Climate Change Litigation in Australia: Companies Could Get Three-year Pass

Developments are underway, heightening the ongoing debate over climate change laws in Australia. The Australian Treasury is floating a proposal that would set new limits on the climate-related lawsuits filed against private companies.

It would protect corporations from private litigation over misleading climate claims for three years if passed. Overall, it would affect at least 20,000 businesses, including the country’s massive LNG, coal and iron ore sectors, financial services, food and beverage industries, etc.

The proposal marks a significant shift in corporate reporting in Australia. From July 2024, it will be mandatory for large companies to outline climate-related risks in their financial disclosures, with smaller businesses to follow in later years.

Companies must specify whether or not they have a climate transition plan. If they do, they would be required to make it public. Companies must also provide details on their Scope 1, 2 and 3 greenhouse gas emissions (GHG).

These businesses would also have to specify their resilience to a climate scenario where the world is 1.5°C warmer than the pre-industrial era and at least one other higher emissions scenario.

The Treasury’s initiative has been timed to coincide with the long-awaited release of two International Sustainability Standards Board (ISSB) global standards regarding general sustainability and climate-related disclosures.

Climate Issues in Australia

Given Australia’s GHG emissions, largely due to its enormous fossil fuels industry, the Treasury’s proposal seems a step in the right direction. It should also up the ante for Australian companies to come clean about their emissions. However, proposal opponents claim otherwise.

The New South Wales Bar Association (NSWBA) is adamant that the proposal should not be passed. It is concerned that a three-year temporary ban would restrict access to justice and undermine the country’s goal to reduce emissions to 43% of 2005 levels by 2030. It also sees corporate greenwashing as a real possibility if companies get a three-year pass.

“Adequate enforcement mechanisms for ‘greenwashing’ – misrepresenting an entity’s climate-related impacts, risks and mitigation efforts – are critical for protecting investors from unexpected losses and ensuring that Australia fulfils its international and statutory climate-related commitments,” it said.

Others, including the Australian Environmental Defenders Office (EDO), warn that the three-year moratorium could prevent similar cases to its recent action against Santos for alleged greenwashing.

Striking a Balance: Climate Change Laws in Australia

Proponents of the proposal, however, counter these claims. They claim that these concerns are being exaggerated. They see the proposal as the Federal Government seeking a balance between environmental protection and responsible resource development.

Simon Molyneux, managing director at Perth-based Molyneux Advisors, comes down hard against what he sees as excessive climate change litigation in the country.

“The nefarious environmental lawfare had the upper hand in Australia during 2023. But the recent judgement in favour of the Barossa pipeline rebalances things,” he told EnergyTrackerAsia. He refers to a January 14 Federal Court ruling that found that Australian gas major Santos’ Barossa gas project wouldn’t harm Indigenous cultural heritage sites.

The project will provide feed gas to the Santos-led Darwin liquefaction project in the Northern Territory, but it has been on hold since 2022. Traditional owners were concerned over the USD 5.8 billion Santos project’s development and launched a court case against it. However, Australian courts have agreed that it can now go forward.

Climate change litigation in Australia has mostly seen an upward trajectory, with cases including claims from Indigenous groups. Some 41 cases were filed in 2021, with another 57 in 2022. However, total climate cases decreased to just 22 by the end of last year.

Rebekkah Markey-Towler, a research fellow at the University of Melbourne’s Sustainable Finance Hub, tracks climate litigation in Australia. She sees the Treasury’s proposal as an important first step.

She told Energy Tracker Asia that legislation like this has several different aims. These include getting businesses to think about their climate change risks and opportunities and figuring out how they include these in their strategies going forward.

“[This] legislation is striking a balance between giving companies the ability to work out their plan for climate change risk and, at the same time, asking what they are putting into these reports for climate change disclosure,” she said. “It ensures that data isn’t just being pulled from nowhere, but that it’s good quality.”

“It’s like companies saying, ‘I’m not going to be sued if I have a go at climate change risk disclosure’ because they have a three-year window. But, the proposal also ensures that their disclosures are backed with evidence,” she added.

Pacifying Corporate Concerns

For its part, the Treasury justifies its proposal because it offsets concerns that companies could be overly cautious in making climate disclosures if they are worried about being litigated while the new standards are implemented. However, the proposal wasn’t likely to have caught Australian companies off guard. Since 2017, around 180 Australian organisations opted to make climate disclosures aligned with the four-pillared approach of the TCFD (Task Force on Climate-related Financial Disclosures).

What’s the Australian Government Doing About Climate Change?

Although Canberra has been criticised recently for its lack of climate change mitigation initiatives, it has recently tried to up its game. Its policy is to reduce emissions through technology development and application, and it wants to build resilience and adaptation to climate change. Other countries, however, are pushing for more action and climate-friendly legislation.

One of the World’s Worst Polluters

Considering both sides of the argument, it has to be remembered that Australia remains one of the worst polluters on the planet per capita. This has not only caused considerable angst in the global community but has damaged its reputation – all in the name of fossil fuel profits and jockeying for global market share.

Efforts are being made to rein in those emissions, including through carbon capture utilisation and storage (CCUS) technology. But CCUS hasn’t been proven at a large scale, and a growing body of research indicates it’s unreliable.

As such, given Australia’s massive natural resource development, any limitation on climate litigation seems to be missing the point. Three years is a long time to hold back climate change litigation in one of the worst polluting countries in the world.