On 18 July 2022, the High Court declared that the UK’s Net Zero Strategy is, in part, unlawful and ordered the Secretary of State to revise it by March 2023. A recent briefing by Clifford Chance titled “UK Net Zero Strategy ruled unlawful leaving uncertainty over UK climate policy” considers the judgment and its implications for future climate policy and, more generally, for UK climate litigation. This is an extract from the said briefing…

Context – the Climate Change Act 2008 and the Net Zero Strategy

The UK Government announced its high profile ‘net zero’ policy in June 2019 and swiftly made it legally binding through an amendment to the Climate Change Act 2008 (CCA 2008). The successive 5 year binding ‘carbon budgets’ under the Act were also strengthened, and the sixth budget, for 2033-2037, (CB6) was the first to be amended as part of the new trajectory towards net zero.

Stakeholders called for a robust UK Net Zero Strategy (NZS) to provide the detailed policies and measures needed to achieve these targets. A NZS was also seen as crucial to the Government’s credibility in its role as COP26 President (which took place in November 2021) and to its success in persuading other countries to ramp up their commitments and action on climate change. The NZS was published shortly before COP26 in October 2021.

The NZS contains a wide range of policy proposals across multiple sectors. Given uncertainty about energy and technology solutions to climate change in the years to come, the NZS featured a number of modelled ‘2050 scenarios’ showing the contributions of different technologies in different sectors to the emission reduction effort. The NZS then set out an indicative ‘delivery pathway’ for emissions reductions to 2037 (the end of the CB6) which was said to be consistent with these scenarios and was based on the understanding of each sector’s potential to reduce emissions.

While the NZS delivery pathway and the modelling involved suggested that the reductions required by CB6 would be achieved by a slim margin, it emerged during the preliminary stages of the present case that the proposals and policies in the NZS whose impact had been quantitatively (i.e. numerically) analysed would only meet 95% of the reductions necessary for CB6. The remaining 5% reductions (the 5% Shortfall) would be secured from future “planned policy work” referred to in the NZS but whose predicted effects had been subject only to qualitative analysis and judgement. Information as to which policies and proposals had been subject to quantitative analysis and the fact that there was a 5% Shortfall was not mentioned in the NZS, and this ultimately formed a key aspect of the legal challenge to the NZS brought in the High Court by Friends of the Earth, ClientEarth and Good Law Project, NGOs that are increasingly focusing their efforts on seeking to make governments globally move more quickly on climate action through legal action. Given the overlapping nature of the challenges, the High Court delivered a single judgment on the conjoined claims brought on a number of grounds.

CCA 2008 Ground 1

Ground 1 related to the duty of the Secretary of State for Business, Energy and Industrial Strategy (SoS) under Section 13 of the CCA 2008 to prepare proposals and policies necessary to enable carbon budgets to be met. Ground 1 had two parts.

Firstly, it was claimed that the SoS could only satisfy its Section 13 duty where quantitative analysis had been conducted into the effects of policies or proposals that would deliver 100% of the reductions necessary to meet CB6 (and not only 95%). This part of Ground 1 did not succeed. Significantly, the judge felt that, although there was a need for a certain level of quantitative analysis, it was inevitable that qualitative judgement would also be required given that predictive assessment many years into the future would be involved, and given uncertainties about future economic growth, energy, prices, population growth, the impact of investment in technological innovation and policy implementation.

Secondly, it was claimed that the material provided to the Minister of State (acting on behalf of the SoS) for sign off on the NZS (the Briefing), was legally insufficient for him to be satisfied under Section 13 that the proposals and policies would enable CB6 to be met, because the following information was not provided: a. The contribution each quantifiable proposal or policy would make to meeting carbon budget; and b. Identification of the proposals and policies that would ensure that the 5% Shortfall will be met.

Although department officials had conducted quantitative analysis identifying the extent to which individual policies contributed to the carbon budgets, this was not included in the Briefing (which considered only the combined effects of the policies). This part of Ground 1 was successful.

CCA 2008 Ground 2

Ground 2 related to the SoS’s duty under Section 14 CCA 2008 to report to Parliament on proposals and policies for meeting carbon budgets. Under this ground, the claimants argued that certain information was missing from the NZS, being numerical explanations for his conclusion that the NZS proposals and policies would meet the carbon budgets, and the extent that each proposal or policy (insofar as quantifiable) contributed to required emissions reductions. Ground 2 was successful in part.

The Human Rights Ground 3

Finally, the Human Rights Ground addressed whether the Court should alter the ordinary interpretation of Sections 13 and 14 CCA 2008 to make these provisions more conducive with, or more effective for, the protection of the rights to life, quality of life and property under the European Convention on Human Rights (ECHR) as is required under section 3(1) of the Human Rights Act 1998 (HRA).

The claimants’ argument was premised on the fact the UK has obligations to uphold the Convention rights, and that a failure to take effective action against climate change represents a real and imminent threat to basic human rights under the Convention. Accordingly, the claimants argued that the greater and more effective the action taken by the state to reduce emissions and safeguard against climate action, the greater the effect will be in minimising the risk in the future to life, quality of life and property. On the claimants’ case, only a more stringent interpretation of Sections 13 and 14 CCA 2008 could be compatible with the ECHR. The court deemed this argument as “too ambitious” in a number of respects.

Implications of the judgment

Significantly, the Claimants viewed much of the content of the NZS positively, and they had therefore sought only a declaration that the NZS was unlawful, rather than for the NZS to be quashed in its entirety. As a result, the Court ordered the Secretary of State to lay a fresh (compliant) NZS before Parliament before the end of March 2023. It is also worth noting that these claims did not challenge the ambition of the CCA 2008 targets or the carbon budgets. To this extent, the judgment is unlikely to lead to a major change in direction of climate policy.

However, this is more than a merely technical judgment. The fact that the SoS will now need specifically to consider how the unquantified policies will reach the 5% shortfall in emission reductions, may mean that individual policies and proposals (whether previously quantified or not) need to be strengthened to give the SoS sufficient confidence that CB6 can be met (i.e. by 2037). The fact that a certain level of the quantitative analysis undertaken will now need to be included within the NZS itself, will give the CCC and Parliament (and of course, NGOs) greater opportunity to determine whether the SoS has got that judgement right and potentially for stakeholders to challenge the NZS again if they think he has not.

The judgment also highlights just how complex the process is to determine a strategic path towards net zero to be played out over several decades, given the technological, economic, social and political uncertainties at play. The judgment should give some comfort to the Government and officials that uncertainty of policy effect is not an obstacle to a lawful NZS, but that must be counter-balanced by allowing the Parliament, the CCC and the public the ability to properly scrutinise the political judgement involved in addressing that uncertainty.

In November 2021, the UK Government confirmed its intention to require listed companies, asset managers and regulated asset owners to publish ‘transition plans’. Although the Government currently does not intend for these to be net zero transition plans, the FCA has already introduced guidance encouraging businesses headquartered in the UK and other countries with net zero targets, to consider national net zero commitments when making disclosures on transition plans as part of their TCFD disclosures. While work is still ongoing under HM Treasury’s Transition Task Force to determine what a transition plan should look like in the private sector, it is likely that the Courts will in the future be called to assess company transition plans (or disclosures on them); it will be interesting to see the extent to which the Courts will wish to investigate the granular detail of boardroom analysis and processes, to the same extent they are prepared to do in relation to the Government’s transition plans. More broadly, companies should be thinking about their plans for transition to a low carbon economy, and basing their transition plans on robust evidence and analysis as far as possible.

The complete briefing can be accessed here