Using Litigation to Expedite the Clean Energy Transition

Stretching over an expansive 80 square kilometres, the Hambach mine operated by RWE, one of the largest electricity producers in Germany, is a staggering sight. If there was ever a symbol of mankind’s impact on Earth, this mine, visible from space, would have to be it. The entire local ecology has been disrupted to excavate the coal that lies beneath. What used to be an ancient forest with rare species is now greatly diminished.

Hambach has become an iconic site for clashes between a public that supports a more ambitious climate policy and fossil fuel companies eager to hold onto business before the inevitable energy transition or ‘Energiewende’ takes hold. 

At a time when the world’s existing stock of fossil fuel infrastructure is enough to increase mean temperature by 2 degrees Celsius, Germany cannot consider expanding coal mines as being consistent with its own climate targets. Moreover, Germany’s coal phaseout plan which sets a deadline of 2038 is far too late. The coal phaseout is a compromise with an entrenched fossil fuel lobby. 

When climate policy is susceptible to dilution, is there another method that can reflect the will of society and ensure actions are ‘2-degree compatible’? As we explain in a recent paper, we think environmental litigation provides a cost-effective, replicable and potentially scalable means of expediting the energy transition.  

Taking inspiration from the Sierra Club which challenged the expansion of a new coal fleet in the USA, one court case at a time, we believe that cases against fossil fuel companies can advance Germany’s climate goals too. Since 2010, the Sierra Club has helped advance the retirement of over 300 coal-fired power plants across the USA. 

We conduct two complementary assessments: (i) a legal analysis finding that German law provides several grounds for the revocation of coal mining permits, particularly when linked to quantifiable damages to local ecosystems and communities; and (ii) an economic analysis using natural capital accounting to quantify the environmental and societal costs associated with continued and halted mining activity. The backdrop for this analysis is rapidly declining renewable energy costs, the fact that renewables employ more people than coal in Germany, and an increasing awareness of the deleterious impacts of air pollution on human health. 

To be sure, not everything can be quantified for a cost-benefit analysis. Hambach Forest is home to several rare species that are protected by EU law (listed in Annex IV of the Fauna Flora Habitats Directive). Due to the special nature of these species, Hambach should ordinarily be considered a protected zone that is safeguarded from disturbance. The discrepancy between EU law and the actions of RWE has already provided the basis for a temporary cessation of lignite excavation in the area. However, we think that a further case can be made on grounds of locally-concentrated health-related damages. 

The costs of continued mining (air pollution, damages to local ecosystem services, climate change) outweigh the costs of revoking coal mining permits (e.g. replacing energy infrastructure with clean alternatives, compensating laid-off workers, and lost revenues to RWE). We find the net present value of gains from immediately halting operations at Hambach mine are €98–208 billion over 34-years, equivalent to 13–30% of North-Rhine Westphalia’s annual GDP. These results can be explained by the harmful impacts of air pollution and the fact that lignite mining is scarcely a profitable activity: a quick look at RWE’s balance sheets reveals that lignite mining just about breaks even. 

In terms of local damages, air pollution due to burning lignite mined at Hambach increases particulate matter (PM2.5), which is known to cause respiratory illnesses and, increase hospital visits, healthcare costs, and the incidence of premature deaths. Health-related savings from avoided air pollution are two orders of magnitude greater than costs of generously compensating laid-off mining workers.

Moreover, if lignite were substituted with only solar PV, there would be cost savings since the levelized cost of electricity from solar PV in Germany is lower than that of lignite. However, to be conservative, we consider replacing all lignite-based electricity with solar PV and battery storage. In this case the investment in new, green energy infrastructure would pay itself back in less than four years through the savings realized on the healthcare front from avoided PM2.5 pollution.

We run a sensitivity check on our results to see how they align with government estimates. In its latest methodological report, the Federal Environment Agency (2019) recommends a rate of €180/tCO2e to capture the total greenhouse gas and air pollution costs associated with lignite mining and combustion. Applying this rate results in a cumulative cost of €153 billion (NPV over 34 years), which falls within our range of estimated damages lending some external validity to our findings.

Statements have been made by RWE’s CEO claiming that halting lignite excavation to preserve the Hambach Forest would make it one of Germany’s most expensive woodlands (see news coverage). Our analysis suggests that failing to halt lignite excavation at Hambach would make the opencast mine one of Germany’s most expensive healthcare crises. On this basis, we believe coal mining permits may be prematurely revoked. 

Agencies and courts can therefore play a critical role in ensuring that the hidden costs of coal are brought to the forefront, and by doing so, ensure that a just energy transition takes place. Natural capital accounting can be one tool to help bolster the evidentiary basis for such cases. As Justice Louis Brandeis elucidated back in 1922, ‘[c]oal in place is land; and the right of the owner to use his land is not absolute. He may not so use it as to create a public nuisance; and uses, once harmless, may, owing to changed conditions, seriously threaten the public welfare.’

We believe the conditions have now changed. German coal excavation law was written at a time when coal had to be cheaply and rapidly excavated to fund war efforts and nation-building. The burden of proof was on demonstrating why coal excavation should not take place. Today, with cheap renewable energy and a looming climate crisis, we think the burden of proof should be reversed. One must ask, upon consideration of all factors such as air pollution, community displacement and ecological damage, why should coal mining continue? 

Sugandha Srivastav is a DPhil Candidate in Environmental Economics within the Economics of Sustainability programme at the Institute of New Economic Thinking at the University of Oxford.

Ryan Rafaty is a Postdoctoral Research Fellow in Climate Policy at Nuffield College and an Associate of the Institute of New Economic Thinking at the University of Oxford.

Björn Hoops holds the Chair of Private Law and Sustainability at the University of Groningen.