motor vehicles.. which..cause, or contribute to, air pollution which may reasonably be anticipated to endanger public health or welfare. 85
Air pollutant is defined under the Clean Air Act to include:
any air pollution agent or combination of such agents, including any physical, chemical, biological...substance or matter which is emitted into or otherwise enters the ambient air. 86
After referring to the above provisions, the US Supreme Court found that greenhouse gas emissions did fall within this definition and commented:
the Clean Air Act’s sweeping definition of air pollutant includes ‘ any air pollution agent…’. On its face, the definition embraces all airborne compounds of whatever stripe, and underscores that intent through the repeated use of the word “any.” Carbon dioxide, methane, nitrous oxide, and hydrofluorocarbons are without a doubt “physical [and] chemical . . . substance[s] which [are] emitted into . . . the ambient air. The statute is unambiguous .(emphasis added) 87
It may only be a matter of time before similar judicial actions are attempted against environmental regulators in Australia and, in the right judicial setting, a similar legal interpretation might be applied. However, there will be greater difficulties in demonstrating that such specific statutory duties to address
85 Clean Air Act (CAA) 42 USC s/s 7401 et seq. (1970), section 202(a)(1) (42 U.S.C. § 7521). 86 CAA, ibid, section 7602(g). 87 Massachusetts v Environmental Protection Agency 549 US (2007) (Supreme Court of the United States, decided 2 April 2007) at 26.
230 emissions exist, and are required to be exercised, owing to the less prescriptive wording generally found within existing Australian environmental legislation.
REQUIREMENTS TO ASSESS THE ENVIRONMENTAL IMPACTS OF GREENHOUSE GAS EMISSIONS
A The Proper Role of EIA Process in Assessing Emissions
In all Australian state, territory and federal jurisdictions, environmental assessment is a key feature of strategic environmental planning and management
and a key means of achieving ESD.88 Environment Impact Assessment (EIA) has been described as ‘a systematic process for the examination and evaluation of the environmental effects of proposed activities that are considered likely to
significantly affect the environment’. 89
The environmental assessment process is a means of ensuring that environmental considerations are given equal consideration in the assessment of social,
economic and environmental impacts of proposed activities. 90 The role of environmental assessment has been described as enabling:
an assessment of whether there are threats of damage;
an evaluation of the conclusiveness or certainty of the scientific evidence;
informed decisions to be made to avoid or mitigate, whenever practical, serious or irreversible damage; and
88 Gerry Bates, Environmental Law in Australia (6 ed, 2006) Chatswood, Lexis Nexis Butterworths at 313. 89 Ibid. 90 Ibid, 316.
231 shifting the burden of proof to persons potentially responsible for
environmental harm. 91
A proper EIS will address the cumulative environmental impacts resulting from
the proposed project. 92 A proper EIS will consider the potential impacts from the likely greenhouse gas emissions of the proposed activity. The EIA must do more than simply play lip service to the fact that some emissions will result or that there is some remote possibility of climate change occurring. In order to properly fulfil its function, the EIA must assess the long-term, cumulative impacts on the environment from the greenhouse gas emissions of the proposed activity .93
The decision-maker must question whether there is sufficient information to
make a proper assessment of the direct and indirect consequences of an action.94 Therefore, the EIA should ensure that:
there is sufficient information before the [decision-maker] to enable his consideration of all relevant matters so that if there is serious or irreversible environmental damage from climate change/global warming and there is scientific uncertainty about the impact he can determine if there are measures he should consider to prevent environmental degradation in relation to this project. 95
The fact that there may be a lack of scientific certainty regarding the future impacts of climate change cannot be used as an excuse for not properly
considering such impacts as part of the assessment process:96
91 Bentley v BGP Properties Pty Ltd (2006) 145 LGERA 234, Justice Preston at [68]. 92 BT Goldsmith Planning Services Pty Ltd v Blacktown City Council [2005] NSWLEC 210 at [90]. 93 Gray v Minister for Planning and Others (2006) 152 LGERA 258 at 297. 94 Minister for Environment and Heritage v Queensland Conservation Council [2004] FCAFC 190. 95 Gray v Minister for Planning and Others (2006) 152 LGERA 258 at 296. For a discussion of the depth of that consideration see David Farrier, 'The Limits of Judicial Review: Anvil Hill in the Land and Environment Court' in Tim Bonyhady and Peter Christoff (eds), Climate Law in Australia (2007) Sydney, The Federation Press, 189 at 196. 96 Gray v Minister for Planning and Others (2006) 152 LGERA 258 at 297.
232 scientific uncertainty is not the same as low probability…even when timing and magnitude of an event or effect is uncertain, there may be a strong scientific basis for concern about the impact. 97
Consequently, an EIA should assess the likely impacts from the emission of greenhouse including the likelihood of localised environment harm from changes in the global climate as a result of the increase in cumulative global emissions. The fact that significant emissions will result from the project will not necessarily lead to rejection of the proposal. The likely significant environmental impacts from those emissions must be balanced against all other economic, social and environmental factors.
B Duties to Assess Impacts in State Planning Regimes
Major industrial projects have the potential to involve significant environmental effects and will be required to comply with some form of environmental impact assessment (EIA) process in most jurisdictions. The Environmental Impact Statement (EIS) should assist the decision maker in their consideration of: the likely environmental impacts of the project; whether to approve the project; and
whether conditions should be attached to that approval. 98 Consequently, the EIA process has the potential to play a critical role in enabling authorities to evaluate and balance the risks of climate change impacts from emissions and the implications of possible conditions to mitigate or offset those emissions.
The following paragraphs provide an overview of the requirements to evaluate the significant environmental impacts of projects under Australian planning laws. This analysis highlights the variance in the function and scope of the planning schemes across each of the state and territory jurisdictions. Despite this, the
97 Donald A. Brown, 'The Precautionary Principle as a Guide to Environmental Impact Analysis: Lessons Learned from Global Warming' in Joel A. Tickner (ed), Precaution, Environmental Science, and Preventive Public Policy (2003) Washington, Island Press, 141 at 154. 98 Jacqueline Peel, n51, 142.
233 language and breadth of all of these schemes appears sufficient to encompass regulation of the likely adverse environmental effects of greenhouse gas emissions and climate change. As noted by one commentator:
while the planning legislation in each State makes no specific reference to greenhouse gas emissions, there would seem little doubt that in each State the planning function acknowledges environmental values, enables the consideration of environmental impacts and, in most cases, requires environmental impacts to be considered. 99
In SA, where a statutory emissions reduction target has been adopted, the Development Act 1993 requires development to be assessed against the
provisions of the appropriate development plan and building rules. 100 Development plans must seek to promote the provisions of the SA Planning Strategy and should facilitate protection of the environment, ecologically sustainable development and the management, conservation and use of natural
and other resources. 101 The SA Planning Strategy refers to the SA target of reducing emissions by 60 per cent by 2050 and states that:
all developments to support targeted population and economic growth must be sustainable, promoting improved resource management practices (including water and waste) and reducing reliance on non-renewable resources. 102
Accordingly, the controlling provisions of development plans must promote the reduction of greenhouse gas emissions and the protection of the environment. In relation to major projects, the Minister may declare a development or project to
be of major environmental, social or economic importance . 103 The Development Assessment Commission will direct the type of environmental assessment to be
99 Douglas E Fisher, n53, 215. 100 Development Act 1993 (SA), section 33(1). 101 Development Act 1993 (SA), ss 3,23(3). 102 Government of South Australia, 'Planning Strategy for Metropolitan Adelaide' (August 2006) at 17. 103 Development Act 1993 (SA), section 46.
234 undertaken for these projects. 104 Specific SA development plans also make reference to greenhouse gases. For example, the City of Adelaide Development Plan contains principles of development control that require all new residential and office developments and extensions/refurbishments to be designed to
‘minimise energy consumption’ and ‘limit greenhouse gas emissions’. 105 Development must also comply with the regulations which may be made in relation to building sustainability, energy efficiency requirements and reductions
of greenhouse gases. 106
The objective of the Western Australia (WA) Planning and Development Act
2005 is to promote the sustainable use and development of land in the state. 107 In the preparation of a State Planning Policy the Commission must have regard to, inter alia, conservation of natural or cultural resources for social, economic, environmental, ecological and scientific purposes and ‘amenity, design and
environment’. 108 The EPA may request an environmental review of a proposed scheme and has the power to issue instructions to the Commissioner regarding
the required process of that review. 109 Significant proposals for development may
also be referred to the EPA for assessment. 110 A significant proposal is defined as a proposal likely, if implemented, to have a significant effect on the
environment. 111 It is a matter for the EPA to determine the form, content, timing
and procedure of any such environmental review. 112
104 Development Act 1993 (SA), Part 4, Division 2. 105 Government of South Australia, 'Adelaide (City) Development Plan under the Development Act 1993' (Consolidated August 2007), Principles 111-113. 106 These regulations are yet to be made. Development Act 1993 (SA), section 108 and Schedule 1, Cl. 17A. 107 Planning and Development Act 2005 (WA) section 3(1)(c). 108 Planning and Development Act 2005 (WA) section 27(b)(e). 109 Environmental Protection Act 1986 (WA) section 48C(1)(a), Planning and Development Act 2005 (WA) section 39. 110 Environmental Protection Act 1986 (WA), Part IV. 111 Environmental Protection Act 1986 (WA), section 37B. 112 Environmental Protection Act 1986 (WA), section 40.
235 In NSW, where consent is required for development, the consent authority must have regard to ‘the likely impacts of that development, including environmental impacts on both the natural and built environments, and social and economic
impacts in the locality.’ 113 Development is defined to include, inter alia, the use
of land and the carrying out of work. 114 In considering whether there will be significant effects on threatened species, populations or ecological communities the consent authority must turn its mind to a range of factors including impacts to
critical habitat and disruption of life cycle of species. 115 Where development is to be carried out by a public authority, the determining authority has a duty to ‘examine and take into account to the fullest extent possible all matters affecting
or likely to affect the environment by reason of that activity’. 116 Accordingly, these provisions clearly require the authority to consider the potential impacts from the use of the land and the carrying out of works, including the emission of greenhouse gases, and the resulting effects on the environment. A formal EIA must be carried out if the development is designated or the activity is likely to
‘significantly affect the environment’. 117 If it is likely to significantly affect an endangered species or ecological community, a Species Impact Statement (SIS)
is also required. 118
Ministerial approval is required for projects that are deemed to be major development projects under either a State Environmental Planning Policy (SEPP)
or by order of the Minister. 119 These projects may also be declared critical infrastructure projects if, in the opinion of the Minister, the project is essential
for the state for economic, environmental or social reason. 120 This declaration
restricts the application of state planning instruments and third party appeals. 121
113 Environmental Planning and Assessment Act 1979 (NSW), ss79C (1)(b),111. 114 Environmental Planning and Assessment Act 1979 (NSW), section 4. 115 Environmental Planning and Assessment Act 1979 (NSW), section 5A. 116 Environmental Planning and Assessment Act 1979 (NSW), section 111. 117 Environmental Planning and Assessment Act 1979 (NSW), ss 112(1), 78A(8)(a); Environmental Planning and Assessment Regulation 2000 (NSW), Schedule 3. 118 Environmental Planning and Assessment Act 1979 (NSW), ss78(8)(b), 112 (1B). 119 Environmental Planning and Assessment Act 1979 (NSW), ss75B, 75D. 120 Environmental Planning and Assessment Act 1979 (NSW), section 75C. 121 Environmental Planning and Assessment Act 1979 (NSW), section 75T.
236 In Victoria, local planning authorities are required to consider ‘significant
environmental effects’. 122 This may require the preparation of an Environmental
Effects Statement (EES). 123 The Ministerial Guidelines for Assessment of Environmental Effects under the Environmental Effects Act comments that projects with potential greenhouse gas emissions exceeding 200,000 tonnes of carbon dioxide equivalent per annum might lead to impacts of regional or state significance and could warrant referral to the Minister to determine whether an
EEA is required. 124 The Minister must, as part of the determination process, consider whether the project is capable of having a significant effect on the environment including the likelihood of adverse effects and the associated uncertainty of available predictions as well as the availability of other assessment
processes. 125
Finally, in Queensland, entities exercising functions under the Integrated Planning Act 1997 are required to have regard to the purposes of the Act and to
advance its purposes in the performance of their functions. 126 Those purposes include taking into account environmental effects, avoiding or lessening the adverse effects of development and ensuring sustainable or prudent use of natural
resources. 127
In particular, they must ensure that decision making processes:
(ii) take account of short and long-term environmental effects of development at local, regional, State and wider levels; and
(iii) apply the precautionary principle; and
122 Planning and Environment Act 1987 (Vic), section 60. 123 Environmental Effects Act 1978 (Vic), section 8. 124 Department of Sustainability and Environment, Ministerial Guidelines for Assessment of Environmental Effects Under The Environmental Effects Act 1978 (7 ed, 2006) Melbourne, Victorian Government at 7. 125 Ibid, 10. 126 Integrated Planning Act 1997 (Qld), section 1.2.2. 127 Integrated Planning Act 1997 (Qld), section 1.2.3.
237 (iv) seek to provide for equity between present and future generations. 128
For development prescribed by the regulations, the EIA process must be
complied with. 129
The above analysis highlights the variety of regulatory approaches to environmental assessment and environmental protection adopted across the states and territories. On a proper application of the subject-matter, scope and purpose of these planning regimes, it would be expected that the significant long term effects on the environment and the community from adverse climate change would be balanced against the short term economic and social interests of the approval of the project. The proper outcome of this evaluation would be the imposition of reasonable conditions of approval requiring the mitigation or offset of some or all of the future emissions of the project. Ideally, this would be the case. Certainly, this would be in accordance with the objectives of these regimes. However, this is not the norm in practice.
Furthermore, when the decision of the determining authority is subject to judicial challenge the outcome is often unsuccessful. These schemes vary in their level of particularity of the matters to be taken into consideration in the EIA process. Consequently, where this process is not complied with by the determining authority the judiciary must undertake an awkward process of interpretation to conclude that the promotion of the stated objectives of the regime includes a consideration of the principles of ESD and, specifically, requires a quantitative
assessment of the greenhouse gas emissions of the project. 130 This leads to the
128 Integrated Planning Act 1997 (Qld), section 1.2.3(a). 129 Integrated Planning Act 1997 (Qld), Part 8. 130 For example Drake Brockman v Minister For Planning [2007] NSWLEC 490 (Jagot J) at [118]- [119] where the applicant failed to establish that the Minister for Planning was specifically bound to quantitatively assess the greenhouse gas emissions from a project in considering the principles of ESD. In NSW, reference to the public interest, in a section where there is no specific reference to ESD, has been taken to embrace the concepts of ESD in the context of the subject matter scope, and purpose of the Environmental Planning and Assessment Act 1979 (NSW): Walker v Minister for Planning [2007] NSWLEC 741; (2007) LGERA 124 at [154]; BGP Properties v Lake Macquarie City Council (2004) 138 LGERA 237 at 257; Telstra Corporation Ltd v Hornsby Shire Council (2006)
238 conclusion that the EIA process, in practice, would be significantly improved by the inclusion of a specific legislative provision requiring the assessment, and mitigation, of greenhouse gas emissions as part of the approval process.
EVALUATING EMISSIONS AND ENVIRONMENTAL EFFECTS: THE LAW IN PRACTICE
Litigation under environmental and planning statutes is increasingly being used as a tool for drawing attention to the ramifications of unrestricted greenhouse gas emissions. This is especially so in Australia where a number of cases have been brought challenging the failures of statutory agencies, in determining resource use applications, to consider properly the global impacts from emissions of proposed projects . Such challenges require that the Australian Courts interpret a concoction of broad and specific legal principles and statutory provisions including: the concept of ESD; the precautionary principle; evidence of any harm to the environment from emissions; and other relevant aspects to determine how emissions should be addressed by the determining authority. The result has been a line of judicial determinations spanning the full spectrum from: complete acceptance of the evidence of climate change and the need to assess the impacts of emissions; to overwhelming doubt regarding the IPCC reports and any causal link between emissions and discernable environmental harm. Accordingly, the following case studies evaluate those determinations of the Australian Courts in which the practical interpretation and application of the law to the issue of climate change is central to judicial considerations. The case studies below include judicial consideration of the causative link between greenhouse gas emissions and climate change; the operation of the principles of ESD in respect
67 NSWLR 256; 146 LGERA 10 at [123]; Carstens v Pittwater Council (1999) 111 LGERA 1 at 25; Gray v Minister for Planning (2006) 152 LGERA 258 at [42]-[44].
239 of the predicted impacts of climate change; and the economic implications of placing restrictions on industrial emissions.
A The Treatment of Causation in Environmental Case Law
The key challenge for determining authorities is the taxing issue of causation. That is the establishment of a sufficient causal link between greenhouse gas emissions from a proposed project; climate change; and resulting adverse impacts on environmental values in Australia.
The Courts have distinguished between causal links and mere speculation of adverse impacts. As commented in the Nathan Dams case:
a causal relationship between an action and a presumptive impact was capable of almost infinite extension Fitzgerald v Penn (1954) 91 CLR 268 at 277....infinite extension of the requisite causal link should be avoided by excluding possible impacts that were merely “speculative”. 131
As early as 1994, the Courts seemed ready to accept a demonstrated causal link between greenhouse gas emissions and potential environmental harm:
the evidence establishes that the project will emit CO 2, which is a greenhouse gas, and will contribute to the enhanced greenhouse effect, a matter of national and international concern. 132
However, the range of decisions since then presents a series of inconsistent judicial deliberations regarding the causal link between climate change and the emissions from Australian projects.
131 Minister for the Environment and Heritage v Queensland Conservation Council Inc (2004) 134 LGERA 272; [2004] FCAFC (Nathan Dams Case) at [45]. 132 Greenpeace Australia Ltd v Redbank Power Company Pty Ltd and Singleton Council (1994) 86 LGERA 143 at 153.
240 For example, in 2004, the Victorian Civil and Administrative Tribunal (VCAT) considered a planning scheme amendment that facilitated mining coal fields to supply coal to the adjacent electricity generation facility (the Hazelwood case). The terms of reference for the established panel of inquiry included a direction that the panel was not to refer to greenhouse gas emissions from the electricity generation facility as these issues were to be addressed ‘through a separate
process’.133 The EES under the Environmental Effects Act 1978 (Vic) and the Planning and Environment Act 1987 (Vic) did not address the production of
greenhouse gases from the burning of the coal. 134 Public submissions were made in relation to the emission of greenhouse gases and the panel was legally required
to consider all submissions but had been specifically prohibited from doing so.135 The failure to consider the emissions of the plant was appealed. VCAT held that these were relevant submissions and were required to be considered by the panel
even if they related to an indirect effect of the amendment. 136 VCAT considered the potential impacts from the energy generated as a result of the planning scheme amendment and described the test as follows:
whether the effect may flow from the approval of the amendment; and if so, whether, having regard to the probability of the effect and the consequences of the effect (if it occurs), the effect is significant in the context of the amendment. 137
In applying this test, VCAT remarked:
many would accept that, in present circumstances, the use of energy that results in the generation of some greenhouse gases is in the present interests of Victorians; but at what cost to the future interest of Victorians? Further the generation of greenhouse gases from a brown coal power station clearly has the potential to give rise to “significant” environmental effects. Hence I think it follows that a planning
133 Charles Berger, 'Hazelwood: A new lease on life for a greenhouse dinosaur' in Tim Bonyhady and Peter Christoff (eds), Climate Law in Australia (2007) Sydney, The Federation Press, 161 at 165. The panel was established under the Environmental Effects Act 1978 (Vic), section 9. 134 Australian Conservation Foundation v Latrobe City Council (2004) 140 LGERA 100 at 101. 135 Charles Berger, 'Hazelwood: A new lease on life for a greenhouse dinosaur' in Tim Bonyhady and Peter Christoff (eds), Climate Law in Australia (2007) Sydney, The Federation Press, 161 at 165. 136 Australian Conservation Foundation v Latrobe City Council (2004) 140 LGERA 100 Justice Morris (The Hazelwood Case) at 109, 110. 137 Ibid, 109.
241 scheme could contain a provision directed at reducing the emission of greenhouse gases from a coal burning power station – not only to maintain an ecological process, but to balance present and future interests. 138
And observed the following:
put another way, the approval of [the amendment] will make it more probable that the Hazelwood Power Station will continue to operate beyond 2009; which, in turn, may make it more likely that the atmosphere will receive greater greenhouse gas emissions than would otherwise be the case; which may be an environmental effect of significance. 139
This case has been described as a landmark decision owing to the fact that:
for the first time, an Australian adjudicative body had accepted a clear chain of causation from a proposed activity (coal mining) through to foreseeable downstream consequences (greenhouse gas emissions from combustion of the coal) to the contribution to climate change caused by those emissions. 140
However, it should be noted that the science linking anthropogenic greenhouse
gas emissions with climate change was not in dispute in this appeal. 141 In contrast, in the 2006 decision of WPSQ Proserpine/Whitsunday Branch Inc v Minister for the Environment and Heritage (the Bowen Basin Case) , the Court has been described as being:
far more sceptical of arguments concerning a causal link between coal mining activities and damage to ecosystems through climate change than his judicial colleagues in the Hazelwood and Anvil Hill case s. 142
138 Australian Conservation Foundation v Latrobe City Council (2004) 140 LGERA 100 at 109. 139 Ibid, 110. 140 ‘Although in the end..the legal victory did not significantly alter the government’s approach’, Charles Berger, 'Hazelwood: A new lease on life for a greenhouse dinosaur' in Tim Bonyhady and Peter Christoff (eds), Climate Law in Australia (2007) Sydney, The Federation Press, 161 at 170. 141 Ibid, 168. 142 Jacqueline Peel, 'The Role of Climate Change Litigation in Australia's Response to Global Warming' (2007) 24 Environmental and Planning Law Journal 90 at 102.
242 The Court criticised the lack of a demonstrated causal link as follows:
I have proceeded upon the basis that greenhouse gas emissions consequent upon the burning of coal mined in one of these projects might arguably cause an impact upon a protected matter, which impact could be said to be an impact of the proposed action ... However I am far from satisfied that the burning of coal at some unidentified place in the world, the production of greenhouse gases from such combustion, its contribution towards global warming and the impact of global warming upon a protected matter, can be so described. The applicant’s concern is the possibility that at some unspecified future time, protected matters in Australia will be adversely and significantly affected by climate change of unidentified magnitude, such climate change having been caused by levels of greenhouse gases (derived from all sources) in the atmosphere. There has been no .. attempt to identify the extent (if any) to which emissions from such mining, transportation and burning might aggravate the greenhouse gas problem. 143 (emphasis added)
A similar argument was submitted before the Court in the US decision of Massachusetts v Environmental Protection Agency. In that case, the submission that any such reductions would be globally insignificant was rejected in the following terms:
EPA maintains that its decision not to regulate greenhouse gas emissions from..motor vehicles contributes so insignificantly to petitioners’ injuries…EPA does not believe that any realistic possibility exists that the relief petitioners seek would mitigate global climate change and remedy their injuries. This is especially so because predicted increases in greenhouse gas emissions from developing nations, particularly China and India, are likely to offset any marginal domestic decrease. 144
But EPA overstates its case...Agencies, like legislatures, do not generally resolve massive problems in one fell regulatory swoop…And reducing domestic automobile emissions is hardly a tentative step. 145
143 Wildlife Preservation Society of Queensland (WPSQ) Proserpine/Whitsunday Branch Inc v Minister for the Environment and Heritage (the Bowen Basin Case)(2006) 232 ALR 510, Justice Dowsett at [72]. 144 Massachusetts v Environmental Protection Agency 549 US (2007) (Supreme Court of the United States, decided 2 April 2007) at 20-21. 145 Ibid, 21.
243 While it may be true that regulating motor-vehicle emissions will not be itself reverse global warming, it by no means follows that we lack jurisdiction to decide whether EPA has a duty to take steps to slow or reduce it…A reduction in domestic emissions would slow the pace of global emissions increases, no matter what happens elsewhere. 146
In the decision of Gray v The Minister for Planning, the Court declared invalid decisions under the NSW Environmental Planning and Assessment Act by Director-General in relation to a proposal to build a large coal mine known as the
Anvil Hill Project. 147 The project was predicted to mine up to 10.5 million tonnes
of coal per annum. 148 The Director General’s requirements for the content of the environmental assessment of the project included that the proponent address
‘[a]ir quality – including a detailed greenhouse gas assessment’. 149 The assessment addressed only the direct emissions from the project (scope 1 emissions) and indirect emissions from the use of electricity (scope 2
emissions). 150 Emissions from third party burning of the coal were not assessed
(scope 3 emissions). 151 The environmental assessment was deemed adequate by the Director-General and placed on public exhibition. A judicial challenge was then commenced.
The Court held that the Director-General was legally bound to consider the impacts of greenhouse gas emissions of the downstream burning of coal by third parties in the environmental assessment of new coal mines (scope 3 emissions). The Court based that finding on the need to take into account the fundamental
146 Ibid, 22-23. 147 Gray v Minister for Planning and Others [2006] NSWLEC 720; (2006) 152 LGERA 258, Justice Pain. 148 Ibid, 266. 149 Ibid, 270. 150 Ibid, 271-272. 151 Ibid.
244 principles of ESD, the precautionary principle and the principle of
intergenerational equity as part of the EIA process.152
In relation to the test of causation and significance, the Court observed:
Climate change/global warming is widely recognised as a significant environmental impact to which there are many contributors worldwide but the extent of the change is not yet certain and is a matter of dispute. The fact there are many contributors globally does not mean the contribution from a single large source such as the Anvil Hill Project in the context of NSW should be ignored in the environmental assessment process. The coal intended to be mined is clearly a potential major single contributor to GHG emissions deriving from NSW given the large size of the proposed mine. That the impact from burning the coal will be experienced globally as well as in NSW, but in a way that is currently not able to be accurately measured, does not suggest that the link to causation of an environmental impact is insufficient. 153
......
I consider there is a sufficiently proximate link between the mining of a very substantial reserve of thermal coal in NSW, the only purpose of which is for use as fuel in power stations, and the emission of GHG which contribute to climate change/global warming, which is impacting now and likely to continue to do so on the Australian and consequently NSW environment, to require assessment of that GHG contribution of the coal when burnt in an environmental assessment under Pt 3A. 154
In addition, the Court found that the potential for future regulation of emissions was no reason to exclude those emissions from the scope of an environmental assessment:
it is not appropriate to limit the scope of the environmental assessment on the basis that GHG emissions may or may not be subject to regulation in the future whether
152 Ibid, 293-297. Such requirements were based on the need to take into account the public interest under section 79C of the Environmental Planning and Assessment Act 1979 (NSW). 153 Ibid, 287. 154 Ibid, 288.
245 in NSW or overseas. The fact that it may be difficult to quantify an impact with precision does not mean that it should not be done. 155
B The Absence of Climate Change Regulation As a Determining Factor
The assessment and approval of proposed major projects in Australia requires the evaluation of a number of competing factors including:
conclusions regarding causal links and the potential for environmental harm from the greenhouse gas emissions of a project;
residual doubt regarding the scientific findings of the IPCC and the levels of scientific uncertainty in those findings;
the absence of legislation to regulate specifically greenhouse gas emissions and climate change;
opinions as to the appropriate role of the judiciary and whether regulation of emissions is something more properly determined by the Australian legislature;
the potential local economic and social benefits from the approval of the projects; and
the potential local economic and social impacts from the refusal of the project or from the imposition of conditions requiring the reduction or offset of some or all of the emissions of the project.
155 Ibid, 297.
246 The absence of legislation to address climate change appears to be a significant factor in these determinations. As noted by one commentator:
it is important to point out, however, that some of the equivocation about environmental impact is attributable not to gaps in scientific research but to uncertainties about the extent of the social commitment to reducing greenhouse gas emissions over time. 156
The fact that a project will result in an amount of greenhouse gas emissions is but one planning and environment factor to be balanced in the decision-making
process. 157 As commented in the Redbank Power Case :
the application of the precautionary principle dictates that a cautious approach should be adopted in evaluating the various relevant factors in determining whether or not to grant consent; it does not require that the greenhouse issue should outweigh all other issues. 158
In the Redbank Power Case , the Court had accepted that there was a causal link between the project, emissions and climatic impacts yet commented that:
whether [power stations] should be prohibited is, of course, a matter for government policy and it is not for the Court to impose such a prohibition. It is for State and national governments to take into account the competing economic and environmental issues raised by the greenhouse effect and to set policy in light of those issues. 159
Likewise, the Court observed in the Bowen Basin Case that:
the applicant’s case is really based upon the assertion that greenhouse gas emission is bad, and that the Australian government should do whatever it can to stop it
156 David Farrier, n95, 194. 157 Greenpeace Australia Ltd v Redbank Power Company Pty Ltd and Singleton Council (1994) 86 LGERA 143. 158 Ibid, 154. 159 Ibid, 153.
247 including, one assumes, banning new coal mines in Australia. This case is far removed from the factual situation in Minister for Environment and Heritage v Queensland Conservation Council Inc (2004) 139 FCR 24. 160
C The Xstrata Coal Mine: A Case Study
The flaws of the current Australian environmental legal system, in failing to regulate emissions, do not stem from an absence of legislation or statutory authority. The power to regulate is there for the taking. Instead it appears to stem from the prevailing conflict between the short term economic priorities to protect the economy, jobs and economic growth and the long term threats of climate change from continuing emissions from major industries. The result is a governmental approach which attempts to provide the illusion of regulation without any substantive restrictions on the emissions from major projects. This is well illustrated in the series of litigation regarding the Xstrata coal mine, discussed in some detail below.
In 2005, Xstrata Coal Queensland Pty Ltd (Xstrata) applied for the extension of its mining lease and an associated amendment to the environmental authorisation for the mine under the Mineral Resources Act 1989 (Qld) (MRA) and the Environmental Protection Act 1994 (Qld) (EPA) for the mining project at Suttor Creek in Queensland. Those applications were objected to by the Queensland Conservation Council (QCC).
I The Nature of the Objection to the Mining Expansion
Objections to the application by Xstrata were heard in the Land and Resources Tribunal in early 2007. The QCC sought the imposition of conditions including, inter alia, that 100 per cent of the greenhouse gas
160 Wildlife Preservation Society of Queensland (WPSQ) Proserpine/Whitsunday Branch Inc v Minister for the Environment and Heritage (2006) 232 ALR 510 at [72].
248 emissions from the mining, transport and use of the coal be avoided, offset or
reduced . 161 QCC later sought to amend that condition to 100 per cent of emissions from the mining project and 10 per cent of emissions from the
transport and use of the coal. 162
This imposition of conditions was based on evidence including the reports of
the IPCC and UK Stern Review 163 that:
greenhouse gas emissions (principally as a consequence of energy use) is contributing to global warming and climate change – which itself is imposing significant economic, social, and environmental costs on Australia and the rest of the world. 164
QCC submitted to the Tribunal that the mine would still be economically viable if it paid for offsets for 10 per cent of its greenhouse gas emissions. This was described by QCC as follows:
this makes the cost of offsetting the whole of the mine's direct emissions and 10 per cent of its indirect emissions $55-$144 million..well within the margin of economic viability of the mine and still allowing Xstrata a profit of about $1 billion for a mine costing about $2.2 billion to operate. 165
However, this amendment was refused by the Tribunal on the basis that it would substantially change the case that Xstrata had to meet and QCC was
not permitted to make submissions outside of its particularised objections. 166
161 Queensland Conservation Council Inc v Xstrata Coal Queensland P/L & Ors [2007] QCA 338, Justice McMurdo (President) at [5]. 162 Ibid, [6]. 163 Nicholas Stern ‘The Economics of Climate Change: The Stern Review’ (Cabinet Office, HM Treasury 2006). 164 Re Xstrata Coal Queensland Pty Ltd & Ors [2007] QLRT 33 at [11]. 165 Toby Hutcheon, 'Racing to the Aid of King Coal', The Courier Mail (Brisbane), 16 October 2007, Perspectives http://www.news.com.au/couriermail/story/0,23739,22596694-27197,00.html at 15 June 2008. 166 Queensland Conservation Council Inc v Xstrata Coal Queensland P/L & Ors [2007] QCA 338 at [7].
249 II The Nature of the Evidence Before the Tribunal
The Tribunal was entitled to inform itself of anything it considered
appropriate but it was also specifically required to observe natural justice. 167 In his decision, the President relied heavily on a journal that came to his attention titled ‘The Stern Review: A Dual Critique’. By letter dated 5 February 2007, the Tribunal wrote to the parties as follows:
…since the President reserved his decision in this matter last Thursday, he has become aware of two documents which may be relevant to his decision. They are:
• The Stern Review: A Dual Critique , Vol 7 No 4, World Economics Journal, October-December 2006, pages 165-232.
• Climate Change 2007: The Physical Science Basis (Summary for Policymakers) , Intergovernmental Panel on Climate Change Working Group 1 Fourth Assessment Report, Paris, February, 2007, pages 1-21.
The parties each filed their submissions in response to the documents referred to by the Tribunal. QCC contended that the Tribunal should not have regard to the documents referred to in the letter as they were
contrary to the uncontested evidence at the hearing 168 and noted, by letter dated 14 February 2007, that:
3.the submissions of Xstrata and the EPA raise matters which go beyond the evidence and that were not put to any of the expert witnesses called at the hearing.
4.QCC does not know how the Tribunal proposes to make use of the two documents or the submissions of Xstrata and the EPA; however, QCC raises the requirements in sub-s49(1) of the Land and Resources Tribunal Act 1999 that the Tribunal must observe the rules of natural justice and must act as quickly, and with as
167 Land and Resources Tribunal Act 1999 (Qld), ss 49(1); 49(2)(b); Mineral Resources Act 1989 (Qld) section 268(2). 168 Submissions filed by QCC 9 February 2007.
250 little formality and technicality, as is consistent with a fair and proper consideration of the issues before it. 169
III The Decision of the Land and Resources Tribunal
The Tribunal reached its decision the following day on 15 February 2007. In rejecting the application of QCC, the President concluded that:
having regard to all of the evidence before me, I am not satisfied that: • the proposed coal mine would:
○ cause any adverse environmental impact which could not be managed by the draft environmental authority;
○ prejudice the public right and interest; • any good reason has been shown to refuse the subject applications; and • ESD principles operate to require the applications to be conditioned as advocated by the objectors. 170
In relation to the issue of causation and environmental harm from greenhouse gas emissions, the President commented:
QCC submitted that I should have regard to ESD principles “to mitigate the serious environmental degradation caused by global warming.” The difficulty with that submission is that..it is based upon an assumption concerning the cause and effect of global warming. In the present case, I am not satisfied that that assumption (relevantly, a demonstrated causal link between this mine’s GHG emissions and any discernable harm —let alone any “serious environmental degradation” —caused by global warming and climate change) has been shown by QCC to be valid.…………Indeed even if this mine’s GHG emissions were eliminated completely , QCC failed to show that that would have the slightest effect on global warming or climate change. 171
169 QCC, by letter dated 14 February 2007. Queensland Conservation Council Inc v Xstrata Coal Queensland P/L & Ors [2007] QCA 338 at [10], [12]. 170 Re Xstrata Coal Queensland Pty Ltd & Ors [2007] QLRT 33 at [22]. 171 Ibid, [21].
251 In reaching his decision, the President critiqued the findings of the IPCC regarding global warming and the global risks of climate change and made the following surprising comment:
with all respect, a temperature increase of only 0.45°C over 55 years seems a surprisingly low figure upon which to base the IPCC’s concerns about its inducing many serious changes in the global climate system during the 21 st Century. 172
In relation to the sought condition to offset, avoid or reduce emissions, the President noted that:
apart from having no demonstrated impact on global warming or climate change…any such condition would have.. the real potential to drive wealth and jobs overseas and to cause serious adverse economic and social impacts upon the State of Queensland. Absent universally applied policies for GHG reduction, requiring this mine (and no others) to limit or reduce its GHG emissions would be arbitrary and unfair. That cannot be what our law requires. 173
The Tribunal thereby made orders recommending to the Minister for Mines and Energy that the application for additional surface area, and the related environmental authority, be granted without any of the conditions sought by QCC. QCC appealed against those orders.
IV The Findings of the Court of Appeal
The Queensland Court of Appeal found that all of QCC’s experts had given opinions accepting that global warming and climate change were both real and caused by anthropogenic emissions of greenhouse gases and Xstrata’s experts had also unequivocally accepted in their evidence that anthropogenic greenhouse gas emissions contributed to global warming and that emissions
from the mine would also contribute to it: 174
172 Ibid, [18]. 173 Ibid, [23]. 174 Queensland Conservation Council Inc v Xstrata Coal Queensland P/L & Ors [2007] QCA 338 at [37]-[38].
252 the competing expert evidence presented by Xstrata on the one hand and QCC on the other at the hearing did not put in issue that global warming and climate change were real and were caused by emissions of greenhouse gases linked to human activity, especially the burning of fossil fuels. 175
The President of the Queensland Court of Appeal commented:
the fact that climate change is occurring and that anthropogenic greenhouse gas emissions have contributed to it, was undoubtedly common ground between the parties at the hearing…. What was in issue was the extent to which the proposed mine would contribute to global warming and whether, in the applicable factual and statutory matrix, the Tribunal should impose conditions on the recommended granting of Xstrata's applications in response to the mine's potential contribution to global warming. 176
The Court of Appeal noted that the Tribunal’s decision that it was not satisfied of any demonstrated causal link between Xstrata's greenhouse gas emissions and any discernible harm appeared to have been significantly influenced by the Carter-Byatt critique of the Stern Review, a critique which was raised in neither Xstrata's nor the EPA's case and was contrary to their
positions taken at the hearing. 177 The Court of Appeal held that, in the
circumstances, this amounted to a denial of natural justice to QCC: 178
merely informing the parties that the Tribunal had become aware of documents which may be relevant to its decision did not satisfy the Tribunal's obligation to afford the parties procedural fairness by giving them a real opportunity to present information or argument on a matter not already obvious but in fact regarded as important by the decision-maker. 179
175 Ibid, [36]. 176 Ibid, [41]. 177 Ibid, [44]. 178 Ibid, [47]. 179 Ibid, [46].
253 The obligation to protect the right to natural justice was espoused by the Court of Appeal as follows:
the statutory scheme under which the Tribunal operated in this case demonstrated a clear legislative intention to have applications … heard and determined expeditiously but according to principles of natural justice. It is regrettable that this has not resulted in the present case which must now be re-heard. QCC is, however, entitled to have its objections heard and determined according to law. 180
The Court of Appeal further held that QCC should be allowed to amend the condition sought requiring that 100 per cent of emissions be avoided, reduced or offset to a requirement of only 10 per cent as:
the proposed amendment to the particulars involved a question of degree and amount; if anything it narrowed rather than widened, but certainly did not alter, the issue for determination between the parties. 181
The orders of the Land and Resources Tribunal were set aside and the matter
remitted to the Land Court for determination according to law.182
V The Governmental Response: Validating Legislation
In response to this judicial determination that the plaintiffs had been denied natural justice, the Queensland government stepped in to propose legislation to validate the development. Such a process would remove any requirement for due process to be observed.
180 Ibid, [56]. 181 Ibid, [51]. 182 Following the transfer of jurisdiction from the Land and Resources Tribunal to the Queensland Land Court, section 91 Land Court Act 2000 (Qld) and section 87 Land and Resources Tribunal Act 1999 (Qld) as amended by the Land Court and Other Legislation Amendment Act 2007 (Qld).
254 The second reading speech of the validating bill indicates the government’s concerns that the decisions of the Governor in Council and the Minister for Environment, to issue the mining lease and the environmental authority, could be declared invalid:
this means that the future of the new mining operations...and the future of everyone employed there is literally hanging by a thread. This thread could be cut at any moment if someone successfully took this matter to court. 183
The purpose of the Mining and Other Legislation Amendment Bill 2007 (Qld) (MOLA) was to validate the grant of the mining lease under the MRA and the environmental authority under the EPA ‘in order to remove any uncertainty about the validity of those grants and to secure the future of the
mining operations’. 184 This was implemented through the insertion of the following new provisions:
Section 418AA (2) Mineral Resources Act 1989 :
The application made under section 275 to include additional surface area No. 2 in the mining lease is taken to have been validly granted on 29 March 2007.
Section 579A (2) Environmental Protection Act 1994 :
The Minister’s decision made on 8 March 2007 to grant the application is taken to have been validly made under chapter 5. 185
The MRA and the EPA require a number of factors to be taken into account, in the making of decisions whether to grant the mining lease and an environmental authority, including any adverse environmental impacts, principles of ESD and the public interest. Yet, in enacting this validating legislation, the Parliament was not bound to consider any such factors. The
183 Minister for Mines and Energy, ‘Second Reading Speech: Mining and Other Legislation Amendment Bill ’ (16 October 2007) at 3591. 184 Explanatory Notes, Mining and Other Legislation Amendment Bill 2007 (Qld). 185 Mining and Other Legislation Amendment Act 2007 (Qld).
255 Parliament’s decision to pass the validating legislation does not appear to have been based on concerns regarding environmental protection or concerns regarding the future economic and social costs of climate change. Indeed, it appears to have been based primarily on short-term economic considerations regarding the commercial viability of the mining project and the need to remove any threats to the jobs of those affected.
The announcement of the government’s decision to propose such legislation contained the following comments:
we will protect the mine’s 190 jobs and the investment in the mine….The coal industry is central to the Queensland economy and we will not allow a technicality to threaten its development and jobs. 186
It also noted that a national emissions trading scheme was ‘the appropriate way to manage emissions rather than an ad hoc approach which singles out
particular companies.’ 187 These comments may well be justified in themselves. However, there was no reference to the absence of a right to participate, to comment, or to be heard. This is especially significant since such rights were part of the statutory decision-making processes that had been bypassed by the enactment of the validating legislation.
Interestingly, the explanatory note to the MOLA under the heading ‘Consistency with Fundamental Legislative Principles’ acknowledges that:
the validating legislation arguably does not have sufficient regard to the rights of individuals, in that it denies the QCC and its members the opportunity to be heard further on greenhouse gas issues arising out of the mining operations. 188
186 Premier Anna Bligh and Minister for Mines and Energy ‘Joint Statement: Government to Legislate to Ensure Coal Mine’s Future’ (12 October 2007) http://statements.cabinet.qld.gov.au/MMS/StatementDisplaySingle.aspx?id=54462 at 15 June 2008. 187 Ibid. 188 Explanatory Notes, Mining and Other Legislation Amendment Bill 2007 (Qld), ‘Consistency with Fundamental Legislative Principles’.
256 It is mere speculation to consider whether the Land Court would have made the same recommendation as the Land and Resources Tribunal. The development may or may not have been approved. Either way, the Land Court would have been aware of the Court of Appeal’s direction to ensure natural justice which is one of the essential elements of the rule of law.
D The Role of Judicial Appeal in Regulating Climate Change
The outcomes of the above judicial appeals are illustrative of the inherent complexities and inconsistencies between the treatments of greenhouse gas emissions from projects across the various Australian jurisdictions. Judicial appeals are a costly, cumbersome and uncertain tool for regulating emissions in Australia particularly given the lack of consistency across state environmental and planning regimes. Moreover, in the controversial area of climate change, the outcome is highly dependent upon the opinion of the presiding judge regarding the existence of climate change and the economic implications of regulating emissions. Accordingly:
litigation for an environmental cause is a strategy with inherent drawbacks and difficulties include its expense, the need to identify appropriate test cases, and persuading judges of the validity of “climate friendly” interpretations of environmental legislation that will often be deeply unpopular with government and industry. 189
The outcomes of these administrative and judicial determinations demonstrate the dichotomy of the law in theory and the law in practice. These consent authorities appear reluctant to embrace and apply the principles of ESD, inter-generational equity and precaution in practice. The decisions of these consent authorities appear to represent a misunderstanding as to the true scope of the legislation and the full environmental implications of greenhouse gas emissions and climate change. These regulatory errors are often compounded in judicial appeals where
189 Jacqueline Peel, n142, 104.
257 the Court supports the status quo and fails to require the proper application of the law in light of the evidence of the likely harmful impacts of emissions.
The uncertainty of the application of existing laws to greenhouse gas emissions has created additional risks and compliance costs for those major industries that are the targets of these actions. Moreover, the lack of clarity and unpredictability in the application of the law to emissions, and the risk of retrospective findings of unlawfulness by the common law, deters future business planning to introduce technological changes and other modifications to reduce levels of emissions. An effective legal response to the impacts of climate change requires a settled regulatory path to guide behavioural changes rather than the retrospective evaluation of actions. However, this is not the traditional role of the common law and it cannot, and should not, be used as a planning instrument.
Consequently, an effective regulatory approach to climate change requires a coherent set of legal principles to guide behaviours. There are difficulties in achieving a consistent approach to climate change regulation through the disparate state based schemes with their vastly different approaches to environmental management. Given Australia’s international duty to reduce its emissions, it is preferable that the regulation of our national emissions should take place in accordance with a considered, consistent and harmonised national approach to environmental regulation. Ultimately, this leads to the conclusion that it is more properly the realm of the Federal government to regulate consistently the environmental, economic and social risks from significant greenhouse gas emissions. The potential role of the Federal government in regulating these environmental impacts is considered below.
An effective regulatory approach requires not only a coherent set of legal principles but also the considered and appropriate interpretation of those rules by relevant authorities and the judiciary. This may require additional education of
258 relevant decision-makers to enable them to make fully informed decisions regarding the environmental implications of greenhouse gas emissions and to ensure that the principles of ESD are fully embedded within that decision making process. It may also require the creation of specific statutory duties requiring authorities to not only undertake a full and proper consideration of the potential impacts of greenhouse gas emissions but also to impose conditions of approval which require proponents to take all reasonable steps to minimise those emissions and mitigate the predicted impacts.
POTENTIAL COMMONWEALTH REGULATION OF GREENHOUSE GAS EMISSIONS
The Federal Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act) has the potential to play a significant role in the regulation of greenhouse gas emissions in Australia. The EPBC Act does not currently specifically regulate greenhouse gas emissions and climate change. However, under its current scope and language, the legislation does extend to projects with significant emissions and could apply to all major industrial projects in Australia. Indeed, given the inconsistencies and uncertainties in the assessment and treatment of emissions at a state level, it is preferable that the regulatory regime for these projects is established in an open and transparent manner at a national level with supervised implementation through the existing state-based regulatory authorities.
A The Theoretical Scope and Operation of the EPBC Act
The objects of the EPBC Act are clear in referring to the protection of the environment, the promotion of the principles of ESD and the implementation of Australia’s international obligations:
259 (a) to provide for the protection of the environment, especially those aspects of the environment that are matters of national environmental significance; and (b) to promote ecologically sustainable development through the conservation and ecologically sustainable use of natural resources; and (c) to promote the conservation of biodiversity; and (ca) to provide for the protection and conservation of heritage; and .... (e) to assist in the co-operative implementation of Australia’s international environmental responsibilities. 190
In order to achieve its objects, the EPBC Act:
adopts an efficient and timely Commonwealth environmental assessment and approval process that will ensure activities that are likely to have significant impacts on the environment are properly assessed. 191
The EPBC Act goes beyond a mere referral to the principles of ESD and instead specifies the components of the principle in the following terms:
(a) decision-making processes should effectively integrate both long-term and Short-term economic, environmental, social and equitable considerations; (b) if there are threats of serious or irreversible environmental damage, lack of full scientific certainty should not be used as a reason for postponing measures to prevent environmental degradation; (c) the principle of inter-generational equity-that the present generation should ensure that the health, diversity and productivity of the environment is maintained or enhanced for the benefit of future generations; (d) the conservation of biological diversity and ecological integrity should be a fundamental consideration in decision-making. 192
190 Environment Protection and Biodiversity Conservation Act 1999 (Cth) (hereafter the EPBC Act), section 3(1). 191 EPBC Act, section 3(2). 192 EPBC Act, section 3A.
260 Accordingly, the text of the EPBC Act is clear in stating that it is intended to conserve and protect the Australian environment and that lack of full scientific certainty should not be used as a reason for not taking steps to prevent environmental degradation in Australia. Actions which have or are likely to have a significant impact on matters of national environmental significance are controlled actions including actions that may have significant impact on:
declared world heritage properties;
declared Ramsar wetlands;
listed threatened species or endangered communities; and
listed migratory species. 193
Declared world heritage properties include Kakadu National Park in the Northern Territory and the Great Barrier Reef in Queensland both of which are on the World Heritage List. Declared Ramsar wetlands are sites recognised under the
international Ramsar Convention as being of international significance. 194
The Australian Courts have determined that, in considering the impacts of these activities, there is an obligation to consider not only the direct impacts from the construction of the project but also the indirect impacts flowing from the project where they are ‘sufficiently close to the action to allow it to be said, without straining the language, that they are, or would be, the consequences of the action
on the protected matter’. 195 The test of significance to be applied to these impacts is whether the impact is ‘important, notable or of consequence having regard to
its context or intensity.’ 196
193 Also actions in Commonwealth marine areas and on Commonwealth land that may have a significant impact on the environment. EPBC Act, section 24. 194 Convention on Wetlands of International Importance especially as Waterfowl Habitat (the Ramsar Convention) (adopted 2 February 1971, Ramsar, Iran)(entry into force 1975). Australia has 63 such declared Ramsar wetlands, Australian Government, ‘Protecting Australia’s Ramsar Wetlands’ (2002, Canberra) http://www.environment.gov.au/epbc/publications/ramsar.html viewed 15 June 2008. 195 Minister for the Environment and Heritage v Queensland Conservation Council Inc (2004) 134 LGERA 272; [2004] FCAFC 190 (Nathan Dams Case) at [53]. 196 Booth v Bosworth (2001) 114 FCR 39 at 64, Justice Branson.
261 The term ‘impact’ is defined under the EPBC Act as:
(a) the event or circumstance is a direct consequence of the action; or
(b) for an event or circumstance that is an indirect consequence of the action…the action is a substantial cause of that event or circumstance. 197
The legislation sets out an array of criteria to be met in order for indirect secondary actions to meet the definition of ‘impact’ including the reasonable
contemplation of the parties and the foreseeability of the outcome. 198
The carrying out of a controlled action, without an approval, is prohibited. Proponents of activities that are likely to affect a matter of national significance
are obliged to refer the action to the Minister for determination. 199 If deemed to be a controlled action, these projects can potentially be governed by both state and
federal environmental assessment processes. 200 It is a matter for the Minister to
determine whether an activity is a controlled action. 201 The EPBC Acts specifies that the Minister must consider all adverse impacts from the proposed action and
must not consider any beneficial impacts. 202
If the Minister determines that the action is a controlled action then an assessment must be carried out under the EPBC Act. The Minister may choose from a range of assessment mechanisms including a public environment report,
environmental impact statement, or public inquiry. 203
197 EPBC Act, section 527E(1). 198 EPBC Act, section 527E(2). 199 EPBC Act, section 63. 200 Unless exempted by an assessment bilateral agreement between the state and Federal Government. 201 EPBC Act, section 75(1). 202 EPBC Act, section 75(2). 203 EPBC Act, section 87(1).
262 In deciding whether or not to approve the taking of an action, and what conditions to attach to an approval, the Minister must consider matters related to
the environment and relevant economic and social matters .204 The Minister must
also take into account the principles of ESD.205 The Act specifically states that the Minister must not act inconsistently with Australia’s international obligations regarding world heritage, ramsar wetlands and threatened and migratory
species. 206
If the Minister determines that an approval is appropriate then it may be issued with any conditions that are necessary or convenient for protecting, or mitigating
damage to , a matter protected by Part 3. 207 These conditions could include
monitoring plans, insurance and deposits. 208 In deciding whether to attach a condition of approval, the Minister must consider the desirability of ensuring that the condition represents a cost-effective means of achieving the object of the
condition. 209
It should be noted that the Governor General is empowered to make specific regulations to give effect to Australia’s obligations under the UNFCCC but this
discretionary power has not been exercised. 210
B The Practical Application of the EPBC Act to Climate Change
The Australian Great Barrier Reef World Heritage Property and Wet Tropics World Heritage Area are both sensitive and vulnerable to the impacts of greenhouse gas emissions and climate change. As noted by one commentator:
204 EPBC Act, section 136(1). 205 EPBC Act, section 136(2). 206 EPBC Act, ss137-140. 207 EPBC Act, section 134. 208 EPBC Act, section 134(3). 209 EPBC Act, section 134(4)(b). 210 EPBC Act, section 520(3)(k).
263 Climate Change is accepted as a major threat to coral reefs worldwide including the [Great Barrier Reef]. It is expected to affect coral reefs mainly through changes of three variables: increases in sea surface temperature causing coral bleaching; decreases in calcification rates, slowing coral growth due to changing seawater chemistry; and increases in sea level. 211
According to the IPCC, there is a very high risk that a significant loss of biodiversity will occur by 2020 in ecologically rich sites, including the Great Barrier Reef, Queensland Wet Tropics and Kakadu National Park, as a result of
climate change. 212 The IPCC has identified a clear link between temperature
increases and greenhouse gas emissions. 213 It has also concluded that anthropogenic warming has ‘had a discernable influence on many physical and
biological systems’. 214
In light of the above, it would seem both likely and reasonable that major projects with significant emissions would, as a minimum, be referred to the Minister and assessed as controlled actions under Part 8 of the EPBC Act. However, this has not occurred and the Australian government has resisted the view that these emissions are likely to harm environmental values in Australia. For example, the Bowen Basin case highlighted ‘the Commonwealth Government’s reluctance to assess the climate change impacts of large new coal mines and the need for
reform of the EPBC Act’. 215 The case related to two referrals under the EPBC Act for the development of new coal mines (the Isaac Plains Project and the Sonoma Project). Both referrals submitted that the mines did not impact on matters on national environmental significance and were not controlled actions under the
211 Chris McGrath, 'Setting Climate Change Targets to Protect the Great Barrier Reef' (2007) 24 Environmental and Planning Law Journal 182 at 185. 212 IPCC, 'Climate Change 2007: Impacts, Adaptation and Vulnerability: Summary for Policy Makers, Contribution of Working Group II to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change' (IPCC Secretariat, 2007) at 13. 213 IPCC Working Group I, n47, 8. 214 IPCC, Working Group II, n212, 9. 215 Kirsty Ruddock, 'The Bowen Basin Coal Mines Case: Climate Law in the Federal Court' in Tim Bonyhady and Peter Christoff (eds), Climate Law in Australia (2007) Sydney, The Federation Press, 173 at 173.
264 EPBC Act. 216 The Isaac Plains Project was expected to involve the mining of an
estimated 10 million tonnes of coal over the nine year life of the project. 217 The Sonoma Project was expected to produce 30 million tonnes of product coal over
the fifteen year life of the mine. 218
The Minister’s delegates decided that these mines would not have significant impacts on matters of national environmental significance. An officer in the department considered the Isaac Plains proposal and commented that ‘the nature of induced climate change from the referred coal mining operation, and impacts on the world heritage values, are speculative’ .219 In reaching a decision that the proposed Isaac Plains Project was not a controlled action, the delegate added:
I regard the likelihood of significant impacts on [national environmental significance] arising from the marginal addition of greenhouse gases to be extremely small, in addition to speculative. 220
In relation to the Sonoma Project, the same departmental officer commented:
the quantum contribution to induced climate change directly attributable to the referred action is minute and not likely to be measurable against the context of existing and reasonably foreseen contributors. 221
The delegate determined that the proposed Sonoma Project was not a controlled action and noted that any indirect impacts on World Heritage Areas were
speculative. 222
216 Ibid, 174. 217 Wildlife Preservation Society of Queensland (WPSQ) Proserpine/Whitsunday Branch Inc v Minister for the Environment and Heritage (2006) 232 ALR 510 at [10]. 218 Kirsty Ruddock, n213, 174. 219 Wildlife Preservation Society of Queensland (WPSQ) Proserpine/Whitsunday Branch Inc v Minister for the Environment and Heritage (2006) 232 ALR 510 at [17]. 220 Ibid, [18]. 221 Ibid, [29]. 222 Ibid, [30].
265 The Court rejected the submissions of the applicants that the delegate had failed to consider properly the greenhouse gases generated in the extraction, transportation and burning of coal and that the cumulative nature of greenhouse
gas emissions should be taken into account. 223 In relation to the causal evidence before it, the Court remarked:
I am far from satisfied that the burning of coal at some unidentified place in the world, the production of greenhouse gases from such combustion, its contribution towards global warming and the impact of global warming upon a protected matter, can be so described…. there has been no suggestion that the mining, transportation or burning of coal from either proposed mine would directly affect any such protected matter, nor was there any attempt to identify the extent (if any) to which emissions from such mining, transportation and burning might aggravate the greenhouse gas problem. 224
The Court also rejected the applicants’ submission that the principles of ESD should be incorporated as part of the evaluation process and observed:
it is not clear that this “principle” can be applied to the decision-making process prescribed by s75. In any event it has not been established that either project will cause serious or irreversible environmental damage. 225
This regulatory trend continued when, in February 2007, the Minister determined that the proposed Anvil Hill coal mine was not a controlled action under the EPBC Act. The project involved an open cut coal mine and ancillary facilities estimated to mine up to 10.5 million tonnes of coal per annum for domestic and
export markets. 226 The delegate’s reasons for decision were stated as follows:
I found that, while it is clear that, at a global level, there is a relationship between the amount of carbon dioxide in the atmosphere and warming of the atmosphere, the climate system is complex and the processes linking specific additional greenhouse
223 Ibid, [55],[56]. 224 Ibid, [72]. 225 Ibid, [54]. 226 Anvil Hill Project Watch Association Inc v Minister for Environment and Water Resources [2007] FCA 1480 (20 September 2007, Justice Stone) at [17].
266 gas emissions to potential impacts on matters protected under Part 3 of the EPBC Act are uncertain and conjectural...in light of the relatively small contribution of the proposed action to the amount and concentration of greenhouse gases in the atmosphere, I found that a possible link between... gases..from the proposed action and a measurable or identifiable increase in global atmospheric temperature...is not likely to be identifiable. 227
The decision was challenged in the Federal Court of Australia. Submissions for the applicant placed heavy reliance on the overriding objectives of the EPBC Act. Judge Stone cited with approval the decision of the Court in the Bowen Basin Case in the following terms:
his Honour noted that the decision-maker in that matter had accepted the possibility that the coal might be burn, thereby producing additional greenhouse gases which might cause climate change and said that “The point at which he disagreed with the applicant was as to the likelihood of any adverse impact upon a protected matter and the extent thereof.” In my view that is precisely the position here.
.....the relatively small contribution of the proposed emissions to total global emissions could not be seen as having a significant impact. That is a conclusion that was open to her on the findings she had made. 228
Consequently, despite the strong language of the EPBC Act, in its practical application the EPBC Act suffers from the same flaws as its state counterparts and, once again, illustrates the dichotomy between the law in theory and its practical application to the risks of unfettered greenhouse gas emissions. Despite the judicial contemplations outlined above, it seems clear that Australian projects with significant levels of greenhouse gas emissions would be ‘likely to have a significant impact on matters of national environmental significance’ under Part 3 of the EPBC Act. Under the current definition of impact, the greenhouse gas emissions must be considered to be a ‘substantial cause’ of the climate change
227 Quoted in David Farrier, n95, 203. 228 Anvil Hill Project Watch Association Inc v Minister for Environment and Water Resources [2007] FCA 1480 at [36], [40].
267 event. 229 This poses some difficulty for both determining authorities and the judiciary as some level of scientific uncertainty remains regarding that causal link
between emissions and resulting harm. 230 However, the Act embraces the principles of ESD, inter-generational equity and precaution. It is those key principles which should influence the decision-maker to assess appropriately the social and environmental impacts of unfettered emissions and impose conditions to minimise those emissions in order to avoid adverse impacts on matters of national significance. The presence of some scientific uncertainty should not be used to justify the failure to restrict Australia’s greenhouse gas emissions and address the risks of climate change.
Since the inception of the EPBC Act there have been numerous proposals to
include a specific trigger for climate change impacts within the regime. 231 Most recently, the current Prime Minister has indicated an intention to reform the EPBC Act to require an assessment of the climate change impacts of all new
major projects in Australia as part of the environmental assessment process. 232 However, the effectiveness of any climate trigger will be wholly dependent on the quality of determinations of the Minister in considering the environmental impacts and imposing stringent conditions requiring the reduction or offset of the emissions of these projects. Such conditions would need to be imposed in parallel with, not in place of, the regulation of emissions under any national emissions trading scheme. In the absence of these restrictions, the trigger is
likely to be nothing more than legislative decoration. 233 Effectively addressing greenhouse gas emissions in Australia requires not merely formative reforms but also critical changes to the substantive effects of the law in practice.
229 EPBC Act, section 527E(1). 230 Issues in establishing a causative link are discussed in Chapter Six. 231 For a summary of these proposals see Andrew Macintosh, 'The Greenhouse Trigger: Where did it go and what of its future?' in Tim Bonyhady and Peter Christoff (eds), Climate Law in Australia (2007) Sydney, The Federation Press, 46. 232 Australian Labour Party, 'ALP National Platform and Constitution 2007' (44th ALP National Conference, 2007), Chapter 9, Principle 24. 233 Andrew Macintosh, n231, 60.
268 AUSTRALIA’S LEVEL OF COMPLIANCE WITH THE CLIMATE CHANGE REGIME
Through the creation of domestic policies aimed at addressing climate change Australia is, prima facie , in compliance with its obligations to do so under the climate change regime. In addition to the large number of policies and programs in existence which refer to addressing climate change, the language and scope of the existing environmental and planning regimes is clearly sufficient to apply to this emergent environmental threat.
However, it is clear that Australia’s regulatory approach is not in accordance with the spirit and the text of the international environmental accords and does not comply substantively with Australia’s international duties. Principles of ESD, inter-generational equity and precaution, under existing environmental protection regimes, have not been applied to emitting activities to protect the Australian environment from likely degradation and harm. The economic, social and environmental risks of climate change, resulting from cumulative levels of emissions, are not being considered fully and balanced as part of the EIA process. As a consequence, the potential harms from climate change are often omitted or undervalued in determinations regarding the approval of large scale emitting activities. The end result of this unfortunate regulatory approach is the continual approval of major projects with no obligation to mitigate or offset anticipated levels of greenhouse gas emissions. Accordingly, it is apparent that Australia is not furthering the objectives of the climate change regime by taking action to stabilise emissions at a level that would avoid anthropogenic interference with the climate system.
269 THE ROLE OF LAW IN FACILITATING ADAPTATION TO CLIMATE CHANGE
Thus far, this Chapter has considered the role of environmental regulation in minimising greenhouse gases to avoid the harmful environmental and social impacts of climate change. However, some adverse impacts of climate change are now inevitable. The historic levels of greenhouse gas emissions, coupled with the inertia of the climate system, means that any emission reductions that are achieved may now be too late to prevent the occurrence of all adverse
climatic changes. 234
As noted by the IPCC:
past emissions are estimated to involve some unavoidable warming (about a further 0.6°C by the end of the century relative to 1980-1999) even if atmospheric greenhouse gas concentrations remain at 2000 levels..There are some impacts for which adaptation is the only available and appropriate response.235
What this means, in real, practical terms, is that some level of adaptive behaviour is necessary for modern society even if we are successful in meeting the most challenging of the IPCC stabilisation scenarios .236 The legal community is only just beginning to consider the full suite of appropriate measures that will be required to adapt to those predicted impacts. The role of law in facilitating this adaptation is multi-faceted and includes both anticipatory and reactive functions such as urban planning and development consent functions, access to insurance, disaster relief and compensation programs to respond, and promote resilience, to the impacts of climate change. As a minimum, this will include accommodations within planning regimes and conditions of consent to deter maladaptive
234 IPCC, WMO and UNEP, 'Climate Change: The IPCC Scientific Assessment, Report Prepared for Intergovernmental Panel on Climate Change by Working Group I' (Cambridge University Press, 1990) at xi. Mohan Munasinghe and Rob Swart, Primer on Climate Change and Sustainable Development: Facts, Policy Analysis, and Applications (2005) Cambridge, Cambridge University Press at 172. 235 IPCC, 'Climate Change 2007: The Synthesis Report: Summary for Policy Makers, Fourth Assessment Report of the Intergovernmental Panel on Climate Change' (IPCC Secretariat, 2007) at 18. 236 Ibid, 20.
270 behaviours in coastal communities and to promote adaptive behaviours, including the development of renewable energy sources. These regulatory functions are considered in the following paragraphs. Consumer preferences will also have a significant influence on the sustainability of designs of homes and commercial buildings. These so-called ‘green buildings’ are often regulated through voluntary schemes and contractual provisions contained in common transactional documents such as leases and land contracts. The role of these legal mechanisms, in responding to the impacts of climate change, is also considered below.
A The Duty to Adapt to Climate Change
The UNFCCC requires not only the mitigation of emissions but also cooperation between nations and preparation for adaptation to the impacts of climate change including coastal zone management; water resources; agriculture; and for the protection and rehabilitation of areas affected by drought, desertification and
floods. 237
Once again, the climate change regime is silent on the particular principles that should operate to facilitate such adaptation. Adaptation has been described as ‘the adjustment in human and natural systems in response to climate change stresses and their effects, which moderates damage, and helps to exploit
opportunities for benefit’. 238
The IPCC has provided some initial guidance to nation parties on the types of
adaptive strategies that need to be implemented across the globe. 239 However, there is vast uncertainty as to ‘how much’, and ‘what’ adaptation is needed to
237 UNFCCC, n5, Article 4(1)(e). The Kyoto Protocol, n9, contains similar obligations and establishes an adaptation fund for vulnerable developing countries using the share of proceeds from the Clean Development Mechanism (CDM). 238 Mohan Munasinghe and Rob Swart, Primer on Climate Change and Sustainable Development: Facts, Policy Analysis, and Applications (2005) Cambridge, Cambridge University Press at 185. 239 IPCC, Working Group II, n212.
271 minimise the adverse impacts of climate change. Mitigation and adaptation are interconnected. The nature and scale of adaptation will need to be continually re- evaluated and adjusted in light of the success of global initiatives to mitigate greenhouse gas emissions, or otherwise, and changes in the scientific predictions. Moreover effective adaptation measures are highly dependent on specific, geographical and climate risk factors as well as regional institutional, political
and financial constraints:240
the array of potential adaptive responses available to human societies is very large, ranging from purely technological (e.g.,sea defences), through behavioural (e.g., altered food and recreational choices), to managerial (e.g., altered farm practices) and to policy (e.g., planning regulations). 241
The IPCC predicts that the specific climatic impacts experienced within Australia will include:
intensified water security problems as a result of reduced precipitation and increased evaporation;
significant loss of biodiversity in some ecologically rich sites including the Great Barrier Reef and Queensland Wet Tropics;
increased risks from sea level rise and increases in the severity and frequency of storms and coastal flooding due to ongoing coastal development and population growth; and
decline in production from agriculture and forestry due to increased
drought and fire. 242
240 Ibid, 19. 241 Ibid. 242 IPCC, 'Climate Change 2007' , n212, 13. IPCC, 'Climate Change 2007: Impacts, Adaptation and Vulnerability, Contribution of Working Group II to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change' (IPCC Secretariat, 2007) at 509.
272 In relation to the particular adaptive capacities of Australia, the IPCC concludes that:
the region has well-developed economies, extensive scientific and technical capabilities, disaster mitigation strategies, and biosecurity measures. However, there are likely to be considerable cost and institutional constraints to the implementation of adaptation options...... Indigenous communities have low adaptive capacity...Water security and coastal communities are the most vulnerable sectors.... Natural systems have limited adaptive capacity... Projected rates of climate change are very likely to exceed rates of evolutionary adaptation in many species. Habitat loss and fragmentation are very likely to limit species migration in response to shifting climatic zones. 243
It can be said with some certainty that adapting to the impacts of climate change goes hand in hand with improved levels of environmental sustainability. The IPCC has concluded that the promotion of sustainable development could reduce vulnerability to climate change by enhancing adaptive capacity and increasing
resilience. 244 Accordingly, there is an emerging parallel role for the Australian legal system in promoting sustainability and guiding adaptation to the likely future effects of climate change. This requires an interventionist approach, on the part of global, regional and local authorities, to promote adaptation and address the regulatory issues associated with the increased incidences of floods, storms, loss of food production, unreliability of energy supplies, rising sea levels and failing infrastructure.
B Adaptation and Coastal Development
One of the aims of the Australian COAG National Climate Change Adaptation Framework is to revise all planning systems, including codes, standards and guides, to increase resilience to climate change and reduce vulnerability to
243 IPCC, 'Climate Change 2007: Impacts, Adaptation and Vulnerability, Contribution of Working Group II to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change' (IPCC Secretariat, 2007) at 509. 244 Ibid, 20.
273 climate change hazards. 245 Sound planning management for coastal inundation is vital in Australia where more than 80 per cent of the population lives within 50
kilometres of the rising seas. 246 According to the IPCC, sea-level rise and human development are together contributing to losses of coastal wetlands and
mangroves and increasing damage from coastal flooding. 247 Moreover, rising sea levels in conjunction with storm surges provide a real threat of floods and inundation for Australian coastal communities. Adaptation to sea level rises is addressed, to varying extents, in many state climate change plans and strategies but; ‘there is considerable disparity in the extent to which climate impacts have
figured in public planning and decision-making throughout Australia’. 248
The adaptation strategy for Byron Bay in the State of NSW is illustrative of the tension that can result where private landowners are prohibited from taking actions to adapt to rising sea-levels and protect their properties. In making determinations regarding consent to develop on coastal land, the local authority is required to take into account, inter alia, the NSW Coastal Policy 1997, the
Coastline Management Manual, and the North Coast Design Guidelines. 249 The NSW Coastal Policy 1997 includes the goal of considering the potential effects of
climate change in the planning and management of coastal development. 250 Under State Environmental Planning Policy No 71 Coastal Protection , the local authority must consider the likely impact of coastal processes and coastal hazards on development and any likely impacts of development on coastal processes when preparing a draft local environmental plan (LEP) and when determining a
245 COAG, ‘National Climate Change Adaptation Framework’ (COAG, 13 April 2007) at 26, www.coag.gov.au/meetings/130407/docs/national_climate_change_adaption_framework.pdf at 15 June 2008 246 CSIRO, 'Climate Change and Australia's Coastal Communities' (CSIRO, 2002). 247 IPCC, Working Group II, n212, 9. 248 Jan McDonald, 'The Adaptation Imperative: Managing the Legal Risks of Climate Change Impacts' in Tim Bonyhady and Peter Christoff (eds), Climate Law in Australia (2007) Sydney, The Federation Press, 124 at 128. See, for example, SA Coastal Erosion, Flooding and Sea Level Rise Standards and Protection Policy www.environment.sa.gov.au at 15 June 2008 and the South-east Queensland Regional Coastal Management Plan 2006 (Qld). 249 North Coast Regional Environmental Plan 1988 (NSW), cl. 32B(2). 250 NSW Government, NSW Coastal Policy 1997 : a sustainable future for the New South Wales Coast’ (NSW, 1997), NSW Coastal Policy 1997 Goals 2.1, 2.2.
274 development application to carry out development on coastal land. 251 In addition, any draft LEP that applies to land adjoining or adjacent to a coastal foreshore area should:
(a) restrict development so as to minimise long term risk to life and property and its impact on the coastal processes, and
(d) prohibit development landward from the back beach erosion scarp that is at immediate risk from coastal processes, other than development involved with stabilisation works. 252
Coastal zone management plans may be prepared by local authorities for their respective coastal zones. 253 These plans must address the protection and preservation of beach environments and beach amenity, and the emergency actions that may be carried out during periods of beach erosion including ‘works for the protection of property affected or likely to be affected by beach erosion, where beach erosion occurs through storm activity or an extreme or irregular event’. 254 Where a coastal zone management plan has been prepared, it is an offence to carry out work for the purpose, or that has the effect, of preventing or remediating beach erosion, or for protecting property likely to be affected by beach erosion, except in accordance with the plan. 255 A coastal management plan is still to be adopted by Byron Shire Council. 256
Under the Byron Local Environmental Plan 1988 , the objectives of land zoned ‘coastal land’ include the prevention of ‘development which would adversely affect, or be adversely affected by, coastal processes’. 257 The objectives of the
251 State Environmental Planning Policy No 71 Coastal Protection, cl 7, cl 8(j). The LEP must also give effect to the provisions of the NSW Coastal Policy 1997 ; Direction of the Minister for Planning under the Environmental Planning & Assessment Act 1979 (NSW), section 117. 252 North Coast Regional Environmental Plan 1988 (NSW), cl 32. 253 Coastal Protection Act 1979 (NSW) section 55B. Local authorities in coastal zones may be directed by the Minister for Planning to make a coastal zone management plan. 254 Coastal Protection Act 1979 (NSW) section 55C. 255 Coastal Protection Act 1979 (NSW) section 55K. 256 According to Byron Shire Council, a plan will be developed in 2008, http://www.byron.nsw.gov.au/Environment/Coastal/ManagementPlan.aspx at 15 June 2008. 257 Byron Local Environmental Plan 1988 (NSW) at 30, Zone No. 7(f1)(Coastal Land Zone).
275 Byron Development Control Plan 2002 include the aim of ensuring that ‘the impact of coastal processes on potential development is minimised by limiting development and ensuring any development is only temporary’. 258 Where new development is located between the beach escarpment and the immediate impact line (as identified in the Coastline Management Study), no building may be located within 20 metres of the escarpment and any works must be of modular construction and able to be removed within 12 hours. 259 For any development within the immediate impact line and the 50 year erosion line, consent is granted subject to the proviso that the development consent must cease, and the development must be relocatable by road vehicle, if the erosion escarpment comes within 50 metres of the development. 260
It is also a condition of consent that a restriction is placed on the title to the property in the following terms:
the subject land and any improvements erected thereon must not be used for the purpose of (land use) in the event that the erosion escarpment, as defined by the Works and Services Director of the Council of the Shire of Byron from time to time, comes to within 50 metres of any buildings or any part thereof at any time erected on the said land. 261
A similar restriction is placed on development located within the 50 year and 100 year erosion lines. In that case, the owner has the option of demolition, rather than relocation, of the property. 262 However, Byron Shire Council has also repeatedly refused applications for consent to carry out erosion protection works
in the area. 263 As a result this ‘informal policy of planned retreat unquestionably
258 Byron Development Control Plan 2002 (NSW), Part J2.1. 259 Byron Development Control Plan 2002 (NSW), Part J2.1. 260 Byron Development Control Plan 2002 (NSW), Part J2.2. 261 Under section 88E of the Conveyancing Act 1919 (NSW); Byron Development Control Plan 2002 (NSW), Part J2.2. 262 Byron Development Control Plan 2002 (NSW), Part J2.3. 263 McDonald, n248, 131-133 and Parkes v Byron Shire Council [2003] NSWLEC 104 (unreported) (Justice Lloyd, Land and Environment Court, 5 May 2003); Parkes v Byron Shire Council [2004] NSWLEC 92 (unreported) (Commissioner Tuor, Land and Environment Court, 15 June 2004); John
276 shifts the adaptation burden onto the landowner, but confers no right to undertake private adaptation measures’. 264
Despite the notifications on title at the time of purchase, community tensions have arisen as a result of the combinations of: the policy of planned retreat; prohibitions on private coastal protection works; and the significant property values of these coastal properties. The residents of Belongil Beach in Byron Bay have called for a reconsideration of this strategy and have threatened to sue Byron Shire Council for its failure to comply with the NSW Coastal Protection
Act and to protect residents from coastal erosion from rising sea levels. 265 However, as noted by one commentator, ‘only rarely would local or state authorities be found to owe a positive duty to actively protect their property from
coastal erosion’. 266
A similar challenge was made to local authorities in Auckland, New Zealand (NZ), where coastal homes were classified as being at risk of ‘coastal inundation’
following a local report on global-warming sea level rises. 267 According to reports, the value of the properties dropped 30 per cent, following the classification, and the landowners sought to have the classification removed from
the Land Information Memorandum issued by the local council. 268
Van Haandel v Byron Shire Council [2006] NSWLEC 394 (unreported) (Commissioner Brown, Land and Environment Court, 20-21 June 2006). 264 McDonald, n248, 133. 265 See, for example, Heath Gilmore, 'Waterfront Owners Threat to Sue Over Rising Sea Levels', The Sun-Herald (Sydney), 20 May 2007, 7. 266 Jan McDonald, 'A Risky Climate for Decision-Making: The liability of development authorities for climate change impacts' (2007) 24(6) Environmental and Planning Law Journal 405 at 413. 267 J Bengtsson, R Hargreaves and I.C. Page, 'Assessment of the Need to Adapt Buildings in New Zealand to the Impacts of Climate Change' (Study Report No 179 (2007), BRANZ, 2007) at 87; Beston, Anne, ‘Seaside Houses Falsely Tagged as Flood Risks’ The New Zealand Herald , 14 October 2006. 268 Ibid.
277 In NSW, the approval of a retirement development located on a flood constrained coastal plain was held to be void on the basis that the Minister for Planning had failed to consider, as part of his considerations of the public interest and ESD, whether the impacts of the proposed property would be compounded by changed weather patterns as a result of climate change and whether this would lead to an increased risk of flooding:
climate change flood risk is, prima facie, a risk that is potentially relevant to a flood constrained, coastal plain development such as the subject project…. In my opinion, having regard to the subject matter, scope and purpose of the EPA Act and the gravity of the well-known potential consequences of climate change, in circumstances where neither the Director-General’s report nor any other document before the Minister appeared to have considered whether climate change flood risk was relevant to this flood constrained coastal plain project, the Minister was under an implied obligation to consider whether it was relevant and, if so, to take it into consideration when deciding whether to approve the concept plan. The Minister did not discharge that function. 269
In Queensland, there is at least one example of a Court upholding the decision of a local authority to relocate development to avoid the risks of inundation. In 2007, a landowner appealed a condition of approval issued by Redland Shire Council that, in effect, moved the proposed building from an area at risk of flooding to a different part of the same coastal property. The proposed location of the house was in an area subject to once in 100 year inundation whereas the condition of
approval identified an area with a higher elevation. 270 Under established town planning principles, the Court should not consider whether a better site exists elsewhere for proposed development, only whether the proposed application is
appropriate. 271 The Queensland Court of Appeal held that the condition imposed
269 Walker v Minister for Planning [2007] NSWLEC 741; (2007) LGERA 124 at [161], [166]. An appeal has been lodged by the Minister against this decision. The appeal hearing will take place later this year. 270 Charles & Howard Pty Ltd v Redland Shire Council [2007] QCA 200 at [3]. 271 Scurr v Brisbane City Council (No 6) (1975) QPLR 162 at 165-166; Comkey Pty Ltd v Caboolture Shire Council (2006) QPELR 399 at [47], Bennett & Anor v Livingstone Shire Council & Ors (1985) QPLR 214 at 216, The Aborigines and Islanders Alcohol Relief Service Limited v Mareeba Shire Council & Ors (1985) QPLR 292 at 295-296, Queensland Adult Deaf and Dumb Society (Incorporated) v Brisbane City Council (1972) 26 LGRA 380 at 386, Castro v Douglas Shire Council
278 by the Council was a valid condition taking into account local planning policies regarding sea level rises which had the objective of protecting residential housing from floodwaters ‘by excluding such development from lands inundated by the
Average Recurrence Interval of one in 100 year flood.’ 272
These examples highlight the legal uncertainty surrounding the authority of local councils to demand adjustments to the manner of use of private property in order to protect the community from those risks. Decisions by local councils to act or not act, where the local authority has exercised sufficient control over the threat, may result in legal challenges and potential findings of liability for the losses
suffered by private landowners. 273 Consequently, the role of local authorities may need to be strengthened through specific statutory powers enabling those authorities to demand amendments to the design, location, use of building materials and level of sustainability of proposed development in order to promote adaptation and minimise the risks posed by the impacts of climate change. Greater community education and awareness must also be achieved to assist landowners in understanding the reasons behind such regulation and the full implications of the future risks of climate change to their properties.
C Adaptation and Renewable Energy Projects
Addressing the risks of climate change will require a portfolio of legal responses including the establishment of strict obligations to reduce emissions and the facilitation of renewable energy sources. This will require a shift in the traditional regulatory approach to the assessment of new projects and will require the balancing of conflicting short term social and environmental impacts with the
(1992) QPLR 146 at 158, Luke v Maroochy Shire Council & Watpac Developments Pty Ltd (2003) QPELR 447 at [50], Charles & Howard Pty Ltd v Redland Shire Council [2007] QCA 200 at [21]. 272 Charles & Howard Pty Ltd v Redland Shire Council [2007] QCA 200 at [10], [25]-[29]. 273 McDonald, n 266, 413. Although greater exemptions are emerging for local authorities through the various tortious law reforms (discussed in Chapter Six).
279 long term potential to reduce significantly Australia’s greenhouse gas emissions. This is not currently the norm in the consideration of renewable energy projects in Australia. 274
One example of the adoption of a balanced assessment can be found in the 2007 Taralga Case involving a proposed windfarm in New South Wales. The proposal was objected to by local landowners and the local community on the basis of visual and noise impacts. The Court acknowledged that the windfarm
would interrupt the natural cohesion of the local landscape. 275 However, the Court considered this is light of the public interest in the promotion of renewable energy. The Court accepted the conclusions of the IPCC reports regarding the link between fossil fuel use and climate change, noted the likely impacts on the Australian Great Barrier Reef, water resources and agriculture and observed that ‘the difficulty facing governments globally is how to deal with the implications of climate change whilst continuing to meet the demands of a growing population’. 276
The Court referred to the central role of the principles of ESD and the concept of intergenerational equity regarding the development of new energy resources and remarked:
addressing the implications of climate change involves a complex intersection of political, economic and social considerations. It is widely recognised that the state of the global environment is in rapid decline, requiring an urgent response if the
274 For a discussion of other approaches to the approval of wind farms, in particular, see James Prest, 'The Bald Hills Wind Farm Debacle' in Tim Bonyhady and Peter Christoff (eds), Climate Law in Australia (2007) Sydney, The Federation Press, 230 and the discussion of cases preceding Taralga in Judith Jones, 'Global or Local Interests? The Significance of the Taralga Wind Farm Case' in Tim Bonyhady and Peter Christoff (eds), Climate Law in Australia (2007) Sydney, The Federation Press, 262. 275 Taralga Landscape Guardians Inc v Minister for Planning and Res Southern Cross Pty Ltd [2007] NSWLEC 59 at [116]. 276 Ibid, [68]-[72].
280 current quality of life enjoyed by most Australians is to continue and future generations are to have access to the resources of the present.277
This judgment has been described as emphasising ‘the need for environmental laws to be interpreted at a local level in order to respond to the global challenge
of climate change’. 278 The Court noted that the attainment of inter-generational equity in the production of energy requires two things. The first is that the mining and use of energy is sustainable . The second is to increasingly substitute energy sources that result in less greenhouse gas emissions thereby ‘reducing the
cumulative and long term effects caused by climate change’. 279
The Court concluded that renewable energy sources are an important method of reducing emissions and noted that wind energy involves almost zero emissions
once constructed. 280 In this context, the Court came to the conclusion that the overall public benefits outweighed the private objections:
there is a significant public interest..in adoption of alternative, more environmentally friendly, energy generation sources….the broader public interest must outweigh this impact [on the local landowners]. 281
In NZ, the Resource Management Act seeks to facilitate the approval of renewable energy projects by requiring that, in considering an application for a resource consent, the consent authority must not have regard to the effects of such a discharge on climate change except to the extent that the use and development of renewable energy enables a reduction in the discharge into air of greenhouse gases, either in absolute terms; or relative to the use and development
277 Ibid, [67], [73]. 278 Kirsty Ruddock, n215, 182. 279 Taralga Landscape Guardians Inc v Minister for Planning and Res Southern Cross Pty Ltd [2007] NSWLEC 59 at [74]. 280 Ibid, [75],[79]. 281 Ibid, [146]-[147].
281 of non-renewable energy. 282 Accordingly, under the provisions of the NZ Act, resource consent is more likely to be granted for a renewable energy project, which will enable reductions in the discharge of greenhouse gases into the air, than a fossil fuel based project. 283
D Adaptation to Climate Change and Common Legal Transactions
I Climate Change and Sustainable Building Design
The most common of legal transactions involve property as the central asset. The implications of climate change on existing and future buildings are significant. The lifespan of new buildings today can be 40 to 60 years which means that the buildings that we are currently designing and constructing will be significantly affected by the impacts of climate change. 284 According to a study commissioned by the Australian Greenhouse Office (AGO), the main impacts of climate change with implications for Australian buildings are:
increased energy consumption due to higher temperatures;
health effects of over-heating;
increased risk of damage from more intense tropical cyclones, storms and stronger winds and from increased cracking of drier soils and ground movement impacting on foundations and pipe work;
increased damage from flooding; and
increased bushfire risk. 285
282 Resource Management Act 1991 No. 69 (NZ), section 104E. 283 Greenpeace New Zealand v Northland Regional Council [2007] New Zealand Resource Management Appeals 87 at 99 [50] and 100 [55]; (Williams J, High Court, Auckland). 284 Australian Greenhouse Office, 'An Assessment of the Need to Adapt Buildings to the Unavoidable Consequences of Climate Change' (Report to the Australian Greenhouse Office, Department of the Environment and Water Resources, BRANZ, 2007) at 3. 285 Ibid.
282 The Australian Building Code incorporates energy efficiency provisions that require new building works, residential and commercial, to meet specified energy efficiency performance standards based on the Australian climate
zone in which the building will be located. 286 These mandatory requirements specify criteria relating to the building fabric, external glazing, heat resistance, air movement and efficiency of lighting and equipment depending
upon whether the building is housing, multi-residential or commercial. 287 These provisions have been adopted through many of the state planning
schemes but this is not uniform. 288 For example, new development in SA must comply with either the Building Code of Australia or the South Australian Housing Code . The latter code requires all new homes to achieve a 5 star energy efficiency rating compatible with the relevant climate zone of the site. 289 More specific sustainable design principles are required to be followed for new developments in the City of Adelaide Development Plan in order to minimise energy consumption and limit greenhouse gases. 290 These include:
passive solar consideration in the design, planning and placement of buildings;
286 Building Code of Australia 2006, Volume One Energy Efficiency Provisions, Section J. The Building Code 2003 applied energy efficiency standards to housing. In BCA 2006, these now apply to building classes 2-9. See also D E Fisher, 'Formulation of Building Standards for Energy Conservation in Buildings' (2006) 18 Environmental Law and Management 282 at 290-291. 287 Australian Building Codes Board, ‘Energy Efficiency Provisions for Housing’ (27 August 2007) http://www.abcb.gov.au/go/whatweredoing/workprogram/projectsae/energy/eeprovisionshousing at 17 June 2008; Australian Building Codes Board ,‘Energy Energy Provisions for Multi-Residential and Commercial Buildings’ (27 August 2007), http://www.abcb.gov.au/go/whatweredoing/workprogram/projectsae/energy/eecommercial at 17 June 2008. 288 Energy efficiency requirements are imposed in many of the States and Territories but there is not yet a unified national approach; see Building Code of Australia 2006, Volume One Energy Efficiency Provisions, Section J. The Building Code 2003 applied energy efficiency standards to housing. BCA 2006 applies energy efficiency standards to building classes 2-9. For a brief overview of the different jurisdictional approaches see http://www.houseenergyrating.com/ at 15 June 2008. The National Framework for Energy Efficiency is intended to achieve a nationally consistent legislated regime, http://www.nfee.gov.au/buildings.jsp?xcid=121 at 15 June 2008. 289 2002 South Australian Housing Code , Appendix H; see Planning SA ‘SA Housing Code Amendment 14 (May 2007) - Appendix H, http://www.planning.sa.gov.au/download.cfm?DownloadFile=E5B9F999-F203-0D46- AD26A708FBF4E684 at 15 June 2008. 290 These principles apply to all new residential and office developments and extensions/refurbishments. Government of South Australia, 'Adelaide (City) Development Plan under the Development Act 1993' (Consolidated August 2007), Principle 113.
283 designing for the life-cycle of the development to allow for future adaptation;
considering low levels of embodied energy in the selection and use of materials;
developing energy efficiency solutions including passive designs using natural light, solar control, air movement and thermal mass; and
using low carbon and renewable energy sources.291
Other states, such as NSW, have implemented their own separate regimes for
energy efficiency in building design.292
There are also some embryonic examples of the need to adapt to climate change being taken into consideration in judicial deliberations. For example, the case of Jackson Teece v Waverley Council involved a residential flat building proposal which had a number of deficiencies including inadequate
parking and poor solar access. 293 While the proposal as a whole was refused, Roseth SC made the following interesting observation in respect of the inadequate parking:
given the current concern with climate change and the increasing emphasis on the use of public transports, I would be reluctant to refuse an application because it is deficient in parking, so long as the deficiency does not cause other people inconvenience. 294
291 Ibid. 292 For example, the SEPP (Building Sustainability Index: BASIX) 2004 (NSW) requires all new homes in New South Wales to use up to 40 per cent less potable water and produce up to 40 per cent fewer greenhouse gas emissions than the average home. There are also some State-based initiatives designed to promote energy efficiency in the corporate sector including the Clean Energy Act 2008 (Qld) (passed 14 May 2008) which requires businesses which use 10 terajoules or more of energy each year to undertake an energy audit and devise an energy savings plan (Parts 5- 6 Clean Energy Act 2008 (Qld)). 293 Jackson Teece v Waverley Council [2007] NSWLEC 69, Senior Commissioner Roseth, at [28],[29]. 294 Ibid, [28].
284 It is likely that the legal framework for the design, construction and operation of buildings will continue to strengthen as the effects of climate change become more apparent. Ultimately, it is likely that each planning scheme will provide, and enforce, detailed requirements regarding site choice, building design, material selection and operational efficiency of all buildings in response to the risks posed by climate change. Given the increased complexities of retrofitting existing buildings, it is increasingly important that buildings are designed with this future regulatory environment in mind. It is also imperative that a consistent national approach to these issues is developed in order to provide strong incentives to the building industry to continue to innovate and enhance the sustainability of the design, construction and operation of these buildings.
II Adaptation to Climate Change and Green Leasing
The impacts of climate change have resulted in a ‘green building evolution’ in the move towards more environmentally sustainable building design and operations. The green building evolution includes some mandatory resource efficiency standards contained in certain local planning schemes as well as a raft of voluntary measures such as the Green Star Scheme and the National Australian Built Environment Rating Scheme that seek to impose a sustainability standard on the design and operation of commercial buildings
in Australia. 295 Recent years have also seen the emergence of ‘green leases’ for buildings through which landlords and tenants cooperate to achieve certain performance standards.
The Green Building Council of Australia defines a Green Star building as a property that incorporates design, construction and operational practices that significantly reduce or eliminate the negative impact of development on the
295 Green Building Council of Australia, ‘Green Star’ http://www.gbca.org.au/green-star/ at 15 June 2008; National Australian Built Environment Rating Scheme (formerly Australian Building Greenhouse Rating).
285 environment and occupants. The aim is to achieve buildings that are optimally energy, water and resource efficient. To be a ‘Green Star building’, the building must have achieved a Green Star rating of four or more stars
under the Green Building Council of Australia’s rating system. 296 The Green Star rating evaluates separately the environmental impacts that are a direct consequence of a project’s site selection brief, design, construction and maintenance under a number of categories. Those categories of environmental assessment are:
management; energy efficiency; water efficiency; indoor environment quality (IEQ); transport; material selection; land use ecology; emissions; and innovation. 297
A recent review of Green Star certified buildings found that these buildings generally achieve:
a. a reduction in energy use of up to 85 per cent against equivalent conventional buildings; b. a reduction in potable water consumption of over 60 per cent against conventional buildings; c. average carbon dioxide reduction equivalent to removing 130 cars off the road permanently; and d. an average of 69 per cent of construction waste being diverted from landfill. 298
296 Richard Bowman and John Mills, 'Valuing Green: How Green Buildings Affect Property Valuations and Getting the Valuation Method Right' (Green Building Council of Australia, 2008) at 9. 297 Green Building Council of Australia ‘The Inside Guide to Green Star’ http://www.gbcaus.org/docs/GBCA_The%20Inside%20Guide%20to%20Green%20Star.pdf at 15 June 2008. 298 Richard Bowman and John Mills, n296, 10.
286 The positive financial implications of a green building include lower building operating costs, ease of sale and rental of the building, enhanced tenant retention and improved occupancy rates. 299 Other benefits extend to improvements in
tenant productivity, general wellbeing and occupational health and safety. 300 This is predicted to result in green buildings attracting a premium in the rental market as well as being ‘future proofed’ against the risk of higher energy costs and tightening regulations on building sustainability performance. 301 The implications of a green building in a lease setting are significant. To achieve optimal environmental performance, building owners and tenants must cooperate fully to achieve certain benchmarks for energy use, water use and waste management (disposal and recycling) with ongoing information keeping and reporting between the parties. 302 This is in direct contrast to the traditional, arm’s
length, commercial relationship between a landlord and tenant. 303 Accordingly, ‘green leases’ will need to incorporate expressly the specific rights and obligations of the landlord and tenant, mutual environmental performance benchmarks, and evolved cooperative mechanisms for addressing non- compliance and issues in disputes.
The National Australian Built Environment Rating Scheme (Nabers) is another voluntary scheme intended to assist Australian building owners, managers and tenants to promote and market their greenhouse performance and encourages best practice in the design, operation and maintenance of commercial buildings to minimise greenhouse emissions. 304 It is administered nationally by the Nabers Office. The energy rating (from 1-5) can apply to the base building, entire
299 Ibid, 5. 300 Ibid 6. 301 Ibid. 302 Tim Power, 'Lease Arrangements for Green Commercial Buildings' (2007) Freehills: Update http://www.freehills.com.au/publications/publications_2243.asp at 15 June 2008. 303 Sharon Christensen and William Duncan, 'Green Leases - A New Era in Landlord and Tenant Co- operation?' (2007) 15 Australian Property Law Journal 54 at 58. 304 Formerly known as the Australian Building Greenhouse Rating Scheme (ABGR). National Australian Built Environment Rating Scheme, ‘Nabers Energy Commitment Agreement [new buildings and refurbishments]’, 1. National Australian Built Environment Rating Scheme, ‘Nabers Energy Commitment Agreement [new or refurbished tenancies and fitouts]’, 1 http://www.nabers.com.au/office.aspx at 15 June 2008.
287 building or individual tenancies according to their actual performance using 12 months of energy data. 305
Building owners and tenants are required to enter into contractual agreements with the Nabers Office prior to the use of the energy rating. The contracting party must be the proprietor or head lessee of the premises. The so-called commitment agreement allows the proponent to nominate the star level that the project will perform at, once the building is fully operational. Three stars represent current best market practice and commitment agreements are intended to nominate star levels of 4, 4.5 or 5. Once the commitment agreement has been signed, building owners and tenants are able to promote the greenhouse performance of the building or tenancy. The prior approval of the Nabers Office is required where the party wishes to sell, transfer or otherwise dispose of ownership of the premises and relevant rights and obligations under the
agreement must be assigned to the third party. 306
According to the AGO, buildings that include sustainable measures, including strong passive solar design principles and efficient water usage systems, are
likely to be more resilient to the impacts of climate change. 307 The Commonwealth Energy Efficiency in Government Operations Policy requires energy efficiency obligations to be included in all documentation for all premises
owned or leased by the Commonwealth. 308 Contracts, leases and other relevant documentation for new buildings, major refurbishments and new leases over 2,000 square metres must specify minimum energy performance standards of 4.5
stars under the ABGR. 309
305 Ibid. 306 If the third party purchaser does not wish to be bound by a commitment agreement then the owner or tenant, as the case may be, is entitled to immediately terminate the agreement. National Australian Built Environment Rating Scheme, ‘Nabers Energy Commitment Agreement [new buildings and refurbishments]’, 5. National Australian Built Environment Rating Scheme, ‘Nabers Energy Commitment Agreement [new or refurbished tenancies and fitouts]’, 5. 307 Australian Greenhouse Office, n284, 4. 308 Australian Greenhouse Office, 'Energy Efficiency in Government Operations Policy' (Commonwealth of Australia, 2006). 309 Ibid 1. This does not apply to tenancy areas of less 2,000m 2 and leases of under 2 years where only requirements for energy efficient lighting and separate metering apply. Exceptions can be granted for an ABGR rating of less than 4.5 in special circumstances eg heritage listed buildings. Department of
288
The AGO has developed a ‘Green Lease Schedule’ to be used in all leases for Commonwealth buildings and lettings, that makes provision for a range of
ongoing energy efficiency performance obligations. 310 The schedule requirements
vary according to the size and nature of the particular lease. 311 However, the standard provisions in the green lease schedule generally relate to:
the achievement and maintenance of the 4.5 ABGR energy rating (this can be adjusted down in limited circumstances);
separate metering of all tenancies and central services (including electricity, gas, hot and cold water);
agreement to an Energy Management Plan which assesses strategies for maintaining the ABGR rating, managing energy intensity and achieving energy intensity improvements;
establishment of a Building Management Committee, for larger tenancies, to operate as a communication, consultation and record keeping vehicle; and
dispute resolution and remedial clauses which adopt a cooperative approach to rectifying non-compliance and invoke the use of an appropriately specialised expert to resolve issues under the green lease
schedule. 312
It is envisaged that the uptake of green leases and sustainable buildings designs will increase, and may even become a mandatory requirement, as the impacts of climate change on the Australian environment become more pronounced.
the Environment and Water Resources and Australian Greenhouse Office, 'Energy Efficiency in Government Operations Policy: Green Lease Schedule (GLS)' (Commonwealth of Australia, 2007). 310 Australian Greenhouse Office, ‘Green Lease Schedule’ http://www.environment.gov.au/settlements/government/eego/index.html at 15 June 2008. 311 Department of the Environment and Water Resources and Australian Greenhouse Office, 'Energy Efficiency in Government Operations Policy: Green Lease Schedules Guidance Notes' (Commonwealth of Australia, 2007) at 12. 312 Ibid, 9-10.
289 III Adaptation to Climate Change and Contracts for the Sale of Land
When advising in relation to the sale of land, Australian legal practitioners should be increasingly aware of the potential physical, economic and environmental implications of adverse climate change and the effect that may have on the value of their clients’ assets. The potential future risks from climate change include sea level rises, flooding and the risk of future inundation of properties with resulting deterioration in property values and loss of assets. There is also the risk of failure of buildings from increased temperatures, droughts and incidences of severe weather events. Purchasers should also be made aware of the financial implications of future regulatory regimes which may require the mandatory installation of energy efficient and water saving devices and may restrict the ability of landowners to fully exploit the opportunities associated with their assets.
Property assessments should take into account the risk of climate change impacting on the asset and, in particular, the risks of flooding and inundation on the present and future value of the property. Whether the building is environmentally sustainable will also impact on the existing and future market value of the property. Unsustainable buildings may result in accelerated value depreciation of the asset and may require major capital works to meet future regulatory changes including the imposition of more
stringent economic and environmental performance standards. 313 Such developments could require the insulation of all buildings, the use of appliances with 4 or 5 star efficiency ratings, the installation of solar hot water systems, greywater recycling systems and so on. These could potentially be mandatory for all new homes as well as requiring retrofits in existing homes.
313 Richard Bowman and John Mills, n296, 5-6.
290 Land contracts may increasingly require warranties from the vendor regarding the energy efficiency and water efficiency of the property. In the Australian Capital Territory, it is now mandatory for vendors to disclose the current level of energy performance of a dwelling prior to sale. All advertisements for the sale of premises must contain a statement of the
energy efficiency rating (EER) of the habitable part of the premises. 314
Failure to include such a statement is a strict liability offence. 315 A person will also commit a strict liability offence if the EER is false or misleading in
a material particular. 316 The vendor must supply the prospective buyer with a copy of the EER before entering into a contract for the sale of the premises
and the buyer must certify in writing that the EER has been received. 317 If this does not occur then the seller is liable to pay the buyer an amount equal to
0.5 per cent of the purchase price of the premises. 318
In this era of drought and water restrictions, the presence of water tanks has also become a significant factor in the marketing of properties. The performance of the property in meeting water restrictions is also increasingly relevant. In Queensland, for example, excessive water users are required to enter into water efficiency management plans with the local water authority through which the owner undertakes to install water efficient taps, toilets,
showers and appliances within a set period of time. 319 Repeated non- compliance will result in fines, outdoor watering bans and the installation of
flow restrictors on the property’s water supply. 320 These restrictors are installed to the water meter at the property and will reduce significantly the
314 Civil Law (Sale of Residential Property) Act 2003 (ACT), section 22(1). 315 Civil Law (Sale of Residential Property) Act 2003 (ACT), section 22(2). 316 Civil Law (Sale of Residential Property) Act 2003 (ACT), ss 22(3)-22(5). 317 Civil Law (Sale of Residential Property) Act 2003 (ACT), ss 23(1)-22(2). 318 Civil Law (Sale of Residential Property) Act 2003 (ACT), section 23(3). 319 For non-residential users, this is implemented through Part 5, Division 3 of the Water Act 2000 (Qld) (ss 360ZCA-360ZCK). 320 Queensland Water Commission, ‘Residential Excessive Water User Compliance Program: Level 6’, http://www.qwc.qld.gov.au/myfiles/uploads/level%206/fact%20sheets/L6FS_ExcessiveUse.pdf at 15 June 2008.
291 water flow rate. 321 The water commissioner has advised that restrictors will be initially installed for a 30 day period but will be reinstalled for serial
offenders. 322 Accordingly, the past performance of the property, and its ability to meet water targets through normal day-to-day operations, is becoming an important aspect for consideration in the purchase of a
property.323
Where carbon credits have been sold from carbon stored in the vegetation on the property then the purchaser must also consider the rights and responsibilities associated with that stored carbon including the contractual assignment of legal obligations to preserve the carbon stocks on the land for a lengthy period of time.
CONCLUSION
Environmental law is driven by the imperative of managing risk, and climate
change is no exception to this rule.324 As noted by one commentator ‘[c]limate law...is..the very core of environmental law, for no environmental problem is as pervasive or as long-term in its impact’.325
In the absence of specific regulation aimed at restricting Australia’s national emissions, the current systems to regulate pollution and environmental harm are
321 Ibid. Broad powers to restrict (and prohibit) water supply ‘where the commission considers it necessary’ are provided under Part 6 of the Water Act 2000 (Qld). These restrictions can extend to water taken from a rainwater tank that is connected to a service provider’s reticulated supply (section 360ZD(3)). 322 Queensland Water Commission, n320. 323 The generation and sale of carbon credits from vegetation on land is discussed further in Chapter Seven . 324 Nicolas De Sadeleer, n21, 3. 325 Benjamin Richardson, 'Climate Law and Economic Policy Instruments: A New Field of Environmental Law' (2004) [2004](1) Environmental Liability 19 at 19.
292 readily equipped to step into this void and regulate greenhouse gas emissions and their environmental repercussions. In theory , the objectives and scope of these existing environmental legal systems comfortably extend to the regulation of climate change and the restriction of emissions. Indeed, the Federal EPBC Act is particularly well suited to addressing major projects with significant levels of emissions and the potential to impact on matters of national significance. However, in practice , the interpretation and application of these laws merely pays lip service to the objectives of environmental protection. As noted by one commentator:
the law as set down in legislation does not always reflect what happens in practice. The availability of legal rights and powers often does not reflect the reality of natural resources management….natural resources management is more likely to be constrained by political influences, which include social, cultural and economic considerations, than by absence of legal power. 326
The lack of political will to restrict emissions has prevented determining authorities from giving the impacts of emissions and climate change the full consideration required under the principles ESD. As a result of this derogatory treatment, the principles of ESD are demoted to a secondary consideration rather than being treated as they should be, that is, as a primary imperative which should underpin all decision-making in Australia. Moreover, erroneous findings as to the causes of climate change, and the consequences of additional anthropogenic emissions, undermine the proper functioning of these legal systems. The result is the suboptimal operation of a protective regime with very little substantive effect on the emissions of Australian industries. Consequently, a major paradigm shift is required to regulate greenhouse gas emissions, and the risks of climate change, in Australia effectively. The science of climate change must be accepted at all governmental levels and greater education provided to determining authorities regarding the causal links between emissions and climate
326 Gerry Bates, 'Legal Perspectives' in Stephen Dovers and Su Wild River (eds), Managing Australia's Environment (2003) Sydney, The Federation Press, 255 at 255.
293 change. Furthermore, the principles of ESD, inter-generational equity; and precaution must be embraced and given their full status in all environmental and planning determinations across Australia.
The existing legal system is also clearly not primed to facilitate adaptation to the impacts of climate change. The current legal approach is ad hoc, inconsistent across the state and territory jurisdictions, and lacking in any clear parameters for implementation. Adaptation requires that sustainability becomes the norm in all aspects of building design, location and operation; and in resource choices and resource use. Accordingly, an effective regulatory approach requires traditional property laws, planning regimes, land contracts and leasing provisions, across Australia, to be reformed to accommodate this new overarching priority of promotion of the principles of ESD.
Effectively responding to the causes and impacts of climate change is a challenging task and requires a regulatory authority with ample information, expertise, funding and other resources at its disposal. Given these resourcing challenges, and the need for national consistency in the regulation of Australian industries, it appears preferable that such regulation is directed at a Commonwealth level with consistent implementation through the various state- based regulatory authorities. Such an approach will achieve greater harmony in the regulatory approach to the emissions from major projects whilst utilising the existing resources of the state authorities. In the event that a national emissions trading system is established for Australia, these regulatory approaches have the potential to play a significant complementary role towards achieving Australia’s emission reduction and adaptation objectives.
294 Chapter Six - The Potential Role of the Common Law of Torts
in Addressing Climate Change Harm in Australia 1
INTRODUCTION
Humans play a pivotal role in contributing to climate change through the burning of fossil fuels, the use of products that emit greenhouse gases and land-use changes such as urbanisation, deforestation and agricultural practices. Changes to our climate system are predicted to result in rising sea levels, rising
temperature and higher incidences of severe storms. 2 Climate-related harm could include loss of homes, livestock and other property, damage to public infrastructure and to coastal settlements, impaired agricultural yields, loss of
livelihoods and population displacement. 3 The human health impacts could involve thermal stress and heat-related deaths and illnesses, proliferation and geographical shifts of infectious diseases, impaired nutrition and other adverse
mental and physical health risks. 4
Despite this growing evidence, many authorities and industries in Australia appear reluctant to undertake immediate action to reduce greenhouse gas
emissions. 5 Accordingly, some climate-related harm is now inevitable. This
1 Sections of this chapter were published in Nicola Durrant, 'Tortious Liability for Greenhouse Gas Emissions? Climate Change, Causation and Public Policy Considerations' (2007) Volume 7, Issue 2 QUT Law and Justice Journal 403 and Nicola Durrant, 'Professional Liability for Climate-Affected Advice' (2007) Issue 60 Queensland Environmental Practice Reporter 114 . 2 IPCC, 'Climate Change 2007: The Physical Science Basis: Summary for Policy Makers, Contribution of Working Group I to the Fourth Assessment report of the Intergovernmental Panel on Climate Change' (IPCC Secretariat Geneva, 2007); IPCC, 'Climate Change 2001: Synthesis Report to the Third Assessment Report of the Intergovernmental Panel on Climate Change' (Cambridge University Press, 2001)). 3 Ibid. 4 IPCC, 'Climate Change 2001', n2, 9. 5 Some States are beginning to implement State-based reduction targets but these do not yet amount to a prohibition on greenhouse gas emissions. For example, the Climate Change and Greenhouse Gas Emissions Reduction Act 2007 (SA).
295 leads to the question. On whom should the risk fall for climate harm? Is it
industry, government or the private individual? 6
The purpose of this chapter is to assess the potential legal issues in establishing liability for large-scale emitters of greenhouse gases, in Australia, for resulting harms caused from changes to the climate system. This paper focuses on the likely role of the common law of torts in addressing resulting harms from climate change. It does so primarily through an analysis of the potential scope of liability in hypothetical negligence and nuisance suits against coal mining projects and
coal-fired power plants. This chapter identifies a range of significant obstacles in successfully bringing claims in negligence for climate change harm. These include issues in foreseeability, causation and the operation of public policy principles. This chapter concludes that the prospects of success of such tortious actions are remote. Consequently, the distribution of risk from climate change, and associated allocation of liability, would be more appropriately addressed through consistent, national legislation rather than through the ad hoc adaptation of the common law.
CLIMATE CHANGE AND THE LAW OF TORTS
Climate change is a global phenomenon and has resulted in international agreements to reduce global greenhouse gas emissions and minimise climate harms. A majority of the international community agreed to an international framework for reducing emissions through the United Nations Framework
6 Or in the words of Myles Allen; ‘what might happen if it all goes horribly wrong?’ Myles Allen, 'The Spectre of Liability: Part 1-Attribution' in Kenny Tang (ed), The Finance of Climate Change: A Guide for Governments, Corporations and Investors (2005) London, Risk Books, 367 at 367.
296 Convention on Climate Change (UNFCCC) and the Kyoto Protocol . 7 The overriding objective of the UNFCCC, of which Australia is a party, is to achieve the ‘stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate
system’.8
Australia is also a party to the Kyoto Protocol. The current Federal Australian government deposited the instrument of ratification of the Kyoto Protocol with the UNFCCC Secretariat in late 2007. Australia became bound to comply with
its obligations under the Kyoto Protocol in March 2008. 9 This includes an obligation to reduce greenhouse gas emissions to 108 per cent of 1990 levels in
during 2008 and 2012. 10
Both the UNFCCC and the Kyoto Protocol are silent on the allocation of responsibility for damage caused as a result of anthropogenic greenhouse gas emissions. This means that, at an international level, reparation of harm must be addressed through existing international law principles including the principle of
State responsibility for transboundary harm. 11 At a national level, and in the absence of specific legislation regulating emissions and climate harm, the allocation of liability for losses must fall to be addressed by the common law.
7 United Nations Framework Convention on Climate Change , opened for signature on 4 June 1992, 31 ILM 849 (entered into force on 21 March 1994)(UNFCCC); Kyoto Protocol to the United Nations Framework Convention on Climate Change , opened for signature 16 March 1998 (entered into force on 16 February 2005) (Kyoto Protocol)(together the climate change regime). 8 UNFCCC, n7, Article 2. 9 That is 90 days from the receipt of the Instrument of Ratification by the United Nations. 10 Kyoto Protocol, n7, Article 3 and Annex A. 11 See Roda Verheyen, Climate Change Damage and International Law: Prevention Duties and State Responsibility, Developments in International Law: Volume 54 (2005) Leiden, Martinus Nijhoff Publishers.
297 The common law is a dynamic area of law that is able to adapt to the changing
needs of society. 12 The principal goal of tort law has been described in many formats. One theoretical approach refers to tort law as corrective justice, another as maximising social welfare and a third as the distribution or allocation of the
costs of risk-bearing. 13 From these three, the appropriate basis for liability for environment related torts appears to be based on considerations of sharing the
risk of the broad social costs of climate change. 14 Accordingly, in the emerging area of climate losses, the Court must develop and adapt legal principles to identify wrongdoers, recognise the wrong done, allocate blame and distribute losses. However, it is debatable whether the common law of torts is able to adapt sufficiently to apply to the modern, global, environmental, problem of climate
change which cuts across the public and private arenas. 15
THE HYPOTHETICAL CLIMATE SUIT: ACTIONS IN NEGLIGENCE
Tortious actions in negligence are most likely to be brought against large users of fossil fuels, suppliers of fossil fuels and the creators of products that utilise fossil
fuels. 16 Actions may also be brought against governments in their capacity as public authorities and where they own or control public works and infrastructure such as electricity utilities. This chapter focuses, in particular, on the hypothetical scenario involving the long-term operation of a coal mine, coal-fired electricity plant or other large-scale industrial emitter of greenhouse gases in Australia. Such entities could be either publicly or privately owned.
12 Karen Morrow, 'Nuisance and Environmental Protection' in John Lowry and Rod Edmunds (eds), Environmental Protection and the Common Law (2000) Oxford, Oregon, Hart Publishing, 139 at 139. Perre v Apand Pty Ltd (1999) 198 CLR 180 at [92] per McHugh J. 13 Glanville Williams and B.A. Hepple, Foundations of the Law of Tort (2 ed, 1984) London, Butterworths at 197-198, 201. 14 Karen Morrow, n12, 157. 15 Ibid. 16 Joseph Smith and David Shearman, Climate Change Litigation: Analysing the Law, Scientific Evidence and Impacts on the Environment, Health and Property (2006) Adelaide, Presidian Legal Publications at 17.
298 Accordingly, it is against this factual background that the following tortious principles are considered:
the existence of a duty of care owed by the defendant to the plaintiff;
a breach by the defendant of the standard of care; and
damage to the plaintiff caused by the defendant’s breach of the duty.
DUTY OF CARE AND THE EMISSION OF GREENHOUSE GASES
A Duty of Care and Physical Harm
The type of harm suffered has implications for the finding that a duty of care is owed. Potential climate related harm, following greenhouse gas emissions, includes physical property damage from heat, wind, floods and sea level rises. Where greenhouse gas emissions have caused property damage, personal injury and consequential loss then it is necessary to determine whether the relationship between the parties falls within one of the recognised relationships giving rise to
a duty of care. 17
The foundation for the establishment of a duty of care is found in the so-called
‘neighbour principle’ as espoused in Donoghue v Stevenson: 18
you must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour. Who then, in law is my neighbour? The answer seems to be – persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called into question.
17 Spartan Steel & Alloys Ltd v Martin & Co [1973] 1 QB 27. 18 Donoghue v Stevenson [1932] AC 562 at 580 per Lord Atkin.
299 The establishment of a neighbour relationship between the emitter and the plaintiff requires a number of elements including that the plaintiff be ‘so closely and directly affected’ that the emitter ought reasonably to have them in contemplation as being so affected. Proximity was explained by Deane J in the following manner:
[proximity] involves the notion of nearness or closeness and embraces physical proximity (in the sense of space and time) between the person or property of the plaintiff and the person or property of the defendant, circumstantial proximity such as an overriding relationship of employer and employee or of a professional man and his client and causal proximity in the sense of the closeness or directness of the relationship between the particular act or cause of action and the injury sustained. 19
The application of this principle to an industrial plant and local residents affected by emissions appears quite valid. However, the impacts of climate change go beyond the local community and extend to the regional, national and the global. As the nexus between the emitter and the plaintiff expands, the likelihood of the Court finding a duty of care becomes more and more uncertain.
B Duty of Care and Pure Economic Loss
Where harms relating to climate change involve only a risk of physical damage, or property devaluation, then no physical harm will be involved and this will be pure economic loss. This could occur in circumstances of negligent misrepresentation of the risks of property flooding, negligent performance of services in omitting to address climate risks, defective goods and property damage.
19 Jaensch v Coffey (1984) 155 CLR 549 at 584.
300 Where the harm caused by the emitting industry results in pure economic loss
then recovery will be permitted only in limited circumstances. 20 As noted:
in my opinion it is still right to say that as a general rule damages are not recoverable for economic loss which is not consequential upon injury to the plaintiff's person or property. The fact that the loss was foreseeable is not enough to make it recoverable. However, there are exceptional cases in which the defendant has knowledge or means of knowledge that the plaintiff individually, and not merely as a member of an unascertained class, will be likely to suffer economic loss as a consequence of his negligence, and owes the plaintiff a duty to take care not to cause him such damage by his negligent act. 21
In such circumstances, this will require the establishment of a novel duty of care by the Court. The Court now applies an incremental approach to the establishment of a novel duty of care, that is, ‘the law should develop novel categories of negligence incrementally and by analogy with the established
categories’. 22 This multi-factorial approach looks to a range of legal and policy principles including the defendant’s control of the circumstances giving rise to the harm and the vulnerability of the plaintiff in terms of their inability to protect
themselves from that harm. 23
The concept of vulnerability was described in Woolcock Street Investments v CDG Property Ltd as follows :
“vulnerability”, in this context, is not to be understood as meaning only that the plaintiff was likely to suffer damage if reasonable care was not taken. Rather, “vulnerability” is to be understood as a reference to the plaintiff’s inability to protect itself from the consequences of a defendant’s want of reasonable care, either
20 Perre v Apand Pty Ltd (1999) 198 CLR 180. 21 Caltex Oil (Aust) Pty Ltd v The Dredge “Willemstad” (1976) 136 CLR 529 at 555. 22 Sutherland Shire Council v Heyman (1985) 157 CLR 424 at 481 per Justice Brennan. 23 Sullivan v Moody (2001) 207 CLR 562; 183 ALR 404 at [48]-[49]; Rogers v Whitaker (1992) 175 CLR 479; Bryan v Maloney (1995) 182 CLR 609; Hill v Van Erp (1997) 188 CLR 159; 142 ALR 687, Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515; Esanda Finance Corporation v Peat Marwick Hungerfords (1997) 188 CLR 241. See also Jane Stapleton, ‘The Golden Thread at the Heart of Tort Law: Protection of the Vulnerable’, (2003) 24 Australian Bar Review 41.
301 entirely or at least in a way which would cast the consequences of loss on the defendant. 24
With respect to greenhouse gas emissions, the emitter has control of the nature and amount of greenhouse gases produced and emitted by its industrial activities. The avoidance of harm from climate change is outside the control of the plaintiff
and, as individuals, they are unable to prevent the occurrence of climate change. 25 Moreover, as severe weather events, coastal erosion, landslides and floods increase in vulnerable areas the insurance sector is increasingly denying coverage
for these climate change related risks. 26
However, in considering whether to establish a novel duty, the Court will also take into account public policy principles. Public policy issues present a significant obstacle for any tortious action based on harm from climate change. Climate change is a global phenomenon and occurs as a result of natural processes as well as historic and continuing anthropogenic emissions. The establishment of a duty of care for harm caused by climate change as a result of the contribution of the particular emissions of the defendant could be regarded as the imposition of an unreasonable social burden. The Court may determine that holding these individual emitters responsible for the cumulative global and historic emissions of our industrialised society is an unreasonable shift of responsibility and has the potential to result in the imposition of indeterminate
liability on emitters. 27 As part of its considerations, the Court will balance the interests of the community with concerns that the identification of a duty of care could result in a flood of claims before the Courts alleging breach. As the harms
24 Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515 at [23] per Chief Justice Gleeson, Justices Gummow, Hayne and Heydon. 25 Ibid. 26 Andrew Dlugolecki and Mojdeh Keykhah, 'Climate Change and the Insurance Sector: Its Role in Adaptation and Mitigation' in Kathryn Begg, Frans Van Der Woerd and David L. Levy (eds), The Business of Climate Change: Corporate Responses to Kyoto (2005) Sheffield, Greenleaf Publishing, 147; RF&C Investments, 'In the Front Line: The Insurance Industry's Response to Climate Change' (Reo Research, 2007) at 8; Evan Mills, 'From Risk to Opportunity: 2007 Insurer Responses to Climate Change' (CERES, 2007). 27 Cole v South Tweed Heads Rugby League Football Club Ltd (2004) 207 ALR 52.
302 from climate change become more and more apparent in Australia, concerns about the flood of claims will become all the more legitimate in the eyes of the law.
C Duty of Care and Public Authorities
Public authorities are likely to experience increased claims in negligence against them as a result of their direct action, or failure to take action, in addressing the risks of climate change. This could include claims in respect of:
the choice of protective standards in planning schemes (for example, the minimum height above sea-level for new development); the determination of individual development applications, including conditions for flood or bushfire protection and erosion control; and the choice of protective strategies such as the construction of levees, seawalls, and stormwater systems. 28
Successful claims against authorities regarding the development of planning schemes would be unusual given that such determinations are generally
considered by the Court to be political in nature. 29 However, claims regarding individual determinations of development applications may have greater prospects of success where ‘council is exercising considerable control over the fate of the site in circumstances where it must be taken to have knowledge of the current predictions of climate impacts, at least compared with a trusting and
vulnerable purchaser’. 30 Whether a duty is found to be owed by the authority will depend upon the stringency of the wording of the empowering legislation and whether it is characterised as being owed to individuals or the public at large.
28 Jan McDonald, 'A Risky Climate for Decision-Making: The liability of development authorities for climate change impacts' (2007) 24(6) Environmental and Planning Law Journal 405 at 412. Claims in negligence might also be bought against public authorities in circumstances where they own or control the facilities responsible for large scale greenhouse gas emissions. 29 See, for example, Ryan v Great Lakes Council; New South Wales v Ryan (2002) 77 ALJR 183 at 186. Ibid. 30 McDonald, n28, 412.
303 Moreover, statutory tort law reforms in Australia have limited the scope of potential liabilities of public authorities and provided additional defences to tortious claims. For example, the following principles will apply in determining whether a duty of care exists in relation to a public authority:
(a) the functions required to be exercised by the authority are limited by the financial and other resources that are reasonably available to the authority for the purpose of exercising the functions;
(b) the general allocation of financial or other resources by the authority is not open to challenge;
(c) the functions required to be exercised by the authority are to be decided by reference to the broad range of its activities (and not merely by reference to the matter to which the proceeding relates);
(d) the authority may rely on evidence of its compliance with its general procedures and any applicable standards for the exercise of its functions as evidence of the proper exercise of its functions in the matter to which the proceeding relates. 31
Accordingly, public authorities are able to rely on evidence of limited financial and other resources in defending findings of a duty, or breach of that duty, by the Court. The onerous financial burden of responding to the risks of climate change will heavily influence the Court’s consideration of reasonableness when
determining whether a duty of care exists in relation to climate change. 32
31 Section 35 of the Civil Liability Act 2003 (Qld). Similar provisions have been enacted in s 42 of the Civil Liability Act 2002 (NSW), s38 of the Civil Liability Act 2002 (Tas), s110 of the Civil Law (Wrongs) Act 2002 (ACT) and s5W of the Civil Liability Act 2002 (WA). Section 83 of the Wrongs Act 1958 (Vic) is similar but excludes (b). Richard Douglas, Gerard Mullins and Simon Grant, The Annotated Civil Liability Act 2003 (QLD) (2004) Chatswood, LexisNexis Butterworths at 35.5. 32 See also Elizabeth Carroll, ‘Wednesbury Unreasonableness as a Limit on the Civil Liability of Public Authorities’ (2007) 15 Tort Law Review 77.
304 CAUSATION AND LIABILITY IN CLIMATE SUITS
A The Standard of Care and Emissions of Greenhouse Gases
Once a duty of care has been found to have been owed, the Court must consider what is the relevant standard of care and if it has been breached. The standard of care is determined, as a question of law, through the application of an objective
standard of the ‘reasonable person’. 33 This was described by Mason J in Wyong Shire Council v Shirt as follows:
in deciding whether there has been a breach of the duty of care the tribunal of fact must first ask itself whether a reasonable man in the defendant's position would have foreseen that his conduct involved a risk of injury to the plaintiff or to a class of persons including the plaintiff. If the answer be in the affirmative, it is then for the tribunal of fact to determine what a reasonable man would do by way of response to the risk. The perception of the reasonable man's response calls for a consideration of the magnitude of the risk and the degree of the probability of its occurrence, along with the expense, difficulty and inconvenience of taking alleviating action and any other conflicting responsibilities which the defendant may have. It is only when these matters are balanced out that the tribunal of fact can confidently assert what is the standard of response to be ascribed to the reasonable man placed in the defendant's position. 34 (emphasis added)
Accordingly, in setting the appropriate standard of care the Court will determine the magnitude of the risk of climate change, the probability of that risk actually occurring and the relative expense of requiring the defendant to take steps to alleviate that risk.
B Calculus of Breach of Duty and Climate Harm
The relevance of the ability to take precautions against a risk of harm is now articulated in the various statutory tort law reforms in the following manner:
33 Glasgow Corporation v Muir [1943] AC 448 at 454. 34 Wyong Shire Council v Shirt (1980) 146 CLR 40 at 47-48 per Justice Mason.
305 (1) A person does not breach a duty to take precautions against a risk of harm unless—
(a) the risk was foreseeable (that is, it is a risk of which the person knew or ought reasonably to have known); and
(b) the risk was not insignificant; and
(c) in the circumstances, a reasonable person in the position of the person would have taken the precautions. 35
Foreseeability of the risk has been described by the Court as:
a risk of injury which is remote in the sense that it is extremely unlikely to occur may nevertheless constitute a foreseeable risk. A risk which is not far-fetched or fanciful is real and therefore foreseeable. 36
Under the tort law reforms, this common law test of foreseeability has been
altered to apply to risks that are ‘not insignificant’. 37 This was discussed in
Drinkwater v Howarth 38 as:
a risk which is much more than far-fetched or fanciful may not differ materially from a risk which is not insignificant……if the plaintiff was clearly at risk, then it cannot be said that the risk was insignificant. It was a clear risk. 39
So the question to be asked is whether the risk of climate change was ‘not insignificant’ at the time of the emission of the greenhouse gases? The UNFCCC,
35 Section 9 of the Civil Liability Act 2003 (Qld). Similar provisions to s 9 have been enacted in s43 Civil Law (Wrongs) Act 2002 (ACT), s5B Civil Liability Act 2002 (NSW), s32 Civil Liability Act 2002 (SA), s11 Civil Liability Act 2002 (Tas), s48 Wrongs Act 1958 (Vic), s5B Civil Liability Act 2002 (WA). Richard Douglas, Gerard Mullins and Simon Grant, The Annotated Civil Liability Act 2003 (QLD) (2004) Chatswood, LexisNexis Butterworths at 9.7. 36 Wyong Shire Council v Shirt (1980) 146 CLR 40 at 48 per Justice Mason. 37 Compare with section 48(3)(a) of the Wrongs Act 1958 (Vic) which states that this term includes, but is not limited to, acts that are far-fetched or fanciful. 38 Drinkwater v Howarth [2006] NSWCA 222. 39 Ibid, at [16] and [19].
306 of which Australia is a party, was adopted in 1992. 40 The preamble to the UNFCCC clearly state that the parties to the UNFCCC are concerned about the impact of increased atmospheric emissions on global warming and climate change:
concerned that human activities have been substantially increasing the atmospheric concentrations of greenhouse gases, that these increases enhance the natural greenhouse effect, and that this will result on average in an additional warming of the Earth’s surface and atmosphere and may adversely affect natural ecosystems and humankind. 41
On the basis of this international agreement, it could be legitimately argued that the risk of injury from climate change resulting from human emissions of greenhouse gases was a real, foreseeable risk and ‘not insignificant’ risk as of 1992. In contrast, it was not until 2007 that the Australian Federal government officially acknowledged that the science linking greenhouse gas emissions and global warming was convincing:
over time, the scientific evidence that the climate is warming has become quite compelling and the link between emissions of greenhouse gases from human activity and higher temperatures is also convincing. 42
In any event, the publication of the Fourth Assessment Report on Climate Change of the Intergovernmental Panel on Climate Change (IPCC Report), in February 2007, made it abundantly clear that climate change was occurring, that the effects of climate change were of an adverse or harmful nature and that
greenhouse gas emissions were contributors to that occurrence. 43
40 UNFCCC, n7. This was signed by Australia on 4 June 1992 and ratified on 30 December 1992. 41 UNFCCC,n7, Preamble. 42 Prime Minister John Howard, ‘Address to the Melbourne Press Club’ (23 July 2007, Melbourne) http://www.egovmonitor.com/node/13024 at 14 June 2008. 43 IPCC, 'Climate Change 2007', n2.
307 In relation to climate warming, the IPCC Report concludes that
warming of the climate system is unequivocal , as is now evident from observations of increases in global average air and ocean temperatures, widespread melting of snow and ice, and rising global mean sea level. 44
The IPCC Report identifies a clear link between temperature increases and greenhouse gas emissions and concludes that ‘most of the observed increase in globally average temperatures since the mid-20 th century is very likely due to the observed increase in anthropogenic greenhouse gas concentrations’ .45
The assessment concludes that continued emissions at or above current rates will, very likely, cause further warming and induce larger changes in the climate th system than those observed during the 20 century. 46 Accordingly, at the time of release of this report with its increased scientific certainty, knowledge of the probability of harm from unabated greenhouse gas emissions could be concluded to have entered the public arena.
An analogy may be drawn with medical negligence cases where knowledge of the risk of harm has developed over time. In H v Royal Alexandra Hospital for
Children ,47 there was no general knowledge of the risk of contracting HIV via blood transfusions until the first documented case in 1983. Justice Badgery- Parker found that, upon publication of the reported case, the hospital ought to have been aware of the risk:
the first Australian case of AIDS was published in April 1983. I have no difficulty in concluding that reasonably informed physicians, scientists and blood transfusion
44 Ibid, 4. 45 Ibid, 8. ‘Very likely’, in this quote, refers to a scientific certainty of above 90 per cent. 46 Ibid, 10. 47 H v Royal Alexandra Hospital for Children (1990) Aust Torts Reports 81-000.
308 services in this country ought to have been well aware by at latest April 1983 that there was a real risk. 48
A similar argument could be run in relation to the release of the IPCC report in February 2007. The IPCC Report addresses climate change impacts predominantly at a global level. It could be argued that the specific harm experienced by the plaintiff was not itself reasonably foreseeable because those localised impacts were not predicted by the IPCC. However, this argument becomes weaker as Australian studies on likely climatic impacts, at a regional
level, become publicly available. 49
Additionally, the argument could be raised by defendants that, because of the global, cumulative relationship between greenhouse gas emissions and climate change, the harm would have occurred regardless of the care taken by the defendant. The IPCC Report concludes that past and future emissions will continue to contribute to warming and sea level rises for more than a millennium to come due to the large timescales required to remove the gases from the
atmosphere. 50 Carbon dioxide, for example, will stay in the atmosphere for up to
one hundred years. 51
In determining whether there has been a breach of duty, the Court will undertake an assessment of, amongst other matters, the reasonableness of the precautions undertaken by the defendant. The matters to be considered are articulated in the statutory tort law reforms as follows:
48 Ibid , at 67,529. 49 For example, CSIRO and Australia Bureau of Meteorology, 'Climate Change in Australia:Technical Report 2007' (Commonwealth Scientific and Industrial Research Organisation, 2007); RSJ (Bob) Beeton et al, 'Australia State of the Environment 2006: Independent Report to the Australian Government Minister for the Environment and Heritage, Department of the Environment and Heritage, Canberra' (Australia State of the Environment Committee, 2006), http://www.environment.gov.au/soe/2006/index.html at 14 June 2008. 50 IPCC ‘Climate Change 2007’, n2, 13. 51 The other greenhouse gases have both longer and shorter life spans.
309 in deciding whether a reasonable person would have taken precautions against a risk of harm, the court is to consider the following (among other relevant things)—
(a) the probability that the harm would occur if care were not taken;
(b) the likely seriousness of the harm;
(c) the burden of taking precautions to avoid the risk of harm;
(d) the social utility of the activity that creates the risk of harm. 52
The level of probability of the harm occurring will vary according to the nature of the plaintiff and the point in time of the assessment. The probability and likely seriousness of the risk of harm will be assessed at the time of injury to the
plaintiff. 53 In terms of the seriousness of the harm, the Court will take into account the gravity of the harm in terms of the global impacts from greenhouse gas emissions and predicted changes to the climate system.
In terms of the burden of taking practical precautions with respect to the nature of the risk, this is described as:
(a) the burden of taking precautions to avoid a risk of harm includes the burden of taking precautions to avoid similar risks of harm for which the person may be responsible; and
(b) the fact that a risk of harm could have been avoided by doing something in a different way does not of itself give rise to or affect liability for the way in which the thing was done. 54
52 For example, section 9(2) of the Civil Liability Act 2003 (Qld). 53 Roe v Minister of Health [1954] 2 QB 66. 54 Section 10 of the Civil Liability Act 2003 (Qld). Similar provisions have been enacted in s44 Civil Law (Wrongs) Act 2002 (ACT), s5C Civil Liability Act 2002 (NSW), ss 11 and 12 Civil Liability Act 2002 (Tas), s49 Wrongs Act 1958 (Vic), s5B(2) Civil Liability Act 2002 (WA). Richard Douglas, Gerard Mullins and Simon Grant, The Annotated Civil Liability Act 2003 (QLD) (2004) Chatswood, LexisNexis Butterworths at 10.3.
310 The Court will assess the reasonableness of the acts taken by the defendant. In
Graham Barclay Oysters Pty Ltd v Ryan, 55 the distributor of oysters was sued in negligence after the plaintiff contracted hepatitis from oysters which had been grown in contaminated water. Justice McHugh considered the reasonableness of the acts of the defendant and commented:
no doubt the magnitude of the risk, if it eventuated, was high. But so are the magnitudes of many risks that reasonable people run because the alternative is too costly or too inconvenient. The magnitude of the risk of being involved in a motor car accident is very high, and the risk could be minimised, if not eliminated, by no car ever travelling at more than 10 km per hour. But few would contend that travelling at 10 km per hour was the only reasonable response to the risk of a motor car accident. 56
A similar analysis could be applied in relation to the magnitude of risk of climate change and the reasonableness of requiring industries to avoid all (or most) greenhouse gas emissions. A balance needs to be identified between the risk and the reasonable steps that could be taken to minimise emissions. This could include use of ‘clean coal’ technologies or carbon capture and storage (CCS), the generation or purchase of offset credits through emission reduction projects or
modification to plants to utilise alternative fuel sources. 57
The Court will look to the expense, difficulty and convenience of the taking of
those practical precautions in the context of the gravity of the harm. 58 The fact that the defendant does not possess the resources to implement the reasonable
precautions is not itself a sufficient defence. 59 The Court could take into account the ability of the defendant to pass the costs of these initiatives on to consumers
55 Graham Barclay Oysters Pty Ltd v Ryan (2002) 211 CLR 540 at [111]. 56 Ibid. 57 Discussed in Nicola Durrant, ‘Emissions Trading, Offsets and Other Mitigation Options for the Australian Coal Industry’(2007) 24(5) Environmental Planning and Law Journal 361. 58 Caledonian Collieries Ltd v Speirs (1957) 97 CLR 202; Romeo v Conservation Commission (NT) (1998) 192 CLR 431; Wyong Shire Council v Shirt (1980) 146 CLR 40. 59 PQ v Australian Red Cross Society [1992] 1 VR 19; Apex Holiday Centre (Inc) v Lynn [2005] WASCA 58.
311 and the ultimate cost implications for the community. The Court will also
consider the social utility of the activity giving rise to the harm. 60 In a modern context, it would be possible to raise the argument that there is an essential community need for continued energy supply in order for our society to function.
In considering whether there has been a breach of duty, the Court will take into account any relevant statutory or customary standards. Whether there is statutory authorisation for the harmful act will also be a relevant factor. For example, if legislation prescribed the amount of greenhouse gas emissions that could lawfully be emitted into the atmosphere then this would be factored into the consideration of the reasonableness of the conduct. It is possible that the future Federal emissions trading system would encompass such an authorisation. Current environmental protection legislation in Australia regulates ‘environmental harm’ and ‘pollution’ in such terms that could reasonably be applied to restrict greenhouse gas emissions. However, environmental protection authorities are not currently enforcing those provisions in relation to greenhouse gases and, as a general rule, those authorisations do not prohibit or restrict
greenhouse gas emissions. 61
Customary standards will also be a relevant consideration for the Court. Industries worldwide have lawfully emitted unabated greenhouse gases since the time of the industrial revolution. Customarily, there have been no limits or restrictions on those emissions from industrial activities. However, this is but one factor for the Court to take into consideration and will not necessarily operate to prevent a finding of breach of duty.
60 This has traditionally been applied in cases involving the police, ambulance and other social services in terms of the community good. For example, Daborn v Bath Tramways Motor Co Ltd [1946] 2 All ER 333; Watt v Hertfordshire County Council [1954] 2 All ER 368. 61 As discussed in Chapter Five.
312 BREACH OF DUTY AND DAMAGE IN CLIMATE SUITS
In deciding whether a breach of duty caused the particular damage the Court will consider:
whether the breach of duty was a necessary condition of the occurrence of the harm (factual causation); and
whether it is appropriate for the scope of the liability of the person in
breach to extend to the harm (scope of liability). 62
A Establishing Factual Causation in Climate Suits
Attribution of responsibility under the law of torts is based on causation as a
limiting force. 63 To be liable in negligence there must be a causal connection
between the defendant’s breach of duty and the harm suffered by the plaintiff. 64 However, climate change represents a unique challenge for the establishment of causation and it is unlike any other form of environmental pollution or toxic
tort. 65
I Causation and the Climate System
The IPCC was established in 1988 to assess existing scientific information in order to understand the scientific basis of risk of human-induced climate
change and its potential impacts. 66 The Earth’s climate system is described by the IPCC as follows:
62 For example, section 9 Civil Liability Act 2003 (Qld). 63 Robert G Lee, 'From the Individual to the Environmental: Tort Law in Turbulence' in John Lowry and Rod Edmunds (eds), Environmental Protection and the Common Law (2000) Oxford, Oregon, Hart Publishing, 77 at 78. 64 For example, section 11(1)(a) Civil Liability Act 2003 (Qld). 65 Emissions from the exhausts of cars and deterioration in local air quality have a clear temporal and spatial link. There are analogies to be drawn between causation issues in climate litigation and those already experienced in tobacco and toxic tort suits. However, the evidentiary links in climate litigation are significantly more complex. Robert G Lee, 'From the Individual to the Environmental: Tort Law in Turbulence' in John Lowry and Rod Edmunds (eds), Environmental Protection and the Common Law (2000) Oxford, Oregon, Hart Publishing, 77 at 81. 66 IPCC, ‘About IPCC: Mandate’; http://www.ipcc.ch/about/index.htm at 14 June 2008.
313 an interactive system consisting of five major components: the atmosphere, the hydrosphere, the cryosphere, the land surface and the biosphere, forced or influenced by various external forcing mechanisms, the most important of which is the Sun …the direct effect of human activities on the climate system is [also] considered an external forcing….Many physical, chemical and biological interaction processes occur among the various components of the climate system on a wide range of space and time scales, making the system extremely complex. 67
The Courts have traditionally applied the common sense and experience test
encompassing the ‘but for’ test. 68 That is, whether the plaintiff’s damage would have occurred ‘but for’ the defendant’s act or omissions in combination with value judgments of the Court and the infusion of policy
considerations . 69 This civil standard of proof requires the plaintiff to demonstrate, on the balance of probabilities, that the defendant’s acts or
omissions caused the damage suffered. 70 There must be a ‘more probable
inference in favour of what is alleged’ not just a possibility. 71 The action will
fail if non-negligent causes of the harm are equally probable on the facts. 72 In
the case of Barnett v Chelsea ,73 the plaintiff alleged negligence in the hospital care of her husband after he had consumed arsenic tea. The plaintiff failed to establish a causal link between the breach of the duty of care and her husband’s death as the Court found that her husband would have died
regardless of the care he received. 74
67 IPCC, 'Climate Change 2001', n2, 1.1.2. 68 This is reflected in ss 11(1)(b) and 11(4) of the Civil Liability Act 2003 (Qld). 69 March v E & M H Stramare Pty Ltd (1991) 171 CLR 506 at 516 per Chief Justice Mason. 70 Barnett v Chelsea and Kensington Hospital Management Committee [1969] 1 QB 428. 71 Justice Gibbs in TNT Management Pty Ltd v Brooks (1979) 23 ALR 345 at 349; Seltsam Pty Ltd v McGuiness (2000) 49 NSWLR 262 per Justice Spigelman at 75; St George Club Ltd v Hines (1961) 35 ALJR 106 at 107. 72 Chisholm v State Transport Authority (1987) 46 SASR 148; Tubemakers of Australia Ltd v Fernandez (1976) 50 ALJR 720 at 724 per Justice Mason. 73 Barnett v Chelsea and Kensington Hospital Management Committee [1969] 1 QB 428. 74 Ibid.
314 However, a simple cause and effect approach is problematic in the case of harm from climate change, as expressed by the IPCC:
many processes and interactions in the climate system are non-linear. That means that there is no simple proportional relation between cause and effect. A complex, non-linear system may display what is technically called chaotic behaviour. This means that the behaviour of the system is critically dependent on very small changes of the initial conditions. This does not imply, however, that the behaviour of non-linear chaotic systems is entirely unpredictable. 75
Accordingly, it is inevitable that some level of scientific uncertainty will
prevail. 76 As noted by one commentator:
even if predictions about future temperature increase could be made with acceptable levels of certainty, predicting the consequences of specific temperature increase on ecological systems requires confrontation with many additional issues that are plagued by scientific uncertainty. The science of ecology is much too soft to predict ecosystem-wide responses to stress with certainty. 77
The IPCC is regarded as an example of the emergence of ‘post-normal science’, that is, a scientific approach with relaxed scientific thresholds which embodies the precautionary principle and utilises an extended peer
community. 78 Accordingly, this adoption of a post-normal approach to scientific assessment has repercussions for the ability of plaintiffs to establish a persuasive causative link on the scientific evidence available. There is, of course, no strict requirement to meet the scientific standard of proof in the
establishment of judicial causation. 79 In the determination of causation, the
75 IPCC, 'Climate Change 2001' n2, 1.2.2. 76 Jacqueline Peel, The Precautionary Principle in Practice: Environmental Decision-Making and Scientific Uncertainty (2005) Sydney, The Federation Press at 36. 77 Donald A. Brown, 'The Precautionary Principle as a Guide to Environmental Impact Analysis: Lessons Learned from Global Warming' in Joel A. Tickner (ed), Precaution, Environmental Science, and Preventive Public Policy (2003) Washington, Island Press, 141 at 145. 78 Jerry Ravetz, 'The Post-Normal Science of Precaution' (2004) 36 Futures 347; Tuomo Saloranta, 'Post-Normal Science and the Global Climate Change Issue' (2001) 50 Climatic Change 395; Silvio Funtowicz and Jerome Ravetz, 'Science for the Post-Normal Age' (1993) 25 Futures 739. 79 Although probabilistic evidence has been adopted in some medical cases; see Richard Goldberg, Causation and Risk in the Law of Torts: Scientific Evidence and Medicinal Product Liability (1999) Oregon, Hart Publishing.
315 Court will adopt a common sense approach. 80 Nevertheless, it is difficult to identify, on the balance of probabilities, that the greenhouse gas emissions of the defendant caused the harm suffered in the presence of such scientific doubt. As concluded by one commentator:
for the vast majority of damaging weather events, we will never be able to prove beyond reasonable doubt that “but for” human influence on climate, that event would never have occurred. 81
Climate change is a global phenomenon and is the result of historic emissions from human society. Current greenhouse gas emissions will contribute to the overall cumulative atmospheric concentrations. Therefore, it will be problematic to prove that a particular defendant (or selection of identified defendants) was responsible for the historic emissions which caused the climate system to change and the resulting local environmental impacts within Australia, which in turn caused the particular harm suffered by the
plaintiff. 82 Moreover, the spatial and temporal scales between the release of emissions, the resulting climate changes and the resulting harm or loss are inherently unpredictable . As explained by the IPCC:
when variations in the external forcing occur, the response time of the various components of the climate system is very different. With regard to the atmosphere, the response time of the troposphere is relatively short, from days to weeks, whereas the stratosphere comes into equilibrium on a time-scale of typically a few months. Due to their large heat capacity, the oceans have a much longer response time, typically decades but up to centuries or millennia.… Therefore the system may respond to variations in external forcing on a wide range of space- and time-scales. 83
80 Laferriere v Lawson (1991) 78 DLR (4th) 609; [1991] 1 SCR 541 at [159]; Halverson v Dobler [2006] NSWSC 1307 at [176] per McClellan CJ. 81 Myles Allen, 'The Spectre of Liability: Part 2-Implications' in Kenny Tang (ed), The Finance of Climate Change: A Guide for Governments, Corporations and Investors (2005) London, Risk Books, 381 at 381. 82 See Eduardo Penalver, 'Acts of God or Toxic Torts? Applying Tort Principles to the Problem of Climate Change' (1998) 38(Fall) Natural Resources Journal 563 at 579-582. 83 IPCC, 'Climate Change 2001', n2, 1.2.2.
316 There is a complex series of processes, responses and feedbacks that occur in the climate system following the cumulative radiative forcing of the greenhouse gases as depicted in Figure Four. In addition, some natural climate variability will continue to occur. There will be difficulty in distinguishing between natural climate variability and human induced climatic changes. Moreover, the argument may persist that due to the cumulative global nature of emissions the harm would have occurred
regardless of the contributions of the defendant. 84
Figure 4: UNEP/GRID-Arendal, ‘Climate Change: Processes, Characteristics and Threats’, (2005) UNEP/GRID-Arendal Maps and Graphics Library, at http://maps.grida.no/go/graphic/climate_change_processes_characteristics_and_threats at 16 June 2008.
84 Provided that a causative link is otherwise established, defendants may still be held individually liable in negligence or nuisance notwithstanding that the contribution alone would be insufficient to amount to unreasonable interference Bonnici v Ku-Ring-Gai Municipal Council [2001] NSWSC 1124; (2001) 121 LGERA 1 per Sperling J at [196]; Blair v Deakin (1887) 52 JP 327.
317 II Increase in the Risk of Harm from Climate Change
In certain cases involving negligence and harm to health, the Court has moved away from the strict application of civil proof. In an attempt to bridge the evidentiary gap from lack of knowledge the Court has instead applied the test of whether, on the balance of probabilities, the defendant’s negligence
materially contributed to the risk of the damage occurring. 85
One of the primary decisions in this area is McGhee v National Coal Board. 86 In that case, an employee was exposed to abrasive brick dust, no washing facilities were provided, and he developed dermatitis. The Court held that the employer was liable in negligence where his breach of duty had caused, or materially contributed to , the injury suffered notwithstanding that there were other factors which had contributed to the injury:
first, it is a sound principle that where a person has, by breach of a duty of care, created a risk, and injury occurs within the area of that risk, the loss should be borne by him unless he shows that it had some other cause. Secondly,…one may ask, why should a man who is able to show that his employer should have taken certain precautions… and who in fact sustains exactly that injury…have to assume the burden of proving more: namely, that it was the addition to the risk, caused by the breach of duty, which caused or materially contributed to the injury? In many cases…this is impossible to prove, just because honest medical opinion cannot segregate the causes of an illness between compound causes. And if one asks which of the parties…should suffer from this inherent evidential difficulty, the answer as a matter of policy or justice should be that it is the creator of the risk who…must be taken to have foreseen the possibility of damage, who should bear its consequences. 87
85 McGhee v National Coal Board [1972] 3 All ER 1008; [1973] 1 WLR 1; Bonnington Castings Ltd v Wardlaw [1956] AC 613, Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32. 86 McGhee v National Coal Board [1972] 3 All ER 1008; [1973] 1 WLR 1. 87 McGhee v National Coal Board [1972] 3 All ER 1008 at 1012; [1973] 1 WLR 1 at 6 per Lord Wilberforce cf. Wilsher v Essex Health Authority [1988] AC 1074.
318 Similarly, in the United Kingdom case of Fairchild v Glenhaven Funeral
Services Ltd , 88 the House of Lords permitted the evidentiary gap to be overcome for an employee who suffered mesothelioma. Mesothelioma and anthropogenic climate change can be characterised in similar terms as they are triggered by cumulative impacts. Mesothelioma has been described by one expert as:
cumulative in that the longer the exposure and the heavier the exposure the greater the dose of asbestos which enters the lung and therefore the greater the chance of fibres getting into the periphery of the lung where they would generate mesothelioma. 89
Under the state of medical knowledge at the time, onset of the disease could not be attributed exclusively to one of several successive employers, all equally careless. The Court in Fairchild v Glenhaven Funeral Services Ltd held that, in certain special circumstances, the Court could depart from the usual 'but for' test of causal connection and treat a lesser degree of causal connection as sufficient, namely that the defendant's breach of duty had materially contributed to causing the claimant's disease by materially
increasing the risk of the disease being contracted. 90 It might be possible for plaintiffs to bring sufficient evidence to demonstrate that the large-scale fossil fuel user materially increased the risk of climatic impacts, with resulting harm, by their greenhouse gas contributions. However, the Australian Courts are yet to embrace the United Kingdom approach to exceptional cases.
88 Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32. 89 Evidence of Dr Joseph in Scott (DDT 48/90) quoted in Wallaby Grip (BAE) Pty Ltd (in liq) v Macleay Area Health Service (1998) 17 NSWCCR 355 (CA). 90 Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32. This test will not apply where there are any number of noxious agents which may equally probably have caused the harm or damage; Wilsher v Essex Area Health Authority [1988] AC 1074; Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32 at [22] per Lord Bingham.
319 In special cases in Australia it must be shown, as a minimum, that on the balance of probabilities the defendant materially contributed to the injury
suffered. 91 The distinction between increase in risk and material contribution
was discussed in Seltsam Pty Ltd v McGuiness : 92
the issue in the present case is whether an increased risk did cause or materially contribute to the injury actually suffered…There is a tension between the suggestion that any increased risk is sufficient to constitute a ‘material contribution’, and the clear line of authority that a mere possibility is not sufficient to establish causation for legal purposes…The reconciliation between the two kinds of reference is to be found in the fact that… the actual risk had materialised. The ‘possibility’ or ‘risk’ that X might cause Y had in fact eventuated, not in the sense that X happed and Y also happed, but that it was undisputed that Y had happened because of X. 93 (emphasis added).
Assuming that the traditional standard of proof would apply to climate torts in Australia, the establishment of a causative link between the harm suffered and the identifiable increased risk by the defendant will be highly problematic. It is possible that some of these difficulties in establishing causation may be lessened where the plaintiff is the government:
when states bring tort claims, the plaintiffs have almost infinite lifespans and cover large amounts of territory, allowing for an aggregation of effects over both space and time…The aggregation of harms makes it easier to rule out confounding factors…aggregation allows plaintiffs to better establish that some present harms from climate change exist in the broader geographic and temporal range. 94
91 Orica Limited and Anor v CGU Insurance Limited [2003] NSWCA 331 at [90] per Spigelman CJ; Bendix Mintex Pty Ltd v Barnes (1997) 42 NSWLR 307 at 312–320 per Mason P; Wallaby Grip (BAE) Pty Ltd (in liq) v Macleay Area Health Service (1998) 17 NSWCCR 355 (CA). 92 Seltsam Pty Ltd v McGuiness (2000) 49 NSWLR 262. 93 Ibid at 280 per Chief Justice Spigelman. 94 David A. Grossman, 'Warming Up to a Not-So-Radical Idea: Tort-Based Climate Change Litigation' (2003) 28 Colombia Journal of Environmental Law 1 at 24-25.
320 Plaintiffs may also benefit from the use of class actions where there are a
number of actions with common issues of law or fact. 95 Although the joining of such actions would not lessen the burden of establishing causation, they could assist through the pooling of resources towards obtaining necessary scientific and factual evidence regarding the defendant’s contribution to the harm suffered. Nevertheless, the probability of success of tortious actions for climate harm would be enhanced if Australian Courts were persuaded that climate change is an ‘exceptional circumstance’ meriting the relaxation of the strict ‘but for’ test and the adoption of the United Kingdom approach. For this to occur, the Court must be persuaded that there are good public policy reasons for the extension of liability under a less stringent causative
approach. 96 In the absence of such judicial developments, the difficulties in establishing causation appear, at this point in time, insurmountable.
III Relevance of Environmental Principles
It will be interesting to observe the judicial treatment of these unique claims in negligence as they emerge in Australia and, in particular, the potential role that established environmental law principles could play in traditional deliberations of causation. This includes the application of the concept of ecologically sustainable development (ESD) and the embedded principle of
inter-generational equity and precautionary principle. 97
95 See Damien Grave and Ken Adams, Class Actions in Australia (2005) Sydney, Lawbook Co and John Taberner, Class Actions and Climate Change (6 September 2007) Freehills, www.freehills.com.au/publications/publications_6950.asp at 14 June 2008. 96 Section 11(2) Civil Liability Act 2003 (Qld). Similar provisions have been enacted in s45 Civil Law (Wrongs) Act 2002 (ACT), s5D Civil Liability Act 2002 (NSW), s13 Civil Liability Act (Tas), s51 Wrongs Act 1958 (Vic), s5C Civil Liability Act 2002 (WA), s34(2) Wrongs Act 1936 (SA). 97 Ecologically Sustainable Development Steering Committee, 'National Strategy for Ecologically Sustainable Development' (Australian Government, 1992), Part 1; Australian Government, 'Intergovernmental Agreement on the Environment' (1992).
321 ESD is described as, ‘development which aims to meet the needs of Australians today, while conserving our ecosystems for the benefit of future
generations’. 98 And:
using, conserving and enhancing the community's resources so that ecological processes, on which life depends, are maintained, and the total quality of life, now and in the future, can be increased. 99
Moreover, the precautionary principle asserts that a lack of scientific certainty should not be used as a reason for not taking action to protect the
environment. 100 This principle is designed to alleviate the acknowledged difficulties of obtaining full scientific certainty. The effect of this statutory principle is, inter alia, to lower the threshold at which decision-makers must
acknowledge that a reasonable risk to the environment exists.101 Accordingly, the precautionary principle has the potential to play a significant role in the adaptation of common law principles to these emergent environmental harms.
The interaction of the precautionary principle with the common law standard of proof could operate to lower the threshold at which a risk of harm from
greenhouse gas emissions becomes ‘probable’. 102 However, until such time as the Court considers this issue, the interaction of these principles is largely conjecture. Moreover, even as the threshold for establishing a causative link
decreases, the risk of the Court imposing indeterminate liability increases. 103 This policy issue may operate to persuade the Court that it is not appropriate to impose indeterminate private liability for these forms of global public harm.
98 Ibid. 99 Ibid. 100 David Freestone and Ellen Hey, 'Origins and Development of the Precautionary Principle' in David Freestone and Ellen Hey (eds), The Precautionary Principle and International Law (1996) The Netherlands, Kluwer Law International, 3 at 13. 101 Nicolas De Sadeleer, Environmental Principles: From Political Slogans to Legal Rules (2002) New York, Oxford University Press at 160. 102 Jacqueline Peel, n76, 155. 103 Perre v Apand Pty Ltd (1999) 198 CLR 180 at 221 (McHugh J ).
322 B Scope of Liability in Negligence
As part of its deliberations, the Court must also consider whether it is appropriate for the scope of the liability of the person in breach to extend to the
harm caused. 104 This will include a consideration of intervening causes and public policy issues.
I Intervening Causes and Climate Change Harm
The Court must consider whether other causes have intervened to break the chain of causation. As commented, ‘man must guard against normal
phenomenon of nature not against unusual ones’. 105 Defendants may raise the argument that climate change, and the resulting impacts, are ‘out of the ordinary’ and that all ordinary precautions have been taken against foreseeable harm.
Alternatively, it could be submitted that more recent greenhouse gas emissions from other entities, following the emissions of the defendant, acted
as novus actus interveniens . 106 In the context of significant emissions worldwide it might be argued that those other greenhouse gas emissions were intervening events, breaking the chain of causation and that those emitters
were in fact ‘the last wrongdoers’. 107 The success of such arguments would depend upon the prevailing judicial attitudes to the establishment of causation.
104 Section 11(1)(b) Civil Liability Act 2003 (Qld). 105 Blyth v Birmingham Waterworks (1856) 11 Exch; John Fleming, The Law of Torts (9 ed, 1998) North Ryde, LBC Information Series at 249. 106 Scott v Shepherd (1773) 2 W Bl 892. 107 Home Office v Dorset Yacht Company Ltd [1970] AC 1004.
323 II Policy Considerations in Climate Suits
This chapter has identified a number of potential policy issues that could operate to persuade the Court to not identify a duty of care. These policy considerations will also play an important role in the Court’s decision as to
whether the scope of liability for breach of that duty is appropriate. 108 These include considerations of the fairness of imposing the burden of liability relative to the fault of the defendant as well as:
the spectre of indeterminate liability; 109
floodgates concerns; 110
public/private issues: who can better avoid the loss and who should bear the risk for the public harm of climate change?
the availability (or lack of) alternative remedies under common law and statute; and
the deliberate decision of the legislature not to regulate or prohibit emissions and the appropriate roles of the Court and Parliament
respectively.111
The combination of all of these policy considerations will weigh heavily in the Court’s determination of whether it is appropriate to impose liability on the defendant. Overall, it is highly probable that the Court would conclude that it is not appropriate to impose liability for the emission of greenhouse gases and the resulting climate harm.
108 Considered in Anns v London Borough of Merton [1978] AC 728. 109 For example, Caltex Oil (Australia) Pty Ltd v The Dredge ‘Willemstad ’ (1976) 136 CLR 529 at 555. 110 For example, Chester v Council of the Municipality of Waverley (1939) 62 CLR 1. 111 Brodie v Singleton Shire Council (2001) 206 CLR 512.
324 THE HYPOTHETICAL CLIMATE SUIT: PROFESSIONAL LIABILITY FOR CLIMATE-AFFECTED ADVICE
As noted, evidence regarding the potential physical, economic and social impacts of climate change is growing. Recent reports from the IPCC emphasise the
potential threats from climate change to our modern society. 112 Moreover, regional reports are now emerging which predict the specific impacts on
Australian societies from adverse climatic changes. 113 Given this increased concern regarding the potential damage brought about by climate change, professional advisors should take into account these climate change impacts in the provision of information or advice to their clients. Such climate-related advice could include:
architectural advice and engineering reports; 114
surveys and valuations of properties; 115
investment advice;
advice/information provided by public authorities; and
the provision of commercial legal advice. 116
There is a general legal obligation to exercise reasonable skill and the care in the
provision of professional advice. 117 This may arise as a term of a contract; it may arise as a statutory duty; it may arise as a liability in tort. Consequently, advisors should be taking into account the risks of increased temperatures, droughts and
112 IPCC, 'Climate Change 2001'; 'Climate Change 2007', n2. 113 For example, CSIRO and Australia Bureau of Meteorology, 'Climate Change in Australia:Technical Report 2007' (Commonwealth Scientific and Industrial Research Organisation, 2007). 114 Voli v Inglewood Shire Council (1963) 110 CLR 74 at [84]-[85]. 115 Smith v Eric S Bush [1990] 1 AC 831. 116 Capebay Holdings Pty Ltd v Sands [2002] WASC 287 (4 December 2002) at [87]. 117 John L. Powell and Roger Stewart (eds), Jackson and Powell on Professional Liability (6 ed, 2007) London, Sweet and Maxwell at [2-005].
325 incidences of severe weather events and the risk of failure of buildings from defective building design and construction. They should also be considering the financial implications of future regulatory regimes which restrict the use of carbon emitting technologies. A failure to take these risks into consideration may
give rise to legal liabilities for the provision of negligent information or advice. 118
A Professional Advisors, Climate Change and Negligence
It is a well-established principle that, in the provision of advice to their client,
professionals must exercise reasonable skill and care.119 Breach of such a duty of care, by a professional advisor, may give rise to liabilities in the tort of negligence. The standard of care of a professional advisor was described in
Andrew Master Hones Ltd v Cruikshank & Fairweather:
the degree of knowledge and care to be expected is thus seen to be that degree possessed by a notional duly qualified person practising that profession. The test is therefore, if I may put it that way, an objective test referable to the notional member of the profession and not a subjective test referable to the particular professional man employed. 120
Accordingly, the professional must meet the objective standard of reasonable
competence. 121 However, the existence of a duty of care does not mean that professionals will be held liable for all losses which their clients experience. As Lord Denning MR commented:
the law does not usually imply a warranty that he will achieve the desired result, but only a term that he will use reasonable care and skill. The surgeon does not warrant that he will cure the patient. Nor does the solicitor warrant that he will win the case. 122
118 MLC v Evatt [1971] AC 793 119 Astley v Austrust Ltd (1999) 197 CLR 1; Gutteridge, Haskins & Davey Pty Ltd [1993] 1 VR 27. 120 Andrew Master Hones Ltd v Cruikshank & Fairweather [1980] R.P.C. 16 at 18 per Justice Graham. 121 Midland Bank Trust Co Ltd v Hett, Stubbs and Kemp [1979] Ch 384 at 402 per Justice Oliver. 122 Greaves & Co (Contractors) Ltd v Baynham Meikle & Partners [1975] 1 WLR 1095 at 1100D per Lord Denning MR.
326 At common law, evidence of general practice within the professional field will be a relevant consideration by the Court in its determinations of the standard of care
owed by the profession. 123
Where harms relating to climate change involve only a risk of physical damage, or property devaluation, then no physical harm will be involved and this will be pure economic loss. This could occur in circumstances of negligent misrepresentation of the risks of property flooding, negligent performance of services in omitting to address climate risks, defective goods, and property damage. As discussed above, where the harm caused by the emitting industry results in pure economic loss then recovery will be permitted only in limited
circumstances. 124 The multi-factorial approach of the Court will assess a range of legal and policy principles including the defendant’s control of the circumstances giving rise to the harm and the vulnerability of the plaintiff in terms of their
inability to protect themselves from that harm. 125
B Architects, Engineers, Developers and Climate Change
Liabilities may accrue to architects, engineers and builders in the provision of advice regarding the suitability of design, location and construction of buildings. Like all other professionals, they must exercise reasonable care and skill in the
course of carrying out work. 126 This includes taking into account the appropriate design and location of new buildings that will still be in use as the effects of climate change intensify. There may also be an implied term in their contracts
123 Edward Wong Finance Co Ltd v Johnson Strokes and Master [1984] AC 296; Heydon v NRMA Ltd (2000) 51 NSWLR 1. Christian Witting, Liability for Negligent Misstatements (2004) New York, Oxford University Press at 13.10. 124 Perre v Apand Pty Ltd (1999) 198 CLR 180. 125 Sullivan v Moody (2001) 207 CLR 562; 183 ALR 404 at [48]-[49]; Rogers v Whitaker (1992) 175 CLR 479; Bryan v Maloney (1995) 182 CLR 609; Hill v Van Erp (1997) 188 CLR 159; 142 ALR 687, Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515; Esanda Finance Corporation v Peat Marwick Hungerfords (1997) 188 CLR 241. See also Jane Stapleton, ‘The Golden Thread at the Heart of Tort Law: Protection of the Vulnerable’, (2003) 24 Australian Bar Review 41. 126 Voli v Inglewood Shire Council (1963) 110 CLR 74 at 84.
327 with clients that the product, such as the designed building, is fit for its intended
purpose. 127
The implications of climate change on existing and future buildings are significant. The lifespan of most new buildings today is approximately 40 to 60 years which means that the buildings that we are currently designing and
constructing will be significantly affected by the impacts of climate change. 128 According to a study commissioned by the Australian Greenhouse Office (AGO), the main impacts of climate change with implications for Australian buildings are:
increased energy consumption due to higher temperatures;
health effects of over-heating;
increased risk of damage from more intense tropical cyclones, storms and stronger winds and from increased cracking of drier soils and ground movement impacting on foundations and pipe work;
increased damage from flooding; and
increased bushfire risk. 129
Accordingly, the risks posed by climate change require architects, engineers and developers to give greater consideration to the location, design and construction of buildings and to take into account these likely impacts and the risks that they pose to the constructed asset. The location of the building should take into
127 Doug Rea Enterprises Pty Ltd v Hymix Australia Pty Ltd (1988) 4 BCL 67; s71 Trade Practices Act 1974 (Cth), Pt 4 Domestic Building Contracts Act 2000 (Qld), Pt 2C Home Building Act 1989 (NSW), Pt VA Building Act 1972 (ACT), s8 Domestic Building Contracts Act 1995 (Vic), s32 Building Work Contractors Act 1995 (SA). 128 Australian Greenhouse Office, 'An Assessment of the Need to Adapt Buildings to the Unavoidable Consequences of Climate Change' (Report to the Australian Greenhouse Office, Department of the Environment and Water Resources, BRANZ, 2007) at 3. 129 Ibid.
328 account the risk of inundation and vulnerability to severe storms. 130 The selection of building materials should take into account the possibility of heat stress and thermal movement. Buildings should also be designed with additional wind
loading as a possibility from severe weather events. 131 Foundations should be deeper to counteract increases in local erosion and soil instability from thermal movement. Stormwater and drainage system designs should take into account the possibility of rising sea levels and water tables. Finally, these buildings should be designed for the future carbon constrained environment using energy
efficient design and components. 132
C Surveyors, Valuers and Climate Advice
Surveyors and valuers may be engaged to inspect, value and provide advice to prospective purchasers in relation to buildings and properties. Surveyors are required to exercise reasonable care and skill in the inspection of a building and should take into account all of the factors identified above.
The most common symptoms of climate change in buildings are likely to be structural defects caused by the climatic impacts of drought and erosion including subsidence, cracking and undermining of foundations. In terms of structural damage, the buyer will be concerned with both current and future structural damage to the property.
130 J Bengtsson, R Hargreaves and I.C. Page, 'Assessment of the Need to Adapt Buildings in New Zealand to the Impacts of Climate Change' (Study Report No 179 (2007), BRANZ, 2007). 131 Australian Greenhouse Office, n128, 4. 132 Energy efficiency requirements are imposed in many of the States and Territories but there is not yet a unified national approach; see Building Code of Australia 2006, Volume One Energy Efficiency Provisions, Section J. The Building Code 2003 applied energy efficiency standards to housing. BCA 2006 applies energy efficiency standards to building classes 2-9. For a brief overview of the different jurisdictional approaches see http://www.houseenergyrating.com/ at 15 June 2008. The National Framework for Energy Efficiency is intended to achieve a nationally consistent legislated regime, http://www.nfee.gov.au/buildings.jsp?xcid=121 at 15 June 2008.
329 As noted in Matto v Rodney Broom Associates :133
[a] buyer, unless he says otherwise, is not concerned only with structural damage likely to occur while he is, in the immediate future, living in the house but also with structural damage which is likely to occur at a more remote data of which the impact upon him will result..[including] his ability to sell the house. 134
Accordingly, it is arguable that current surveys being undertaken by professional surveyors should take into account the defects that are likely to be caused by climate change in the foreseeable future. In the provision of valuation reports, valuers should also take into account the above factors and, in particular, the risks of flooding and inundation on the present and future value of the property. The standard applied by the Court is that the report must represent the ‘true value’ of the property based on a competent valuation of the premises. A valuer may be liable in negligence where that valuation does not represent the true value and
contains a material and negligent error. 135 Valuers may be also be potentially liable for misleading and deceptive conduct under section 52 of the Trade Practices Act 1974 (Cth) and under the Fair Trading Act of each respective state
and territory. 136
In the case of MGICA (1992) Ltd v Kenny & Good Pty Ltd 137 a mortgage insurer sued in negligence and for misleading conduct for the overvaluation of a property. The Court held that the valuation was so far removed from the ‘true value’ as to be misleading, since:
the supply of [the] valuation report ..conveyed representations, not only that the opinions expressed in them were held, but also (a) that the opinions were based on
133 Matto v Rodney Broom Associates [1994] 2 E.G.L.R. 163. 134 Ibid at 168 per Lord Justice Ralph Gibson. 135 Merivale Moore Plc v Strutt & Parker [1999] Lloyd’s Rep. P.N 734 at 744; Bolam v Friern Hospital Management Committee [1957] 1 W.L.R. 582. 136 Section 38(1) Fair Trading Act 1989 (Qld), s42(1) Fair Trading Act 1987 (NSW), s12(1) Fair Trading Act 1992 (ACT), s56(1) Fair Trading Act 1987 (SA), s14(1) Fair Trading Act 1990 (Tas), s9(1) Fair Trading Act 1999 (Vic), s10(1) Fair Trading Act 1987 (WA), s42(1) Consumer Affairs and Trading Act (NT). 137 MGICA (1992) Ltd v Kenny & Good Pty Ltd (1996) 140 ALR 313.
330 reasonable grounds; (b) that they were the product of the exercise of due care and skill; and (c) that they were, after making due allowance for their nature as opinions as to the market value of real estate as at a particular time, safe to be relied upon and not outside the range of latitude properly to be allowed to them. 138
Accordingly, both surveyors and valuers are, prima facie , obliged to take into account the likely impacts of climate change in the provision of their professional information or advice.
D Public Authorities as Advisors
It is common conveyancing practice to request information from the local council regarding the attributes of the property to be purchased including the flooding risks of the property. Accordingly, local councils play a pivotal role in the provision of advice regarding the status of properties. Local councils may have a duty to exercise reasonable care in the provision of such advice. At common law, the provision of advice by a local council has the potential to give rise to liabilities for resulting losses provided that:
such losses were reasonably foreseeable to the council at the time of the provision of the advice; and
it was reasonable for the plaintiff to act in reliance of that advice. 139
Where, for example, the property is a low-lying coastal property which will be at risk of inundation from rising sea-levels, then Councils should exercise caution in advising whether the property is at risk of flooding.
138 Ibid, 356-357 per Justice Lindgren. 139 Shaddock v Parramatta City Council (1981) 150 CLR 225; Pisano v Fairfield City Council [1991] Aust. Torts R. 69; Burke v Forbes Shire Council (1987) 63 LGRA 1.
331 The scope of potential local Council liability has been narrowed significantly by statutory exemptions and limitations as part of the statutory tort law reforms. In the establishment of a duty of care and in its considerations of whether that duty has been breached, the Court will take into account the limited resources of the Council, in the context of the wider range of responsibilities of the Council .140 Moreover, the statutory tort law reforms provide that an act or omission of the authority does not constitute a wrongful act or omission unless it was so unreasonable that no public authority could properly consider it to be a reasonable exercise of its functions:
(1) This section applies to a proceeding that is based on an alleged wrongful exercise of or failure to exercise a function of a public or other authority.
(2) For the purposes of the proceeding, an act or omission of the authority does not constitute a wrongful exercise or failure unless the act or omission was in the circumstances so unreasonable that no public or other authority having the functions of the authority in question could properly consider the act or omission to be a reasonable exercise of its functions. 141
Consequently, the Courts will apply the objective test of the ‘reasonable council’ and will consider whether such a reasonable council in the same position would take the same course of action. Accordingly, the circumstances in which a local council may be held liable in negligence have been significantly curtailed by the enactment of these tort law reforms. Nevertheless, there may be circumstances in which a local council is held liable for the provision of negligent advice where the information regarding the flooding risks is reasonably available to the
140 Section 35 Civil Liability Act 2003 (Qld), s42 of the Civil Liability Act 2002 (NSW), s38 of the Civil Liability Act 2002 (Tas), s110 of the Civil Law (Wrongs) Act 2002 (ACT) and s5W of the Civil Liability Act 2002 (WA). Section 83 of the Wrongs Act 1958 (Vic) is similar but excludes (b). Richard Douglas, Gerard Mullins and Simon Grant, The Annotated Civil Liability Act 2003 (QLD) (2004) Chatswood, LexisNexis Butterworths at 35.5. 141 Section 35 Civil Liability Act 2003 (Qld). Similar provisions have been adopted in ss 43 and 44 of the Civil Liability Act 2002 (NSW) and s111 of the Civil Law (Wrongs) Act 2002 (ACT). Section 84 of the Wrongs Act 1958 (Vic) is similar but with additional exemptions. Richard Douglas, Gerard Mullins and Simon Grant, The Annotated Civil Liability Act 2003 (QLD) (2004) Chatswood, LexisNexis Butterworths at 36.6.
332 Council and the advice is not provided in good faith following reasonable
inquiries. 142
E Legal Advisors and Climate Advice
In addition to the obligation to exercise due skill and care, the duties of legal
advisors towards their clients also include a fiduciary obligation. 143 This fiduciary duty has been described as ‘a paradigm of the general duty to act with care imposed by law on those who take it upon themselves to act for or advise
others’. 144 Lawyers have a duty to protect their clients from any real and foreseeable risks by giving appropriate advice and, if necessary, initiating an
action to guard against such risks. 145
Therefore, in terms of the future risks of climate change, legal professionals have
a duty to warn their clients about the inherent risks of a transaction. 146 This includes advising clients in relation to the likely physical impacts on acquired assets and on the regulatory developments that may restrict the ability of the client to fully exploit the opportunities associated with the property.
Obligations to consider the impacts of climate change are not restricted to advisors in the environmental arena but extend to advice furnished in the property law, construction, banking and finance, government and corporations law arenas to name but a few. All lawyers should be aware of the potential
142 Mid Density Developments Pty Ltd v Rockdale Municipal Council (1993) 44 FCR 290. See also the statutory exemption from liability for advice furnished in good faith e.g. s733, Local Government Act 1993 (NSW). 143 Stephen Walmsley, Alister Abadee and Ben Zipser, Professional Liability in Australia (2002) Pyrmont, Lawbook Co at 82-83. Maguire v Makaronis (1997) 188 CLR 449. 144 Henderson v Merrett Syndicates Ltd [1995] 2 A.C. 145 at 205F per Lord Browne-Wilkinson. 145 Montague Mining Pty Ltd v Gore [1998] FCA 1334. 146 Capebay Holdings Pty Ltd v Sands [2002] WASC 287 (4 December 2002) at [92] per Justice Pullin; C W Dixey & Sons Ltd v Parsons (1964) 192 EG 197; Stephen Walmsley, Alister Abadee and Ben Zipser, Professional Liability in Australia (2002) Pyrmont, Lawbook Co at 317.
333 physical, economic and environmental implications of adverse climate change
and the effect that may have on the current provision of strategic legal advice. 147
F Duties of Directors and Avoiding Climate Risks
For completeness, it should also be noted that company directors may also be in breach of their fiduciary duties as a result of their failure to take into account the likely impacts of climate change or to take reasonable steps to minimise the
financial risks and liabilities of the company regarding climatic changes. 148
Company directors have a duty to manage the business of the company in the
best interests of the company. 149 There is a duty imposed on directors of companies to take reasonable care and exercise diligence in the performance of
their office. 150 In the making of business decisions, directors must also reasonably
inform themselves about the relevant subject-matter. 151 Accordingly, there is an obligation that directors keep themselves informed as to the likely impacts of climate change on the company and the steps that can be taken to minimise risks
to the company. 152 The duties of a director include an obligation to take steps to avoid significant liabilities from future regulatory greenhouse regimes such as cap and trade initiatives and other carbon constraints. It also extends to minimising the risks of climate-related liabilities including averting potential tortious actions for unabated greenhouse gas emissions. Shareholders may also seek a resolution at the annual general meeting that requires the company to
147 This emphasises the importance of proper scoping of professional work with clients in order to expressly specify the extent to which potential climate change impacts predicted by the IPCC will be taken into account in such professional advice. 148 Rosemary Lyster, 'Chasing Down the Climate Change Footprint: Forces Converge' (2007) 24(4) Environmental and Planning Law Journal 281 at 309. 149 Section 181 Corporations Act 2001 (Cth) requires Directors to exercise their powers and discharge their duties in good faith and in the best interests if the company. 150 Section 180 Corporations Act 2001 (Cth) requires Directors to exercise due care and diligence in the discharge of their duties. 151 Section 180(2) Corporations Act 2001 (Cth). See also Daniels (formerly practising as Deloitte Haskins and Sells) v Anderson (1995) 37 NSWLR 438. 152 In the United Kingdom, directors must also have regard to the impact of the company’s operations on the community and the environment, section 173(d) Company Law Reform Act 2006 (UK).
334 disclose its annual greenhouse gas emissions and to take action to reduce its
carbon footprint. 153 Failure of a company to respond properly, or to action such resolutions, could also lead to additional actions and liabilities of the company
and its directors. 154
POTENTIAL DEFENCES TO CLIMATE SUITS IN NEGLIGENCE
In defence of a tortious action, it could be argued that the plaintiff’s own negligence or fault contributed to the injury or loss suffered where that damage
was a reasonably foreseeable consequence of the plaintiff’s fault. 155 The question
to be asked is whether the plaintiff’s conduct increased the risk of harm? 156 If found to have been contributory negligent, the Court will apportion liability and will reduce the award of damages based on the principle of what is just and equitable given the plaintiff’s degree of fault or share in responsibility for the
damage. 157 This could potentially result in a 100 per cent reduction in damages. 158
Accordingly, in climate suits, it could be argued that the loss or harm of the plaintiff was caused partly by the fault of the plaintiff. As noted by one commentator, we are all potentially responsible under tort law for our continued
153 Christina Ross, Evan Mills and Sean Hecht, 'Limiting Liability in the Greenhouse: Insurance Risk- Management Strategies in the Context of Global Climate Change' (2007) 26A Stanford Environmental Law Journal 251 at 264. For a discussion of disclosure obligations in the US, see Jeffrey A. Smith and Matthew Morreale, 'The Fiduciary Duties of Officers and Directors' in Michael B. Gerrard (ed), Global Climate Change and U.S. Law (2007) Chicago, American Bar Association, 497. 154 Rosemary Lyster, ,n148, 315. 155 Joslyn v Berryman (2002) 214 CLR 552. 156 Azzopardi v State Transport Authority (Rail Division) (1982) 30 SASR 434. 157 Joslyn v Berryman (2002) 214 CLR 552; Davies v Swan Motor Company (Swansea) Limited [1949] 2 KB 291 at 326 per Lord Denning; Stapley v Gypsum Mines Ltd [1953] AC 663 at 682. 158 Section 24 Civil Liability Act 2003 (Qld), Similar provisions have been enacted in s47 Civil Law (Wrongs) Act 2002 (ACT), s5S Civil Liability Act 2002 (NSW), s4(1) Civil Liability Act 2002 (Tas), s63 Wrongs Act 1958 (Vic).
335 emissions of greenhouse gases. 159 This could be based on the plaintiff’s own acts of emitting, or causing to be emitted, greenhouse gases through their consumption of goods and services thereby adding to the cumulative risk of adverse climate change. However, this submission is less persuasive where the plaintiff can show that they have taken steps to minimise or offset their own
emissions. 160
An alternative defence could be raised of volenti non fit injuria where the plaintiff can be shown to have freely accepted the risk of injury from climate change, through their consumption of goods and services, with the full knowledge of the risk that the emission of greenhouse gases would result in
climate change and harm. 161 The evidence must support an inference that the plaintiff consented to the risk of injury, by the defendant, and to the lack of
reasonable care which would create that risk of harm. 162 This argument could be weakened where it can be demonstrated that there was no free choice in using those goods and services as there were no reasonably available, low-emission,
alternatives at the time.163
Finally, time limitations in the bringing of an action could pose significant
difficulties for plaintiffs. 164 In any action, the plaintiff must identify the point in time at which the cause of action accrued. This is problematic in the climate scenario where it is impossible to identify the historical point in time at which the emission of greenhouse gases gave rise to the current harm suffered. Given scientific uncertainty as to the timescale between the emission of greenhouse
159 David A. Grossman, n94, 25. 160 It is envisaged that proportionate responsibility for emissions will be uneven with greater fault falling to the industrial source of emissions rather than the emissions of the individual plaintiff. 161 Smith v Baker and Sons [1891] AC 325. 162 Woodridge v Sumner [1963] 2 QB 43 at 69. 163 David A. Grossman, n 91, 51. As to the requirement to be able to choose freely see Bowater v Rowley Regis Corporation [1944] KB 476 at 479 per Lord Justice Scott. 164 As a general rule, a limitation period of three years applies to personal injuries and a period of 6 years to property damage. Sections 11,10(1) Limitation of Actions Act 1974 (Qld), ss 16B(2), 11(1) Limitation Act 1985 (ACT), ss 18A, 50C, 14(1)(b) Limitation Act 1969 (NSW), ss 36, 35 Limitation of Actions Act 1936 (SA), ss 5(1), 4(1)(a), Limitation Act 1974 (Tas), ss 5(1AA), 5(1)(a) Limitations of Actions Act 1958 (Vic), ss 13(1),12 Limitation Act 1935 (WA).
336 gases and resulting forcing effect in the climate system, it will be a challenge to identify the point in time at which the action accrued.
THE HYPOTHETICAL CLIMATE SUIT: ACTIONS IN PUBLIC AND PRIVATE NUISANCE
In addition to actions in negligence, affected persons may also consider bringing an action in nuisance for interference with their rights of use and enjoyment of their land. The types of activities that might give rise to successful claims in nuisance are not closed and extend to a myriad of unlawful interferences
including flooding, noxious smells, dust, vibration, fire and noise. 165 Accordingly, nuisance could apply to a range of climate change impacts where the effects are aggravated by the acts of the defendant such as the spread of flooding and fire.
The most likely causes of action in nuisance relate to flooding and the actions of the local authority regarding the construction and maintenance of sea walls and other coastal protection devices and actions taken to address rising sea levels and the risks of storm surges. Nuisance actions against private actors could also be envisaged as property owners take steps to protect themselves from flooding, storm damage and bushfires and, in doing so, inadvertently interfere with neighbouring properties.
Nuisance actions against large-scale emitters could also be considered. The main challenge in developing such actions relates to the delayed effect between the release of the emissions and the sufferance of the interference. Greenhouse gas
165 Sedleigh-Denfield v O’Callaghan [1940] AC 880; Lord Mayor, Aldermen and Citizens of the City of Manchester v Farnworth [1930] AC 171; Pwllbach Colliery Co Ltd v Woodman [1915] AC 634; Hargrave v Goldman (1963) 110 CLR 40; Sturges v Bridgman (1879) 11 Ch D 852.
337 emissions accrue in the atmosphere for significant timescales before the effects of climate change become apparent. The difficulty will present itself when a plaintiff seeks to bring a nuisance action for interference suffered today that is allegedly caused by the historic greenhouse gas emissions of the defendant(s).
In addition, the defendant company allegedly responsible for the harmful emissions may no longer be operational. In the case of emissions of greenhouse gases from a long standing, historic, large-scale emitter such as a coal mine then
the nuisance may be characterised as a continuing one. 166 Where the interference is characterised as a continuing nuisance then the action may be commenced at
any time during the nuisance and damages may be sought for the historic harm. 167 However, if the emission of greenhouse gases is instead characterised as an isolated instance of interference then the action must be commenced within six
years from the interference. 168 Regardless of time limitations, in both cases, establishing a causative link between the current interference and the historic emissions will be exceedingly difficult.
A Elements of Nuisance
Acts or omissions may amount to both public and private nuisances. Nuisance was described in Hargrave v Goldman as the ‘unreasonable interference with a
person’s use or enjoyment of land, or some right over, or in connection with it.’ 169 Accordingly, a successful cause of action in nuisance must establish that:
the plaintiff has title to sue in respect of the nuisance; 170
the defendant has interfered with a recognised right; 171 and
166 Midwood & Co Ltd v Manchester Corporation [1905] 2 KB 597. 167 Earl of Harrington v Derby Corporation [1905] 1 Ch 205. 168 Section 10(1) Limitation of Actions Act 1974 (Qld), s11(1) Limitation Act 1985 (ACT), s14(1)(b) Limitation Act 1969 (NSW), s35 Limitation of Actions Act 1936 (SA), s4(1)(a), Limitation Act 1974 (Tas), s5(1)(a) Limitations of Actions Act 1958 (Vic), s38(1)(c) Limitation Act 1935 (WA). The limitation period is three years in the Northern Territory under s11 (1)(b) Limitation Act 1981 (NT). 169 Hargrave v Goldman (1963) 110 CLR 40 at 49 per Justice Windeyer. 170 Oldham v Lawson (No 1) [1976] VR 654.
338 the interference was both substantial and unreasonable. 172
B Potential Climate Actions in Private Nuisance
Actions in private nuisance could include claims by property owners affected by flooding, sea level rises and other climatic impacts as a result of greenhouse gas emissions. Actions could also potentially be brought by farmers experiencing
loss of production from climatic impacts on crops and soil productivity. 173
In order to bring an action in private nuisance, the plaintiff must have a legally recognised interest in the land or rights to occupy or exclusively possess the
land. 174 Occupation, by itself, is not sufficient to give rise to a right to sue and the
plaintiff must have exclusive possession. 175 Accordingly, claims in nuisance may be brought by land owners, mortgagors, tenants and licensees.
A successful nuisance action must relate the impacts of climate change to some physical or substantial and unreasonable interference with the use and enjoyment
of the specific property. 176 Given this, most cases of climate related nuisance
claims will be based on actual damage to property. 177 The interference must be so substantial as to cause harm or material damage to the land or substantial
interference with the comfort and convenience of the occupier of the land. 178 Where the otherwise insubstantial acts of one or more defendants together
171 Sedleigh-Denfield v O’Callaghan [1940] AC 880 at 903. 172 Kine v Jolly [1905] 1 Ch 480; Sedleigh-Denfield v O’Callaghan [1940] AC 880. 173 Joseph Smith and David Shearman, n16, 82. 174 Malone v Laskey [1907] 2 KB 141. 175 Oldham v Lawson (No 1) [1976] VR 654; Stockwell v Victoria [2001] VSC 497 (17 December 2001) (Justice Gillard). 176 Robinson v Kilvert (1889) 41 Ch D 88 at 94; 61 LT 60. 177 Land includes protected rights attached to the land such as an easement and profit à prendre. Cunard v Antifyre Ltd [1933] 1 KB 551; Phipps v Pears [1965] 1 QB 76; [1964] 2 All ER 35. 178 Munro v Southern Dairies [1955] VLR 332.
339 amounts to unreasonable interference, then they may all be held individually
liable for the resulting aggregate nuisance. 179
As noted, the disturbance of rights must be connected with the land and recognised by law. In the case of Phipps v Pears , it was held that there was no recognised easement in law to protect a property from the adverse effects of the weather. As commented by the Court:
every man is entitled to pull down his house if he likes. If it exposes your house to the weather, that is your misfortune. It is no wrong on his part. Likewise every man is entitled to cut down his trees if he likes, even if it leaves you without shelter from the wind or shade from the sun. 180
The Courts have recognised interference based on noise, 181 smell, 182 and vibration183 impacts on the property but it seems unlikely that temperature would be considered an actionable interference. A claim relating to the detrimental effects
of increased air temperature was considered in the case of Robinson v Kilvert. 184 In that case there was a claim in nuisance by the occupier of premises where paper was manufactured. The defendant had installed heating equipment that led to increased air temperatures which had detrimental effects on the paper. The Court found that this was not sufficiently noxious to amount to a nuisance and that the harm was caused due to the particular sensitivity of the plaintiff’s choice
of manufacturing process. 185
179 Bonnici v Ku-Ring-Gai Municipal Council [2001] NSWSC 1124; (2001) 121 LGERA 1 at [196]; Blair v Deakin (1887) 121 LGERA 1. 180 Phipps v Pears [1965] 1 QB 76; [1964] 2 All ER 35 at 38 per Lord Denning MR. 181 Vincent v Peacock [1973] 1 NSWLR 466. 182 Bamford v Turnley (1862) 3 B&S 62. 183 Sturges v Bridgman (1879) 11 Ch D 852. 184 Robinson v Kilvert (1889) 41 Ch D 88. 185 Ibid.
340 C Potential Climate Actions in Public Nuisance
Actions may also be bought under the common law principles of public nuisance
for interference caused to the public at large. 186 Potential actions in public nuisance would be likely to include actions against public authorities regarding flooding and coastal erosion in public areas and actions against large-scale greenhouse gas emitters by those industries economically affected by climate change such as the tourism, skiing and fishing industries.
At common law, a public nuisance is described as an act or omission which materially affects the reasonable comfort and convenience of the life of a class of
the public. 187 Under the criminal law, common nuisance is described as follows:
a person must not unlawfully do an act or make an omission in relation to property under the person’s control that:
(a) causes danger to the public’s lives, health or safety; or
(b) causes danger to the public’s property or comfort, and physical injury to anyone; or
(c) obstructs the public in the exercise or enjoyment of a right common to all its members, and causes physical injury to anyone. 188
The Attorney-General, as the public representative, would normally commence
any necessary action in nuisance on behalf of the public. 189 The interference complained of must be substantial and unreasonable and it must interfere with a
recognised public right. 190 Public rights include public access to highways,
186 In some Australian jurisdictions public nuisance may also attract criminal sanctions, see for example, section 300 Criminal Code 1995 (Qld) and the various State environmental protection legislation. 187 Wallace v Powell [2000] NSWSC 406; (2000) 10 BPR 18,481 per Chief Justice Hodgson at [32]; A-G v PYA Quarries Ltd [1957] 2 QB 169 at 184 per Lord Justice Romer. 188 Criminal Code 1995 (Qld) s300. Maximum penalty, three years imprisonment. 189 For example, Attorney-General; Ex rel Pratt v Brisbane City Council [1988] 1 Qd R 346; (1987) 63 LGRA 294. 190 Ball v Consolidated Rutile Ltd [1991] 1 Qd R 524; Deepcliffe Pty Ltd v The Council of the City of the Gold Coast [2001] QCA 342 (31 August 2001).
341 footpaths and waterways as well as pollution of public waters. 191 Public rights are not necessarily related to land and public nuisances:
may be established in the case of exposing in public a person with an infectious disease, selling food unfit for human consumption, obstructing a highway, or allowing a house near a highway to be ruinous. 192
In certain circumstances an individual may also bring an action in public nuisance where it can be shown that, as a result of the defendant’s interference with a public right, the individual has suffered particular, or special, damage over
and above that suffered by the public at large. 193 Special damage extends from economic loss, to delay and inconvenience, suffered as a result of the
interference. 194 The difficulty in bringing successful actions in public nuisance, as an individual, stems from the requirement that the plaintiff must prove that their injury and inconvenience is more substantial than the general public. This can be an onerous test to meet. In the past, commercial fishermen have been denied relief for pollution of waters on the basis that their fishing rights are no different
to those of the general public. 195
D Unreasonable Interference and Private Nuisance
If the obstacle of standing is successfully overcome then it must be shown that the interference is both substantial and unreasonable . Not all interference will attract liability in nuisance. The Court will seek to achieve a balance between the competing rights of enjoyment of the occupier of land and the rights of use and
enjoyment of his or her neighbour.196
191 Walsh v Ervin (1952) VLR 361; Tate & Lyle Industries Pty Ltd v Greater London Council [1983] 2 AC 509; Railtrack plc v Mayor & Burgesses of London Borough of Wandsworth [2001] EWCA Civ 1236; The Wagon Mound (No 2) [1967] 1 AC 617. 192 Kent v Minister for Works (1973) 2 ACTR 1; 21 FLR 177 at 204 per Justice Smithers. 193 Walsh v Ervin (1952) VLR 361 at 371 per Justice Scholl. 194 Ibid. 195 Ball v Consolidated Rutile [1991] 1 Qd R 524. In that case, the pecuniary loss was held to not be sufficient for standing. 196 Elston v Dore (1982) 149 CLR 480.
342 As commented by the Court:
a balance has to be maintained between the right of the occupier to do what he likes with his own and the right of his neighbour not to be interfered with. It is impossible to give any precise or universal formula, but it may broadly be said that a useful test is perhaps what is reasonable according to the ordinary usages of mankind living in society, or, more correctly, in a particular society. The forms which nuisance may take are protean. 197
………………………………..
for the purpose of ascertaining whether as here the plaintiff can establish a private nuisance I think that nuisance is sufficiently defined as a wrongful interference with another's enjoyment of his land or premises by the use of land or premises either occupied or in some cases owned by oneself. The occupier or owner is not an insurer; there must be something more than the mere harm done to the neighbour's property to make the party responsible. Deliberate act or negligence is not an essential ingredient but some degree of personal responsibility is required, which is connoted in my definition by the word ‘use’. 198
Whether an interference with the use and enjoyment of land is substantial will be determined by the Court in accordance with reasonable standards for the use and
enjoyment of the land in question. 199 This will be assessed in light of the character, duration and time of the interference and the effect of the interference of the plaintiff:
what are reasonable standards must be determined by common sense, taking into account relevant factors, including what the Court considers to be the ideas of reasonable people, the general nature of the neighbourhood and the nature of the location at which the alleged nuisance has taken place, and the character, duration and time of occurrence of any noise emitted, and the effect of the noise. 200
197 Sedleigh-Denfield v O’Callaghan [1940] AC 880 at 896. 198 Ibid, 896–7. 199 Oldham v Lawson (No 1) [1976] VR 654 at 655 per Justice Harris. 200 Ibid.
343 In the case of climate-related nuisance claims, the Court will be obliged to undertake a challenging deliberation process that distinguishes between the unlawful acts of the defendant and the natural interference of the modern climate system. It may be argued that the interfering harm is caused, not by the defendant, but instead by natural events. However, there is judicial precedent for defendants to be held liable in nuisance where a hazard occurs on their land, be it caused by a natural event or man-made, where the defendant had knowledge of
the hazard and took no steps to prevent interference to the plaintiff. 201 Accordingly, an element of reasonable foreseeability will operate in determining whether the defendant knew or ought to have known of the occurrence of the
nuisance. 202
Private owners and public authorities may be liable for interference caused by the construction of protective works that cause damage or flooding to adjoining land. Nuisance claims relating to flooding and drainage are reasonably common although the legal outcome is not always clear. In Sedleigh-Denfield v O'Callaghan , the defendant was held liable in nuisance for the negligent construction of an artificial work which resulted in flood waters flowing on to the
plaintiff's land. 203 In contrast, in the case of Elston v Dore the defendant filled an
artificial drain which operated to remove floodwater from the plaintiff’s land. 204 This was held to not constitute a nuisance as it did not cause the land to be damaged, invaded or interfered with. The damage suffered was held to be due to
the natural deficiency of the appellants’ land. 205
201 Leakey v National Trust [1980] QB 485; Delaware Mansions Ltd v Westminster City Council [2001] 4 All ER 737. Cf Goldman v Hargrave [1967] 1 AC 645 where the defendant failed to extinguish a fire in a tree on the property caused by lightning. 202 The Wagon Mound (No 2) [1967] 1 AC 617; Delaware Mansions Ltd v Westminster City Council [2001] 4 All ER 737 203 Sedleigh-Denfield v O’Callaghan [1940] AC 880. 204 Elston v Dore (1982) 149 CLR 480. 205 Ibid.
344 In proving that unlawful interference has occurred in the climate suit, the
principle of ‘give and take, live and let live’ will be applied by the Courts. 206 Not all interference will constitute a nuisance and the utility of the defendant’s activities will be balanced against the general public interest. The onus of proof resides with the defendant to show the reasonableness of their acts in light of the interference. The defendant is under an obligation to do what is reasonable in all of the circumstances taking into account the nature of the activities, the characteristics of the actual defendant and, where relevant, the availability of
financial resources for the defendant to address the risk. 207
If there are reasonably practical alternatives, which would not involve excessive expenditure, and would prevent the interference then the use may be considered
unreasonable. 208 For example, the ability to utilise alternative fuel sources, CCS technology or to take steps to offset the greenhouse gas emissions of an industrial plant may be considered by the Court. It may be argued that these technologies are not yet fully mobilised for commercial use and involve significant start-up
costs. 209 Nevertheless, pilot programs to trial these technologies are possible and the associated costs will be considered in the context of the general economic position of the defendant. In the case of large-scale emitters, with significant annual profits, the Court may well consider the development and use of alternative technologies to be reasonable given all of the circumstances.
In defending a cause of action in nuisance, public authorities may be able to rely on the statutory authorisation of the activities giving rise to the interference and proof that the harm done is an inevitable consequence of the exercise of that
statutory authorisation.210 The Court must determine that the empowering statute,
206 Bamford v Turnley (1862) 3 B&S 62 at 32-33 per Bramwell B. 207 Leakey v National Trust [1980] QB 485 Lord Justice Megaw at 526; Ruthning v Ferguson (1930) 45 CLR 604. 208 McMahon v Catanzaro [1961] QWN 22; Painter v Reed [1930] SASR 295 at 304 per Justice Richards. 209 The availability of renewable energy sources in Australia is discussed in Chapter Four. 210 Bonnici v Ku-Ring-Gai Municipal Council [2001] NSWSC 1124; (2001) 121 LGERA.
345 for example the relevant Local Government Act , specifically authorises the
specific activities that gave rise to the nuisance. 211 The burden of proof will fall on the public authority to show that it was the intention of the statute to permit the harm suffered; namely, interference with private rights to the use and
enjoyment of land. 212 Where the harm may have been avoidable but the cost of avoiding harm arising from the only practicable means of exercising that
authority was prohibitive then the authority will not be held liable for the harm. 213
The judicial process of statutory interpretation of the empowering provisions has been described as follows:
(1) When a public body, or individual, erects or uses structures, purporting to act under statutory authority, and thereby creates a nuisance, or otherwise injures a member of the public, the first question for determination is whether the damage complained of is the result of an act authorised or directed by the statute, upon its true construction. (2) If the act causing the damage is so authorised, the defendant is not liable unless he is guilty of negligence in the design or execution of the work. (3) Negligence in such circumstances must be based some active operation or on defect in design on the part of the defendant, and not upon mere inactivity or nonfeasance. 214
Consequently, although public authorities may find themselves increasingly the subject of claims in negligence and nuisance for climate change related harm, the ambit of liability in Australia is relatively narrow compared to private defendants and is becoming increasingly so as the exemptions and immunities of public authorities continue to expand.
211 Metropolitan Asylum District v Hill (1881) 6 App Cas 193; Allen v Gulf Oil Refining Ltd [1981] AC 1001. 212 Cohen v City of Perth (2000) 112 LGERA 234; Kempsey Shire Council v Lawrence (1996) Aust Torts Reports 81-375. 213 Bonnici v Ku-Ring-Gai Municipal Council [2001] NSWSC 1124; (2001) 121 LGERA 1 per Sperling J at [191]. 214 Madell v Metropolitan Water Sewerage and Drainage Board (1936) 36 SR 68 at 72-73 per Justice Davidson as quoted with approval in Symons Nominees Pty Ltd v Road & Traffic Authority New South Wales (1991) Aust Torts Reports 81-081 by Justice Brownie.
346 E Examples of Climate Change Nuisance Actions in the United States
There have been numerous attempts in the United States of America (US) to bring actions in public nuisance to prevent greenhouse gas emissions and to
minimise the occurrence of global warming. 215 In the case of State of Connecticut
et al v American Electric Power Company et al, 216 a group of States 217 brought an action against the five largest emitters of carbon dioxide in the US in public nuisance. The plaintiffs alleged that:
global warming will cause irreparable harm to the property in New York State and New York City and that it threatens the health, safety and well being of New York’s citizens, residents and environment. 218
Evidence was provided of existing temperature increases and predicted climatic changes and the plaintiffs sought an order:
(i) holding each of the Defendants jointly and severally liable for contributing to an ongoing public nuisance, global warming and (ii) enjoining each of the Defendants to abate its contribution to the nuisance by capping its emissions of carbon dioxide and then reducing those emissions by a specified percentage each year for at least a decade. 219
The Court held that these were non-justiciable political questions to be addressed by the political branches and commented that:
the scope and magnitude of the relief Plaintiffs seek reveals the transcendently legislative nature of this litigation. Plaintiffs ask this Court to cap carbon dioxide emissions and mandate annual reductions of an as-yet-unspecified percentage… Because resolution of the issues presented here requires identification and balancing of economic, environmental, foreign policy and national security interests
215 For a review of these cases see Lee A. DeHihns III, 'Climate and the Court' (2008) 25(1) The Environmental Forum 22. 216 State of Connecticut et al v American Electric Power Company et al 406 F. Supp. 2d 265; 2005 U.S. Dist. LEXIS 19964; 35 ELR 20186 (United States District Court For the Southern District of New York,15 September 2005). For a detailed discussion of this case see Dawn T. Mistretta and Stanley B. Green, 'Global Warming Litigation: Cooling Down or Heating Up in the Private Sector?' (2006) Winter 2006 Toxic Torts and Environmental Law 1. 217 The action was brought by the States of Connecticut, New York, California, Iowa, New Jersey, Rhode Island, Vermont, Wisconsin and the City of New York. 218 State of Connecticut et al v American Electric Power Company et al 406 F. Supp. 2d 265 at 268 and 270. 219 Ibid, 268.
347 “an initial policy determination of a kind clearly for non-judicial discretion” is required. 220
These issue of political non-justiciabiity is a significant obstacle in climate suits in the US. More recently, an action was commenced by the State of California against six leading car manufacturers seeking damages for creating
and contributing to the public nuisance of global warming. 221 In September 2007, the District Court determined that it lacked jurisdiction to hear the matter as the case involved public policy, foreign policy, and political issues:
the adjudication of Plaintiff’s claim would require the Court to balance the competing interests of reducing global warming emissions and the interests of advancing and preserving economic and industrial development. AEP , 406 F. Supp. 2d at 272. The balancing of those competing interests is the type of initial policy determination to be made by the political branches, and not this Court. 222
Another action in public nuisance was brought by an individual in the case of
Korsinksky v United States EPA. 223 The action was commenced against the US EPA and a number of other environmental departments for their emission of greenhouse gases and their failure to implement ‘practical, feasible and
economically viable options for eliminate [sic] carbon dioxide emissions.’ 224 The plaintiff sought standing on the grounds that he was more vulnerable to ‘disease-causing environmental pollution’ because he was suffering from ‘sinuses-related diseases’ and had developed a ‘mental sickness’ upon
learning of the danger of pollution. 225 The Court held that ‘such allegations fall more within the realm of the hypothetical and the conjectural rather than
220 Ibid, 272 and 274. 221 People of the State of California v General Motors Corporation et al 2007 (Case No. C06-05755 MJJ, 2007, United States District Court for the Northern District of California) at 1. 222 Ibid, 11-12. 223 Korsinksky v United States EPA 2005 U.S. Dist. LEXIS 21778 (United States District Court For the Southern District of New York, 28 September 2005). 224 Ibid, [2] 225 Ibid, [6]-[7].
348 the actual or imminent and therefore are insufficient for the purposes of
standing’. 226 This finding was upheld on appeal where the Court commented ‘moreover, Korsinsky has failed to sufficiently allege that his injury is likely
to be redressed by any relief the district court could grant’.227
ADEQUACY OF REMEDIES IN NEGLIGENCE AND NUISANCE
In considering the effectiveness of the common law of tort in addressing climate harm, it is necessary to consider, briefly, the adequacy of the remedies that may be awarded in a successful climate suit.
If a successful action in negligence is established then the Court may allocate common law damages. The principle for the award of such a remedy is that the plaintiff must be put in the position that it would have been in had the climate
tort not been committed. 228 If a successful action is brought in nuisance then the potential remedies for the interference would include abatement, injunctive relief
or common law damages.229 Where the claim is in private nuisance, damages
may include the diminution in land value from the interference.230
226 Ibid, [8]. 227 Korsinksky v United States EPA , 192 Fed. Appx. 71 (United States Court of Appeals for the Second Circuit, 10 August 2006) at 72. 228 In terms of damages for negligence advice, the Court will consider how much detriment the plaintiff has suffered as a result of the failure to provide the correct advice; Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 and Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1. 229 Moss v Christchurch Rural District Council [1925] 2 KB 750; the award of an injunction is discretionary and will depend upon the nature of the nuisance, the public interest and other factors. The award of an injunction will be more likely where the nuisance is of a continuing nature. Miller v Jackson [1977] QB 966. 230 Hunter v Canary Wharf Ltd & London Docklands Development Corporation [1997] UKHL 14; [1997] AC 655; Premier Building and Consulting Pty Ltd v Spotless Group Ltd [2007] VSC 377.
349 The effectiveness of these remedies in addressing the loss and damage from the impacts of climate change is debatable. Such actions are valuable in their ability to draw attention to the current deficiencies of the Australian regulatory environment in addressing climate related harm. However, regardless of the remedy of the Court, climate change will continue to occur and harm will continue to ensue. Even if an injunction is awarded, this will only mitigate some of the global emissions and will not halt climate change entirely. In terms of the award of damages, it is questionable whether the quantum awarded could (or should) ever fully compensate the plaintiff for the losses resulting from the unlimited scope of impacts of global climate change. Give this, tortious principles can only achieve so much in the regulation of emissions and mitigation of climate change. The law of tort also appears to be of limited assistance in acting as a distributive mechanism for climate change harm. This places increased reliance on the conventional distributive mechanism of insurance in addressing the risks of climate change.
THE ROLE OF INSURANCE IN ADDRESSING CLIMATE HARM
The object of insurance has traditionally been to protect each individual against an uncertain loss by pooling risks across a diverse group of individuals who pay an annual premium towards the pool’s overall predicted losses in return for compensation for claimable events. 231
231 Gary S. Guzy, 'Insurance and Climate Change' in Michael B. Gerrard (ed), Global Climate Change and U.S. Law (2007) Chicago, American Bar Association, 541 at 542.
350 The social benefits of insurance have been described as follows:
if priced correctly, insurance not only provides a social “safety net” but induces individuals and businesses to take more intelligent risks, while lessening the burden on government to intervene in the event of severe financial hardship. 232
Whether a particular risk of loss is insurable is dependant upon the loss meeting the following conditions for insurability:
randomness of the loss (unpredictability of events occurring);
assessability of the frequency and severity of claimable events (quantifiable);
mutuality of interest (risk community); and
economic feasibility–affordability of the payments for claimable events (premium). 233
The increasing frequency and intensity of climate change impacts will result in a higher demand for insurers to transfer the risk of loss from climate change events. The insurance industry can, in theory, provide coverage against a wide range of climate and weather related impacts as well as coverage for climate related losses through director and officer cover and health and life insurance cover. However, the increasing levels of risk of loss associated with those climate change events will directly influence the availability, price and conditions to be imposed on any
climate change insurance. 234
232 REO, 'In the Front Line: The Insurance Industry's Response to Climate Change' (F&C Investments, 2007) at 4. 233 Christopher Walker and Brian Thomas, 'Protecting Your Carbon Asset: Risk and Insurance in the Greenhouse Gas Markets' in Kenny Tang (ed), The Finance of Climate Change: A Guide for Governments, Corporations and Investors (2005) London, Risk Books, 293 at 298. 234 Gary Guzy, n231, 546.
351 Climate change has been described as having the potential to bankrupt the global insurance industry. 235 Of particular concern is the increasing level of unpredictability, and increasing frequency and severity, of the impacts of climate change. This prevents not only the ability to anticipate losses but also the ability to accurately price the risks of climate change. 236 Moreover, the effects of natural disasters are compounded by the demographic and socio-economic trends across the world. 237 Hand in hand with the increased frequency and intensity of tropical cyclones and severe storms is an increased risk of flooding from rivers and tributaries breaking their banks, flash flooding events and inundation from storm-surges and tsunamis. Australian society has expressed a preference for coastal and canal developments resulting in high intensity residential development, with increasing property values, within metres of high tide levels. This proximity to the water makes adaptation to storms, flooding and inundation extremely difficult. The result of this will be increased premiums, additional conditions on cover and, in some areas, a complete absence of availability of cover. 238
The Insurance Council of Australia predicted that approximately 170,000 Australian homes are located in such high risk areas that insurers may determine not to accept the risk.239 This issue is not confined to Australia. Over a million new homes to be built in flood prone areas in the United Kingdom are stated as being at risk of becoming ‘unsaleable, uninsurable and uninhabitable.’ 240 As a result, the British insurance industry is threatening to refuse flood coverage unless more flooding defences are established by the British government.
235 Sverker C. Jagers, Matthew Paterson and Johannes Stripple, 'Privatizing Governance, Practicing Triage: Securitization of Insurance Risks and the Politics of Global Warming' in David L. Levy and Peter Newell (eds), The Business of Global Environmental Governance (2005) Cambridge, MIT Press, 249 at 254. 236 Ibid; REO, n232,15. 237 Gary S. Guzy, n231, 547. Evan Mills, Richard J Jnr Roth and Eugene Lecomte, 'Availability and Affordability of Insurance Under Climate Change: A Growing Challenge for the U.S.' (CERES, 2005) at 2. 238 Karl Sullivan, ‘Issues: Residential Flood Insurance’ (Insurance Council of Australia), http://www.insurancecouncil.com.au/Residential-Flood-Insurance/default.aspx at 15 June 2008. 239 Ibid. 240 Jennifer Hill, ‘New Houses in Flood Areas “Uninsurable”’ (15 February 2008, Planet Ark) http://www.planetark.com/avantgo/dailynewsstory.cfm?newsid=46972 at 15 June 2008.
352
So what is the role for insurers amidst all of these potential climate change losses? It is clear that the insurance sector has the potential to play a significant role in dealing with the future affects of adverse climate change. The industry has been aware of the enormous financial implications of climate change for some time now. Whether the insurance industry is prepared to respond to consumer demand and insure these growing climate risks will depend on the extent to which it is prepared to evolve to embrace these new liabilities and to utilise innovative tools such as weather derivatives, catastrophe bonds and micro-insurance to manage
that risk. 241 In the absence of strong regulation, the insurance industry is in a position to exercise considerable influence on public policy to reduce greenhouse gas emissions, promote adaptation (including use of improved building design and building materials) and discourage inappropriate land use in vulnerable
areas. 242 Insurers may also choose to incentivise good practice to reduce global emissions by facilitating investment in renewable energy and emission reduction programs and offering preferential premium rates to sustainable buildings, hybrid
cars and energy efficient businesses. 243
As severe weather events, coastal erosion, landslides and floods increase in vulnerable areas the result may be that insurers deny coverage for those liabilities. If coverage is denied in high risk areas then the local government may be forced into the position of surrogate insurer in providing disaster relief and assisting in the rebuilding of damaged homes and businesses. The question of who should source the funds for such measures is highly debatable. In the absence of such relief then, ultimately, it will be the individuals themselves who must absorb the full costs of climate change. Their only recourse may then be to
241 Andrew Dlugolecki and Mojdeh Keykhah, 'Climate Change and the Insurance Sector: Its Role in Adaptation and Mitigation' in Kathryn Begg, Frans Van Der Woerd and David L. Levy (eds), The Business of Climate Change: Corporate Responses to Kyoto (2005) Sheffield, Greenleaf Publishing, 147 at 158, 160; Sverker C. Jagers, Matthew Paterson and Johannes Stripple, n235, 259-260. 242 Evan Mills, 'From Risk to Opportunity: 2007 Insurer Responses to Climate Change' (CERES, 2007) at 35. See also Evan Mills, 'From Risk to Opportunity: How Insurers Can Proactively And Profitably Manage Climate Change' (CERES, 2006). 243 Mills 2007, ibid, 2-3.
353 attempt to seek recompense from potentially negligent entities, such as planning authorities, architects, engineers and builders, who caused the building to be approved and constructed in a position of such vulnerability. Given the unlikely success of such climate suits, it seems preferably for the insurance industry to continue to provide insurance cover for climate risks but to incorporate the increased risk of losses into the price of premiums and to include additional conditions on coverage that require, for example, the installation of property protection measures against the risks of flood.
PROSPECTS OF SUCCESS OF CLIMATE ACTIONS
The purpose of this chapter was to consider the role of the common law principles of negligence and nuisance in addressing climate related harms from large-scale emitters in Australia. At this embryonic stage of climate change torts, both in Australian and overseas jurisdictions, it is largely a theoretical exercise in assessing the likely probabilities of success of tortious actions. So much will be dependent upon the character of the defendant, the nature of the harm suffered and the specificity of the scientific evidence available. Critically, it will also depend upon the judicial philosophy of the residing Court in terms of their commitment to developing the common law to remedy these new emerging climate injustices.
This chapter has identified a number of significant obstacles to the successful instigation of tortious actions for climate related harm including: foreseeability, causation and public policy considerations. Without doubt, the establishment of causation remains the primary obstacle to any successful action, in negligence or nuisance, against any private or public defendant. The level of scientific
354 uncertainty is significant and the challenges of meeting the legal test of causation enormous.
The likelihood of the Court indulging such tenuous claims of a causative link between the emissions and harm suffered is doubtful. Moreover, the judiciary may well consider that it is not its proper role to establish such wide private liability for harm that is caused through the global, public , phenomenon of climate change. Concerns about the imposition of indeterminate liability, floodgates concerns, and the proper role of the legislature in ‘laying down the
law’ may well operate to prevent a finding of any liability in negligence. 244 As noted in the decision of Cambridge Water :
as a general rule it is more appropriate for strict liability in respect of operations of high risks to be imposed by Parliament, than by the courts. If such liability is imposed by statute, the relevant activities can be identified, and those concerned can know where they stand. Furthermore, statute can where appropriate lay down precise criteria establishing the incidence and scope of such liability. 245
Despite these issues, climate change suits are likely to become more frequent in the Australian setting. In the first instance, defendants are likely to be public authorities rather than private persons due to their temporal longevity and the perception that these authorities have greater financial resources at their disposal. However, it is these very public entities that are provided with increased legal protections, under the statutory reforms to the Australian tort laws, making findings of liability against them all the more remote.
244 James Goudkamp, ‘The Spurious Relationship Between Moral Blameworthiness And Liability for Negligence’ (2004) Melbourne University Law Review 11. 245 Cambridge Water Co. Ltd v Eastern Counties Leather plc [1994] 2 AC 264 per Lord Goff of Chieveley at [76].
355 The application of nuisance principles to adaptation activities that aggravate the effects of climate change appears to fall within the traditional realms of nuisance, particularly in those circumstances involving the increased risks of flooding and bushfire. In the case of flooding, a reasonably clear causal link can be envisaged between the failure to maintain build or maintain sea walls, and other protective works, and the resulting flooding of private land. However, nuisance claims against current large scale emitters of greenhouse gases will be much more problematic. Continued, unabated, greenhouse gas emissions do pose a serious threat to the well being of the general community. However, the inertia present in the climate system prevents liability being attributed to those current emitters of greenhouse gases. Greenhouse gases will remain in the atmosphere for long time-scales and current emissions will increase the existing concentrations of
gases. 246 Although the continuation of emissions will contribute to global warming, strictly speaking, the interference suffered now cannot be causally
related to current emissions but is the result of those past emissions. 247 Therefore, true responsibility for such harm resides with our historic large-scale industrial emitters.
THE FUTURE OF TORT-BASED CLIMATE LITIGATION
In an ideal world, the common law of tort would not be used as a primary tool for achieving mitigation of, and adaptation to, the impacts of climate change. As a regulatory tool, tortious actions for climate harm are expensive and unruly and the outcomes are indeterminate. As noted by one commentator:
246 IPCC, WMO and UNEP, 'Climate Change: The IPCC Scientific Assessment, Report Prepared for Intergovernmental Panel on Climate Change by Working Group I' (Cambridge University Press, 1990) at xi. 247 In the United Kingdom, where there are multiple contributors that together create the nuisance, each of the contributors is liable for the cumulative effects of their polluting actions. Pride of Derby and Derbyshire Angling Association Ltd v British Celanese [1953] Ch 149.
356 the ad hoc nature of court proceedings, the expense involved in bringing them, and the uncertainty as to their results means that, in the long-term, litigation alone is unlikely to be an optimal approach for bringing about effective action to address climate change. 248
Given the prevailing uncertainties and weaknesses in tortious actions for climate change, the common law is not the most appropriate tool for achieving necessary behavioural changes to reduce emissions and avoid climate harms. In addressing climate change, the proper role of the common law should be to act as a complementary measure against a background of strong regulatory action. However, it is highly questionable whether the common law can adapt
sufficiently to address the current black hole in the regulatory web. 249 International and domestic regulatory frameworks for the reduction of greenhouse gas emissions are emerging around the world in an ad hoc fashion. There is now a Federal government proposal in Australia to implement a scheme for the reduction of greenhouse gas emissions. However, such a scheme would not commence until 2010 and reductions in emissions would not be instantaneous. Moreover, all of these emerging regulatory schemes fail to make provision for the distribution of the liabilities and losses of climate change harm leaving such matters to be determined by the ad hocery of the common law.
It is submitted that the issue of liability, within Australia, would be better addressed through a nationally consistent , clear regulatory framework to allocate liability, fairly and equitably, for the risk of climate change harm. The creation of clear statutory principles could provide large-scale emitters with some level of certainty regarding their future climate risks and legal liabilities. Potentially, some form of compensation fund could also be established through the allocation of a proportion of the royalties or taxes paid to the governments by these
248 Jacqueline Peel, 'The Role of Climate Change Litigation in Australia's Response to Global Warming' (2007) 24 Environmental and Planning Law Journal 90 at 103. 249 John Murphy, 'Noxious Emissions and Common Law Liability: Tort in the Shadow of Regulation' in John Lowry and Rod Edmunds (eds), Environmental Protection and the Common Law (2000) Oxford, Oregon, Hart Publishing, 51 at 75.
357 industries. Such legislation should adopt an appropriate test for causation which incorporates the precautionary principle and accommodates the prevailing scientific uncertainty to enable legitimate claims to be brought. Such regulation requires the balancing of a range of conflicting economic, social and
environmental priorities of our society, both now and in the future. 250 Accordingly, it is submitted that such a process more properly resides in the democratic domain of the legislature.
250 Jacqueline Peel, n248, 103.
358
Chapter Seven – The Role of Law in a Multi-National Global
Carbon Market: Rights, Duties and Legal Innovation 1
INTRODUCTION
The raison d'etre of the international climate change regime is to achieve significant reductions in the Earth’s atmospheric concentrations of greenhouse gas emissions sufficient to avoid adverse anthropogenic interference with the climate system. Achieving such large-scale, short-term, reductions in emissions requires radical and abrupt changes in society’s choice of energy sources, efficiency of energy use and overall level of environmental sustainability. The policy tool selected for the climate change regime, to facilitate these behavioural adjustments, is the innovative regulatory mechanism of the tradeable emission
instrument within a capped international carbon market. 2 Through the artificial construct of the emission instrument, the regime establishes a duty to reduce emissions in conjunction with a trading mechanism. This is intended to incentivise emission reductions and enable those reductions to be carried out at the geographic location at which it is most cost-effective to do so. In order to achieve the necessary global emission reductions, in the most cost-effective manner, a strong legal duty to reduce emissions must be embedded within an optimally efficient trading system. For that optimality to occur, the carbon market must be designed and implemented with a harmonious fusion of economic and legal functions.
1 This chapter expands upon a short analysis of the legal frameworks published in Nicola Durrant, ‘Emissions Trading, Offsets and Other Mitigation Options for the Australian Coal Industry’, (2007) Volume 24, Issue 5 Environmental Planning and Law Journal 361. 2 Kyoto Protocol to the United Nations Framework Convention on Climate Change , opened for signature 16 March 1998 (entered into force on 16 February 2005); United Nations Framework Convention on Climate Change , opened for signature on 4 June 1992, 31 ILM 849 (entered into force on 21 March 1994) (together the Climate Change Regime). The term carbon market is used in this thesis to refer to those markets trading in carbon emission instruments as well as those trading in greenhouse gas emission instruments more generally.
359 However, the arbitrary imposition of an international carbon market, and tradeable emission instrument, onto existing domestic legal systems creates serious challenges in the mutual creation and recognition of these artificial constructs. Moreover, weaknesses in the regulatory design of the climate change regime may well operate to prevent the emergence of a compatible global carbon market. The lack of strong regulatory drivers at the international level, with respect to the design and implementation of domestic regimes, combined with the complexity and immaturity of the international climate market, has resulted in the creation of an assortment of domestic carbon markets and climate change programs with incongruent legal characteristics.
The purpose of this chapter is to consider the necessary legal features of an effective carbon market to facilitate the cost-effective reduction of greenhouse gas emissions. It does so through an analysis of the key legal features of the emerging international, regional and domestic carbon market mechanisms. In particular, this chapter addresses the following critical components of an effective legal framework to facilitate carbon trading:
a strict duty to reduce emissions within a specified period of time;
the creation of tradeable emission instruments, within a trading system, to incentivise reductions to meet the emission reduction obligation;
a regulated program to enable the creation, transfer and surrender of credits from projects that reduce or abate emissions (known as offsets); and
a legal regime to regulate, and permit net reductions in emissions from, the capture, transport and storage of greenhouse gases (carbon capture and storage or CCS).
360 THE STATUS OF THE ATMOSPHERE UNDER INTERNATIONAL LAW
The Earth’s atmosphere is an undifferentiated gaseous mass which constantly circulates around the planet including through national air space. 3 The atmosphere is composed of several distinct layers. The first layer, the troposphere, extends upwards from the surface of the Earth for 15 kilometres and accounts for 85 per cent of all atmospheric gases. 4 This is followed by the stratosphere, which extends from 15 kilometres to 50 kilometres above the Earth’s surface, and the layers of the mesosphere and the thermosphere. 5
The legal status of the atmosphere is not clearly defined in international law. 6 Global commons, such as the high seas, have traditionally fallen within the doctrine of res communis and are beyond the jurisdiction of any one nation but may be used by all. 7 In comparison, the fish within the seas are treated as res nullius and do not belong to anyone until such time as they are appropriated. However, the atmosphere is unique. It is partly located within the air space of the territories of nation States and, under customary law, those States have ‘complete and exclusive’ sovereignty over that space. 8 Accordingly, those parts of the atmosphere within the air space are technically capable of sovereign ownership. However, in practical terms, the biological characteristics make it impossible to impound and take exclusive possession of the atmospheric gases. 9 As a result, although the States have not relinquished all claims to the atmosphere it has been
3 Marvin S. Soroos, 'Garrett Hardin and tragedies of global commons' in Peter Dauvergne (ed), Handbook of Global Environmental Politics (2005) Cheltenham, Edward Elgar, 35 at 40. 4 Ibid, 8. 5 Ibid. 6 Ibid, 33. 7 Ibid, 7. 8 Chicago Convention of International Civil Aviation 1944 , Article 1, (entered into force 1947) cited in D.J Harris, Cases and Materials on International Law (5 ed, 1998) London, Sweet and Maxwell at 239. The boundary between air space and outer space is unsettled but a better view appears to be that air space is linked to atmosphere and present where there are traces of air to be found (see Bin Cheng, Studies in International Space Law (1997) Oxford, Clarendon Press at 32). 9 Marvin S. Soroos, 'Preserving the Atmosphere as a Global Commons' (1998) 40(2) Environment 6 at 34.
361 customarily treated as though it is beyond national jurisdiction. 10 This lack of clarity regarding ownership and access rights remains unresolved in those international instruments which regulate emissions to the atmosphere including the terms of the climate change regime.
The atmosphere could be described as common property. Common property is conventionally regarded as:
amorphous, diffuse, ephemeral and unspecified in comparison with private property, and this view, when it is successful in the political and legal process, plays a role in the enclosure of the commons. 11
However, in many respects, the greenhouse gas sink mechanism of the global atmosphere does not fit neatly within the concepts of an open access resource domain. As commented:
atmospheric absorptive capacity is not a resource in the same sense as are, for example, ocean fisheries. There is no resource flow to any appropriator; fish are taken by fishermen, but pollution diffuses throughout the available airspace. 12
Whether the atmosphere possesses the characteristics of an open access resource is debatable. As a result of the creation of the climate change regime, the atmosphere is no longer a true open-access regime. The United Nations (UN) has created a body which regulates rights of access to the sink mechanisms of the atmosphere by those parties to the regime. In this respect, the atmosphere has been provided with common property status, as a common concern, which is
10 Marvin S. Soroos, n3, 35 at 40 and Marvin S. Soroos, 'The Evolution of Global Commons' in Ho- Won Jeong (ed), Global Environmental Policies: Institutions and Procedures (2001) Hampshire, Palgrave Publishers, 39 at 50. 11 McCay and Acheson, The Question of the Commons (1987) at 22 quoted in Michael Goldman, 'Inventing the Commons: Theories and Practices of the Commons' Professional' in Michael Goldman (ed), Privatizing Nature: political struggles for the global commons (1998) London, Pluto Press, 20 at 25. 12 Susan J. Buck, The Global Commons: an introduction (1998) Washington, Island Press at 126.
362 managed by the parties to the climate change regime (through the COP/MOP). However, for those developed countries and conscientious objectors such as the United States of America (US), who remain outside of the regime, the atmosphere retains its pre-existing legal character. 13
It could be argued that the atmosphere was, even prior to the Kyoto Protocol, no longer an open access resource. The creation of international regulatory bodies, through the UN, and the imposition of rules and regulations regarding use intervened in the unfettered use and abuse of the commons. The Montreal Protocol addresses the emission of ozone depleting substances to the atmosphere, the Convention on Long-Range Transport of Air Pollutants 14 addresses pollution to the atmosphere and the UNFCCC began the process of restricting the use of the sink capacities of the atmosphere in such a way as to cause adverse climate change impacts. It should also be noted that customary laws regarding State responsibility and transboundary harm apply in relation to excessive greenhouse gas emissions to the atmosphere. In particular, the atmosphere is subject to the international ‘no-harm’ principle which prohibits a State from causing harm to the environment of other States or in areas not subject to national jurisdiction. 15 It would flow from this principle that a State is under an obligation not to cause harm to the global environment and its resources, from its activities, including exceeding the carrying capacity of the Earth’s atmospheric sink mechanisms. 16
Exploitation of the atmosphere’s sink capacities, and the corresponding impacts of climate change, will affect all of the Earth’s common pool resources and resource domains. As a result, the climate change regime is aimed at establishing a protective regulatory policy, with quasi-property rights incentives, to overcome
13 Bruce Yandle, 'Grasping for the Heavens: 3-D Property Rights and the Global Commons' (1999 - 2000) 10 Duke Environmental Law & Policy Forum 13 at 39. 14 Convention on Long-Range Transport of Air Pollutants (1979) (entered into force 16 March 1983). 15 Stockholm Declaration of 1942 and, in particular, ‘Decision of the Trail Smelter Arbitral Tribunal’ 1941, American Journal of International Law 35; 684. This is discussed in Chapter Three. 16 There are, substantial evidentiary difficulties associated with establishing a link, on the balance of probabilities, between activities or actions of nations and the resulting adverse climatic impacts. Causation issues are discussed in Chapter Six.
363 these externalities and minimise such exploitation. Accordingly, the climate change regime could be considered more akin to a global environmental governance regime addressing environmental concerns rather than the strict privatisation of a commons.
The global nature of the climatic system renders a collaborative global effort both appropriate and necessary. As the Kyoto Protocol acknowledges, climate change and its adverse effects are a ‘common concern of humankind’ and, as such, it creates a duty to cooperate in a common response. This duty could be regarded as a public trust obligation towards achieving the sustainability of the atmosphere in which the institutional bodies of the climate change regime act as stewards of the commons. 17 Regardless of its ultimate characterisation, this acknowledgment requires synergy between global efforts to address climate change and consistency in the recognition and treatment of tradeable emission instruments under the international climate market.
The phrase ‘common concern of humankind’ is a lesser version of the phrase ‘common heritage of mankind’ which is used to refer to, for example, the resource of Earth’s outer space. The common heritage of humankind embodies a firmer acknowledgement of the collective duties of humanity and rights of ownership in and collective control of the specific resource. Common heritage refers to ‘neither private property nor public or collective property but universal property, “without a subject”, or without any subject but the fiction of a unified humanity.’ 18 The effect of this, according to one commentator, is not to:
mark the end of the appropriation of things or the elimination of existing forms of property, but rather expresses restrictive limitations on exclusive rights and shows
17 For a discussion of public trusts see Peter H Sand, 'Sovereignty Bounded: Public Trusteeship for Common Pool Resources' (2004) 4(1) Global Environmental Politics 47 at 57 who submits that global trusteeship is ‘conceivable, feasible and tolerable.’ 18 Balibar, E Masses, Classes, Ideas: Studies on Politics and Philosophy Before and After Marx (1994) (trans J Swenson) at 220-221 quoted in Aykut Coban, 'Caught Between State-Sovereign Rights and Property Rights: regulating biodiversity' (2004) 11(4) Review of International Political Economy 736 at 751.
364 the ‘intrinsic limits of the total possession’ of things, since its very existence is predicated on participation of all ‘proprietors’ and on the reciprocal control of the collective activity of humanity on nature (emphasis added). 19
COMMODIFICATION OF THE ATMOSPHERIC COMMONS: RIGHTS TO EMIT AND THE CLIMATE CHANGE REGIME
A Legal Innovation in Protecting the Atmospheric Commons
The atmosphere is part of the global commons. It is an open-access resource domain with a finite capacity to absorb carbon dioxide and other pollutants without adverse environmental impacts. 20 The resulting stable and benign climate from this ecological function is beneficial for all humankind and could be characterised as a global public good. 21 Unfortunately, as part of the commons, the atmosphere also suffers from unrestricted global exploitation. As Hardin described in the now infamous work, ‘The Tragedy of the Commons’, the natural self-interest behaviour of individuals to maximise his or her own personal gain, in this case resulting in the undertaking of activities which emit excessive greenhouse gases into the atmosphere at the expense of the climate system. As a result:
each man is locked into a system that compels him [or her] to increase his [or her] herd without limit – in a world that is limited. Ruin is the destination toward which all men rush, each pursuing his own best interest in a society that believes in the freedom of the commons. 22
19 Aykut Coban, n18, 751. 20 Marvin S. Soroos, n3, 38. 21 Ibid, 45. 22 Garrett Hardin, 'The Tragedy of the Commons' (1968) Science 162at 1244 cited in Michael Goldman, 'Inventing the Commons: Theories and Practices of the Commons' Professional' in Michael Goldman (ed), Privatizing Nature: political struggles for the global commons (1998) London, Pluto Press, 20 at 24.
365 In economic terms, the emission of greenhouse gases, and the resulting adverse impacts of climate change, are a classic example of market failure. 23 In such cases, the market has failed to register the economic value of the carrying capacity of the atmosphere in accommodating emissions and the exploitation of that resource is treated as an externality to the market. 24 These circumstances led the Stern Review on the Economics of Climate Change to conclude that ‘climate change...is the greatest and widest-ranging market failure ever seen’. 25
Market instruments are often associated with the cost-effective achievement of environmental goals and objectives. 26 They can play a crucial role in internalising the real environmental cost of activities into the pricing of goods and services thus acting as a rationing device. 27 A related environmental principle is that of the Polluter Pays principle by which the polluter, or end user, is held financially responsible for the costs of their activities:
the polluter should bear the expense of carrying out...pollution prevention and control measures…to ensure that the environment is in an acceptable state. In other words the costs of these measures should be reflected in the cost of goods and services which cause pollution in production and/or consumption. 28
This purpose of this principle is to internalise externalities to integrate the true environmental and social costs of modern activities into the price of goods and
23 William D Nordhaus, 'To Slow or Not to Slow: the Economics of the Greenhouse Effect' (1991) 101(July 1991) The Economic Journal 920 at 923; Neil Adger and Samual Frankhauser, 'Economic analysis of the greenhouse effect: optimal abatement level and strategies for mitigation' (1993) 3(1-3) International Journal of Environment and Politics 104 at 104. 24 Aykut Coban, n18, 753. 25 Nicholas Stern ‘The Economics of Climate Change: The Stern Review’ (Cabinet Office, HM Treasury 2006), at i, http://www.hm- treasury.gov.uk/independent_reviews/stern_review_economics_climate_change/sternreview_index.cf m at 14 June 2008. 26 European Environment Agency, 'Using the Market for Cost-Effective Environmental Policy: Market-based Instruments in Europe' (No1/2006, EEA, 2006). 27 Ibid, 5; Daniel J Dudek and John Palmisano, 'Emissions Trading: why is this thoroughbred hobbled?' (1988) 13(2) Colombia Journal of Environmental Law 217 at 222. 28 OECD, 'Recommendation on the Implementation of the Polluter-Pays Principle' (C(74)223, 1974), I(2).
366 services. 29 This, in turn, is intended to encourage the market to react to the new price signal for these goods and services and to modify its behaviour to achieve outcomes that are more economically efficient. 30 The emission reduction duties imposed under the climate change regime are compatible with this principle as obligations to reduce emissions apply only to those emissions for which the party is directly responsible. Accordingly, under the climate change regime, nations are not held responsible for their indirect emissions occurring within other jurisdictions.
There are a range of policy tools available for use in the regulation of environmental problems including direct regulation, taxes and charges, environmental subsidies, voluntary agreements and permit trading systems. 31 A properly designed economic instrument allows a State or entity to use their knowledge of their own activities to achieve environmental objectives at the lowest cost. 32 When coupled with a fully functioning and properly designed trading system, these policy tools can create efficiency gains with the reallocation of the cost of abatement of emissions to its most cost-efficient point:
properly designed emissions trading markets can capitalize on the common interests if nations, emissions sources, and the public to provide incentives to meet and exceed environmental and economic performance goals. 33
29 Nicolas De Sadeleer, Environmental Principles: From Political Slogans to Legal Rules (2002) New York, Oxford University Press at 21. C.J Barrow, Environmental Management for Sustainable Development (2 ed, 2006) New York, Routledge at 32. 30 Ibid, 21. 31 Nick Johnstone, 'Efficient and Effective Use of Tradable Permits in Combination with Other Policy Instruments' (Paper presented at the OECD Global Forum on Sustainable Development: Emissions Trading 17-18 March 2003 Paris, Greenhouse Gas Emissions Trading and Project Based Mechanisms, Paris, 2003) at 119. 32 Tom Tietenberg, 'Economic Instruments for Environmental Regulation' (1990) 6(1) Oxford Review of Economic Policy 17 at 22. 33 Annie Petsonk, Daniel J Dudek and Jospeh Goffman, 'Market Mechanisms and Global Climate Change: An Analysis of Policy Instruments' (Paper presented at the Trans-Atlantic Dialogues on Market Mechanisms: Bonn 23 October 1998 and Paris, 27 October 1998, 1998) at 5.
367 In this way, market rights are used to commodify environmental harms and to bring them within the rationale of the market system 34 :
production is interaction of man and nature; if this process is to be organized through a self-regulating mechanism of barter and exchange, then man and nature must be brought into its orbit; they must be subject to supply and demand, that is, be dealt with as commodities, as goods produced for sale. 35
Consequently, by modifying the price signals experienced by each individual, the aim is ‘for the best private choice to coincide with the best social choice’. 36 Accordingly, it has been stated that a properly designed emissions trading program can: increase environmental effectiveness; reduce compliance costs; create financial rewards for environmental performance; tap existing expertise; and create incentives for new technologies, processes and environmental management. 37
It was as early as the 19th century that John Stuart Mill predicted the possible development of a market in air owing to its emergence as a scarce resource:
air, for example, though the most absolute of necessaries, bears no price in the market because it can be obtained gratuitously: to accumulate a stock of it would yield no profit or advantage to any one.....If it became customary to sojourn long in places where the air does not naturally penetrate, as in diving-bells sunk in the sea, a supply of air artificially furnished would, like water conveyed into houses, bear a price: and if from any revolution in nature the atmosphere became too scanty for the consumption, or could be monopolized, air might acquire a very high marketable value (emphasis added) 38
34 Aykut Coban, n18, 753. 35 Karl Polanyi, The Great Transformation (1957) Boston, Beacon Press at 130. 36 Tom Tietenberg, n32, 17; Daniel J Dudek and John Palmisano, n27, 222. 37 Annie Petsonk, Daniel J Dudek and Jospeh Goffman, n33, 5. 38 John S Mill, Principles of Political Economy (1848) at 4, quoted in Yandle, n13, 17.
368 The use of market based mechanisms has been heralded as the political saviour of the climate change regime. Presented as a means of achieving greenhouse gas emissions reductions at least cost, the market mechanism is regarded as an innovative policy tool. Under the climate change regime, countries with high domestic marginal abatement costs are able to purchase credits from those countries with low emissions abatement costs thereby allowing reductions to take place in the most cost-efficient geographic location. 39 As a result, the cost of meeting the emission reduction target is significantly lower with international emissions trading compared to obligations to meet all reductions domestically. 40 The use of tradeable emission instruments also creates a financial incentive for innovation and compliance by nations and businesses with potential economic returns from the sale of excess permits. 41 Accordingly, the incorporation of tradeable emission instruments, in the current climate change regime, is designed to:
convert the open access regime currently governing international use of the atmosphere into a well-managed commons regime, with an articulated property rights structure which assures sustainable management practices. 42
However, the use of market instruments as a policy tool is no ‘silver bullet’. The regulatory outcomes of the market will be limited by the choice of emission reduction target to drive the emissions trading scheme. Consequently, an inadequate cap on emissions will undermine the environmental effectiveness of the market model. Proper monitoring of emissions, and enforcement of non- compliance, will also be paramount. 43 Ultimately, the international climate
39 Mohan Munasinghe and Rob Swart, Primer on Climate Change and Sustainable Development: Facts, Policy Analysis, and Applications (2005) Cambridge, Cambridge University Press at 403. 40 Erik Haites and Malik Amin Aslam, 'The Kyoto Mechanisms and Global Climate Change: Coordination Issues and Domestic Policies' (Pew Center on Global Climate Change, 2000) at 1. 41 David M. Driesen, 'Economic Instruments for Sustainable Development' in Benjamin Richardson and Stephen Wood (eds), Environmental Law for Sustainability: A Reader (2006) Oxford Portland, Hart Publishing, 277 at 302-303. 42 Patricia A. Monahan, Letting the market control the greenhouse effect: the promise and the pitfalls of a global emissions trading system (Master of Science (Land Resources) Thesis, University of Wisconsin, 1992) at 14. 43 Any penalty for non-compliance must be significantly higher than the market price of the permit. Erik Haites and Malik Amin Aslam, n40,13, 15.
369 market will be lacking in environmental integrity if, collectively, the climate change regime fails to achieve its global objective of stabilising emissions at a level that prevents adverse anthropogenic climate change. As noted by one commentator:
the carbon market is a means rather than an end and the success of the market and its various segments will be judged by how effectively it assists us in lowering [greenhouse gas] emissions, decarbonising our economies and in achieving truly sustainable development. 44
It should also be remembered that the carbon trading market is an artificial construct which exists purely as a result of the prevailing political will of the nation States and will remain in existence only for as long as the government collective deems it appropriate. The temporary nature of the carbon market introduces a significant element of risk and uncertainty for participants investing in the scheme. Accordingly, to ensure the optimal operation of the international market, it will be necessary to instil confidence in the enduring nature of the tradeable emission instruments, their ongoing inherent value, and the longevity of the trading system.
B Rights to Emit and Assigned Amount Units At the beginning of the first commitment period, each Annex-1 party to the Kyoto Protocol was issued with a number of Assigned Amount Units (AAUs) equal to the percentage, inscribed for the party in Annex B, of its aggregate anthropogenic carbon dioxide equivalent emissions of the greenhouse gases in
the base year, multiplied by five. 45 The assigned amounts, listed in Annex B of the Kyoto Protocol, were agreed upon by each party during negotiations on the
44 David Freestone and Charlotte Streck, 'Introduction: The Challenges of Implementing the Kyoto Mechanisms' (2007) 2(Special Issues: The Kyoto Protocol and Carbon Finance) Environmental Liability 47 at 55. 45 UNFCCC, ‘Decision 13/CMP.1: Modalities for the Accounting of Assigned Amounts under Article 7, paragraph 4, of the Kyoto Protocol: Annex: Modalities for the accounting of assigned amounts under Article 7, paragraph 4, of the Kyoto Protocol’(FCCC/KP/CMP/2005/8/Add.2) Section I (B) at [5].
370 text of the Kyoto Protocol. Each AAU is equal to one metric tonne of carbon dioxide equivalent calculated using global warming potentials.
AAUs do not create rights in relation to the greenhouse gases themselves, instead, they provide a bundle of rights in relation to the emission of those gases. AAUs determine the amount that a party is entitled to emit during the commitment period but do not provide a right or guarantee that a State will be permitted to emit a level of emissions in the future. Indeed, the parties have specifically stated that the Kyoto Protocol ‘has not created or bestowed any right, title or entitlements to emissions of any kind on parties included in Annex-1.’ 46 AAUs do not expire at the end of the first commitment period and may be banked for use in any future commitment periods should they eventuate.47
However, the AAUs of a party are not secure and can be varied through any international agreement reached by the parties in relation to future, post-2012, commitment periods. According, these AAUs are:
unitized and divisible embodiments of promises accepted by sovereign States in the context of a multilateral agreement which for that reason can be revoked, revised and altered through further negotiation. 48
AAUs have been described as quasi property rights comprising of a mixture of a sovereign right to act and a public property right of government entities. 49 These
46 UNFCCC, ‘Decision 2/ CMP 1 Principles, nature and scope of the mechanisms pursuant to Articles 6, 12 and 17 of the Kyoto Protocol’, (FCCC/KP/CMP/2005/8/Add 1). 47 UNFCCC, ‘Decision 3/CMP.1: Modalities and Procedures for a Clean Development Mechanism as Defined in Article 12 of the Kyoto Protocol. Annex: Modalities and Procedures for a Clean Development Mechanism’, (FCCC/KP/CMP/2005/8/Add 1) section F [33]. 48 Jacob Werksman (1996) ‘Greenhouse Gas Emissions Trading and the WTO’ Review of European Community International Environmental Law 8 (3) 251 quoted in Farhana Yamin, 'The Use of Joint Implementation to Increase Compliance with the Climate Change Convention' in James Cameron, Jacob Werksman and Peter Roderick (eds), Improving Compliance with International Environmental Law (1996) London, Earthscan Publications, 229 at 16.
371 hybrid rights are the cornerstone of the tradeable rights regime under the Kyoto Protocol yet their exact legal nature was not explained within the treaty or the decisions of the parties to the climate change regime. The bundles of rights to emit to the atmosphere is akin to the sovereign rights of nations but these rights have been fettered and restricted through the consensus adoption of the climate change regime. Through that diplomatic compromise, the parties have recognised the finite nature of the atmosphere’s sink capacity and created
conditional regulatory rights of access to those atmospheric sinks. 50
However, the restriction of those sovereign rights applies only to those parties who have conceded to such a fetter. Non-parties, such as the US, continue to hold their customary sovereign rights to access the atmosphere. As such, there are no specific limits imposed on their right to emit into the atmospheric sink. However, above a certain emission threshold, their actions would be in breach of their undertakings as parties to the UNFCCC which requires parties to stabilise emissions in the atmosphere at a level that would prevent dangerous
anthropogenic interference with the climate system .51 Accordingly, where the proportionate emitting behaviour of the US contributes to a level of emissions which are scientifically shown to lead to ‘dangerous anthropogenic interference’ then it would be in breach of its international duties under the terms of that treaty.
In addition, the US, along with the parties to the climate change regime, will continue to be subject to the existing principles of customary law including the principle of State liability for transboundary harm. States are not restricted in their sovereign right to the use of natural resources within their territory provided that such activities do not cause harm to the territory of another State. This
49 Matthieu Wemaere and Charlotte Streck, 'Legal Ownership and Nature of Kyoto Units and EU Allowances' in David Freestone and Charlotte Streck (eds), Legal Aspects of Implementing the Kyoto Protocol Mechanisms: Making Kyoto Work (2005) Oxford, Oxford University Press, 35 at 42. 50 Charlotte Streck, 'The Governance of the Clean Development Mechanism: the case for strength and stability' (2007) 2 (Special Issue: The Kyoto Protocol and Carbon Finance) Environmental Liability 91 at 92. 51 UNFCCC, n2, Article 2.
372 principle requires States not to cause damage to the environment of other States or areas beyond the limits of their national jurisdiction and to compensate for any such damage which does occur. 52
C CDM Projects and Certified Emission Reduction Units
The Kyoto Protocol enables parties to earn Certified Emissions Reduction Units (CERs) by transferring technologies and undertaking emission reduction projects
in non-Annex 1 nations (CDM).53 The aim of this tool is thus, prima facie, to assist Annex-1 parties to reach their targets whilst at the same time assisting developing nations to achieve sustainable development. As with AAUs, each CER represents one metric tonne of carbon dioxide equivalent, calculated using global warming potentials. These units are issued under the Kyoto Protocol as a result of the implementation and verification of CDM projects aimed at real, measurable and long-term benefits related to the mitigation of climate change. 54
CERs are able to be transferred to State parties and authorised private entities. They are ‘additional’ credits, able to be added to the number of AAUs in a national account, thereby allowing a State to increase its permitted level of greenhouse gas emissions for the commitment period. The CDM became operational prior to the first commitment period by permitting the use of emission reductions obtained between 2000 and 2008 to be used to meet the
targets. 55 This is subject to the vaguely worded proviso that the use of the market mechanisms must be supplemental to domestic emission reduction activities which must constitute a significant element of their efforts to meet the emission reduction target. 56
52 The issues of transboundary harm and other State liabilities for climate damage are considered in Chapter Three. 53 Kyoto Protocol, n2, Article 12. 54 Kyoto Protocol, n2, Article 12(5)(b). 55 Kyoto Protocol, n2, Article 12(10). 56 UNFCCC, ‘Decision 2/ CMP 1 Principles, nature and scope of the mechanisms pursuant to Articles 6, 12 and 17 of the Kyoto Protocol’, (FCCC/KP/CMP/2005/8/Add 1) at [1]. The EU has determined
373
The CDM has acted as a catalyst for cooperation and collaboration between public and private actors towards the development and diffusion of emission reduction technologies. However, there are complex approval processes, significant transaction costs and high levels of uncertainty and risk associated with investment in CDM projects. To be registered and approved for implementation, the project documentation must first demonstrate, to the satisfaction of the independent verifier and the Executive Board to the CDM, that the project will result in reductions in emissions which are additional to any that would otherwise occur in the absence of the project. 57 Projects implemented under the CDM are also subject to approval locally in the country where the emission reduction projects are to be implemented. 58 In addition, the host party must provide written confirmation that the project assists it in achieving sustainable development. 59
The CDM has been criticised for its failure to ensure that all CDM projects achieve the dual objectives of additional emission reductions and the promotion
of sustainable development. 60 In many cases, only the former is occurring and even then the scale of emission reductions is small in the context of global
emission trends. 61 However, the additionality of emission reductions:
is difficult to verify, since it counterfactual. Most stakeholders agree that many CDM projects are not additional in practice and would also have been implemented in the absence of the CDM. 62
that 50 per cent of its emission reductions must be achieved internally. David Freestone and Charlotte Streck, n44, 49. 57 Kyoto Protocol, n2, Article 12(5)(c). 58 UNFCCC, ‘Decision 3/CMP.1’ n 47, section F [29]. 59 Ibid, section G [40] (a). 60 Karen Holm Olsen, 'The Clean Development Mechanism's Contribution to Sustainable Development: A Review of the Literature' (2007) 84 Climatic Change 59 at 89. 61 Ibid. Ernestine Meijer and Jacob Werksman, 'CDM - Concepts, Requirements and Project Cycle' (2007) 2(Special Issue: The Kyoto Protocol and Carbon Finance) Environmental Liability 81 at 81. 62 Martin Cames et al, 'Climate Change: Long-Term Prospects of CDM and JI' (Research Report 204 41 192, Federal Environmental Agency (Umweltbundesamt), 2007) at 134.
374 CERs are only granted following the independent verification of the actual emissions reductions from the completed project and the approval of the Executive Board. These CER instruments come into existence only through the achievement of a certain level of emissions abatement.63 Accordingly, issued CERs are creatures of a combination of factors including:
the text of the Kyoto Protocol and decisions of the COP/MOP relating to the category of emission reduction project implemented;
the relevant modalities and procedures of the Executive Board to the CDM; and
the terms of any contractual agreement(s) between the transacting parties.
The precise legal nature of the CER will depend upon the application, interpretation and interaction of all these instruments. Where certain aspects of the CDM are not addressed within those legal documents then it must be addressed by the applicable domestic laws. Consequently, ‘only practice will reveal whether this hybrid of public, private, domestic and international law provides a sufficient legal foundation for a market on which the planet’s future depends’. 64
Participants to a CDM project will involve the developing host country, Annex-1 developed nation, project developers, project investors and land owners. The legal rights of each of those participants in the abatement project are somewhat unclear. As a general principle, the right to ownership of the emission instrument will vest with the entity responsible for the implementation of the emission reduction activities. However, in the context of carbon sequestration projects,
63 Martijn Wilder, Monique Willis and Mina Guli, 'Carbon Contracts, Structuring Transactions: Practical Experiences' in David Freestone and Charlotte Streck (eds), Legal Aspects of Implementing the Kyoto Protocol Mechanisms: Making Kyoto Work (2005) Oxford, Oxford University Press, 295 at 301. 64 Ernestine Meijer and Jacob Werksman, n61, 89.
375 ownership of the land, the tree and the sequestered rights may rest with different entities. 65 Legal ownership will also differ if the stored carbon is treated as a ‘natural resource’ within the domestic jurisdiction. In such a case, ownership in the natural resource may be considered to reside in the government. 66 In addition, due to the international implications of the abatement of emissions, national governments may claim sovereign entitlements to the instruments. Consequently, it is essential that all participants reach clear agreement on the method of allocation of the CERs produced by the project, and the legal entitlements and obligations of each party to the transaction.
I Temporary and Long-Term Instruments for Forestry
There are varying types of CERs which may be issued depending upon the category of CDM project implemented by the parties. Whilst the majority of projects will result in the same output, that is, CERs, misgivings as to the permanence of emissions reductions from certain types of Land Use, Land- Use Change, and Forestry (LULUCF) projects resulted in the creation of additional restricted credits. These misgivings are based on the potential for carbon leakage from reduction projects involving land management practices or, more significantly, carbon sequestration in forests. Trees and vegetation extract carbon dioxide from the atmosphere through their processes of photosynthesis. However, the absorption and storage of carbon in these projects are perceived as non-permanent. Natural disturbances such as fires or pests or human disturbances such as changes in management practices or harvest will result in the release of the accumulated carbon stock into the atmosphere. As a result, the parties agreed under the Kyoto Protocol that net emissions reductions or removals by sinks resulting from LULUCF activities would result in the creation of removal units (RMUs) for the first
65 Martijn Wilder, Monique Willis and Katherine Lake, 'Commodifying Carbon' in Kenny Tang (ed), The Finance of Climate Change: A Guide for Governments, Corporations and Investors (2005) London, Risk Books, 51 at 60. The specific rights associated with biological sequestration are discussed later in this Chapter. 66 Martijn Wilder, Monique Willis and Mina Guli, n63, 301.
376 commitment period of the Kyoto Protocol. These are temporary credits not able to be banked following the end of the first commitment period in 2012.
Certain LULUCF activities, namely afforestation and deforestation, may also be implemented as CDM projects. To address the non-permanence criticisms of these sink projects the parties agreed to the creation of specific temporary crediting for these CDM projects, namely, temporary CERs (tCERs) and long-term CERs (lCERs). A tCER is a CER issued for afforestation or deforestation activities which expires at the end of the commitment period following the one during which it was issued. 67 A lCER expires at the end of the crediting period of the afforestation or reforestation activity for which it was issued. 68 Project participants may elect which of these credits will be issued for the emission reductions from the sink projects. The crediting period can be for a maximum of 20 years, renewed twice, or a maximum of 30 years. At the time of each renewal, it must be demonstrated that the original project baseline is still valid or has been updated taking into account new data. 69 In addition, the quantity of removals of emissions must be verified, prior to certification, every five years for the duration of the crediting period. 70 In the event that the amount of sequestered carbon in the project has reduced, the tCERs and lCERs must be replaced with credits from the same activity or AAUs will be deducted from the participants account. 71
67 UNFCCC, Decision 5/CMP 1 ‘Modalities and Procedures for Afforestation and Deforestation Project Activities under the Clean Development Mechanism in the First Commitment Period of the Kyoto Protocol’ Annex, Definitions. 68 Ibid. 69 UNFCCC, Decision 19/CMP 9, n67, Annex, G [23]. 70 Ibid, Annex, I [32][33]. 71 Benoit Bosquet, 'Specific Features of Land Use, Land-Use Change, and Forestry Transactions' in David Freestone and Charlotte Streck (eds), Legal Aspects of Implementing the Kyoto Protocol Mechanisms: Making Kyoto Work (2005) Oxford, Oxford University Press, 281 at 288; Sebastian Scholz and Ian Noble, 'Generation of Sequestration Credits under the CDM' in David Freestone and Charlotte Streck (eds), Legal Aspects of Implementing the Kyoto Protocol Mechanisms: Making Kyoto Work (2005) Oxford, Oxford University Press, 265 at 270.
377 The implementation of a registered monitoring plan is a condition of verification, certification and issuance of any tCERs and ICERs. 72 The issue of tCERs and lCERs are conditional upon the project developer complying with a number of requirements aimed at ensuring the integrity of the sink removals. tCERs and lCERs may be used towards meeting a party’s emission reduction target for the commitment period in which they are issued. A party may only use tCERs and lCERs for a maximum of one per cent of the party’s base year emissions for each year of the commitment period. In addition, at the end of the crediting period tCERs and lCERs must be replaced with other allowances under the climate change regime or with new tCERs/lCERs. 73
Different approaches to the treatment of carbon sequestration credits have been adopted around the world. The core difference has been the permanence of the credit issued for the sequestration and the time period in which the sequestration project must be monitored and managed. This differentiation causes significant difficulties in terms of the fungibility of tradeable instruments across market systems. It also raises criticisms regarding the environmental integrity and sustainable outcomes of the climate change regime. On one view, these sequestration projects are no more than a temporary measure which defer the inevitable emission of carbon to the atmosphere. Alternatively, these measures are a short-term solution which may ease the burden of achieving the necessary emission cuts by the middle of the 21st century. If it is envisaged that we will soon shift to a low carbon economy in which technological innovations will reduce the emitting behaviour of society then, in such circumstances, the future escape of emissions from these temporary stores would have a less severe atmospheric impact than in current circumstances.
72 UNFCCC, Decision 5/CMP 1, n67, Annex, H [29]. 73 Ibid, Annex K, [44] [48]. UNFCCC, ‘Decision 16/CMP.1: Land-Use Land-Use Change and Forestry Annex: Definitions, modalities, rules and guidelines relating to land use, land- change and forestry activities under the Kyoto Protocol’ (FCCC/KP/CMP/2005/8/Add.3), section D.
378 D JI Projects and Emission Reduction Units
Emission Reduction Units (ERUs) are created following the implementation and verification of Joint Implementation (JI) projects in Annex-1 party jurisdictions. Under the Kyoto Protocol, investors in Annex-1 parties with emission limits are able to assist other Annex-1 parties to implement projects in their jurisdiction aimed at reducing anthropogenic emissions by sources or enhancing anthropogenic removals by sinks of greenhouse gases in any sector of the economy. 74 A JI project must have the approval of all parties involved and it must again be demonstrated that the emissions reductions achieved by the project
are additional to any that would have occurred in the absence of the project.75
The method of creation of these rights depends upon whether the host nation meets the pre-requisites to follow the simplified approval process. If these pre- requisites are met, then the host country will itself verify and grant the appropriate number of ERUs to the Annex-1 party. If this is not the case, then the Joint Implementation Supervisory Board will perform this function following
verification by an accredited independent entity (AIE).76 Unlike CERs issued under the CDM, the credits resulting from these JI projects are not additional credits. The host party must cancel the requisite number of AAUs or RMUs in its holding account and issue the same number of ERUs to the nominated party.77 Accordingly, these rights can be regarded as a hybrid of the AAU and CER instruments. JI projects are likely to only be approved within those jurisdictions which possess AAUs in excess to those required to meet their emission reduction duties under the Kyoto Protocol. This is unlikely to be the case in Australia.
74 Kyoto Protocol, n2, Article 6.1. 75 Ibid. 76 UNFCCC, 'Decision 9/CMP.1: Guidelines for the Implementation of Article 6 of the Kyoto Protocol. Annex: Guidelines for the Implementation of Article 6 of the Kyoto Protocol', (FCCC/KP/CMP/2005/8/Add 2). 77 Kyoto Protocol, n2, Article 6.1(b).
379 EFFECTIVENESS OF THE EMERGING GLOBAL CARBON MARKET
In considering the role of law in facilitating the global carbon market, it is necessary to identify the key principles by which the effectiveness of the legal framework can be assessed. It is necessary to identify and balance the requirements for effectiveness across a range of disciplines with potentially conflicting requirements, namely, legal, economic and environmental requirements. A holistic analysis of these requirements is necessary in order to achieve an overall appreciation of the principles for the effective design and operation of a legal regime that utilises innovative market mechanisms to reduce greenhouse gas emissions and address climate change. In addition, the climate change regime must be assessed as a whole and the effectiveness of the carbon market as an innovative regulatory tool must be viewed as a part of both the international and domestic regulatory spheres.
The principles of effectiveness, designed to achieve a holistic balance between the potentially conflicting principles of the various disciplines, can be described as follows:
the economic requirements for the optimal performance of a market including market efficiency and cost-effectiveness; 78
78 Market efficiency, in this context, has been considered in the following papers: Michael I. Jeffery and Warwick R. Baird, 'Using Market-Based Incentives to Curtail Greenhouse Gas Emissions: Factors to Consider in the Design of the Clean Development Mechanism, Joint Implementation and Emissions Trading' (2001) 6(2) Asia Pacific Journal of Environmental Law 117; Organisation for Economic Co-operation and Development, 'Global Warming: Economic Dimensions and Policy Responses' (Organisation for Economic Co-operation and Development, 1995); John Palmisano, Establishing a Market in Emissions Credits: a Business Perspective, IEA environment briefing; no. 2; (1996) London, The Institute of Economic Affairs; Richard Sandor, 'Implementation Issues: Market Architecture and the Tradeable Instrument (in search of the trees)' in United Nations Conference on Trade and Development (ed), Combating Global Warming: study on a global system of tradeable carbon emission entitlements (1992) New York, United Nations, 151; Tom Tietenberg, 'Implementation Issues for Global Tradeable Carbon Entitlements' in Ekko Van Ierland (ed), International Environmental Economics:Theories, Models and Applications to Climate Change, International Trade and Acidification (1994) Amsterdam, Elsevier, 119; Nick Johnstone, n31, Annie Petsonk, Daniel J Dudek and Jospeh Goffman, n33.
380 the environmental policy requirements for effective environmental outcomes including environmental protection, 79 administrative flexibility and global equity; 80 and
the legal requirements for the effective implementation, administration and enforcement of a legally enforceable climate change regime including clear rules, stringent monitoring and verification processes and appropriate enforcement mechanisms. 81
The mechanisms of CDM, JI and emissions trading mechanisms were introduced by the parties to the climate change regime as a means of providing a cost- effective way of achieving global greenhouse gas emission reductions. Therefore, to operate effectively, these market instruments must result in cost- effective outcomes. 82 The literature reviewed identifies a range of factors which may have an impact on the effectiveness of the operation of market mechanisms. The effectiveness of the market mechanisms as ‘flexible and cost-effective measures’ will depend upon the current and future domestic and international legal schemes developed to regulate these market instruments. Any restrictions on market access and trade, high transaction costs or other market distortions will
79 Russell S Jutlah, 'Economic Instruments and Environmental Policy in Canada' (1998) 8 Journal of Environmental Law and Practice 323; Nathaniel O. Keohane, Richard L. Revesz and Robert N. Stavins, n43; Tomasz Zylicz, 'Improving Environment through Permit Trading: the Limits to a Market Approach' in Ekko C Ierland (ed), International Environmental Economics: Theories, Models and Applications to Climate Change, International Trade and Acidification (1994) Amsterdam, Elsevier, 283. 80 Brent M. Haddad and John Palmisano, 'Market Darwinism vs. Market Creationism: Adaptability and Fairness in the Design of Greenhouse Gas Trading Mechanisms' (2001) 1(4) International Environmental Agreements: Politics, Law and Economics 427; Adam Rose, ''Equity' Considerations of Tradeable Carbon Emission Entitlements' in United Nations Conference on Trade and Development (ed), Combating Global Warming: study on a global system of tradeable carbon emission entitlements (1992) New York, United Nations, 55; Leslie Shiell, 'Equity and efficiency in international markets for pollution permits' (2003) 46(1) Journal of Environmental Economics and Management 38; Hermann E. Ott and Wolfgang Sachs, 'The Ethics of International Emissions Trading' in Luiz Pinguelli-Rosa and Mohan Munasinghe (eds), Ethics, Equity and International Negotiations on Climate Change (2002) Cheltenham, UK, Edward Elgar, 159. 81 See, for example, discussions in Gregory Rose, 'A Compliance System for the Kyoto Protocol' (2001) 7(2) New South Wales Law Journal 37 and Sonja Peterson, 'Monitoring, Accounting and Enforcement in Emissions Trading Regimes' (Paper presented at the OECD Global Forum on Sustainable Development: Emissions Trading 17-18 March 2003 Paris, Greenhouse Gas Emissions Trading and Project Based Mechanisms, Paris, 2003). 82 Patricia A. Monahan, n42, 19.
381 increase the economic cost of fulfilling the emission reduction commitments and will reduce the effectiveness of the market as an innovative policy tool. 83 Costs of information procurement, contract negotiations and monitoring and verification as well as the multiple layers of domestic and international approvals may also hinder the flexibility and cost-effectiveness of these market instruments. 84 In addition, any incompatibility between domestic legal institutions and the agreed framework for the climate change regime will impede the flexibility and environmental effectiveness of the mechanisms. 85
Accordingly, the prerequisites for the effective operation of these market mechanisms can be synthesised into the following principles:
clear definition of fungible, tradeable emission instruments with appropriate legal protection in carbon market systems; 86
clear, transparent and consistent rules for participation in the market; 87
83 Darren Kennedy et al, 'Global Economic Impacts of the Kyoto Protocol' in Australian Department of Foreign Affairs and Trade (ed), Trading Greenhouse Emissions: Some Australian Perspectives (1998) Canberra, Commonwealth of Australia, 91 at 101-103. 84 Axel Michaelowa, 'Flexible Instruments of Climate Policy' in Axel Michaelowa and Michael Dutschke (eds), Climate Policy and Development: Flexible Instruments and Developing Countries (2000) Cheltenham, UK, Edward Elgar, 1 at 12. Frauke Eckermann et al, 'The Role of Transaction Costs and Risk Premia in the Determination of Climate Change Policy Responses' (Discussion Paper No. 03-59, ZEW (Centre for European Economic Research), 2003). 85 In relation to compatibility of domestic and international trading systems see Jae Edmonds et al, 'International Emissions Trading and Global Climate Change: Impacts on the Costs of Greenhouse Gas Mitigation' (Pew Center on Global Climate Change, 1999) at 32 and Jan-Tjeerd Boom, 'Design of International Emissions Trading Scheme: A Comparison and Analysis' (2005) unpublished (provided by the author on 29 September 2005) at 11. 86 Richard B Stewart and Phillipe Sands, 'The Legal and Institutional Framework for a Plurilateral Greenhouse Gas Emissions Trading System' in Greenhouse Gas Market Perspectives Trade and Investment Implications of the Climate Change Regime: Recent Research on Institutional and Economic Aspects of Carbon Trading , UNCTAD/DITC/TED/Misc.9 (2001) United Nations, 5 at 10 and Tom Tietenberg, 'Implementation Issues: A General Survey' in United Nations Conference on Trade and Development (ed), Combating Global Warming: study on a global system of tradeable carbon emission entitlements (1992) New York, United Nations, 127 at 133. See also Joe Motha, 'Tradeable Permits: Terms and Taxonomy' in Bureau of Transport Economics (ed), Trading Greenhouse Emissions: Some Australian Perspectives (1998) Canberra, Bureau of Transport Economics, 25; Zhong Xiang Zhang, 'The Design and Implementation of an International Trading Scheme for Greenhouse Gas Emissions' (2002) 39(4) Peace Research Abstracts 459 and Kjell Roland, 'From Offsets to Tradeable Entitlements' in United Nations Conference on Trade and Development (ed), Combating Global Warming: study on a global system of tradeable carbon emission entitlements (1992) New York, United Nations, 23.
382 an open access market with minimal restrictions on trade and an open flow of information to the market; 88
compatibility between the design of the carbon markets in all participating domestic jurisdictions and the market under the climate change regime;89 and
appropriate monitoring and reporting processes, within each legal framework, to ensure player confidence in the market 90 and to enable non-compliance to be identified and appropriately addressed.91
The implications of these requirements on the necessary legal infrastructure to regulate greenhouse gas emissions, in conjunction with a carbon market system, are discussed in the following paragraphs.
A Clear Definition of Tradeable Emission Instruments
The greatest legacy of the Kyoto Protocol is arguably its introduction of property rights in the carbon sink mechanisms of the global atmosphere thus creating a market in the protection of the global atmospheric commons. Property rights in the tradeable emission instrument are one of the core pillars of an effective
87 Richard F. Kosobud, 'Emissions Trading Emerges from the Shadows' in Richard F. Kosobud (ed), Emissions Trading: Environmental Policy's New Approach (2000) New York, John Wiley and Sons, 3 at 29; Robert Stavins, 'What Do We Really Know About Market-Based Approaches to Environmental Policy? Lessons from Twenty-Five Years of Experience' in Richard F. Kosobud (ed), Emissions Trading: Environmental Policy's New Approach (2000) New York, John Wiley and Sons, 49 at 55. 88 Richard Kosobud, n87, 25. 89 Richard Baron and Stephen Bygrave, 'Towards International Emissions Trading: Design Implications for Linkages' (OECD, IEA, 2002) at 38-39 and 58. Erik Haites, 'Harmonisation Between National and International Tradable Permit Schemes' (Paper presented at the OECD Global Forum on Sustainable Development: Emissions Trading 17-18 March 2003 Paris, Greenhouse Gas Emissions Trading and Project Based Mechanisms, Paris, 2003) at 108. See also Zhong Xiang Zhang, 'Should the Rules of Allocating Emissions Permits be Harmonised?' (1999) 31 (1) Ecological Economics ; (2000) 14(4) Journal of Planning Literature . 90 Richard Kosobud, n87, 30; Robert Stavins, n87, 56. 91 Tom Tietenberg et al, 'International Rules for Greenhouse Gas Emissions Trading: Defining the principles, modalities, rules and guidelines for verification, reporting and accountability' (UNCTAD/GDS/GFSB?Misc.6, United Nations Conference on Trade and Development, 1999) at 84.
383 market system. Traditional principles of property law refer to the need for these rights in property to bestow on the holder the rights of usus, abusus and fructus . Usus being the right to use the resource; abusus the right to destroy it, to give it away and to sell it; and fructus the ability to harvest the fruits of that resource. Therefore, the nature of the property right will play a significant role in the ultimate success of the international climate change regime. However, the parties to the Kyoto Protocol specifically recognised that ‘the Kyoto Protocol has not created or bestowed any right, title or entitlement to emissions of any kind on parties’.92 Moreover, at a domestic level, these tradeable instruments may take various forms including private property rights, permits to emit, public rights, security instruments or some other form of intangible asset.
The effectiveness of the multi-national carbon market will depend upon the harmonious recognition and treatment of the tradeable emission instruments. In order to hold value as an element in domestic legal systems, these instruments must be legitimised and protected by the legal system. Greater legitimacy will lead to greater player confidence in the market resulting in increased numbers of market dealings and, ultimately, a more effective carbon market.
The significance of the legal nature of the property rights have been described as follows:
‘Property’ must have a clear-cut or crystalline quality which admits of no doubt either as to its presence or, just as important, as to its absence or infringement. The rights to which ‘property’ relates must have a hard-edged definitional integrity conducive to the intellectual orderliness of the regime as a whole . Property must come in neat, pre-packaged conceptual compartments, immune from capacious tampering or even well-intentioned amplification. 93 (emphasis added)
92 UNFCCC, Decision 5/CP.6 'The Bonn Agreements on the Implementation of the Buenos Aires Plan of Action', (FCCC/CP/2001/5), Part VI, Division 1 at 42. 93 Kevin Gray and Susan Francis Gray, 'The Idea of Property in Land' in Susan Bright and John Dewar (eds), Land Law: Themes and Perspectives (1998) New York, Oxford University Press, at 31- 32.
384
Property in this context refers to the legal relationship between the holder and the object and to the ‘bundle of rights’ able to be exercised in relation it. 94 The concept of property as a bundle of rights has been described as ‘principally the rights to possess the property, to use the property, to exclude others from the property, and to dispose of the property by sale or by gift’.95 Private property rights must be able to be defined, defended and divested. 96 To be clearly defined, the physical attributes of the resource must be appropriately specified so as to be measurable and identifiable. 97 As commented:
for a market to an effective instrument of governance, the nature and subject matter of these rights must be clear, certain and predictable. Whether they have these characteristics is a reflection not only of their own nature but also of the operational powers and capacities associated with these rights. 98
The fluidity of the atmosphere makes such identification and measure physically impossible. An owner cannot point to a portion of the invisible atmosphere and state ‘that gas is mine’. However, the sink capabilities of the atmosphere are technically definable through scientific research and the Kyoto Protocol has enabled virtual trade in this artificial construct within defined limits. 99 It is therefore possible to be conceptually clear as to what each allowance represents in terms of the level of permitted emissions associated with each tradeable instrument.
94 For example, Yanner v Eaton (1999) 201 CLR 351 per Gleeson CJ, Gaudron J, Kirby J and Hayne J. 95 Moore v Regents of the University of California (1990) 793 P. 2d 479 per Mosk J. 96 Yandle,n13, 15. 97 Terry L. Anderson and Donald R. Leal, Free Market Environmentalism (1991) Boulder, Westview Press at 20. 98 Douglas E. Fisher, 'Delivering the National Water Initiative, New Frameworks for Law and Regulation, The Emergence of Innovative Legal Doctrine' (Paper presented at the Delivering the National Water Initiative: understanding the social and industry dimensions, Parliament House Canberra, 4-5 December 2006) at 23. 99 Yandle, n13 at 29 uses the example of the thickness of the ozone layer as a definable property right.
385 In terms of effectiveness of the climate change regime, the following legal attributes can be identified as critical features for the effective use of tradeable emission instruments in a market system: duration; exclusivity; transferability; divisibility; quality of title; and flexibility. 100 Without the presence of each of these elements, the allocated legal instrument will be more akin to regulatory property, with limited property protections, than a commodity and will attract a lesser value with repercussions for the effectiveness of the market system. 101 Consequently, to establish true commodities in the market system, the climate change regime must create clearly defined, fungible, tradeable emission instruments appropriately protected by rules securing ownership and transfer.102 The benefits associated with these instruments should also be capable of unambiguous identification, protection, assignment, transfer and banking and should be capable of being made the subject of a mortgage or charge. The system must also instil market player confidence in the longevity of the market and the long term protection and recognition of the trading instruments. In particular, participants in the international climate market will require assurances that their instruments will be recognised and protected in the post-2012 regulatory landscape.
However, this need for adequate property rights protections in order to achieve market efficiency has the potential to create tensions with the achievement of the environmental goals of the climate change regime. Such focus on the protection of the emission rights of the individual could prevent strong regulation to address the global threat of climate change and the need for humankind as a whole to act to protect the atmospheric commons. Accordingly, a balance must be achieved in all such regimes between the short term protection of rights in property and the need to protect the global society in the long term.
100 Scott quoted in Alina Averchenko, Factors of Effectiveness of the International Climate Change Regime (PhD Thesis, University of Bath, 2004) at 102. 101 For a discussion of commodification in the water context see Janice Gray, 'Legal Approaches to the Management and Regulation of Water from Riparian Rights to Commodification' (2006) 1(2) Transforming Cultures eJournal 64. 102 Richard B Stewart and Phillipe Sands, n86, 10 and Susan Rose-Ackerman, 'Environmental Liability Law' in Tom Tietenberg (ed), Innovation in Environmental Policy: Economic and Legal Aspects of Recent Developments in Environmental Enforcement and Liability (1992) Hants, Edward Elgar 223 at 223. Joe Motha, n86; Zhong Xiang Zhang, n86 and Kjell Roland, n86.
386 B Clear, Transparent and Consistent Rules
All legal frameworks to regulate climate change must ensure that they observe the need for legitimacy and authority in the rule-making functions. The presence of such legitimacy will enhance the ‘pulling power’ of such regimes and, at an international level, may coerce States to comply with rules when it is not necessarily in their short term interest to do so. 103 Consequently, the more an institution is perceived as legitimate, the more stable and effective it is likely to be in operation. 104 The United Nations Development Programme formulated a collection of principles which it considers imperative for the establishment of internationally good governance and which are equally relevant to the climate change regime. These principles include: legitimacy and voice; direction; performance; accountability; and fairness. 105 To achieve the first principle of legitimacy and voice, the international climate change regime must ensure that due process has been followed in the establishment of its rules. The rule-making processes of the climate change regime must comply with the fundamental requirements of the rule of law and must meet those essential characteristics of fairness, justice and integrity. 106 The climate change regime must, inter alia, provide meaningful public engagement and participation in decision-making processes.
The principle of direction looks to the institutional structure and the power of the institutions of the climate change regime, in particular, their leadership and ability to set future policy directions and to adapt to changing environmental, economic and social conditions. Performance refers to the efficiency and effectiveness of those institutions and their regulatory instruments in achieving cost-effective reductions in emissions under the climate change regime. The
103 Thomas M. Franck, 'Legitimacy in the International System' (1988) 82 American Journal of International Law 705 at 705. 104 Daniel Bodansky, 'The Legitimacy of International Governance: A Coming Challenge for International Environmental Law' (1999) 93 American Journal of International Law 596, drawing on the findings of Weber, at 603. 105 John Graham, Bruce Amos and Tim Plumptre 'Principles for Good Governance in the 21st Century' (Institution on Governance, 2003). 106 Thomas M. Franck, n103, 709.
387 concepts of accountability and fairness are intrinsically linked with the need for transparency and equity in the regulation of greenhouse gas emissions across the globe.
C Access to the Market and Minimal Restrictions on Trade
An optimal market system requires transparency in the system with clearly defined rules for players in the market, minimal restrictions on trade and an open flow of information to the market. 107 These requirements are necessary in order to instil market confidence in the system and to promote optimal market performance. In terms of trade in emission instruments, economic principles suggest that, to enhance market efficiency, administrators must avoid excessive regulation of private transactions. 108 Requirements for approval prior to trade or the imposition of conditions on use will have an impact on the flexibility of the mechanisms. 109 These restrictions will translate into cost and time implications for the parties.
Open access to the market will also encourage market liquidity and facilitate an efficient market system. 110 Any restrictions on participation in the market or on the ability to trade will impede this market efficiency even if such restrictions are valid on legal or environmental grounds. 111 However, the drive for market efficiency must be balanced against the need for regulators to maintain flexibility in the implementation of the regime, for example, in the adjustment of the number of tradeable emission instruments in response to new predictions regarding the threats of adverse climate change.
107 Richard F. Kosobud, n87, 29; Robert Stavins, n87, 55. 108 Axel Michaelowa, n84, 9; Susan Rose-Ackerman, n102, 233. 109 Annie Petsonk, Daniel J Dudek and Jospeh Goffman, n33, 6-7. 110 Richard F. Kosobud, n87, 25. 111 Ibid.
388 D Compatible Design of International and Domestic Market Systems
The climate change regime, like many international treaties, relies on compatible implementation at a domestic level to ensure its operation. Therefore, the effective operation of a global, multi-national, carbon market requires domestic institutions and measures to be compatible with the terms of the Kyoto Protocol and with its institutional structures. 112 From a modern environmental governance perspective, there must also be consistent and complementary interactions between the climate change regime and other international environmental regimes. This includes horizontal interactions between institutions at the same level of the organisation and vertical interactions between hierarchically ordered units from the local to the international level. 113
The climate change regime remains largely silent on the manner in which parties should implement their international obligations within the domestic sphere. This has resulted in the adoption of hybrids of domestic policy approaches to emissions reductions incorporating a combination of policies, command and control instruments, carbon taxes, subsidies and incentives and greenhouse gas offset and ‘cap and trade’ systems. As a result, there is a significant issue as to the lack of compatibility and potential inconsistencies between the emergent domestic approaches and international objectives.
A number of parties have or are proposing to develop linkages between proposed or existing emissions trading models. From an economic perspective, these linkages between national emissions trading systems may provide opportunities to meet the targets at a lower total cost and with increased market liquidity and
112 Jonas Ebbesson, Compatibility of International and National Environmental Law (1996) London, Kluwer Law International at xix. 113 Oran R Young, The Institutional Dimension of Environmental Change: Fit, Interplay, and Scale (2002) Cambridge, The MIT Press at 113-132 cited in Sebatsian Oberthur and Thomas Gehring (eds), Institutional Interaction in Global Environmental Governance: Synergy and Conflict among International and EU Policies (2006) Cambridge, The MIT Press at 21.
389 player competitiveness 114 However, ‘if different schemes have vastly different systems and quality controls, this could affect the environmental integrity of the system’. 115
In order to achieve the utopia of a multi-national global market in tradeable emission instruments, envisaged by the Kyoto Protocol, the scheme will need to merge these distinct market systems with their different treatments of greenhouse gas emissions, definitions of credits, conditions of use and market values. 116 Monitoring, verification and enforcement approaches between various systems are critical issues due to the risk of potentially ‘unsound’ credits accessing the international market via countries with more lax verification systems. 117 Inconsistencies in penalties, or lack of enforcement of strong penalties, will also cause difficulties as this may provide an incentive for non-compliance to be exported to the system where the penalty level is the lowest. 118
E Appropriate Monitoring, Verification and Enforcement Processes
Ultimately, the UNFCCC and Kyoto Protocol are together aimed at avoiding the adverse effects of climate change through the reduction of greenhouse gas emission levels. In particular, the target of the Kyoto Protocol is to achieve a minimum five per cent reduction in global greenhouse gas emission levels, compared to 1990 levels, by the end of the first commitment period in 2012. Accordingly, one factor of analysis would logically be whether the design of the regulatory framework can assist in achieving the environmental objectives of the regime. The achievement of the emission reduction targets requires the creation of mechanisms for monitoring, verification and enforcement. Such a regime must be supported by appropriate methods of enforcement which are embedded
114 Erik Haites, n89, 105. Deborah Stowell, Climate Trading: Development of Greenhouse Gas Markets (2005) Hampshire, Great Britain, Palgrave Macmillan at 95. 115 Deborah Stowell, ibid, 214. 116 Charles W. L. Hill, Global Business Today (4 th ed, 2006) Boston, McGraw-Hill Irwin at 7. These issues are considered further in Chapter Seven. 117 Sonja Peterson, n81, 195. 118 Ibid. See also Erik Haites, n89, 108.
390 with the concepts of fairness, justice, and due process and these mechanisms must be implemented in a transparent and consistent manner in order to gain the acceptance of the global community and to act as suitable deterrents.
Without the parties meeting their emission reduction targets, the environmental integrity and credibility of both the market mechanisms and the Kyoto Protocol will be undermined. 119 Additionally, in the absence of appropriate enforcement, there will be little incentive to alter current global behaviours regarding greenhouse gas emission levels. 120 Accordingly, the effectiveness of the market, as an innovative policy tool, requires that there be in place not only appropriate monitoring and verification of the creation and trade of the emission instruments but also sanctions for any identified non-compliances. 121 Monitoring and verification of greenhouse gas emissions, emission reduction projects and resulting tradeable emission instruments are integral components of a working market system and essential to achieve environmentally acceptable outcomes under the climate change regime. 122 Monitoring under the climate change regime takes place through the preparation of national inventories of greenhouse gas emissions. Accordingly, ‘a high quality system for gathering and verifying information on sources and sinks of greenhouse gases is a prerequisite for authoritative review and legitimate response’.123 With many national inventories relying on estimates of their emissions, rather than concrete monitoring of actual emissions, the accuracy of these reports may be questioned with resulting impacts on the environmental integrity of the climate change regime.
119 Erik Haites and Malik Amin Aslam, n40, 6. 120 Ronald B. Mitchell, 'Flexibility, Compliance and Norm Development in the Climate Regime' in Olav Schram Stokke, Jon Hovi and Geir Ulfstein (eds), Implementing the Climate Regime: International Compliance (2005) London, Earthscan, 65 at 65. 121 Tom Tietenberg et al, n91, 53, 84. 122 Richard F. Kosobud, n87, 30; Robert Stavins, n87, 56. 123 Jon Hovi, Olav Schram Stokke and Geir Ulfstein, 'Introduction and Main Findings' in Olav Schram Stokke, Jon Hovi and Geir Ulfstein (eds), Implementing the Climate Regime: International Compliance (2005) London, Earthscan, at 5.
391 LEGAL FEATURES OF THE EMERGENT CARBON MARKETS
A The International Climate Market
As discussed above, the Kyoto Protocol creates a range of market instruments relating to the emission of greenhouse gases to the atmosphere including AAUs, CERs and ERUs. International trade in each of these emission instruments was also established as one of the innovative mechanisms adopted under the climate change regime. Eligible Annex-1 parties may buy or sell their allowances
through emissions trading. 124 The ability to engage in emissions trading is conditional upon the State party being in compliance with certain eligibility requirements including the obligation to submit annual estimates of emissions and to maintain a level of reserve allowances within the national registry. 125 AAUs may also be traded by private entities where they are authorised to trade on behalf of a State. 126
Through the combined effect of the flexibility mechanisms of CDM, JI and global emissions trading parties to the climate change regime are, prima facie, provided with the means to achieve global emissions reductions at those locations where the cost of reduction is lowest. These trading mechanisms are still largely in their embryonic stages and the success of these emission instruments depends upon the effectiveness of the legal rules and frameworks created, both domestically and internationally, for the implementation and operation of these emerging carbon trading markets. Although negotiations for the post-2012 climate change regime are still in progress, it seems very likely that the key features of these tradeable instruments and the international climate market will be included in any negotiated regime. The UNFCCC Executive Secretary has estimated that the carbon market under the Kyoto Protocol will
124 Kyoto Protocol, n2, Article 17. 125 UNFCCC, ‘Decision 3/CMP.1’ n47, at [2]. The automated International Transaction Log (ITL), managed by the UNFCCC Secretariat, verifies the validity of the transactions prior to allowing them to proceed between registries, UNFCCC, ‘Decision 13/CMP.1: Modalities for the Accounting of Assigned Amounts under Article 7, paragraph 4, of the Kyoto Protocol: Annex II: Registry Requirements’ (FCCC/KP/CMP/2005/8/Add.2), Section D [38]. 126 UNFCCC, ‘Decision 3/CMP 1’ n47, at [5].
392 increase from 30 billions Euros in 2006 to 63 billion Euros in 2008. 127 The growth of trade in AAUs will depend largely on the politically acceptability of buying so-called ‘hot air’ or surplus AAUs from Russia and the Ukraine who have excess allowances following the collapse of the soviet union and subsequent economic crisis in the 1990s. 128 There has been a recent growth in the primary and secondary CER markets. 129 Given its later starting date, there has been only limited trade in ERUs under the JI mechanism. 130 Future growth in this international market will be significantly affected by the ability to submit these instruments in compliance with the emerging regional and domestic trading schemes as well as improvements to the approval processes for CDM and JI projects to reduce transactions costs, uncertainty and risk for investors.
A key legal issue in the international climate market is the absence of definition of the tradeable emission instruments. By failing to appropriately characterise the nature of the emission instruments under the international climate change regime, these rights must be dealt with in a haphazard and ad hoc fashion by domestic legal principles under a range of civil law and common law systems which were not established with the treatment of these novel forms of property in mind. As a result of this forced fusion, the bundle of rights associated with a tradeable emission instrument will differ according to: the origins of the instrument, that is, the applicable laws for how and where it was created; its contractual treatment; and its recognition and treatment in the jurisdiction in which the instrument is held. The result is inconsistency and uncertainty in the bundle of rights and protections associated with these instruments across the international market system. Moreover, the specification of these rights is not
127 Yvo de Boer, 'Key Note Address: Executive Secretary, United Nations Framework Convention on Climate Change' (Paper presented at the Carbon Market Insights 2008, Copenhagen, Denmark, 11 March 2008) at 4. 128 Kjetil Roine and Endre M. Tvinnereim, 'The Global Carbon Market in 2007' in David Lunsford (ed), Greenhouse Gas Market 2007 Building Upon A Solid Foundation: The Emergence of a Global Emissions Trading System (2007) Geneva, International Emissions Trading Association, 42 at 44. 129 Ibid,43. The primary market relates to the sale of credits, prior to issue by the CDM Executive Board, through emission reduction purchase agreements (ERPA) while the secondary market trades CERs which have actually been issued by the board. 130 Ibid.
393 assisted by the circular definitions currently utilised in standard form contracts
for the generation and sale of tradeable emission instruments. 131
B The Emergence of Domestic Carbon Trading Systems
The international climate change regime relies upon the domestic implementation of emission reduction policies and initiatives to achieve its objectives of avoiding the adverse effects of climate change. Through its silence on the matter, it also (inadvertently) establishes a critical role for national laws in the creation, trade and legal treatment of the range of artificial emission instruments created under the Kyoto Protocol.
131 Many standard form contracts have emerged for use in international transactions of carbon credits. In the case of contracts for emission reduction projects, these contracts are vital to managing risks and liabilities associated with both the project and the ultimate transfer of credits. For example, the International Emissions Trading Association standard form Emission Reduction Purchaser Agreement , Version 3 (2006) and Code of CDM Terms Version 1 (2006) is widely used for CDM projects involving the sale of generated CERs. That standard form agreement adopts a somewhat circular definition for ‘Certified Emission Reduction’ and refers to the Kyoto Protocol to define the rights associated with those instruments. The definition reads as follows: ‘a unit issued pursuant to Article 12 of the Kyoto Protocol as well as other relevant International Rules and is equal to one metric tonne of Carbon Dioxide Equivalent, calculated in accordance with the International Rules.’ International Rules are defined as: ‘the UNFCCC, the Kyoto Protocol, the Marrakesh Accords, any relevant decisions, guidelines, Modalities and procedures, made by the COP/MOP and Executive Board, in each case as amended from time to time.’ These circular definitions of tradeable emission instruments are a common occurrence in transactions on the international climate market. The IETA Agreement also contains a number of contractual provisions addressing the generation and transfer of CERs. These include a description of the project which will generate the CERs and specification of the number of credits to be purchased at the agreed unit price. The IETA Agreement also imposes obligations on the seller for the verification and registration of the project and for the implementation of the agreed monitoring plan. Where agreed by the parties, the agreement may also include conditions precedent regarding host country approval of the project. Following verification, the IETA Agreement requires the seller to procure delivery of the requisite number of CERs to the purchaser’s CDM registry account. The agreement addresses a range of circumstances that may give rise to rights to terminate. Events of default include the withdrawal of one party’s government from the Kyoto Protocol. In the event that this occurs, instruments may not be issued to CDM and JI project participants from that nation party. In the event of non-delivery of CERs, the agreement provides the purchaser with a number of options including the provision of replacement CERS by the seller, the provision of Market Damages for the delivery shortfall and termination of the agreement. However, where the shortfall is the result of a change in law (rending delivery of the instruments unlawful) or the occurrence of a force majeure event then the seller is relieved from its obligations under the agreement. Interestingly, the above contractual provisions do not specify the full rights and liabilities associated with these CERs in terms of ownership, use and transfer. Presumably, this is due to concerns that an over enthusiastic definition might result in instruments which are not compatible with, or recognised by, the international climate market. However, given the acute silence at the international level, the contractual agreement is a critical medium for providing further clarification on the bundle of rights and protections.
394 In response to the creation of the international climate market, climate change regulation, at domestic and regional levels, place a heavy emphasis on the benefits of utilising market mechanisms to facilitate the achievement of emission reductions:
the main characteristic [of climate law] is the extraordinary reliance on economic policy instruments...as the principal means of influencing energy use and GHG emissions. Indeed, no field of environmental law relies more on economic mechanisms. 132
If the emergent carbon trading schemes do make concerted efforts to adopt compatible designs then linkages may be forged between these market systems. The resulting benefits of linked, multi-national, carbon markets could potentially include a larger volume of traders, harmonious monitoring and reporting standards, fungibility of emission instruments and the more cost-effective operation of the overall carbon market. However, to operate effectively, the climate change regime and any linked domestic or regional emissions trading scheme must create clearly defined emission instruments with appropriate legal protections. Such clarity is necessary in order to inform the global carbon market as to what is being sold, for the market to determine what monetary value to assign to those rights and for the holder of the instrument to be empowered to use and protect his or her bundle of rights. Regrettably, few domestic jurisdictions have created specific statutory laws to clarify legal ownership of these emission reduction credits and those that have done so have adopted ad hoc inconsistent approaches. Consequently, these tradeable instruments take on a number of different forms under the international market and their legal characteristics vary significantly through international, domestic and contractual spheres thus undermining the potential effectiveness of these markets.
132 Benjamin Richardson, 'Climate Law and Economic Policy Instruments: A New Field of Environmental Law' [2004](1) Environmental Liability 19 at 19.
395 C European Union Emissions Trading Scheme
The member states of the European Union (EU) elected to fulfil their commitments under the Kyoto Protocol as an ‘EU Bubble’ and have a collective commitment to achieve an eight per cent reduction in greenhouse gas emissions
by 2012.133 The EU commenced a multi-national emissions trading scheme (EU Scheme) from January 2005 as one of the key policy measures to achieve greenhouse gas emission reductions and to assist EU member states to meet their
target under the Kyoto Protocol. 134 Each member state was obliged to implement the EU Scheme through the passing of national legislation consistent with the directives of the EU Parliament. The trading scheme imposes caps on the national carbon dioxide emissions of all member states which must then be translated into national plans with allocations for the various domestic sectors. There are also proposals to expand the EU Scheme, post-2012, to address
emissions from air transportation, and potentially, maritime transportation. 135
The European Union Scheme is administered by the EU Commission and implemented through statutory enactments within the domestic jurisdictions of
participating member States.136 Accordingly, the market scheme applies across a range of domestic legal systems with their varying climate policies and property law principles. The scheme is subject to a double layer of regulation by both the EU administrator and the local national administrator. Those local administrators implement the scheme in accordance with the directives issued by the EU Commission, other statutory enactments and any applicable local laws. Within the EU, AAUs issued under the Kyoto Protocol are bestowed a dual purpose.
133 This is permitted under Article 4.1 of the Kyoto Protocol, n2. 134 European Union (2005) ‘Greenhouse Gas Emission Allowance Trading Scheme’ at http://europa.eu/scadplus/leg/en/lvb/l28012.htm at 14 June 2008. EU Directive 2003/87/EC (entry into force 25.10.2003) published in OJL of the 25.10.2003. 135 Frank Convery, Denny Ellerman and Christian De Perthuis, 'The European Carbon Market in Action: Lessons From the First Trading Period Interim Report' (MIT CEEPR, Mission Climat of Caisse des Depots, University College Dublin, 2008) at 24. The regulation of, and attribution of responsibility for, emissions from aviation and maritime are also being considered at an international level by the International Civil Aviation Organization (ICAO) and the International Maritime Organization (IMO). 136 EU wide political cooperation to address transnational environmental problems was acknowledged as part of the Single European Act 1986 (EU). Ibid, 7.
396 The allowances are both AAUs for the purposes of the Kyoto Protocol and allowances for the purposes of the EU Scheme. 137
As with the Kyoto Protocol, the EU Scheme is also silent on the exact legal nature of the allowances issued under the scheme and the rights and obligations associated with those allowances. The EU defines its allowances as:
an allowance to emit one tonne of carbon dioxide equivalent during a specified period, which shall be valid only for the purposes of meeting the requirements of this Directive and shall be transferable in accordance with the provisions of this Directive. 138
Allowances are issued by each member State to the operator of each prescribed installation and are valid for the period in which they are issued. 139 Operator’s are only permitted to emit greenhouse gases in accordance with an issued greenhouse gas emission permit. 140 It is a condition of that permit that the operator surrender allowances, at the end of each calendar year, equal to the total emissions of the installation. 141 Allowances are issued to the installations in accordance with each member State’s National Allocation Plan. 142 Those National Allocation Plans are required to be submitted to and approved by the EU. 143
137 Accordingly, EU allowances can have different legal characteristics at the same time at two different legal planes. Anthony Hobley and Peter Hawkes, 'GHG Emissions Trading Registries' in David Freestone and Charlotte Streck (eds), Legal Aspects of Implementing the Kyoto Protocol Mechanisms: Making Kyoto Work (2005) Oxford, Oxford University Press, 127 at 143. 138 European Union, Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC (entry into force 25.10.2003) published in OJL of the 25.10.2003., Article 3 (a). 139 Ibid, Articles 11 and 13. 140 Ibid, Article 6(1). 141 Ibid, Article 6(2)(e). 142 Ibid, Article 9. 143 Ibid.
397 Allowances are valid for the commitment period in which they are issued and are able to be held by any person. 144 Allowances are able to be transferred between members of the European Union and to third parties who have entered into a bilateral agreement with the EU. 145 In addition, member States may allow operator’s to surrender a proportion of required allowances, in the form of CERs and ERUs, from CDM and JI projects implemented outside of the EU. 146
The EU Registry is comprised of a series of linked national registries between the member States. These national registries are standardised electronic databases with a communication link. 147 Operators and individuals within the member State may establish accounts in their local registries. As with the international system, all transactions between the EU registries will proceed via the Community Independent Transaction Log. The independent transaction log will identify irregularities in the issue, transfer and cancellation of allowances. 148 Where an irregularity is identified, the member State must not register the transaction until the irregularities have been resolved. Accordingly, rights of transfer of EU allowances are conditional upon the ‘approval’ of both the member State and the Central Administrator. It is possible that errors may occur in this process and it is questionable whether the EU Commission could be held legally responsible. Commentators suggest that claims might be brought where the termination of a transaction is on the ground that the local registry is not in compliance with the eligibility requirements of the Kyoto Protocol. In those circumstances, it is possible that this would amount to indirect appropriation of
144 Ibid, Articles 13(1) and 19 (2). 145 Ibid, Article 12. 146 European Union. Directive 2004/101/EC of the European Parliament and of the Council as of 27 October 2004 amending Directive 2003/87/EC establishing a scheme for greenhouse gas emission allowance trading within the Community in respect of the Kyoto Protocol's project mechanism (entry into force 13.11.2004) published in OJL 338 of 13.11.2004, Paragraphs (5),(7) and (10). 147 Commission Regulation (EC) No 2216/2004 of 21 December 2004 for a standardised and secured system of registries pursuant to Directive 2003/87/EC of the European Parliament and of the Council and Decision No 280/2004/EC of the European Parliament and of the Council, Official Journal of the European Union L. 386/1 (29.12.2004). 148 2003/87/EC, n138, Article 20.
398 the investment of a foreign investor, but this is largely unchartered territory and the success of such a claim remains uncertain. 149
The allowances under these trading schemes are created, traded and held in a virtual environment. Accordingly, security of holding accounts and the electronic servers are vital components of protecting the bundles of rights associated with these legal instruments. In particular, the holder should be entitled to compensation for any losses resulting from the breach of that security where the holder is not at fault. 150
Allowances are able to be transferred between members of the European Union and third parties who have entered into a bilateral agreement with the EU. 151 Norway, Iceland and Liechtenstein linked the Norwegian emissions trading system with the EU Scheme in 2008 following steps to ensure compatibility in
the rules regarding sectoral coverage, allocation, monitoring and verification. 152 It is possible, from a legal perspective, that the proposed Australian emissions trading scheme could be linked to the EU Scheme through bilateral arrangements. However, for this to be effective, the nature and treatment of allowances must be consistent across all of the linked emissions trading systems.
A review of Phase I of the EU Scheme concluded that there was significant inconsistency between the National Allocation Plans of each country, particularly in relation to the rules for new participants and exiting participants, leading to
149 Anthony Hobley and Peter Hawkes, n137, 150-151. 150 The EU Directives and Regulation relating to the emissions trading scheme do not exclude any liability for those losses incurred as a result of failure in the registry as this is prohibited under the EC Treaty. Annex V of the regulation sets out the core terms and conditions which account holders may be required to accept and this does include provisions which limit the liability of the registry administrator and/or the account holder. 151 2003/87/EC, n138, Article 12. 152 Frank Convery, Denny Ellerman and Christian De Perthuis, n135, 22.
399 undue complexity and lack of transparency of rules. 153 The market also experienced significant price volatility as a result of the surplus of allowances
with Phase 1 allowances falling to less than one Euro in 2007. 154 Phase II of the EU Scheme will have more stringent limits on the allocation of allowances and
more harmonised treatment of installations across the member States. 155 The exact legal nature of the allowances issued under the EU Scheme remains uncertain and domestic treatment under the varying property laws varies between member States. This is an ongoing legal issue to be resolved in both the international climate market and the EU Scheme.
D United Kingdom Emissions Trading Scheme
Members of the EU are required to implement the Directive for the establishment of a scheme for greenhouse gas emission allowance trading into domestic law. In the United Kingdom (UK), this was achieved through the Greenhouse Gas Emissions Trading Scheme Regulations 2005 (the UK Regulation). 156 In preparing the legislation, it was unfortunate that the UK did not take the opportunity to clarify the definition of ‘allowances’ for the purposes of the UK. Instead, the UK Regulation simply refers to the meaning adopted in the EU Directive and the nature of the right being allocated remains unclear. 157 Even less satisfactory is the adopted definition of ‘greenhouse gas emissions permit’ which does not refer to the EU Directive for its interpretation but is stated as meaning a permit granted under the regulation. 158 The conditions able to be imposed on the permit are stated in broader terms in the UK Regulation than those specified under the EU Directive and a UK permit may be issued with ‘such conditions as the regulator considers appropriate’.159
153 Commission of the European Communities, 'Communication : Further Guidance on Allocation Plans for the 2008 to 2012 Trading Period of the EU Emission Trading Scheme' (COM (2005) 703, 2005) at 16. 154 Frank Convery, Denny Ellerman and Christian De Perthuis, n135, 15. 155 Ibid, 25. 156 Greenhouse Gas Emissions Trading Scheme Regulations 2005 (Statutory Instrument 2005 No. 925)(UK). 157 Ibid, Regulation 2. 158 Ibid, referring to the issue of permits under Regulation 9. 159 Ibid, Regulation 10.
400 A separate mandatory emissions trading scheme will be introduced in the UK,
from 2010, under the Carbon Reduction Commitment (CRC) scheme. 160 The scheme will apply to large businesses and public sector organisations whose energy use emissions are currently not regulated under the EU Scheme or other
UK programs. 161
The UK registry performs three different roles with respect to trading. It was a registry for the purposes of the UK Emissions Trading Scheme which ran from 2002 to 2006. It is an EU registry for the purposes of the EU Emissions Trading Scheme and it is a national registry for the purposes of the Kyoto Protocol. As such, the ramifications of failed transactions and compromised servers, especially in the international arena, are profound and the apparent lack of administrator
accountability for such losses appears unreasonable. 162
E New Zealand Emissions Trading Scheme
The New Zealand (NZ) Government is also intending to implement a NZ emissions trading scheme from 2008 to assist in achieving its target under the Kyoto Protocol. 163 The scheme is based on the trade of so-called New Zealand Units. For the first commitment period of the Kyoto Protocol from 2008 to 2012, each New Zealand unit will be backed by one Kyoto Protocol unit held by the Crown and the market will operate under the global cap set by the Kyoto
160 The first capped phase will begin in 2013. DEFRA, ‘Action in the UK-Carbon Reduction Commitment’ http://www.defra.gov.uk/environment/climatechange/uk/business/crc/qanda.htm at 14 June 2008. 161 Including the UK Climate Change Agreements. Ibid. 162 Any liability relating to, among other matters, delays, errors, unauthorised accesses, software faults and server failures is limited to £5,000 for any liability arising in any year including where an account holder holds multiple accounts. Economic losses, such as loss of profits and opportunity loss, and liabilities relating to lost security rights, software or data corruption and regulatory fines or penalties are excluded. UK Environment Agency ‘EU Emissions Trading Scheme: UK Registry: Registry Terms and Conditions’ (Version 1.0: May 2005), Clauses 8.1 and 8.2. 163 New Zealand Government, ' Climate Change (Emissions Trading and Renewable Preference) Bill 2007 (NZ): Explanatory Note' (2007) at 4. Bill introduced to the New Zealand Parliament in December 2007. This bill will amend the Climate Change Response Act 2002 (NZ).
401 Protocol.164 Liable entities must surrender one emission unit to cover each metric tonne of eligible emissions in a compliance period.165 AAUs and CERs from certain eligible activities under the international climate market may be surrendered in compliance with the New Zealand scheme.166 A self-assessment compliance scheme, similar to that used in the taxation system, will be utilised but any identified non-compliance will result in the imposition of penalties and
an obligation to ‘make good’ the shortfall. 167 The market is designed to incrementally cover all greenhouse gases and all sectors, including agriculture and forestry, by 2013. 168 The NZ scheme will involve the devolution to landowners of both the credits for forestry activities that lead to a removal of carbon dioxide from the atmosphere, and the liabilities for the subsequent release of carbon dioxide into the atmosphere by harvesting or deforestation. 169 Sales and purchases from the international climate market are permitted and it is intended that future linkages with other domestic and regional emissions trading schemes will be established. 170 However, this scheme has quite a unique approach to emissions trading and may not be compatible with other established markets such as the EU Scheme.
164 New Zealand Government, ' Climate Change (Emissions Trading and Renewable Preference) Bill 2007 (NZ): Explanatory Note' (2007) at 6. New Zealand Government, 'The Framework for A New Zealand Emissions Trading Scheme' (2007) at 5, 47. New Zealand’s agreed target under the Kyoto Protocol is to reduce emissions to 1990 levels by 2012. 165 New Zealand Ministry for the Environment and the Treasury, 'The New Zealand Government's Proposal for an Emissions Trading Scheme' in David Lunsford (ed), Greenhouse Gas Market 2007 Building Upon A Solid Foundation: The Emergence of a Global Emissions Trading System (2007) Geneva, International Emissions Trading Association, 6 at 6. 166 CERs from nuclear activities are currently excluded from the scheme. New Zealand Government, 'Climate Change (Emissions Trading and Renewable Preference) Bill 2007 (NZ): Explanatory Note' (2007) at 6. 167 Civil penalties will be imposed for identified non-compliance with more severe criminal penalties to be imposed where the participant (including company directors) does so knowingly. New Zealand Government, 'The Framework for A New Zealand Emissions Trading Scheme' (2007) at 51-53, 55. New Zealand Ministry for the Environment and the Treasury, n165, 7. 168 New Zealand Ministry for the Environment and the Treasury, n165, 6. 169 Ibid. 170 New Zealand Government, n167, 46. New Zealand Government, ' Climate Change (Emissions Trading and Renewable Preference) Bill 2007 (NZ): Explanatory Note' (2007) at 7.
402 F US State-Based Trading Scheme
There are also a number of proposed regulated emissions trading schemes for the future including the US Regional Greenhouse Gas Initiative (RGGI) which is scheduled to commence in 2009. RGGI comprises of a multi-state cap and trade program using a market-based emissions trading system. 171 Ten US Northeast and Mid-Atlantic states have agreed to implement a cap on carbon dioxide emissions from those electricity generators with a capacity larger than 25MW and with more than 50 per cent fossil fuel use. 172 The agreed cap is to achieve reductions of 10 per cent below 1990 greenhouse gas emissions levels by 2017. Similar initiatives, and possible involvement in the RGGI market, are being considered by a number of other US States. 173
G Voluntary Carbon Trading Schemes
The emerging international and regional carbon markets have acted as a catalyst for the implementation of emission reduction projects and the sale and purchase of emission instruments on the voluntary markets. From the sky above to the Earth below, the generation and acquisition of credits has been utilised for a range of emissions including those associated with air travel, sea transport, car manufacturing and the hosting of conferences and concerts. It is possible to create a carbon asset or emission instrument purely by way of contract. That contractual asset will exist regardless of whether it is recognised by a regulatory scheme or under the international climate change regime. These contracts generally provide for the independent verification of the level of abatement of emissions resulting in the contractual creation and transfer of Verified Emission Reductions (VERs).
171 Regional Greenhouse Gas Initiative ‘Memorandum of Understanding’ 20 December 2005 http://www.rggi.org/agreement.htm at 14 June 2008. 172 RGGI, ‘About RGGI’, http://www.rggi.org/about.htm at 14 June 2008. Anthony DePalma, 'Nine States in Plan to Cut Emissions by Power Plants', The New York Times 24 August 2005, http://www.nytimes.com/2005/08/24/nyregion/24air.html?ex=1282536000&en=9b4ffd991f98cd72&e i=5088&partner=rssnyt&emc=rss at 14 June 2008. 173 RGGI, ‘Participating States’ http://www.rggi.org/states.htm at 14 June 2008.
403 Voluntary emission reductions may be generated and traded for a variety of reasons. The VER may be created from the abatement activities of an approved CDM project prior to its registration with the CDM Board or from a CDM project that has failed to meet the stringent approval requirements under the
CDM rules. 174 Purchasers of VERs may invest in these credits in order to voluntarily offset their emissions or they may hold them in anticipation of these instruments being recognised by, and able to be submitted in compliance with, a future domestic emission trading scheme. This will involve a high level of risk for the purchaser regarding the compatibility of the voluntary standard of verification with any future statutory requirements for the recognition of the instrument.
VERs may be established through an entirely independent contractual process or through a voluntary abatement scheme with its own standards and requirements for generation of the credits. Under a voluntary emissions reduction scheme, each participant contractually agrees to comply with a voluntary emission reduction target that is set in accordance with a prescribed baseline year. Examples of voluntary schemes include the US Chicago Climate Exchange (CCX), and the previous Australian Greenhouse Challenge and Greenhouse
Challenge Plus programs. 175 Participants must reduce their actual emissions or acquire and retire VERs to meet their targets. Contractually agreed penalties are imposed for non-compliance with the rules of the voluntary scheme. These programs rely on voluntary cooperative agreements between the regulator and participants which specify the level of emissions reductions to be achieved;
monitoring and reporting obligations; and the consequences of non-compliance. 176
174 Martijn Wilder and Liz Day, 'Voluntary Carbon Market – A Legal Perspective' in David Lunsford (ed), Greenhouse Gas Market 2007 Building Upon A Solid Foundation: The Emergence of a Global Emissions Trading System (2007) Geneva, International Emissions Trading Association, 121 at 121. 175 For a discussion of the operation of the voluntary Greenhouse Challenge programs (1995-2005) see Rory Sullivan, 'Greenhouse Challenge Plus: a new departure or more of the same?' (2006) 23(1) Environmental and Planning Law Journal 60 at 69. From 1 July 2006, participation in Greenhouse Challenge Plus became mandatory for those Australian companies claiming excise credits of more than $3 million per annum. AGO ‘Fuel Tax Credits and Greenhouse Challenge Plus Membership’ http://www.greenhouse.gov.au/challenge/members/fueltaxcredits.html at 14 June 2008. 176 Rory Sullivan, ibid, 62.
404 CCX was launched in 2003 and was the first emission reduction and trading system to address all six greenhouse gases. The scheme was self-regulatory and allowed entities from any country to agree voluntarily to the imposition of binding obligations to reduce their greenhouse gas emissions reductions. In Phase I, ending in December 2006, CCX members were required to reduce direct emissions to four per cent below the specified baseline period of 1998-2001. 177 Phase II, will continue until 2010 and requires CCX members to reduce their emissions to six per cent below that baseline. 178 Non-compliance results in the imposition of enforceable penalties. The commodity traded on the CCX is the CFI contract which represents 100 metric tons of carbon dioxide equivalent. CFI contracts are comprised of both Exchange Allowances and Exchange Offsets. Exchange Allowances are issued to Members in accordance with their emission baseline whilst Exchange Offsets are generated by qualifying offset projects. 179 There are proposals to link the CCX with the EU Scheme and to allow EU allowances to be used in compliance with CCX obligations.
The Greenhouse Friendly program certified and independently verified voluntary abatement and offset projects in Australia. Approved Abatement Projects must have demonstrated that the abatement generated was additional to ‘business as usual’ and generated permanent and verifiable greenhouse gas emissions
reductions or sequestration 180 Approved abatement projects have included energy efficiency initiatives, waste diversion and recycling, land fill gas capture and flaring, renewable energy generation, and tree planting and avoided deforestation
projects. 181
177 Chicago Climate Exchange, ‘About CCX’ at http://www.chicagoclimatex.com/content.jsf?id=821 at 14 June 2008. 178 Ibid. 179 Eligible offset projects, including CDM projects, must be registered and are subject to third party verification. Chicago Climate Exchange, ‘CCX Offsets Projects’ at http://www.chicagoclimatex.com/content.jsf?id=23 at 14 June 2008. Ibid. 180 Australian Greenhouse Office, 'Greenhouse Friendly Guidelines' (AGO, 2006) at 19. 181 Australian Greenhouse Office, ‘Abatement Projects’ http://www.greenhouse.gov.au/greenhousefriendly/abatement/projects.html at 14 June 2008.
405 The Australian Climate Exchange (ACX) was launched in 2007 to facilitate the sale of VERs from the Greenhouse Friendly program and any other future
emissions commodities. 182 There is significant scope for the generation of offsets from Australian land to be sold to participants in the existing regulatory schemes provided that the projects are consistent with the rules and requirements of those other regimes. The types of activities that could generate offsets include changes in soil management and land management practices as well as the deliberate planting and cultivation of vegetation and trees on the land to store greenhouse gases.
Approved Greenhouse Friendly abatement projects could be used by Greenhouse Challenge Plus members to offset their emissions. Those projects have included tree planting and avoided deforestation projects and the Carbon Pool and Carbon Smart projects. To apply for approval as an abatement project under Greenhouse Friendly applicants must have:
prepared and submitted an Eligibility Statement;
prepared an Emissions Abatement Study for the project;
developed a Project Monitoring Plan;
had these documents independently verified; and
submitted the application to the Australian Greenhouse Office. 183
Environmental planting projects must have demonstrated that the projects involve an investment or behaviour change that would not normally be undertaken as part of established operating practices. 184 Greenhouse Friendly
182 ACX, ‘Australian Climate Exchange: Trading Platform’ http://www.climateexchange.com.au/Content/tpAbout.aspx at 14 June 2008. The ACX currently lists VERs from non-forest abatement projects approved by the Australian Greenhouse Office under the Greenhouse Friendly program. 183 Australian Greenhouse Office, 'Greenhouse Friendly Guidelines' (AGO, 2006) at 5. 184 Ibid, 21.
406 abatement projects must occur within Australia and must generate greenhouse gas emission reductions or sequestration that are: additional (beyond business as usual); permanent; and verifiable. 185 Consequently, there are a number of legal issues in the successful implementation of offset activities involving the generation of carbon from the maintenance of vegetation stocks on land. These include:
additionality of reductions;
permanence of reductions;
security of tenure and rights to access and maintain carbon stocks;
contractual rights and obligations of the landholder and government; and
interactions with existing statutes and the future regulation of agricultural emissions by the Federal government.
The project must undertake an activity that goes beyond the ‘business as usual’ management practices of the landholder. It should not be an activity that is mandated by any enforced law, statute or other regulatory framework. 186 Accordingly , any abatement associated with vegetation reserves maintained on land as a result of statutory prohibitions, such as the Vegetation Management Act 1999 (Qld), will find the threshold of additionality problematic to reach. 187 The permanence of emissions reductions from trees and vegetation is also a significant issue. Carbon stocks in vegetation fluctuate over time and emissions reductions are not permanent. Because of this, under the Kyoto Protocol only temporary credits are issued for carbon sink projects. In contrast, under the
185 Ibid, 19. 186 Voluntary Carbon Standard, 'Voluntary Carbon Standard 2007' (VCS Association, 2007) at 14-15. 187 Projects implemented to meet regulatory compliance obligations are not eligible abatement projects under the Greenhouse Friendly program, Australian Greenhouse Office, 'Greenhouse Friendly Guidelines' (AGO, 2006) at 19.
407 Greenhouse Friendly program permanent credits are issued provided that the stocks are maintained for at least seventy years. 188
The third issue is the ability to guarantee to both the regulator and the purchaser of the credits that the landholder is able to ensure continued rights to access the land and protect the carbon stocks. The regulator of the Greenhouse Friendly program requires evidence of ‘secure ownership’ of both the sequestered carbon and the land on which it resides. For an owner with freehold title to the land this is challenging enough but to an occupier in possession under a lease of Crown land it is highly problematic as the Crown retains broad prerogative powers of reservation and resumption in respect of leasehold land.
There is also the question of who owns the trees and vegetation on the land? It appears that these are vested in the Crown under the terms of most standard form state leases. If this is the case then the relevant state government would have to assign ownership of the carbon to the landholder as well as being a signatory to all contractual agreements between the landholder and the purchaser.
As noted, VERs may also be created established outside of these formal programs. In such cases, most projects are implemented and certified by independent verifiers to an agreed standard. Independent verification is essential in order to ensure that the emission reductions that the VERs represent have actually been achieved. However, not all VERs are verified resulting in some
criticism that those instruments are lacking in environmental credibility.189 There is also no central register for the surrender of used VERs with the potential for
these instruments to be onsold and used to offset multiple emission sources. 190
188 Australian Greenhouse Office, 'Greenhouse Friendly Guidelines' (AGO, 2006) at 19-21. 189 House of Commons Environmental Audit Committee, 'The Voluntary Carbon Offset Market' (House of Commons, 2007) at 18. 190 Martijn Wilder and Liz Day, n174, 122.
408 There are a range of standards available for use in the independent verification of offset projects. The Voluntary Carbon Standard is intended to ensure that all VCS offsets are real, additional, measurable, permanent, independently verified and unique (that is, the same abatement is not used more than once to offset
emissions). 191 The Gold Standard for Voluntary Offsets , developed by non- governmental organisations, also applies additional criteria to ensure that meaningful consultation with local stakeholders is carried out and that abatement
projects assist in achieving sustainable development. 192 Gold Standard VERs are only created following independent validation and verification by an expert
accredited under the international climate change regime. 193 Finally, the Climate, Community and Biodiversity Standards (CBB) have also been developed for land-based projects that are intended to deliver climate, biodiversity and
community benefits. 194
191 Voluntary Carbon Standard 2007 (VCS 2007) ‘About the VCS’ http://www.v-c-s.org/about.html at 14 June 2008. 192 Only project activities involving renewable energy and end–use energy efficiency measures which promote sustainable development are eligible for accreditation under the Gold Standard. The Gold Standard, 'The Gold Standard: Voluntary Emission Reductions (VERs) Manual for Project Developers' (2006 (version 5)) at 10, 13; www.cdmgoldstandard.org at 14 June 2008. 193 The Gold Standard, 'The Gold Standard: Voluntary Emission Reductions (VERs) Manual for Project Developers' (2006 (version 5)) at 32-36. 194 CCBA, 'Climate, Community and Biodiversity Project Design Standards' (The Climate, Community and Biodiversity Alliance, 2005) at 6-7; www.climate- standards.org/images/pdf/CCBStandards.pdf at 13 June 2008. There are three levels of CCB validation: approved, silver and gold.
409 It should be emphasised that instruments generated from voluntary projects may not have statutory recognition under any future emissions trading scheme. These VERs exist primarily within the four corners of the contract and will be protected only as a contractual right unless specific legislation is passed to address these
rights.195 Accordingly, the scope and content of the contractual documentation for these abatement projects is crucial in order to delineate clearly the rights and
liabilities to be allocated between the parties. 196
H Designing An Emissions Trading System For Australia
As can be seen from the above analysis, a range of regulated and voluntary carbon markets have emerged across the globe all possessing significantly different legal features. These schemes have been created in broad terms making it difficult to predict the legal interactions that may occur between these schemes. Moreover, many of these schemes are still in the design stages with much of their
195 Martijn Wilder, Monique Willis and Katherine Lake, n65, 54. 196 A contract for the sale of credits generated from abatement or offset projects should generally address the follow aspects: i. definition of the project in terms of its geographic location, timeline for implementation and description of the emissions reduction or sequestration activities to be undertaken; ii. specification of the requirements for ongoing monitoring of abatement activities and maintenance of carbon stocks (for forest offset projects); iii. specification of the agreed baseline of the project and the methodology for calculating the credits to be generated from the emissions reduction or sequestration activities; iv. specification of the standard of verification to be applied to the project and the process for verification and certification of emissions reductions; v. identification of the time for the crystallisation of the credits; the quantity of credits to be delivered and the process for the issuance and transfer of those credits into the buyer’s registry account; vi. specification of the agreed price per unit for the carbon credits; vii. definition of the bundle of rights associated with the credits to be generated and transferred including the provision of a warranty from the seller stating that the credits to be transferred are unencumbered and freely transferable; viii. allocation of the costs of implementation of the project and other transactional costs including the payment of applicable taxes; ix. allocation of the risks and liability for any shortfall in the level of abatement of the project, non-delivery of credits and other default events including provisions to obtain insurance; and x. specification of the dispute resolution process to be applied in the event of a dispute between the parties. The emission instrument will adopt a different character, in terms of the bundle of rights associated with the credit, depending upon the jurisdiction in which those instruments are created, held and used. Accordingly, the choice of governing law for the contract will also have a significant bearing on the legal interpretation of the nature of the credits under the contract.
410 key features yet to be settled and with many practical legal issues yet to be encountered. Even those market systems that have been implemented for some years now, including the EU scheme, are still in the ‘learning by doing’ process but appear to be doing little to address the mounting raft of unresolved legal issues. Together, these factors make it difficult to derive the commonalities in the legal approaches across these emerging schemes.
It now appears certain that Australia will have an emissions trading system in operation from 2010. Given the obvious dysfunctions of these existing multi- national markets, the design of the Australian scheme will be critical in enabling it to operate in an optimal fashion. However, the design and legal features of any future carbon market remain unsettled including key components relating to: the emission reduction targets for the scheme; the participants to be regulated; the nature of the tradeable emission instrument and the rules for the creation, allocation, trade and surrender of the emission instruments. The treatment of offsets and CCS under any such regime is also unclear.
A range of discussion papers and proposed models have been released into the
public arena over recent years. 197 However, no clear guide on the preferred design of the future Australian system has been released by the current government. It is clear that an extensive process of economic modelling and public consultation
will be required prior to the enactment of such a scheme. 198 Given this uncertainty, the following paragraphs present the key legal requirements that should be addressed in any design of an effective emissions trading system.
197 Including National Emissions Trading Taskforce, 'Possible Design for a National Greenhouse Gas Emissions Trading Scheme' (NETT, 2006), http://www.cabinet.nsw.gov.au/greenhouse/emissionstrading at 14 June 2008; Prime Ministerial Task Group on Emissions Trading, 'Report of the Task Group on Emissions Trading' (The Department of the Prime Minister and Cabinet, 2007); Garnaut Climate Change Review, 'Interim Report to the Commonwealth, State and Territory Governments of Australia' (2008); Garnaut Climate Change Review, 'Emissions Trading Scheme Discussion Paper' (2008). 198 The final report of the Garnaut Climate Change Review is expected to be released by the end of September 2008. This report will be one of many factors taken into consideration by the Federal government in devising the emission trading scheme. Draft legislation for the implementation of an Australian scheme is intended to be released for public comment by the end of 2008.
411 I Setting the Emission Reduction Target
The imposition of an enforceable emission reduction obligation, or target, is a primary component of any proposed future emissions trading scheme. Without a clear greenhouse gas emission reduction obligation, the resource allocation function of the trading market will have no purpose. This will render the trading scheme environmentally, economically and legally ineffective. Accordingly, the legal framework should be designed with an appropriate emissions stabilisation pathway, linked to specific emission reduction targets, with an identified time-frame for achievement. Such a target must be inextricably linked with the emerging science. The EU has adopted an independent target of reducing its emissions by 20 per cent below 1990 levels by 2020 and is seeking a global commitment to long-term reductions of 60-80 per cent by 2050. 199 These targets are aimed at stabilising atmospheric emissions at 450 ppm and limiting a rise in the
Earth’s temperature to 2 degrees Celsius. 200
The current Australian Prime Minister has indicated that it will adopt an emission reduction target of 60 per cent reductions in emissions, below 2000
levels , by 2050.201 That target is not yet reflected in legislation and interim targets have not been announced.
199 The EU has stated that it will increase that target to 30 per cent if other developed countries follow suit. European Council Meeting, Brussels, 8-9 March 2006 ‘Presidency Conclusions’ Part III at [32], http://www.consilium.europa.eu/ueDocs/cms_Data/docs/pressData/en/ec/93135.pdf at 14 June 2008. 200 Ibid. The EU advocates that an increase of greater then 2 degrees Celsius will lead to adverse anthropogenic climate change. 201 Prime Minister Kevin Rudd has committed to the adoption of a long term target for Australia of reducing emissions by 60 per cent on 2000 levels by 2050 with interim targets to be established. Prime Minister Kevin Rudd, ‘Ratifying the Kyoto Protocol’ (3 December 2007, Media Statement) http://www.alp.org.au/media/1207/mspm030.php at 14 June 2008
412 The Australian Garnaut Climate Change Review has indicated that:
it is in Australia’s interest to seek the strongest feasible global mitigation outcomes – 450 ppm as currently recommended by the science advisers to the UNFCCC and accepted by the European Union. 202
However, if stabilisation of atmospheric concentrations at 450 ppm is adopted by Australia then that would equate to a reduction of 90 per cent in Australia’s national emissions:
under the 450 ppm…stabilisation illustrative scenarios…if it were agreed that per capita emissions would converge by 2050, then Australia’s absolute emissions would have to be roughly 90 per cent….below 2000 levels in 2050. 203
The adoption of a target for Australia may be influenced by ongoing international negotiations regarding post-2012 emission reduction duties under the climate change regime. Nevertheless, the adoption of long-term and interim emission reduction targets are a critical prerequisite for the design of an effective legal framework to regulate climate change in Australia.
II Identifying the Participants
Once Australia has identified its current and future estimated greenhouse gas emissions, and agreed to short-term and long-term emissions reduction goals for Australia, then the specific features of the trading regime can be determined. At this time, it will be necessary to consider a process to transition the existing mandatory renewable energy trading schemes in
Australia into the new regime and to decommission those schemes. 204
202 Garnaut Climate Change Review, 'Interim Report to the Commonwealth, State and Territory Governments of Australia' (2008) at 25. 203 Ibid, 39. 204 These have included: the Commonwealth Mandatory Renewable Energy Target Scheme; New South Wales/ACT Greenhouse Gas Abatement Scheme; Victorian Renewable Energy Target Scheme
413
A primary concern will be identifying those sectors and greenhouse gases to be included in the trading regime. To be compatible with the climate change
regime, it is preferable that the scheme extends to all six greenhouse gases. 205 The EU Scheme currently includes carbon dioxide only and regulates large
industrial and energy-intensive installations. 206 In contrast, the UK Sustainable Development Commission has recommended a trading scheme for all individuals with per capita carbon quotas. 207 Accordingly to the Garnaut Climate Change Review the coverage of the Australian emissions trading scheme should be as broad as possible ‘within practical constraints imposed by measurability and transaction costs’ in order to:
provide an incentive for emissions reductions in all sectors, maximise market liquidity, to minimise the costs of an ETS, and to avoid distortions. 208
While a large number of participants will improve the functioning of the overall market this also involves higher administration and monitoring costs. The largest source of Australian emissions is the stationary energy sub-sector and the transportation sub-sector is also a significant contributor. 209 The number of participants must be able to be managed administratively and the emissions from each emitter must be able to be monitored. For example, there are currently concerns regarding the ability to accurately measure
and Queensland 13 per cent Gas Scheme. There will significant issues in attempting to merge these trading schemes into a national carbon market with their significant variances in the creation and treatment of tradeable instruments. 205 A similar opinion is reached in Garnaut Climate Change Review, 'Emissions Trading Scheme Discussion Paper' (2008) at 27. 206 There is a proposal to include the aviation and shipping sectors in the future. 207 Sustainable Development Commission, ‘Personal Carbon Trading: a radical concept?’ http://www.sd-commission.org.uk/pages/carbontrading.html at 14 June 2008. 208 Garnaut Climate Change Review, 'Emissions Trading Scheme Discussion Paper' (2008) at 27. 209 RSJ (Bob) Beeton et al, 'Australia State of the Environment 2006: Independent Report to the Australian Government Minister for the Environment and Heritage, Department of the Environment and Heritage, Canberra' (Australia State of the Environment Committee, 2006) at 27, available at http://www.environment.gov.au/soe/2006/index.html at 14 June 2008.
414 emissions from the agriculture and forestry sectors in Australia. 210 The Garnaut Climate Change Review notes that emissions from stationary energy, transport, waste, and industrial processes could all be included in an emissions trading scheme and that agriculture and forestry should be included
once measurement and monitoring concerns are resolved. 211
III Defining the Tradeable Emission Instruments
As noted, it is imperative that the legal instruments in the emissions trading system are clearly defined. The statute must define, in a clear and unambiguous manner, the nature of the tradeable emission instruments and the protections and obligations associated with those instruments. Accordingly, it is necessary for domestic laws across Australia to apply consistent rules regarding; the right to hold and to deal with the instruments, taxation liabilities applicable to those dealings, whether compensation is to be afforded for the acquisition or affectation of those rights and other relevant legal principles. It should also be considered whether restrictions should be imposed on the trade and transfer of these allowances within Australia or with overseas parties. 212
IV The Legal Infrastructure
The legal system must be designed to be effective in the implementation, administration and enforcement of the emissions trading system. This will require the imposition of a strict legal duty to reduce greenhouse gas emissions in conjunction with obligations to monitor and report on levels of emissions from regulated entities. To facilitate the trading function of the
210 Ibid, 27-28. 211 Garnaut Climate Change Review, 'Emissions Trading Scheme Discussion Paper' (2008) at 28-29. 212 The Garnaut Climate Change Review interim reports do not consider this legal issue but merely cite Coase in support of the premise that ‘economic efficiency will be achieved as long as property rights are fully defined and that completely free trade of all property rights is possible’ . Ibid, 32.
415 regime, there must also be clear rules for the creation, allocation, transfer and domestic treatment of emission instruments.
It is critical to integrate an effective legal system with the requirements for an effective market system. This tension is illustrated by the following potentially contradictory approaches by the Garnaut Climate Change Review that ‘the challenge in establishing sound governance arrangements is to underwrite stability, continuity, competence and credibility’ 213 and:
in developing the ETS design, the singular objective should be to provide a transactional space that enables the transmission of permits to economic agents for whom they represent the greatest economic value. 214
Monitoring of high number of participants could require significant resourcing of government departments. Vested interests may also attempt to place pressures on government to favour them in administrative decisions. Because of this, the Garnaut Climate Change Review recommends the creation of an Independent Carbon Bank (ICB) to administer the Australian
emissions trading scheme. 215
It is vital that appropriate penalties and liabilities are imposed by a central regulator to identified cases of non-compliance. In terms of enforcement, the penalty for non-compliance must be significantly higher than the market price of the permit in order to act as a proper deterrent. To ensure that the aggregate cap is not exceeded, there should also be imposed an obligation to ‘make good’ the excess emissions and to acquire and surrender emission
instruments from the market.216
213 Ibid, 44. 214 Ibid,5. 215 Ibid, 41. 216 A similar approach is considered by the Garnaut Climate Change Review, ibid, 17,44.
416 V The Use of Offsets and CCS in the System
Rules must also be established regarded the permissibility of submitting offset credits and using CCS in partial or full compliance with emission reduction obligations. It is critical that the regulator ensure that all submitted offset credits, whether from voluntary, regulated or CDM/JI projects, are generated by abatement projects that have resulted in additional, permanent and verifiable greenhouse gas emissions reductions. As noted, additionality
can be a problematic issue. 217
In terms of environmental effectiveness, the use of offset credits from sequestration activities such as forestry, agriculture and CCS should be limited and treated in a manner compatible with the rules under the Kyoto Protocol. If permitted into the scheme, the non-permanence of emissions reductions from these projects should be appropriately acknowledged within
the trading system. 218 The imposition of stringent monitoring and independent verification processes should also be prescribed to ensure that emissions reductions from these abatement projects are in fact ‘real’ and ‘verifiable’.
VI Linkages with Other International and Regional Carbon Markets
The Australian emissions trading system should also be designed and implemented in a manner which is consistent with the international climate change framework and other emerging regional and domestic carbon trading schemes. If Australia succeeds in implementing an emissions trading system, with a compatible legal framework, then it may be able to link with other
217 For example, legal additionality must demonstrate that the abatement of emissions by the project goes beyond what is required to comply with existing laws and regulations. Issues of contention for the regulator, particularly in respect of agriculture and forestry projects, will include the selected baseline for emissions reductions and the eligibility date for the commencement of abatement projects. 218 The inclusion of these offset credits may also prevent linkages with the EU Scheme which currently excludes CERs from nuclear and LULUCF and, under certain conditions, large-scale hydro power projects of over 20MW capacity. However, the New Zealand Scheme does permit the use of these offsets.
417 existing or proposed emissions trading systems such as the international carbon market, the EU Scheme, US markets and NZ trading system either through the international climate change regime or separate bilateral agreements.219
I Requirements for an Effective Multi-National Global Market
Ideally, the current mosaic of emerging emissions trading markets across the world would merge, ultimately, into a fully functioning, multi-national global
carbon market 220 An illustration of the possible future global carbon market is depicted in Figure Five. Once those linkages have been established, each linked market will become vulnerable to the presence of poor governance structures and policies in those linked countries which could potentially result in a total failure of the multi-national market. Consequently, nations must make attempts to achieve a consistent definition of the legal nature of these tradeable emission instruments throughout the linked jurisdictions with harmonised monitoring, reporting and compliance mechanisms across the multiple markets. Concerted efforts must also be made to achieve greater consistency in the domestic treatment of emission instruments under the various domestic regimes for the protection of property.
The above analysis highlights the lack of consistency between the emerging international, regional and domestic carbon trading schemes, and the variances in the treatment of tradeable emission instruments between various domestic jurisdictions. There is no universal definition of the tradeable emission instrument, no universal carbon price and no universal legal framework for the carbon market. Moreover, there is an emerging patchwork of inconsistent
219 For New Zealand suggestions see New Zealand Institute of Economic Research, ‘Emissions Trading Scheme for New Zealand: a report for Business New Zealand’ (26 March 2007) at http://www.businessnz.org.nz/file/1188/Emissions%20Trading%20Scheme%20for%20NZ.pdf at 14 June 2008. 220 Cf. Garnaut Climate Change Review which recommends limiting linkages with the CDM market of the Kyoto Protocol. Garnaut Climate Change Review, 'Emissions Trading Scheme Discussion Paper' (2008) at 35.
418 voluntary, mandatory, cap and trade and baseline and credit market systems with incompatible definitions of instruments, trading rules, recognition of abatement projects, reporting obligations and penalties for non-compliance. The strongest driver and influence on the design of other markets appears to be the EU Scheme. However, the EU Scheme is still in its infancy. Phase 1 was a pilot program
deliberately intended to enable the EU to learn by trial and error. 221 In this context, the linkage of these present systems into a multi-national global carbon market is quite untenable.
Responsibility for this resulting assembly of incompatible markets resides with the climate change regime and is largely the result of the immaturity, complexity and confusion within the international climate market system including its weak legal structure. This is compounded by the embracement of national flexibility in the implementation of the climate change regime and the lack of direction given to parties as to the form and content of domestic climate change systems.
Even if the climate change regime was successful in achieving harmony between the emerging carbon markets it must still contend with the unique legal systems, onto which these markets are fused, and with their varying approaches to the creation, treatment and legal protection of emission instruments. The implications arising from an inconsistent treatment of these tradeable rights are threefold. It will introduce uncertainty and inefficiency into the administration and enforcement of the carbon market. It will prevent the market from achieving confidence in the regulatory system and in the treatment of accrued rights with resulting implications for carbon pricing. The lack of full status under existing property laws may also prevent owners from protecting their rights and from achieving appropriate compensation when those rights are adversely affected. These will undermine player confidence in the market and affect the inherent financial value of the instrument. Collectively, these issues will prevent the full
221 Frank Convery, Denny Ellerman and Christian De Perthuis, n135, 23, 25.
419 commodification of the rights in greenhouse gas emissions which will undermine the achievement of global, cost-effective, emission reductions. To address this deficiency, the international community must establish a common definition for these allowances and clearly characterise the bundle of rights of ownership, use and transfer. There will be obvious difficulties in achieving international consensus on a global model of property law principles across the disparate civil and common law systems. However, ideally, all domestic party jurisdictions would be compelled through an international treaty to enact legislation which harmoniously recognises these defined allowances and provides consistent domestic legal protections for their ownership, use and transfer.
420
Regional EU ETS Voluntary/ State-Based Binding RGGI Japan ETS? Market (US)
New Zealand The Voluntary ETS Multi-National CCX Market Global Carbon (US) Market
International AUS Climate Voluntary Market ETS
AUS
ETS
Figure 5: N. Durrant ‘The Future of the Multi-National Global Carbon Market?’
421
AN EFFECTIVE LEGAL REGIME FOR THE CREATION OF CARBON OFFSETS: RIGHTS TO STORE IN THE EARTH’S SINKS
In addition to the acquisition of credits from the market, there are a number of potential mechanisms by which large-scale emitters, including the coal industry, could generate emission reductions to offset other greenhouse gas emissions.
The Earth has a number of natural stocks which are able to absorb carbon. These include oceans, fossil fuel deposits, the terrestrial system and the atmosphere. 222 The terrestrial system includes rocks, sediments, wetlands, forests, soils, grasslands and agriculture. Photosynthesis absorbs atmospheric carbon into plants, their roots and soil. 223 Changes in land use management can also improve the amount of carbon sequestration in soils such as improved degradation and erosion controls, rehabilitation of degraded lands, conservation tillage, improved fertilisation and forage rotations. 224 In addition, there are a number of direct options by which greenhouse gases may be artificially stored in the geological foundations of the earth. The procedure can be used to extract carbon from emitting stacks and to transfer it for ocean sequestration or geological sequestration using CCS projects. These biological and geological carbon sinks enable liable parties to implement measures to reduce temporarily their level of emissions for the relevant commitment period. In addition, provided that they can be registered and verified, these projects may generate greenhouse gas emission credits under the CDM or under domestic abatement schemes.
222 Julian Dumanski, Klaus von Grebmer and Christian J Pieri, 'Opportunities in Agriculture and Forestry to Mitigate Greenhouse; Results of a Scientific Consultation' (St Michaels, 1998) at 2. 223 Ibid. 224 Ibid, 2-3.
422 Accordingly, the following paragraphs will consider the legal rights to store greenhouse gases in both biological and geological sinks and the associated regulation of these emission reduction projects under international and national environmental law. Recommendations will also be provided for reform of these regulatory arrangements to provide a more consistent, coherent legal approach.
A BioSequestration: storage in forests and soils
Biological carbon sinks enable entities to implement measures to reduce, temporarily, their level of greenhouse gas emissions. In addition, if appropriately registered and verified, these projects may be able to generate greenhouse gas emission credits under the CDM or under appropriate national legislation in the host country.
Atmospheric carbon is absorbed into plants through the process of photosynthesis. 225 This carbon is stored in the branches, leaves and roots of the trees. However, such absorption is not permanent. Plants and trees release a certain amount of carbon dioxide through respiration and the dropping of leaves, bark and branches which decay and release carbon dioxide to the soil and to the atmosphere. 226 In addition, land clearing, timber harvesting, bushfire, disease and decay will all result in the release of carbon. 227
Changes in land use management can also improve the amount of carbon sequestration in soils such as improved degradation and erosion controls, rehabilitation of degraded lands, conservation tillage, improved fertilisation and
225 Julian Dumanski, Klaus von Grebmer and Christian J Pieri, n222, 2. 226 Australian Greenhouse Office Australian Department of the Environment and Heritage, 'Planning Forest Sink Projects: A Guide to Legal, Taxation and Contractual Issues' (Australian Greenhouse Office, 2005) at section 2.1. 227 Ibid, section 2.1.
423 forage rotations. 228 These are all changes which can enhance the natural sinks of the Earth in minimising the amount of atmospheric carbon.
Estimating the amount of carbon stored in a forest stand at a particular point in time is difficult given the fluxes which occur. Therefore constant monitoring is required. There are also liability issues associated with the lack of permanence of the actual emission reductions from these projects and any credits which are issued for these projects. Furthermore, forest sequestration projects have been criticised for promoting the planting of trees which absorb higher levels of carbon rather than species of trees which would necessarily enhance biological diversity.
B Carbon Sequestration and Australian Laws
Carbon sequestration projects raise a number of questions regarding the nature of the rights created in the carbon which is sequestered in the trees. The rights relate to both existing and potential sequestration of an intangible resource and pose a significant challenge to conventional property law principles. Many Australian jurisdictions recognise the right to own carbon sequestered in the trees and vegetation on land separate from the rights relating to the land itself. 229 However, there is no unified approach to these rights and the legislative treatment varies drastically across the various jurisdictions. This inconsistency provides significant challenges for offset projects, particularly where project developers hold land multi-jurisdictionally and must contend with a multitude of compliance regimes.
228 Dumanski, von Grebmer and Pieri, n222, 2-3. 229 Other than the Australian Capital Territory or the Northern Territory.
424 In New South Wales (NSW), the Conveyancing Act 1919 provides for the creation and ownership of separate carbon sequestration rights in respect of the land. 230 A carbon sequestration rights is defined as a ‘right conferred on a person by agreement or otherwise to the legal, commercial or other benefit (whether present or future) of carbon sequestration by any existing or future tree or forest on the land after 1990’. 231
The profit à prendre deemed to exist in relation to the carbon sequestration right is described by the legislation as:
(a) the profit from the land is taken to be the legal, commercial or other benefit (whether present or future) of carbon sequestration by any existing or future tree or forest on the land that is the subject of the carbon sequestration right. 232
These profit à prendre provide the holder of the right with an interest in the land. 233 Traditionally, a profit á prendre has related to the right to take things from the land such as part of the soil, minerals, natural produce, fish or wild animals. 234 This is not strictly compatible with sequestration as that relates to the
storage of carbon on the land rather than the taking of a thing from the land. 235
Forest covenants are also able to be registered on title which address incidental matters associated with the carbon rights such as the provision of access to or the maintenance of trees or forests and the ownership of the trees on the land. 236
230 Conveyancing Act 1919 (NSW) section 87A. 231 Ibid. 232 Conveyancing Act 1919 (NSW) section 88AB(2). 233 Conveyancing Act 1919 (NSW) section 88AB(1). 234 Alfred F. Beckett Ltd v Lyons [1967] Ch 449 at 482B. Kevin Gray, Elements of Land Law (2nd ed, 1993) London, Butterworths at 1045. 235 Paul Curnow and Louisa Fitz-Gerald, 'Biobanking in New South Wales: Legal Issues in the Design and Implementation of a Biodiversity Offsets and Banking Scheme' (2006) 23(4) Environmental and Planning Law Journal 298 at 305. 236 Conveyancing Act 1919 (NSW) ss87A,88F.
425 A similar approach is adopted in Tasmania which provides for the registration of forestry rights, deemed to be profit à prendre. 237 Forestry covenants are also able to be registered on title and are binding on the assignees and personal representatives of the covenantor and on all successors in title of the covenantor to the land. 238
Queensland permits the registration of agreements regarding Natural Resource Products provided that, where the land is held under the Land Act 1994 , the owner owns the natural resource product as an improvement on the land as defined under that Act. 239 Improvement is defined in relatively broad terms and includes ‘cultivation, garden, orchard or plantation’. 240
Natural resource products may include:
all parts of a tree or vegetation, whether alive or dead, including parts below the ground;
carbon stored in a tree or vegetation; and
carbon sequestration by a tree or vegetation. 241
A natural resources product agreement may: vest all or part of the natural resource product in another person; grant another person the right to enter the land to establish, maintain or harvest the natural resource product or to carry out works or activities for the natural resource product; or grant another person the right to deal with the natural resource product. 242 The benefited person’s rights to the natural resource product, under the agreement, are a profit à prendre for the
237 Forestry Rights Registration Act 1990 (Tas) section 5. 238 Forestry Rights Registration Act 1990 (Tas) section 6. 239 Forestry Act 1959 (Qld) section 61J(1A). 240 Land Act 1994 (Qld), Schedule 6. 241 Forestry Act 1959 (Qld) Part 6B, Schedule 3. 242 Forestry Act 1959 (Qld) section 61J(3).
426 purposes of the Land Act 1994 or the Land Title Act 1994 .243 However, the legislation states that the vesting of the natural resource product, under the agreement, does not create an interest in land under the Land Act 1994 or the Land Title Act 1994 .244
In Western Australia a carbon right can be created in perpetuity as a separate interest in the land. 245 The carbon right is both a hereditament and an encumbrance on the land. 246 The proprietor of a carbon right enjoys the legal and commercial benefits and risks arising from changes to the atmosphere that are caused by carbon sequestration and carbon release occurring in or on the land. 247 In addition, the legislation permits the holder of a carbon right to register carbon covenants in relation to the land. 248 A carbon covenant becomes a separate interest in, and runs with, the relevant carbon right as well as attaching to, and running with, the burdened land. 249
In Victoria, the Forestry Rights Act 1996 permits a land owner to enter into a forest property agreement which may: grant a right to plant, maintain and harvest forest property on the land; grant a carbon sequestration right in relation to the forest property; and vest ownership of the forest property in a third party. 250 A forest property owner can also enter into a carbon rights agreement which transfers their carbon sequestration rights to a third party. 251
243 Forestry Act 1959 (Qld) section 61J(5). Land Act 1994 (Qld), Chapter 6, Part 4, Division 8B; Land Title Act 1994 (Qld), Part 6, Division 4B. 244 Forestry Act 1959 (Qld) section 61J(4). 245 But it cannot be varied, Carbon Rights Act 2003 (WA) ss5,6, 9. 246 Carbon Rights Act 2003 (WA) section 6. 247 Carbon Rights Act 2003 (WA) section 8(1). 248 Carbon Rights Act 2003 (WA) ss10-11. 249 Carbon Rights Act 2003 (WA) section 12. 250 Forestry Rights Act 1996 (Vic) section 5. 251 Forestry Rights Act 1996 (Vic) section 12.
427 Certain formality requirements must be met for forest property agreements and carbon rights agreements to be valid. 252 For example, the forest property agreement must specify:
the parties to the agreement;
the land to which it applies;
the forest property to which it applies, including a description of that forest property sufficient to adequately identify it;
the date on or circumstances under which the agreement terminates; and
the rights and duties of the parties to the agreement. 253
The Forest Property Agreement is able to be registered on title. 254 However, a forest property right is deemed to not be an interest in land. 255 The right of entry or access provided in the agreement is not a right of way. 256 A carbon rights agreement is also not an interest in land. 257
The South Australian Forest Property Act 2000 establishes two forms of forest property agreements; vegetation agreements and carbon rights agreements. The Act states that the capacity of forest vegetation to absorb carbon from the atmosphere is a form of property in the nature of a chose in action .258 Under the Act, a carbon right attaches to the forest vegetation to which it relates, and ownership of the right passes with ownership of the forest vegetation. 259 However, ownership of the carbon right can be separated from ownership of the
252 Forestry Rights Act 1996 (Vic) ss6,12. 253 Forestry Rights Act 1996 (Vic) section 6. 254 Forestry Rights Act 1996 (Vic) section 8. 255 Forestry Rights Act 1996 (Vic) ss11(b). 256 Forestry Rights Act 1996 (Vic) ss11(c). 257 Forestry Rights Act 1996 (Vic) ss14. 258 Forest Property Act 2000 (SA) section 3A(1). 259 Forest Property Act 2000 (SA) section 3A(2).
428 forest vegetation under a forest property agreement. 260 Forest property agreements may be registered and are enforceable against successors in title. 261 However, if unregistered, the interest of the transferee is an equitable interest and liable to be defeated by purchasers in good faith, for value and without notice of the agreement. 262
There is a kaleidoscope of inconsistent approaches to the treatment of carbon rights across the Australian states and territories and these regimes appear to have been devised with little regard for their impact on the traditional principles of property law in Australia. The treatment of land and, in particular, carbon rights is fragmented and does not sit comfortably within the existing property law system. There is a critical need to create a new form of property right to appropriately address these novel rights relating to the sequestration of greenhouse gases rather than continuing this awkward treatment of carbon rights. Furthermore, these state-based carbon rights recognising ownership in the stored carbon are inextricable linked with tradeable emission instruments which may be issued as a result of the sequestration of carbon in the forest offset project under the Kyoto Protocol or some other voluntary or regulated domestic carbon trading scheme. There is significant legal uncertainty regarding the interaction between these statutory carbon rights and the issued emission instruments, particularly where the carbon stocks sequestered in the vegetation are depleted following sale of the associated emission instrument. The treatment and longevity of the emission instrument will depend upon the governing scheme. If it is the Kyoto Protocol then only temporary instruments are issued for forest offsets and the instrument will be subsequently cancelled. However, if the instrument has been sold to the unregulated voluntary market then its treatment will be entirely contractual and it is possible that it would continue to be bought and sold as an
offset despite the loss of carbon stocks. 263
260 Ibid. 261 Forest Property Act 2000 (SA) ss7, 9. 262 Forest Property Act 2000 (SA) section 7. 263 Its treatment under a regulated domestic carbon trading scheme will depend entirely on the rules established to deal with this legal issue.
429 AN EFFECTIVE LEGAL REGIME FOR CCS: RIGHTS TO STORE GASES IN THE EARTH’S SUB-SURFACE
Entities may also be able to capture the carbon dioxide at its point of source and artificially store it in formations through the use of CCS technology. CCS involves the capture of the emissions from mining operations, electricity generation plants and other industrial sources and the injection of the carbon dioxide deep into the Earth’s geological foundations such as deep sea-beds (Ocean Sequestration) or subterranean formations (Geological Sequestration). 264
Pilot projects are being implemented in Australia and overseas. Australian examples in operation include the Otway Basin Pilot Project for the injection of carbon dioxide into depleted oil and gas reservoirs in the State of Victoria.265 The legal treatment of this new technology is largely untested. Indeed, as the technological options emerged in recent years, it became apparent that there was an acute absence of national and international law directly applicable to the regulation of these sequestration activities.
A critical issue relates to the sovereign rights of nations to physically access the ocean sub-surfaces and geological formations, under current international laws, and to store the carbon dioxide in those areas. Accordingly, the key legal issues to be resolved relate, first, to the rights to physically access the ocean sub- surfaces and geological formations to store the carbon dioxide and, second, to the long term liabilities associated with the storage of that carbon.
264 Elizabeth Wilson and Mark de Figueiredo, 'Geological Carbon Dioxide Sequestration: An Analysis of Subsurface Property Law' (2006) 36(2) Environmental Law Reporter 10114 at 10114. 265 This is the first geo-sequestration demonstration project in Australia, http://www.co2crc.com.au/otway/ at 14 June 2008. Another proposed project, the Zerogen integrated gasification combined cycle with carbon capture and storage in Queensland is still in the approval application stage http://www.zerogen.com.au/about/timeline at 14 June 2008.
430 The right to sequest carbon will depend upon the location of the proposed storage activity. Where the geological sequestration is intended to take place within sovereign territory then regulation will take place at a national level. This will also be the case where ocean sequestration is to take place within the territorial sea of a nation. The territorial sea extends out from twelve miles from the coastline. Projects may also take place within the Exclusive Economic Zone (EEZ) which extends from the territorial sea out to a maximum of 200 nautical miles from the baselines of the coast. 266 Provided that the nation has claimed the EEZ, in that area, coastal States have sovereign rights of exploration, exploitation and management of the natural resources located in the seabed and waters. 267 The status of the EEZ varies from country to country. For example, Australia has claimed its EEZ through the Seas and Submerged Lands Act 1973 (Cth) whereas the United Kingdom has not claimed its area.
Alternatively, States may exercise sovereign rights to explore and exploit the natural resources of the sea bed and subsoil of the continental shelf. 268 Beyond the EEZ is the high seas in which all States are free to carry out activities provided that due regard is given to the interests of other States and to the rights under UNCLOS regarding international seabed activities.269
A Sequestration within the High Seas
The concept of carbon sequestration was not originally addressed by international law principles simply because the notion of carbon capture and storage was not contemplated at the time of their creation. However, there are some relevant international conventions which relate to sequestration beneath the oceans. These include the United Nations Convention on the Law of the Sea 1982
266 Ray Purdy and Richard Macrory, 'Geological Carbon Sequestration: Critical Legal Issues' (Working Paper 45, Tyndall Centre for Climate Change Research, 2004) at 12. 267 United Nations Convention on the Law of the Sea 1982 (UNCLOS) (Agreed 10 December 1982, Entered into force, 16 November 1994)., Article 2(3). Ray Purdy and Richard Macrory, ibid. 268 UNCLOS, n267, Articles 76 and 77. 269 Ibid, Articles 86 and 87.
431 (UNCLOS), London Convention of 1972 and the London Protocol of 1996. The application of these international agreements is discussed in the following paragraphs.
UNCLOS seeks to provide a legal order for the seas and oceans and imposes a number of general obligations regarding the ocean space. UNCLOS imposes a general obligation on States to protect and preserve the marine environment and notes that States may exploit their natural resources in accordance with that duty to protect. 270 UNCLOS requires that States:
shall take, individually or jointly as appropriate, all measures consistent with this Convention that are necessary to prevent, reduce and control pollution of the marine environment from any source, using the best practicable means at their disposal and in accordance with their capabilities. 271
Pollution of the marine environment is defined in UNCLOS to include:
the introduction by man, directly or indirectly, of substances or energy into the marine environment, including estuaries, which results or is likely to result in such deleterious effects as harm to living resources and marine life, hazards to human health, hindrance to marine activities, including fishing and other legitimate uses of the sea, impairment of quality for use of sea water and reduction of amenities. 272
It is possible that carbon dioxide, in certain quantities, could amount to pollution due to the resulting increase in ocean acidity levels. 273 According to one commentator, the argument could be made that UNCLOS has been breached by those States which emit carbon dioxide thereby permitting the warming of sea surface temperatures; the increase of sea levels; and the increase in carbon
270 Ibid, Articles 192 and 193. 271 Ibid, Article 194(1). 272 Ibid, Article 1(1)(4). 273 Purdy and Macrory, n266,18.
432 dioxide in the sea waters. 274 However, there are a number of difficulties in bringing such an action for breach including standing and causation issues. 275
UNCLOS also imposes obligations on States to take all measures necessary to ensure that activities under their jurisdiction or control are conducted so as not to cause damage by pollution to other States and their environment. 276 All necessary measures includes, inter alia, those designed to minimise to the fullest possible extent:
the release of toxic, harmful or noxious substances, especially those which are persistent, from land-based sources, from or through the atmosphere or by dumping. 277
Dumping in this context means as ‘any deliberate disposal of wastes or other matter from vessels, aircraft, platforms or other man-made structures at sea.’ 278 It does not include placement of matter for a purpose other than the mere disposal thereof, provided that such placement is not contrary to the aims of UNCLOS. 279
The broad rules and framework of UNCLOS are enhanced by the texts of the London Convention and the London Protocol. The London Convention seeks to control pollution of the marine environment including the dumping of waste or other matter that is liable to create hazards to human health, to harm living resources and marine life, to damage amenities or to interfere with other
274 W.C.G. Burns, 'Potential Causes of Action for Climate Change Damages in International Fora: The Law of the Sea Convention' (2006) 2(1) McGill International Journal of Sustainable Development Law and Policy 27 at 38,41,43. Australia has ratified UNCLOS. The US signed UNCLOS but has not ratified the agreement. http://untreaty.un.org/ENGLISH/bible/englishinternetbible/partI/chapterXXI/treaty7.asp at 14 June 2008. 275 Ibid. 276 Ibid, Article 194(2). 277 Ibid, Article 194(3)(a). 278 Ibid, Articles1 (5)(a)(i). 279 Ibid, Article 1(5)(b)(ii).
433 legitimate uses of the sea. 280 Pollution is not defined. The application of the London Convention is limited, in similar terms to UNCLOS, to the deliberate disposal at sea of wastes or other matter from vessels, aircraft, platforms or other man-made structures at sea. 281 The Convention applies to all marine waters other than the internal waters of States. 282
The dumping of certain specified wastes, as set out in the Annexes, is prohibited in the London Convention. 283 In addition, specified wastes above a certain amount require a special permit whilst other wastes are able to be dumped in accordance with a general permit. 284 Carbon dioxide is not specifically included in the Annexes to the Convention. It is debatable whether it is able to be characterised as falling within the prohibited concept of ‘industrial waste’ as waste materials generated by manufacturing or processing operations. 285 Carbon dioxide from mining processes could potentially fall within this definition but electricity production is less likely to constitute manufacture. The Scientific Group to the Convention stated in 1999 that waste derived from fossil fuels did amount to industrial waste. 286 However, the definition of industrial waste specifically excludes any uncontaminated organic materials of natural origin. 287 Therefore emissions resulting from natural processes such as forestry or soils would not apply.
The London Convention operates in parallel with the London Protocol, which entered into force in 2006, and it is being incrementally ratified by the parties.
280 IMO, Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter, the London Convention 1972 (the) (entered into force 1975), Article 1. 281 Ibid, Article 3 (1)(a). 282 Ibid, Article 3(3). 283 Ibid, Article 4(1). 284 Ibid. 285 Ibid, Annex 1(11). Purdy and Macrory, n266, at 21-22. 286 Purdy and Macrory, n266, 25. 287 London Convention, n280, Annex 1(11)(f).
434 The primary objective of the London Protocol is for the parties to:
individually and collectively protect and preserve the marine environment from all sources of pollution and take effective measures, according to their scientific, technical and economic capabilities, to prevent, reduce and where practicable eliminate pollution caused by dumping or incineration at sea of wastes or other matter. 288
Pollution is defined under the Protocol in similar terms to those under UNCLOS. 289 The definition of dumping, under the London Protocol, is also cast in similar terms to the Convention but includes an additional element of ‘any storage of wastes or other matter in the seabed and the subsoil thereof from vessels, aircraft, platforms or other man-made structures at sea’.290 The London Protocol also applies to all marine waters but also applies to the sea, sea-bed and subsoil. 291 It does not include sub-seabed repositories accessed only from land. 292
The London Protocol applies the precautionary principle in the following terms:
contracting Parties shall apply a precautionary approach to environmental protection from dumping of wastes or other matter whereby appropriate preventative measures are taken when there is reason to believe that wastes or other matter introduced into the marine environment are likely to cause harm even when there is no conclusive evidence to prove a causal relation between inputs and their effects. 293 (emphasis added)
288 IMO, Protocol on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter, the London Protocol 1996 (entered into force 2006), Article 2. 289 Ibid, Article 1(10). 290 Ibid, Article (1)(4). 291 Ibid, Article 1(7). 292 Ibid. 293 Ibid, Article 3(1).
435 The London Protocol prohibits the dumping of any wastes or other matter other than those listed in Annex 1. 294 Annex 1 now includes ‘CO2 streams from CO2 capture processes’ in addition to ‘inert, inorganic geological material’ and ‘organic material of natural origin’. The dumping of these wastes may be permitted following the issue of a permit for the activity by the International Maritime Organisation. Approval to issue the permit will be subject to guiding regulations for carbon sequestration which are still to be agreed by the parties. The amendments to the London Protocol specify that carbon dioxide streams may only be considered for dumping, if: disposal is into a sub-seabed geological formation; they consist overwhelmingly of carbon dioxide (they may contain incidental associated substances derived from the source material and the capture and sequestration processes used); and no wastes or other matter are added for the purpose of disposing of them. 295
B Regulation of GeoSequestration Projects in Australia
In addition to ocean sequestration, sequestration could also take place in geological formations within Australian territory. The carrying out of those activities would be regulated by Australian legislation. The carrying out of geological sequestration activities in Australia will encompass many phases including the capture of the carbon dioxide, its transportation, injection underground and indefinite storage. All of these activities require some level of government approval and regulation.
Initial steps have been taken in Australia to establish nationally consistent framework principles and guidelines for the establishment of carbon sequestration projects. The Carbon Dioxide Capture and Geological Storage Regulation was endorsed by the Federal Ministerial Council on Mineral and
294 Ibid, Article 4(1). 295 These amendments entered into force on 10 February 2007, IMO, ‘Marine Environment/Dumping of Wastes and Other Matter/CO 2 Sequestration and Storage’ http://www.imo.org/ at 14 June 2008.
436 Petroleum Resources in November 2005. 296 These regulations identify the key areas of concern regarding CCS activities which require a nationally consistent policy response. These legal issues include:
the environmental assessment and approvals processes to be applied to the projects;
rights to access the sub-surface and property rights in the stored substance;
long-term monitoring and verification obligations; and
liabilities and responsibilities in relation to the stored carbon.
The regulation does not yet have legal status. Until specific, consistent, legislation is enacted in Australia to address the novel legal issues associated with CCS, regulation of projects will largely occur through the amendment and extrapolation of existing environment and planning legislation and petroleum
exploration and mining regulations. 297 Accordingly, the core legal concerns to be addressed in any consistent regulatory frameworks relate to the environmental assessment and approval processes to be applied to these projects, the right to access the project site, property rights in the stored substance and responsibilities (and liabilities) associated with the leakage of carbon dioxide. These issues are discussed further in the following paragraphs.
296 Ministerial Council on Mineral and Petroleum Resources, 'Carbon Dioxide Capture and Geological Storage: Australian Regulatory Guiding Principles' (Ministerial Council on Mineral and Petroleum Resources, 2005) at 4-5, http://www.ret.gov.au/General/Resources- CCS/Pages/RegulatoryGuidingPrinciplesforCarbonDioxideCaptureandGeologicalStorageCCS.aspx at 14 June 2008. The Federal House Standing Committee on Science and Innovation commenced an inquiry into geosequestration technology, including regulatory and approval issues, in June 2006. http://www.aph.gov.au/house/committee/scin/geosequestration at 14 June 2008. 297 The Federal Government recently released an exposure draft of the Offshore Petroleum Amendments (Greenhouse Gas Storage) Bill 2008 (Cth) aimed at regulating the exploration and storage activities for CCS projects undertaken in the offshore waters of Australia. The regime intends for CCS projects to be handed over to the Federal government in the months or years following injection and for monitoring of the site to then reside with the government. The bill is silent on the long-term liability of the government for any leakage of the stored gases.
437 I Environmental Assessments and Approval Processes
The processes of capture and transportation of the carbon dioxide could potentially be addressed though the existing regulation of industrial processes, carriage by pipelines and transport of dangerous goods. However, regulation of the injection and storage of the carbon dioxide will require new consistent regulation to address the potential risks and liabilities of these projects.
There is currently some disparate legislation in Australia which contemplates the establishment of carbon sequestration projects. For example, in South Australia (SA) the use of a natural reservoir to store carbon dioxide is a regulated activity and a licence must be obtained under the SA legislation.298 Regulated substances , which includes carbon dioxide, may be transported by a transmission pipeline subject to a pipeline licence. 299 The SA Petroleum Act specifically considers rights of ownership in carbon dioxide. In terms of reservoirs suitable for storage of the carbon dioxide, the SA Petroleum Act states that property in this so-called regulated resource is vested in the Crown. 300 For carbon dioxide produced by a person, the SA Petroleum Act states that, on production, the carbon dioxide becomes the property of the person who produced it. 301
In Victoria, carbon dioxide which is part of a naturally occurring mixture of hydrocarbons falls within the definition of petroleum and may be stored within the area of a production licence under the Petroleum Act 1998 (Vic). 302 Queensland has also enacted legislation which provides for the storage of prescribed storage gases, including carbon dioxide, in underground
298 Petroleum Act 2000 (SA) section 10. 299 Petroleum Act 2000 (SA) section 46. 300 Petroleum Act 2000 (SA) ss 4 and 5. 301 Petroleum Act 2000 (SA) section 5. 302 Petroleum Act 1998 (Vic) section 6, Division 7 and Division 8. This definition applies only to naturally occurring carbon dioxide and not to carbon dioxide as a by-product such as in coal fired electricity plants.
438 reservoirs. 303 The Queensland regime enables petroleum lease holders to enter into storage agreements with third parties for the storage of carbon dioxide within underground reservoirs within the lease area. 304 Upon the ending of the petroleum lease, if no claim to ownership of the stored gas is made, then the stored gas will become the property of the State of Queensland.305
A large geological sequestration project proposed for the Gorgon area gas fields, off the coast of Western Australia, resulted in the enactment of specific legislation for the sequestration activities of that project. That legislation prohibits the injection of carbon dioxide into underground reservoirs without the approval of the Minister. 306 The Act extends the application of the Petroleum Pipelines Act 1969 (WA) to permit the conveyance of carbon dioxide through those petroleum pipelines. 307 The Minister has indicated that the endorsed Carbon Dioxide Capture and Geological Storage Regulation will be applied to the approval process for carbon storage in the Gorgon project.
II Access to Property and Property Rights
Ownership of the carbon dioxide, once sequestered, is somewhat uncertain under Australian common law. Ownership may vest in the placer of the carbon dioxide or in the owner of the land. In the absence of specific legislation, rights to sequest carbon underground will primarily depend upon the bundles of rights which are held by the State in relation to the sub-surface in those jurisdictions. A key question is therefore; who owns the geological void into which the gases are to be placed and stored? General common law
303 Petroleum and Gas (Production and Safety) Act 2004 (Qld), ss12 and 13. 304 Petroleum and Gas (Production and Safety) Act 2004 (Qld) Part 6. 305 Petroleum and Gas (Production and Safety) Act 2004 (Qld), ss 212-214. This is likely to render the state responsibility for the liabilities associated with any leakage of the stored gases. 306 Barrow Island Act 2003 (WA) section 13. 307 Barrow Island Act 2003 (WA) section 11.
439 principle state that the owner of land enjoys exclusive rights of ownership from the heavens above to the centre of the Earth below. 308 The exact depth of ownership remains largely unresolved but will include sufficient depth to permit access to mineral and geothermal resources. 309 In addition, certain statutory assignments act to place rights to minerals found within the sub- surface of the land in the State.
The question is then; what rights of access and ownership must be obtained by private entities in order to store such carbon dioxide within the Earth’s core? Furthermore, what liabilities may accrue for any harm caused as a result of such storage? Where the land is not vested in the Crown, and ownership does not reside in the project developer, access will need to be secured through a combination of leasing and licensing arrangements. As well as access, project developers would need to agree to contractual provisions addressing a number of legal issues including:
ownership rights to the stored carbon;
indemnities for any damage caused from the presence of the project;
insurance requirements; and
long-term monitoring obligations of the project developer.
III Liabilities Associated with the Stored Carbon Dioxide
CCS activities encompass long timeframes for storage, and potentially indefinite storage, of gases. This gives rise to a need for stringent, regular and ongoing monitoring programs to minimise the risk of leakage of these substances from the storage site. Such programs should be mandatory and
308 Derived from the maxim cuis est solum eius est usque ad coelum et ad inferos referred to in the report of Bury v Pope (1586) Cr Eliz 118; 78 ER 375. 309 Geothermal Kinetics Inc v Union Oil Co of California 141 Cal Rptr 879 (1977).
440 compliance with these monitoring obligations must be strictly enforced by the relevant authority. Given that these storage sites could be operative for thousands of years, it is arguable that rights and liabilities in the management of the stored carbon dioxide should be assigned to government entities which would legally exist in the longer term. This could be done in the form of bonds or guarantees to the State to protect it against any costs and liabilities incurred from management of the project.
Significant statutory liabilities may accrue for the stored carbon. First, owners of the carbon and owners or occupiers of the land could be liable for the unlawful disposal of waste, and contamination of land, if exemptions are not obtained under the local environmental protection legislation. 310 Second, leakage of the stored carbon may occur. This could occur in two different ways. The first is abrupt leakage of carbon dioxide to the atmosphere through migration of the gases to the surface. The second is gradual migration of the carbon dioxide into surrounding geological formations or groundwater sources. 311
An environmental authority would normally be required to undertake the storage of potentially harmful or hazardous substances. Contravention of any of the conditions of the environmental authority would give rise to certain statutory liabilities. 312 As a best case scenario, 99 per cent of the stored carbon will remain within the storage area over a 1000 year period. 313 More
310 For example, in Queensland under Part 8, ss 442, 443 of the Environmental Protection Act 1994 (Qld) and the Environmental Protection (Waste Management) Regulation 2000 (Qld). In New South Wales under ss 115, 142A,143 of the Protection of the Environment Operations Act 1997 (NSW). 311 James McLaren and James Fahey, 'Key Legal and Regulatory Considerations for the Geosequestration of Carbon Dioxide in Australia' (2005) 24(1) Australian Resources and Energy Law Journal 45 at 51. 312 For example, in Queensland this is an offence under section 430 of the Environmental Protection Act 1994 (Qld). The maximum penalty is 2000 penalty units or 2 years imprisonment. 313 IPCC, 'Special Report on Carbon Dioxide and Storage: Summary for Policy Makers and Technical Summary' (Approved and Accepted by IPCC Working Group III and 24th Session of the IPCC, Montreal, Intergovernmental Panel on Climate Change, 2005) http://www.mnp.nl/ipcc/pages_media/SRCCS-final/ccsspm.pdf at 14 June 2008. The IPCC report
441 significant quantities of carbon leakage could result in risks to human life and health, particularly if those quantities leak into a confined area. The IPCC considers that concentrations greater than seven to ten per cent of carbon dioxide in the air would pose immediate dangers to human life and health. 314 Gradual and diffuse leakage would also pose a risk to local groundwater and soils. 315 Accordingly, project developers, owners and occupiers of the land and other responsible entities could be liable for causing environmental harm under existing environmental protection statutes in Australia.316
In addition to potential statutory liability for the leakage, at common law, persons associated with the project may also be liable for the off-site migration of carbon dioxide from actions in trespass, nuisance and negligence. The remedies resulting from a successful action could include damages for losses suffered as well as injunctions to discontinue the offending activity.
C Recommendations for the Consistent Regulation of CCS
Some commentators consider CCS to be the best solution for both the global climate system and modern industrialised society. Others consider reliance on such sequestration to “reduce” emissions to be contrary to the spirit and objectives of the international climate change regime. The benefit of this technological option lies in its ability to reduce, temporarily, the level of greenhouse gas emissions that we are collectively releasing to the atmosphere. This is intended to relieve the urgency of achieving immediate reductions in
considers that it is ‘very likely’ that 99 per cent of the stored carbon would remain over a 100 year period and it is ‘likely’ that 99 per cent would remain over a 1000 year period, at 31. 314 Ibid, 31. 315 Ibid. 316 Through the statutory offences of causing serious or material environmental harm or environmental nuisance, for example under ss 436, 437, 438, and 440 of the Environmental Protection Act 1994 (Qld) and of negligently causing harmful substances to leak, for example under ss 116 and 126 of the Protection of the Environment Operations Act 1997 (NSW). See also the Environment Protection Act 1986 (WA), Environment Protection Act 1993 (SA), Environment Protection Act 1970 (Vic) and the Environmental Management and Pollution Control Act 1994 (Tas).
442 atmospheric greenhouse gas concentrations whilst society implements measures to transition to a low-carbon economy. The significant costs involved in implementing these activities, especially where CCS is a mandatory requirement for significant fossil fuel use, may well provide the necessary financial incentives for the deployment of alternative forms of energy including solar, hydro and geothermal energy sources. 317 Regardless of the moral status of utilising CCS to address emissions, international law and domestic environmental legal systems are not yet prepared for the mass influx of sequestration project proposals. The technology is largely untested and environmental and local planning authorities do not yet possess the appropriate regulatory tools to properly carry out their approval functions in relation to these uncertain, long-term, high-risk activities. The answer, once again, lies in the need for a consistent regulatory framework. Given the potential locations of these projects in ocean waters, as well as in national territories, it is preferable that this framework, and its guiding principles, are agreed and implemented at an international level with local acknowledgment and practical application through domestic environmental protection and planning laws.
These agreed principles should provide consistent answers to the following legal issues:
the characteristics of ideal storage sites;
the level of environment assessment required for the project;
ownership of the stored gas;
the type and regularity of monitoring required for the project;
the allocation of responsibility for the project and for any arising liability;
317 The IPCC recommends the introduction of policies that create a real or implicit price of carbon and could create incentives to invest in low-greenhouse gas alternatives. IPCC 2007 ‘IPCC Fourth Assessment Report, Working III Report: Mitigation of Climate Change – Summary for Policy Makers’ at [23].
443 post-closure responsibilities; and
requirements for insurance, guarantees and other financial arrangements.
Clearly there is significant work to be done on achieving a consistent approach to the legal regulation of CCS both in Australia and internationally.
RECOMMENDATIONS FOR A MORE EFFECTIVE LEGAL REGIME TO COMPLEMENT THE USE OF MARKET MECHANISMS
The creation of an effective carbon market requires the implementation of a supportive legal regime which encompasses the critical components of: an enforceable duty to reduce emissions (with appropriate monitoring and enforcement mechanisms); a tradeable emission instrument within an effective trading system; and a scheme for the creation and recognition of abatement projects. All of these critical components form part of the legal framework adopted by the international community to reduce greenhouse gas emissions and avoid the adverse impacts of climate change. However, the myriad of emergent regional and domestic markets form an awkward collage of regulatory approaches with no common philosophy regarding the nature of the emission reduction duty, tradeable emission instruments, treatment of offsets and regulation of CCS. This appears to be the case of too many chiefs, not enough indians. Weaknesses in the design and implementation of the international climate market, combined with the lack of clear direction to nations mandating the legal features of domestic carbon markets, has resulted in a multitude of incompatible ‘world best’ market designs. The resulting ‘global carbon market’ is emerging as a collection of immature, fundamentally disconnected, carbon markets with little prospect for optimal performance. The establishment of a truly multi-national global carbon market will require significant legal reforms
444 that include, among other matters, the radical transformation of traditional domestic approaches to the protection of rights in property. The harmonious creation and recognition of new forms of property in carbon is required to address, separately, ownership in rights to emit greenhouse gases; sequestered greenhouse gases in offset projects; and stored greenhouse gases in CCS projects as well as the development of principles to address the complex legal interplay
between these three categories of legal rights and duties.318
Given the depth and urgency of emission reductions required to minimise the adverse impacts of climate change, society has placed a disconcerting emphasis on the curative abilities of the carbon market to heal society’s addiction to fossil fuel use. Market incentives alone do not appear to be sufficient to promote the
necessary, short-term modifications in energy use and practices.319 Global and domestic regulation of climate change will be substantively ineffective if excessive faith is placed in the operation of market incentives without the supporting backbone of a strong regulatory structure to achieve abrupt and long- term behavioural changes. The international community must achieve a legal framework which combines the benefits of harnessing innovation, through the tradeable emission instrument and carbon market, with the strengths of traditional command and control regulation. In particular, the choice of emissions stabilisation pathway and the resulting caps adopted for each carbon market system are critical. The targets of the first commitment period of the Kyoto Protocol are clearly inadequate to achieve the environmental objective of avoiding adverse climate change. Furthermore, the international regime permits the creation of additional offsets from the implementation of emission reduction projects with the effect of increasing the cap for the scheme. Given the absence
318 The nature of the property rights in emissions will depend upon what is being done with the greenhouse gases eg emission, sequestration or CCS and the jurisdiction in which it takes place. In addition to property law principles, these rights will also be affected by any applicable contractual provisions; rules of the emission trading scheme; and domestic regulatory regimes. 319 See, for example, Nicholas Stern, 'Key Elements of a Global Deal on Climate Change' (London School of Economics and Political Science, 2008) at 20 ‘other policy instruments will also be needed….international emissions trading is likely to be necessary but not sufficient to meet a 50% by 2050 [target].’
445 of a strong international role model, it is hardly surprising that the emerging domestic trading systems are criticised for lacking environmental credibility.
An effective multi-national approach to the regulation of climate change must do so through many facets and in a comprehensive and harmonious manner. It is imperative that a strong international regime is adopted which obliges each nation State to implement a strong domestic regulatory regime for the mitigation and offset of greenhouse gas emissions and for adaptation to the now inevitable impacts of climate change. Accordingly, the creation of an effective carbon trading market must be but one policy response within a portfolio of integrated legal measures to impose duties and prohibitions in relation to resource use, impose liability for non-compliance with those duties, and provide incentives to promote more sustainable outcomes across our global community.
446
Chapter Eight – Conclusion
This thesis has examined critically the potential role of the law in achieving the significant and rapid reductions in global greenhouse gas emissions required to avoid the adverse impacts of climate change. It has done so through an analysis and evaluation of the emerging regulatory, liability and market approaches under international and Australian laws. A number of deficiencies have been identified in these emerging legal approaches, at international and national levels, and recommendations have been presented regarding necessary reforms. The purpose of this concluding chapter is to synthesise the key deficiencies in the current legal response to the consequences of climate change and to present a series of recommendations to achieve a more effective legal response to this challenging global phenomenon in the future.
THE ROLE OF LAW IN RESPONDING TO CLIMATE CHANGE
The law has traditionally formed a critical backbone to any effective regime to address emerging social concerns. As has been stated:
for those who suffer, in body or in spirit, from the imperfection of the human world as it is, the best way to make a better world is the way of law. 1
The role of law is to structure our society and to serve social policies through ‘a powerful array of statutes, courts, police, and devices such as taxes, permits,
insurance, subsidies and, ultimately, criminal sanctions’.2 Law has traditionally
1 Phillip Allott, 'The True Function of Law in the International Community' (1998) 5 Indiana Journal of Global Legal Studies 391 at 413. 2 Nicholas A. Robinson, 'A Legal Perspective on Sustainable Development' in J Owen Saunders (ed), The Legal Challenge of Sustainable Development: Essays From the Fourth Institute Conference on Natural Resources Law (1990) Ottawa, Canadian Institute of Resources Law, 15 at 15.
447 served the role of protecting the status quo, maintaining traditional liberal values
and providing a stable social and economic environment. 3 The law is able to react to changing priorities in our society but it does so through the sedate, incremental evolution of the legal system. In this respect:
what law does is to allow a society to choose its future. Law is made in the past, to be applied in the present, in order to make society take a particular form in the future. 4
It is concluded that the law does have a significant role to play in any effective response to the global threat of climate change. However, in attempting to respond to climate change, the law is confronted by a unique set of challenging circumstances that it has never before confronted. The phenomenon of climate change is temporally and geographically challenging and it is scientifically complex and uncertain. Any effective legal response must cross the public and private divide, through international and domestic spheres, and must achieve unprecedented levels of national and international cooperation. The current international and Australian legal approaches are clearly dysfunctional and ineffective and the law as it stands is overwhelmingly inadequate to meet the enormity of the challenge posed by climate change.
Consequently, addressing climate change, in particular, and society’s environmental sustainability, more generally, requires a serious re-evaluation of the effective role to be played by the law:
faced with climate change and other environmental threats, as well as persistent poverty for billions of the Earth’s people, “what reason demands” is that we improve the way law works for sustainable development. Law must be strengthened, and compliance must be ensured, to achieve this paramount goal of society. 5
3 Ibid,19. 4 Phillip Allott, n1, 399. 5 Durwood Zaelke, Matthew Stilwell and Oran R Young, 'Compliance, Rule of Law and Good Governance, What Reason Demands: Making Law Work for Sustainable Development ' in Durwood
448 Consequently, the law does have the potential to be a dynamic, and powerful, instrument for reform but to do so it must be used not only reactively, in an ad hoc and piecemeal fashion, but also proactively to stimulate social reform and drive behavioural changes to reduce global emissions and respond to the threat of
climate change effectively.6 To achieve this, society must harness the benefits of a range of traditional and modern legal instruments including regulation, liability and market approaches. Furthermore, each of these critical components must be reformed to enhance their complementary operation and to ensure an integrated legal response is undertaken by the legislature, executive and judiciary.
EFFECTIVENESS OF EXISTING LEGAL RESPONSES
A Regulatory Approaches
I International
This thesis has analysed the existing international regulatory institutions, rules, liabilities and market mechanisms established under the climate change regime. It has concluded that the regulatory design of this regime is innovative, sophisticated and complex but it is also fragmented and legally ineffective. There is an obvious absence of a strict, universal, duty to reduce emissions by sufficient amounts, and within the necessary timeframes, to avoid the adverse impacts of climate change. Moreover, the so-called sanctions for non-compliance are lacking in any clear deterrent value which may result in an accepted culture of non-compliance with these international agreements. The emphasis on flexibility and cost-effectiveness under the Kyoto Protocol, and the absence of directions regarding domestic abatement initiatives; the design of domestic carbon markets; and the consistent national treatment of emission instruments, will all operate to undermine the effectiveness of the international regime. The result is a regulatory gap in
Zaelke, Donald Kaniaru and Eva Kruzikova (eds), Making Law Work: Environmental Compliance and Sustainable Development: Volume 1 (2005) London, Cameron May, 29 at 29. 6 Nicholas A. Robinson, n2, 15.
449 which nation States have a largely unlimited discretion to do as they please, when they please.
Institutionally, the regime has also created a complex menagerie of regulatory bodies and rules to facilitate the flexible market mechanisms of CDM, JI and emissions trading in order to achieve emission reductions in the most-cost effective manner. However, this innovative regulatory approach, in harnessing the financial incentive of the tradeable emission instrument and engaging the private sphere, has been emphasised at the expense of any solid regulatory core to drive deep-rooted changes in national emitting behaviours. Consequently, the effectiveness of the carbon market as a regulatory tool is being, and will continue to be, undermined by this lack of an adequate and enforceable restriction on global emissions. Moreover, there is a lack of due process provided for private entities under the regime which undermines confidence in these mechanisms and prevent the optimal performance of the market.
II Within Australia
In recent years, the scientific reports from the Intergovernmental Panel on Climate Change (IPCC) have become more and more blunt in their warnings as to the seriousness and urgency of the threat of climate change. Despite this, some climate sceptics have remained in the international community amid concerns regarding the economic implications of achieving rapid and substantial reductions in greenhouse gas emissions. As a result, in Australia, there have been only limited regulatory initiatives implemented to address climate change and the emphasis has been on voluntary, ad hoc, programs. The resulting multiples of federal, state-based and local climate change policies, rules and decision-making principles are legally disparate, uncoordinated and predominantly ineffective in responding to climate change. Consequently, the Australian legal approach has had little substantive effect on national levels of business as usual emissions.
450
In the absence of a comprehensive legal approach to restrict Australia’s greenhouse gas emissions, the existing federal, state and local environmental protection and planning regulations, across Australia, have the potential to play a significant role through the evaluation of major projects, minimisation of greenhouse gas emissions and avoidance of environmental harm. Such a role falls well within the scope and purpose of these regimes. However, this thesis has identified a significant dichotomy between the law as written and the law as applied in practice which generally ignores the environmental implications of large-scale emissions. This is largely the result of a fundamental misconception regarding the proper role of the principles of ecologically sustainable development (ESD) in the application of the law; a serious misunderstanding as to nature of climate change and lingering doubt regarding the accuracy of the IPCC predictions.
B Liability Approaches
The absence of the comprehensive mitigation of greenhouse gas emissions in Australia, in conjunction with the general lack of progress by the global community, means that some adverse impacts of climate change are inevitable. As a result, there is a need for a new regulatory approach, both internationally and within Australia, to promote adaptation to these impacts including measures to enhance the levels of environmental sustainability of our society. Moreover, the international climate change regime remains silent on the principles for the allocation of legal responsibility for the harm caused by the impacts of climate change. In the absence of a customised domestic statutory regime, it will fall to the Australian common law to distribute liability for the harms and losses experienced as a result of greenhouse gas emissions and the consequential impacts of climate change. However, the scientific complexities and causative uncertainties of climate change will present almost insurmountable obstacles to a successful suit for loss caused by climate change under the principles of nuisance and negligence. In particular, it would be a near impossible task to meet the
451 threshold for establishing a causative link between emissions, climate change and the harm suffered given the inherent complexity and unpredictability of the climate system. Consequently, it is concluded that the common law is not currently equipped to accommodate these novel legal disputes. Furthermore, given the slow, incremental, evolution of the legal system, it is not the most appropriate mechanism by which to address these emerging losses. New approaches will need to be devised to enable legitimate claims to be made; credible causative links to be established; and fair and just compensation to be awarded under appropriate, transparent and equitable legal principles which are able to accommodate the presence of these unique circumstances. It is submitted that such swift and radical transformations in the law would be most appropriately implemented by the legislature.
C Market Approaches
In an endeavour to address the issues of climate change swiftly and cost- effectively, the international community has adopted the innovative legal instrument of the tradeable emission instrument within an international trading system. This has acted as a catalyst for the design and implementation of a range of emerging domestic, regional and global markets, both voluntary and mandatory, which are intended to link ultimately into a multi-national, global, carbon market. However, the ad hoc design of these schemes, at international and domestic levels, has created a patchwork of disparate systems that are overwhelmingly incompatible in their current forms and could forge only a legally dysfunctional, environmentally ineffective and economically inefficient multi-national market system.
The central legal feature in all of these carbon trading schemes must be a strict, enforceable and deep target for reducing emissions, as indicated by the IPCC, to enable the global community to avoid the adverse impacts of climate change. To respond effectively to climate change, and achieve these substantial reductions in global emissions in the most cost-effective manner, these trading regimes must
452 also be extensively re-designed to achieve compatibility and harmony in their legal features including in the nature of the tradeable instruments and their treatment under domestic laws; the acceptability of offsets and sequestration activities in complete or partial compliance with the scheme; and the sanctions to be imposed for non-compliance. Furthermore, these tradeable emission instruments have been arbitrarily fused onto existing domestic legal systems with little or no regard for their impact on, and interaction with, existing laws and principles. These laws and principles, particularly those relating to property, are longstanding, well-established components of our legal system and cannot be capriciously revoked or manipulated to respond to this international artificial creation of new forms of legal rights. Nevertheless, these artificial constructs now require the creation of new forms of property rights that are specifically designed to recognise and accommodate ownership in: rights to emit greenhouse gases; sequestered greenhouse gases in offset projects; and stored greenhouse gases in CCS projects as well as the development of principles to address the complex legal interplay between these three categories of legal rights and duties.
RECOMMENDATIONS FOR A MORE EFFECTIVE LEGAL RESPONSE
The phenomenon of climate change is an archetypal environmental problem that requires an unprecedented level of global cooperation in order to achieve an effective legal response. Such a response can only be achieved through the sum of private actions within the national sphere. Consequently, responding to climate change requires ‘mutually reinforcing’ approaches at local, national and international levels and behavioural adjustments by all individuals, businesses and governments. 7 Given this, it is apparent that ‘the depth of cooperation in the
UNFCCC is by no means sufficient to begin solving the problem.’ 8 For the
7 J Robinson et al, Climate Change Law: Emissions Trading in the EU and the UK (2007) London, Cameron May’, Foreword’ at 23. 8 Heleen de Coninck, 'Designing Institutions for Climate Change: Why rational design involves technology' (Paper presented at the Amsterdam Conference on Human Dimensions of Global Environmental Change, Amsterdam, May 2007) at 10.
453 international community to create a more effective legal response, it must begin to move away from the traditional emphasis on protected national sovereignty towards a fuller integration of domestic and international approaches to reducing emissions and responding to climate change. In this era of globalisation, we must achieve greater alignment between national laws and international obligations and these must be embedded and achieved through the domestic actions of each party at federal, state and local levels. This will require new and enhanced cooperative institutions at an international level with the creation of national counterparts to provide strong guidance on appropriate and compatible national policies and approaches to addressing the climate change challenge. Within Australia, this would require a drastic increase in the level of federal, state and territory cooperation to attain harmoniously a common environmental goal.
The international regime must create a strict, universal, duty to reduce greenhouse gas emissions, in response to the guidance of the IPCC, with an appropriate monitoring and compliance regime that accommodates both public and private entities. Such duties must be transposed into the domestic regulatory environment with appropriate monitoring and enforcement processes. Domestically, this should include prohibitions on the emission of greenhouse gases above a certain threshold, without authorisations to emit, combined with an obligation to submit sufficient emission instruments representing all liable emissions. Sanctions must be imposed for non-compliance including an obligation to ‘make good’ and surrender acquired instruments from the market equal to the excess emissions. The Federal government must also facilitate and regulate the creation of offsets from environmentally credible projects within Australia as well as the implementation of appropriate carbon capture and storage projects (or CCS). It is also recommended that authorisations to emit include a duty to take all reasonable steps to mitigate or avoid the greenhouse gas emissions from an activity including through the mandated use of alternative energy sources; technological changes; and enhanced efficiency of energy use. This is in accordance with the approach of the international climate change
454 regime which requires substantial domestic mitigation activities in conjunction with carbon trading.
There is also a critical role to be played by environmental impact assessment processes in Australia through the mandatory integration of these assessments as part of all governmental decision-making particularly, approval functions regarding major projects. For this to be effective, Australia must adopt a nationally consistent framework for the evaluation and regulation of major projects with large-scale emissions. The proper application of our environmental protection and planning regulations demands the meaningful consideration of both the short-term and long-term economic, social and environmental implications from these proposed actions. Greater education must be provided to determining authorities to assist them in understanding the risks associated with estimated levels and timeframes of greenhouse gas emissions. Not only is this necessary to achieve compliance with Australia’s international obligations, it is also essential for the effective regulation of our emissions and for the promotion of greater environmental sustainability across Australia.
It is also imperative that the corporate sector is held accountable for their contribution to the loss or harm experienced by the Australian community as a result of the impacts of climate change. In accordance with the polluter pays principle, entities should be required to pay for the proportional costs associated with their pollution through, for example, an obligation to make payment into a national trust in return for authorisations to emit. 9 Funds from that trust could then be used to promote adaptation in the community to minimise loss or damage and to provide fair and just compensation for climate change related harm. 10 The
9 Support for this approach can be found in the following comment: ‘putting a price on greenhouse gas emissions should be a central pillar of mitigation policy. It is crucial to make polluters pay for the damages they cause in order to change behaviour on the massive, widespread, and cross-cutting scale necessary to tackle climate change,’ Nicholas Stern, 'Key Elements of a Global Deal on Climate Change' (London School of Economics and Political Science, 2008) at 18. 10 This fund will have multiple functions to perform in allocating resources for loss or damage to persons, private property and community infrastructure as well as facilitating access to insurance and
455 common law also has a role to play in ensuring justice is served in relation to past emissions, and in particular, for the continued large-scale emissions following the clear scientific warnings of the IPCC. New legal principles will need to be devised which are fair and transparent whilst establishing appropriate evidentiary thresholds to accommodate the prevailing scientific uncertainty and give proper effect to the precautionary principle in practice. Once again, such revolutionary developments in the law more appropriately reside in the jurisdiction of the legislature.
It is concluded that market mechanisms do have a potentially significant role to play in an effective legal response through incentivising emission reductions within the private sphere .11 However, to be effective, the emerging carbon market must be crafted so as to ensure its optimal operation and internal compatibility with respect to the nature of the emission instrument, its treatment under domestic laws, the acceptability of offsets or sequestration activities in complete or partial compliance with the scheme, and the sanctions to be imposed for non- compliance. Even if an effective global carbon market is created, markets alone do not appear to be adequate to achieve the global imperative of significant and rapid reductions in emissions necessary to avoid the adverse impacts of climate change. Consequently, an effective carbon market must be but one policy response within a portfolio of legal measures to promote public and private investment in the development and diffusion of low-emission technologies, increased efficiency of energy use and changes in preferences regarding the choice of energy sources. The development of novel technology brings with it novel risks and legal issues and will necessarily involve the adjustment and expansion of existing legal frameworks to regulate appropriately these emerging new technologies. Accelerated attitudinal changes will also be needed across all levels of society and information exchange will be essential in educating and
to protective measures to enable the community to take steps to protect against the risks of climate change. The administration of the fund could take on a similar form to the Superfund established in the US to deal with contaminated land http://www.epa.gov/superfund/ at 23 June 2008. 11 Andrew Gouldson and Joseph Murphy, Regulatory Realities : the implementation and impact of industrial environmental regulation (1998) London, Earthscan at 3.
456 informing the public and in promoting acceptance and active compliance with this new era of environmental consciousness. Consequently, this thesis has concluded that the global community must utilise a combination of enforceable legal rights and duties, within a cooperative model of governance, to promote innovation and swift behavioural changes on the pathway towards a more
sustainable, low carbon, energy future. 12
The potential role of law in responding to the impacts of climate change does not stop there. This new paradigm in multi-national environmental regulation requires the law to play a proactive role in driving changes across social, economic and ecological spectrums. The dual goals of emission reductions and enhanced sustainability must be embedded rapidly in all levels of law making from the global, to the national, and the local with effective governance across and within the public and private spheres. A holistic and integrated approach to addressing climate change is required within all domestic jurisdictions and particularly, in Australia given the fragmented approach to environmental regulation. It is only national governments that can respond effectively to these international obligations. This requires a re-interpretation and transformation of the existing domestic regulatory, liability and market approaches. It also requires that the principles of environmental sustainability, or ESD, are thrust from the periphery of decision-making to the central touchstone against which all domestic laws and actions are assessed. In responding to the consequences of climate change, environmental sustainability seeks to manage society’s use of the Earth’s natural energy sources and sinks and to maintain optimal and sustainable ecological systems for the benefit of present and future generations. Crucially, it also requires that concessions be made by private interests to protect global public goods including through the universal acceptance of emission reduction obligations. Such reform is imperative given the rate and scope of social and
12 Nigel Bankes, 'Legal Prescriptions for an Atmosphere That Will Sustain the Earth' in J Owen Saunders (ed), The Legal Challenge of Sustainable Development: Essays From the Fourth Institute Conference on Natural Resources Law (1990) Ottawa, Canadian Institute of Resources Law, 155 at 157.
457 economic transformation required to minimise the global adverse impacts of climate change.
This entrenchment of these concepts of ESD within the Australian legal system requires the adoption of an ambitious new legislative standard that demands the integration of the principles of environmental sustainability, precaution and inter- generational equity in the creation and application of all laws . Consideration and promotion of these principles must be made a mandatory component of all rule making and approval functions across Australia rather than residing merely in the discretionary functions of authorities. It is unlikely that this can be achieved through the adoption of a new government policy alone. The magnitude of the required attitudinal shift means such a principle should be legislatively or constitutionally grounded and embedded nationally as a supreme imperative within all aspects of rule-making, decision-making and enforcement. The principles of ESD provide an ideal overarching framework for Australian laws but a level of particularity will be required in order to specify the application of those principles in a practical setting. Consequently, the legislative expression of this duty must particularise the primary and secondary priorities of society in the promotion of ESD including the primary goals of reducing greenhouse gas emissions and adapting to the impacts of climate change.
CONCLUDING COMMENT
In undertaking a critical analysis of the existing legal response to climate change, at an international level and within Australia, one would expect to encounter a complementary portfolio of integrated legal instruments which create legal rights and duties through regulation; address non-compliance and unlawful acts through liability provisions; and promote innovation to minimise global greenhouse gas emissions through market measures. In reality, this thesis has concluded that the current legal response is comprised of a series of discordant, ad hoc, regulatory, liability and market approaches. The international and domestic legal regimes are currently clearly inadequate for the task of regulating greenhouse gas
458 emissions and responding to the serious consequences of climate change. In short, the regulatory approach fails to properly regulate the critical subject-matter of greenhouse gas emissions. The liability provisions are inadequate to provide fair and equitable principles for attributing responsibility for either unlawful emissions or the harmful impacts of climate change. Thirdly, the market mechanisms provide excessive flexibility to the market without the supporting backbone of integrated regulatory and liability provisions. The end result is indeed an ‘innovative’ legal response to the implications of climate change but it is also one which will be legally, environmentally and economically unsuccessful in addressing the urgency of this global challenge. The law may be but one part in the global solution. But it is a critical part. An effective global solution will be found only in reforming the existing legal frameworks to create an integrated legal response to climate change which utilises effective regulatory, liability and market mechanisms to promote the behavioural changes that are essential in achieving the rapid transition to a low carbon society.
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