European Union ‘Fit-for-55 package’ to kickstart wave of climate litigation

The European Union’s flagship decarbonisation package ‘Fit-for-55’, will lead to “a growth in climate litigation cases” with much of the litigation “to involve challenges to government action or inaction” according to a report published today (20 March 2023) by the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and Political Science.

The Fit-for-55 package encompasses a collection of measures aimed at keeping the EU on track to deliver on its 2030 climate target of 55%. It will radically impact on the way in which European society and the economy operate.

In the report, the authors predict the four main types of litigation cases they expect to be filed over the coming years after the Fit-for-55 is adopted:

• Litigation focused on the extension of the European Union Emissions Trading System (EU ETS), building on a history of litigation following previous reforms.
• ‘Government framework’ litigation, focused on the overall ambition and implementation of new climate policies and legislation by the EU and its Member States.
• ‘Just transition’ litigation over the distribution of benefits and burdens of climate action, and over decision-making processes at the Member State and EU level.
• Disputes over what constitutes renewable energy, particularly regarding bioenergy.

In the context of the direct decarbonisation measures set out in the Fit-for-55 package, the authors state that there is “a high likelihood that states may be involved in litigation, as both defendants and plaintiffs, particularly as civil society activists seek to ensure that national level policies and action are as ambitious as possible, and as controversies over the type and nature of new energy technologies continue to play out.”

One aspect of the Fit-for-55 package which has been the subject of much speculation about possible legal challenges has been the Carbon Border Adjustment Mechanism (CBAM), set to be introduced alongside the amendments to the EU ETS. Although the EU institutions have made efforts to ensure compliance with international law (European Parliament, 2020), and some scholars have concluded that it likely would not constitute a breach of international trade law, the authors state that some “countries may still seek to challenge the CBAM before the World Trade Organisation Dispute Settlement Body.”

The authors also expect that other legal reforms associated with Fit-for-55 and the European Green Deal will “give rise to litigation against companies and financial institutions. Many of these measures share a common focus on the collection and provision of information, with a goal of influencing the choices made by consumers and investors.” Legislative proposals discussed include the introduction of the Corporate Sustainability Due Diligence Directive, which aims to introduce mandatory human rights and environmental due diligence requirements into EU law.

In the report, the authors provide recommendations for the EU, civil society organisations, corporations and financial institutions:

• National level legislators need to be considering litigation risks when transposing new and amended EU directives into national law.
• Businesses and their professional advisors should be aware of litigation risk and reform internal practices to avoid this.
• Civil society groups should consider key issues for advocacy and engagement campaigns, with litigation pathways being available where these options are not successful.