December 8, 2015 Read More →

Study: Energy Companies Face Growing Risk in Climate-Related Litigation

Allison Mills for Michigan Tech News:

Climate change lawsuits are becoming more and more likely, but adopting renewable energy could help mitigate that. A new study from Michigan Tech researchers reviewed how climate-related liability for energy companies is calculated and how it could be prevented. The results will be published in Renewable and Sustainable Energy Reviews (preprint available).

Joshua Pearce, an associate professor of electrical engineering and materials science at Michigan Tech, led the research.

“Historically, the lack of knowledge of potential liabilities from climate change has kept energy companies from including it in decision making,” Pearce says. “A review of the recent literature shows such a short-sighted approach is no longer tenable.”

Pearce and his co-author Negin Heidari, a graduated master’s student of Pearce’s, reviewed the seven published methods of assigning liability for emitters. They identified the top ten emitters in the US, and explored potential liabilities, looking in-depth at a single case-study company. They then compared the results of the fractional liability from only natural disasters within the US for a single year to a sensitivity to the future costs of carbon emissions from other sources of emission-related liability.

If carbon emission lawsuits become prevalent, the potential liability is an important criterion for investors. “We were shocked to find that common shareholders of the case study company would see a reduction in their profits of 18 percent compared to emissions liability related to only natural disasters in the US from a single coal-fired power plant,” Pearce says.

Climate Change Liability: How Renewables Can Help Protect Energy Companies

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