Legal Remedies for Climate Change Damage 2

2024 03 25

Although actual law suits against some arbitrary group of fossil fuel producers makes no sense as a strategy for deal with the externality of CO₂ emissions, as discussed, in “Legal Remedies for Climate Change 1”

 https://thomaslhutcheson.substack.com/p/legal-remedies-for-climate-change damage 1

in principle tort law DOES deal with externalities.  If A’s actions harm B, B can sue for damages and the resolution in principle is an efficient distribution of the reduction in the action generating the harm by A and action reducing the harm suffered by B (possibly paid for by A in lieu of more costly reduction in the action generating the harm). 

We might, therefore, think of climate change policy as the outcome of a global lawsuit in which everyone in their role as B, victims of Anthropogenic Climate Change harm, seeks relief from A, themselves in their role as CO₂ emitters.  B calls climate modelers like Nordhaus[1] as a witness to demonstrate the harm of given scenarios of CO₂ emissions corresponding to different policy frameworks that A might be subject to – P_0, P_1, … P _n –  (letting P₀ be the policy status quo) giving rise to harms H_0, H_1,…  H _n.  B would ask for H₀ in damage.  A uses those models to show that the costs of the different policy scenarios are C_1, C_{2, …} C_n. and offers C_min as a settlement. The judge considers both arguments and notes that for P_op the sum of H_op + C_op is minimized and orders A to carry out P_op.  As P_op  was among the scenarios considered only the administrative arrangements for carrying it out need to be worked out.

Not to leave anyone in suspense, P_op is a tax T_op on net emissions of CO₂ (and methane).[2]   For fossil fuel use the administrative arrangements are for each jurisdiction to levy T_op on the first sale of a fossil fuel in proportion to its carbon content.[3]   Revenues could be rebated to consumers on principles of “fairness”, used to reduce other taxes with higher deadweight losses, invested in mitigating H_op, or other uses of benefit to people in the jurisdiction whose use of fossil fuels is being taxed.  Imports from countries that do not tax CO₂ emissions (in principle, none) would be subject to a border adjustment fee in proportion to its content of CO₂.[4]  Production of goods within the jurisdiction whose production technologies emit CO₂ like steel and cement would be taxed similarly on the monitored CO2 emitted (production and importing just being alternative ways of acquiring goods).  With its fuel and fertilizer inputs taxed, crop agriculture output would wash; [taxing the methane of cow burps remains to be worked out 😊].  Forestry or land clearing would be taxed in proportion to the carbon content of the biomass removed.

When in effect, the taxation of net emissions would shift prices that consumers pay for goods and services that “contain” CO₂ and they would shift their purchases accordingly.  Note as well that technologies that remove CO₂ from the atmosphere like carbon capture and sequestration (CCS) or serpentine weathering would be negatively taxed (receive a subsidy) per unit of CO₂ removed as would permanent conversion of unforested to forested land.           

Taxing net emission of CO₂ solves the problem of future emissions, but what does the court do with the damages from the CO₂ already emitted?  Here we have a problem not of efficiently minimizing net harm but of equity.  The CO₂ that has already been emitted has already produced harm -- extreme weather events, lower crop yields, heat stress – and these will continue to grow as a result of said CO₂ already emitted, even as new emissions are being curbed by the tax on net emissions. The aggregate damages can be estimated by the very climate models that give the value of the tax on net CO₂ emissions, but for claiming actual compensation (here I assume that both plaintiffs and defendants are grouped geographically into states) more detailed estimates would be needed.  But even that is just a difficult technical question. 

The contentions issue would be who today would be liable for the damages which have been and will continue to be caused by previously emitted CO₂.  The “court” might decide that payment should be made by states where the CO₂ was emitted [5], but roughly the same distribution would obtain if payment were according to present–day GDP.

Hopefully this kind of hypothetical thinking is useful to countries actually making decisions about their own CO₂ emissions reduction policies and positions to take in upcoming Conferences of Parties (COPs) which should be quite different from actual positions. See [https://thomaslhutcheson.substack.com/p/cop-28-and-counting]

[Standard bleg:  Although my style is know-it-all-ism, I do sometime entertain the thought that, here and there, I might be mistaken on some minor detail.  I would welcome comments on these views.]

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[1] https://www.nobelprize.org/uploads/2018/10/nordhaus-lecture.pdf

[2] Both A and B will presumably see that administrative obstacles to carrying out the investments incentivized by the tax are removed and that government invest in R&D to reduce C_op.

[3] In practice T_op would be a trajectory over time and would be recalculated from time to time mainly as costs of producing outputs with zero carbon technology or of mitigating harms fall or as better climate models re-estimate harms.

[4] As the purpose of the border adjustment fee is to encourage exporting countries to adopt the least cost

way of reducing net emissions, the calculation of the fee for each product need not be exact.

[5] This would not be quite right in that the countries where the emissions occurred did not capture the whole benefit of the emission.