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Commonwealth Company Directors in Spotlight Over Climate Change Liabilities

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Legal liability risks from climate change for British, Australian, Canadian and South African company directors and pension fund trustees will be assessed under a new Commonwealth Climate & Law Initiative (CCLI) launched during the Commonwealth Heads of Government meeting in Malta today today.

The Commonwealth Climate & Law Initiative is a new research, education, and outreach project focused on four Commonwealth countries: Australia, Canada, South Africa, and the United Kingdom. CCLI will examine these issues in these countries and across other Commonwealth common law countries.

The initiative will examine the legal basis for directors and trustees to take account of physical climate change risk and societal responses to climate change. In addition, it will also assess the materiality of potential liabilities associated with inaction. CCLI is a joint initiative between the University of Oxford’s Smith School of Enterprise and the Environment, ClientEarth, and The Prince of Wales’s Accounting for Sustainability Project.

The unparalleled economic risks from climate change have led to rising concerns over the legal liability risks for individuals, companies, and investors in recent months. In September 2015 Bank of England Governor Mark Carney warned company directors could be held legally liable for failing to manage climate change risks. In early November 2015 the New York State Attorney General issued subpoenas to Exxon and Peabody Energy and began investigations over claims they misled the public and investors about the dangers and potential business risks associated with climate change.

These developments, and others, could potentially have significant implications for the insurance sector, but also for other parts of the financial system and for companies in carbon intensive sectors as well. Company directors and pension fund trustees, could be held liable for i) contributing to anthropogenic climate change, ii) not reasonably managing the risks associated with climate change, and/or iii) misleading investors about the business risks of climate change or failing to comply with legal reporting requirements.

Ben Caldecott, Programme Director at University of Oxford’s Smith School of Enterprise and the Environment, said: “Company directors could be at risk of litigation if they mislead investors and the public about climate change. They may also face litigation for having contributed to anthropogenic climate change. This is a very new area, but one with potentially significant consequences. This new initiative will help investors to assess the materiality of these potential liabilities and inform best practice across Commonwealth common law countries.”

Jessica Fries, Executive Chairman of The Prince’s Accounting for Sustainability Project, said: “Climate change poses significant risks for pension funds and companies, in addition to that faced by society as a whole. Trustees and company directors need to ensure that they respond appropriately. A proper understanding of the legal and fiduciary responsibilities is key. This new initiative will explore the issues faced and help to develop a response.”

James Thornton, CEO of ClientEarth, said: “The days of treating climate change as a fringe concern are over and the potential for climate change litigation against companies or individual directors is growing. They urgently need clarity on their responsibilities, so this initiative is timely.”

Katalaina Sapolu, Director, Rule of Law, Commonwealth Secretariat, said: “The Initiative addresses a key intersection between climate change and national law. Its findings will support Commonwealth countries in formulating fair, balanced and progressive legal responses to climate change risks and responsibilities.”

Sarah Barker, Special Counsel, Minter Ellison (a leading Australian-based corporate law firm), said: “The relationship between climate change and corporate wealth generation continues to rapidly evolve. The CCLI’s work to clarify the legal obligations of directors on point will address a significant gap in the governance and risk management literature.  This will provide a critical foundation for directors and their advisors to remain assured that that risks and opportunities associated with climate change are being governed in accordance with their fiduciary duties.”

Ed Waitzer, Senior Partner, Stikeman Elliott LLP (a leading Canadian-based corporate law firm), said: “This timely initiative comes at (and will contribute to) an inflection point in the trajectory of the law. New regulation and expectations will touch the financial services and other sectors, as well as those directly responsible for the governance of issuers and investors in carbon-intensive industries. The implications will spread rapidly to other environmental and social issues. Mapping the trajectory of the law in this area is a societal imperative.”

Economy

Will Self-Driving Cars Be Better for the Environment?

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self-driving cars for green environment
Shutterstock Licensed Photo - By Zapp2Photo | https://www.shutterstock.com/g/zapp2photo

Technologists, engineers, lawmakers, and the general public have been excitedly debating about the merits of self-driving cars for the past several years, as companies like Waymo and Uber race to get the first fully autonomous vehicles on the market. Largely, the concerns have been about safety and ethics; is a self-driving car really capable of eliminating the human errors responsible for the majority of vehicular accidents? And if so, who’s responsible for programming life-or-death decisions, and who’s held liable in the event of an accident?

But while these questions continue being debated, protecting people on an individual level, it’s worth posing a different question: how will self-driving cars impact the environment?

The Big Picture

The Department of Energy attempted to answer this question in clear terms, using scientific research and existing data sets to project the short-term and long-term environmental impact that self-driving vehicles could have. Its findings? The emergence of self-driving vehicles could essentially go either way; it could reduce energy consumption in transportation by as much as 90 percent, or increase it by more than 200 percent.

That’s a margin of error so wide it might as well be a total guess, but there are too many unknown variables to form a solid conclusion. There are many ways autonomous vehicles could influence our energy consumption and environmental impact, and they could go well or poorly, depending on how they’re adopted.

Driver Reduction?

One of the big selling points of autonomous vehicles is their capacity to reduce the total number of vehicles—and human drivers—on the road. If you’re able to carpool to work in a self-driving vehicle, or rely on autonomous public transportation, you’ll spend far less time, money, and energy on your own car. The convenience and efficiency of autonomous vehicles would therefore reduce the total miles driven, and significantly reduce carbon emissions.

There’s a flip side to this argument, however. If autonomous vehicles are far more convenient and less expensive than previous means of travel, it could be an incentive for people to travel more frequently, or drive to more destinations they’d otherwise avoid. In this case, the total miles driven could actually increase with the rise of self-driving cars.

As an added consideration, the increase or decrease in drivers on the road could result in more or fewer vehicle collisions, respectively—especially in the early days of autonomous vehicle adoption, when so many human drivers are still on the road. Car accident injury cases, therefore, would become far more complicated, and the roads could be temporarily less safe.

Deadheading

Deadheading is a term used in trucking and ridesharing to refer to miles driven with an empty load. Assume for a moment that there’s a fleet of self-driving vehicles available to pick people up and carry them to their destinations. It’s a convenient service, but by necessity, these vehicles will spend at least some of their time driving without passengers, whether it’s spent waiting to pick someone up or en route to their location. The increase in miles from deadheading could nullify the potential benefits of people driving fewer total miles, or add to the damage done by their increased mileage.

Make and Model of Car

Much will also depend on the types of cars equipped to be self-driving. For example, Waymo recently launched a wave of self-driving hybrid minivans, capable of getting far better mileage than a gas-only vehicle. If the majority of self-driving cars are electric or hybrids, the environmental impact will be much lower than if they’re converted from existing vehicles. Good emissions ratings are also important here.

On the other hand, the increased demand for autonomous vehicles could put more pressure on factory production, and make older cars obsolete. In that case, the gas mileage savings could be counteracted by the increased environmental impact of factory production.

The Bottom Line

Right now, there are too many unanswered questions to make a confident determination whether self-driving vehicles will help or harm the environment. Will we start driving more, or less? How will they handle dead time? What kind of models are going to be on the road?

Engineers and the general public are in complete control of how this develops in the near future. Hopefully, we’ll be able to see all the safety benefits of having autonomous vehicles on the road, but without any of the extra environmental impact to deal with.

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Economy

New Zealand to Switch to Fully Renewable Energy by 2035

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renewable energy policy
Shutterstock Licensed Photo - By Eviart / https://www.shutterstock.com/g/adrian825

New Zealand’s prime minister-elect Jacinda Ardern is already taking steps towards reducing the country’s carbon footprint. She signed a coalition deal with NZ First in October, aiming to generate 100% of the country’s energy from renewable sources by 2035.

New Zealand is already one of the greenest countries in the world, sourcing over 80% of its energy for its 4.7 million people from renewable resources like hydroelectric, geothermal and wind. The majority of its electricity comes from hydro-power, which generated 60% of the country’s energy in 2016. Last winter, renewable generation peaked at 93%.

Now, Ardern is taking on the challenge of eliminating New Zealand’s remaining use of fossil fuels. One of the biggest obstacles will be filling in the gap left by hydropower sources during dry conditions. When lake levels drop, the country relies on gas and coal to provide energy. Eliminating fossil fuels will require finding an alternative source to avoid spikes in energy costs during droughts.

Business NZ’s executive director John Carnegie told Bloomberg he believes Ardern needs to balance her goals with affordability, stating, “It’s completely appropriate to have a focus on reducing carbon emissions, but there needs to be an open and transparent public conversation about the policies and how they are delivered.”

The coalition deal outlined a few steps towards achieving this, including investing more in solar, which currently only provides 0.1% of the country’s energy. Ardern’s plans also include switching the electricity grid to renewable energy, investing more funds into rail transport, and switching all government vehicles to green fuel within a decade.

Zero net emissions by 2050

Beyond powering the country’s electricity grid with 100% green energy, Ardern also wants to reach zero net emissions by 2050. This ambitious goal is very much in line with her focus on climate change throughout the course of her campaign. Environmental issues were one of her top priorities from the start, which increased her appeal with young voters and helped her become one of the youngest world leaders at only 37.

Reaching zero net emissions would require overcoming challenging issues like eliminating fossil fuels in vehicles. Ardern hasn’t outlined a plan for reaching this goal, but has suggested creating an independent commission to aid in the transition to a lower carbon economy.

She also set a goal of doubling the number of trees the country plants per year to 100 million, a goal she says is “absolutely achievable” using land that is marginal for farming animals.

Greenpeace New Zealand climate and energy campaigner Amanda Larsson believes that phasing out fossil fuels should be a priority for the new prime minister. She says that in order to reach zero net emissions, Ardern “must prioritize closing down coal, putting a moratorium on new fossil fuel plants, building more wind infrastructure, and opening the playing field for household and community solar.”

A worldwide shift to renewable energy

Addressing climate change is becoming more of a priority around the world and many governments are assessing how they can reduce their reliance on fossil fuels and switch to environmentally-friendly energy sources. Sustainable energy is becoming an increasingly profitable industry, giving companies more of an incentive to invest.

Ardern isn’t alone in her climate concerns, as other prominent world leaders like Justin Trudeau and Emmanuel Macron have made renewable energy a focus of their campaigns. She isn’t the first to set ambitious goals, either. Sweden and Norway share New Zealand’s goal of net zero emissions by 2045 and 2030, respectively.

Scotland already sources more than half of its electricity from renewable sources and aims to fully transition by 2020, while France announced plans in September to stop fossil fuel production by 2040. This would make it the first country to do so, and the first to end the sale of gasoline and diesel vehicles.

Many parts of the world still rely heavily on coal, but if these countries are successful in phasing out fossil fuels and transitioning to renewable resources, it could serve as a turning point. As other world leaders see that switching to sustainable energy is possible – and profitable – it could be the start of a worldwide shift towards environmentally-friendly energy.

Sources: https://www.bloomberg.com/news/articles/2017-11-06/green-dream-risks-energy-security-as-kiwis-aim-for-zero-carbon

https://www.reuters.com/article/us-france-hydrocarbons/france-plans-to-end-oil-and-gas-production-by-2040-idUSKCN1BH1AQ

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