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Environmental Law
BY
VICTOR FLATT AND RICHARD O. ZERBE
Victor B. Flatt is the Dwight Olds Chair in Law and the Faculty Co-Director of the Environment,
Energy, and Natural Resources (EENR) Center at the University of Houston Law Center. Dr. Richard
Zerbe is the Daniel J. Evans Professor Emeritus at the University of Washington Evans School of Public
Policy and Governance. We thank Howard McCurdy for useful suggestions. Also thanks to Research
Assistants Elizabeth George and Hannah Steen.
[683]
I. INTRODUCTION
Like the frog in the slowly heating water, we have proved unable to respond
well to the long-term threat of climate change to the point where the threat now
may be a short term one. The problem was well summarized by Nathaniel Rich for
the New York Times Magazine:
The world has warmed more than one degree Celsius since the Industrial Revolution.
The Paris climate agreement — the nonbinding, unenforceable and already unheeded
treaty signed on Earth Day in 2016 — hoped to restrict warming to two degrees. The
odds of succeeding, according to a recent study based on current emissions trends, are
one in 20. If by some miracle we are able to limit warming to two degrees, we will
only have to negotiate the extinction of the world’s tropical reefs, sea-level rise of
several meters and the abandonment of the Persian Gulf. The climate scientist James
Hansen has called two-degree warming “a prescription for long-term disaster.” Long-
term disaster is now the best-case scenario. Three-degree warming is a prescription
for short-term disaster: forests in the Arctic and the loss of most coastal cities. Robert
Watson, a former director of the United Nations Intergovernmental Panel on Climate
Change, has argued that three-degree warming is the realistic minimum. Four degrees:
Europe in permanent drought; vast areas of China, India and Bangladesh claimed by
desert; Polynesia swallowed by the sea; the Colorado River thinned to a trickle; the
American Southwest largely uninhabitable. The prospect of a five-degree warming
has prompted some of the world’s leading climate scientists to warn of the end of
human civilization.1
The toughest emissions reductions being proposed, even by the most committed
nations, will probably not be able to achieve any given global temperature
stabilization target.2 By increasing the amount of greenhouse gasses (GHGs) in the
atmosphere, we are passing on a huge remediation burden (externality) to future
generations that may have no solution. Given this situation, should we not
aggressively seek measures to reduce our present and future risks, including the use
of private and public nuisance cases?
As Frank Mahoney noted about forty-six years ago, there is a tendency to look
to the legislatures for environmental remedies and to overlook or underrate the
potential of common law to contribute to solving such problems. 3 Courts have a
role to play and can contribute to a reduction of the huge damages from climate
change, as well as reduce the potential for catastrophic risks, by allowing a cause of
action based on public nuisance common law, rooted in strict liability, combined
with a damage remedy adopting calculations based on current knowledge. 4 The
damages should be a yearly assessment in order to produce a proper incentive for
emission reduction and, most importantly, related technological change.
1 Nathaniel Rich, Losing Earth: The Decade We Almost Stopped Climate Change, N.Y. TIMES
(Aug. 1, 2018), https://perma.cc/4NVN-46HC.
2 Id.
3 Frank E. Maloney, Judicial Protection of the Environment: A New Role for Common-Law
Remedies, 25 VAND. L. REV. 145, 145 (1972).
4 For a review of various mitigation techniques, see TIM FLANNERY, ATMOSPHERE OF HOPE:
SEARCHING FOR SOLUTIONS TO THE CLIMATE CRISIS (2015).
While federal common law nuisance suits for injunctive relief for greenhouse
gas emissions are blocked by the Supreme Court’s decision in American Electric
Power Co. v. Connecticut5 (American Electric Power Co.), on grounds of
preemption under the Federal Clean Air Act, lawsuits for damages at the state level
may be in play.6
There are significant efficiency advantages to damages granted under strict
liability for nuisance in the form of creating incentives for innovation and the
search for alternative technologies. Suits brought by states, government
subdivisions, and even private parties under common law nuisance law should be
allowed to establish these damages. Many of the recent suits by cities establish
damage that is not speculative as it is based on the cost of future adaptation efforts
made necessary by climate change.7 Even more generalized damages could be
calculated from Environmental Protection Agency (EPA) generated information or
other government calculations such as the social cost of carbon or some variant
thereof.8 While injunctive relief in nuisance lawsuits brings up difficult questions
regarding the role of courts in GHG regulation, lawsuits for past, future, and
ongoing damages, in lieu of an injunction, could be an appropriate remedy and
impact the arc of future emissions.9
Our paper demonstrates that common law public nuisance suits to reduce
emissions through damage claims are economically efficient under all conditions
and scenarios. This provides a powerful argument for recognizing GHG emissions
damages as cognizable under state law, even when there is a federal regulatory
scheme. This economic proof also calls into question some prior case law rejecting
both public and private nuisance law suits for GHG emissions. Outside of an
explicit preemption of state law, this efficiency should be persuasive evidence of
the need to preserve the common law public nuisance claims, and the role of courts
in mitigating and compensating for damages due to GHG emissions.
Part II of the paper reviews nuisance law and how our courts have applied that
to greenhouse gas emissions so far. Part III then discusses the history of nuisance
lawsuits, noting that economic efficiency does and should play a powerful role in
recognizing the presence of nuisance and that this gives courts a role in responding
to damage claims. Part IV demonstrates how allowing state common law nuisance
damage suits for greenhouse gas emissions to exist with or without regulation
produces the optimal efficiency result in all circumstances. The Article then
concludes.
II. NUISANCE LAW AND THE DAMAGE FROM GREENHOUSE GAS EMISSIONS
A private nuisance is defined as an intentional unreasonable invasion in the
private use and enjoyment of land.10 A public nuisance is an interference with the
health or moral welfare of the general public. 11 In the last 20 years, multiple cases
have been brought claiming that the emission of greenhouse gases or the
facilitation of greenhouse gas emissions are private or public nuisances subject to
damages and injunction.
The keystone federal case from the U.S. Supreme Court held that federal
common law nuisance lawsuits for injunction are preempted by the Clean Air
Act.12 The Court held that Congress delegated to EPA the decision whether and
how to regulate carbon dioxide emissions from power plants, and that this
delegation displaces federal common law. 13 Specifically, federal common law
nuisance lawsuits for injunctive relief “would be displaced by the federal
legislation authorizing EPA to regulate carbon-dioxide emissions.”14 By finding
preemption, the Court noted that, “[i]ndeed, were EPA to decline to regulate
carbon-dioxide emissions altogether at the conclusion of its ongoing §7411
rulemaking, the federal courts would have no warrant to employ the federal
common law of nuisance to upset the agency’s expert determination.” 15 The
justices based their decision on the observation that the U.S. Congress had
delegated the power to regulate greenhouse gases (including carbon dioxide) to the
EPA.16 Once Congress delegated regulatory authority to a federal administrative
agency, the delegation displaced any federal common law right of the plaintiffs to
seek common law relief in the courts. The plaintiffs had to take their complaints to
the EPA.
The Supreme Court has declined to determine whether and to what extent
nuisance claims based on state common law are preempted by the Clean Air Act. 17
Importantly, the American Electric Power Co. Court noted that a different standard
governs for preemption of federal common law than for preemption of state
common law. State law is only to be preempted if there is a clear and manifest
Congressional purpose.18 The Supreme Court’s 1987 decision in International
Paper Co. v. Ouellette19 (Ouellette) held that state law nuisance lawsuits were not
10 RESTATEMENT (SECOND) OF TORTS § 822 (AM. LAW INST. 1979) (the Third Restatement of
Torts was approved at the American Law Institute’s 2018 meeting but has not been published).
11 DAVID W. ROBERTSON ET AL., CASES AND MATERIALS ON TORTS 567 (5th ed. 2017).
12 Am. Elec. Power Co., 564 U.S. 410, 424 (2011); 42 U.S.C. §§ 7401–7671q (2012).
13 Am. Elec. Power Co., 564 U.S. at 426. After the Second Circuit delivered its opinion and prior to
the Supreme Court’s judgment, EPA had taken several relevant actions following Massachusetts v.
Environmental Protection Agency, 549 U.S. 497 (2007), which included issuing the Endangerment
Finding and establishing the Tailoring Rule, affecting the nation’s largest GHG emitters.
14 Id. at 423.
15 Id. at 426.
16 Id.
17 See Dan Farber, The Return of Federal Common Law, LEGAL PLANET (Mar. 1, 2018),
https://perma.cc/RS49-YRAR.
18 Am. Elec. Power Co., 564 U.S. at 423.
19 479 U.S. 481, 500 (1987).
automatically preempted by the Clean Water Act.20 Following Ouellette, the Fourth
Circuit in North Carolina ex. rel Cooper v. Tennessee Valley Authority 21 (TVA II),
refused to hold that Congress had “entirely preempted the field of emissions
regulation [under the Clean Air Act].”22
However, while the Fourth Circuit expressly refused to find that the Clean Air
Act preempted all state law tort claims concerning air pollution, it did find
preemption in that particular case.23 The court noted that the Clean Air Act was
inclusive and predictable, thus occupying some of the air pollution field, and that
emissions from four Tennessee coal plants were specifically subject to the
comprehensive breadth of the Clean Air Act.24 Indeed, the court noted that there
were explicit Clean Air Act sections designed to address just the issue of interstate
pollution that North Carolina complained of. 25
Other federal courts have applied the preemption reasoning to damages as
well as injunctions. Around the same time American Electric Power Co. was
decided, two other federal cases involving federal tort claims were decided.26 In
Comer v. Murphy Oil USA,27 owners of land and property along the Mississippi
Gulf coast sued oil companies and energy companies seeking monetary
compensation for damages. The landowners argued that these companies caused
emissions of greenhouse gases that contributed to global warming and added to the
ferocity of Hurricane Katrina which in turn destroyed their property.28 In Native
Village of Kivalina v. ExxonMobil Corp. 29 (Village of Kivalina), an indigenous
village and city alleged that multiple oil, energy, and utility companies had emitted
massive greenhouse gases which had resulted in global warming and the significant
erosion of the land where the city sat and thus threatened the city with imminent
destruction.30 Just as in American Electric Power Co., both courts in these cases
dismissed the federal tort action claims on various grounds before reaching the
merits.31 After the decision by the Supreme Court in American Electric Power Co.,
the Comer district court dismissed the tort action based on the American Electric
Power Co. opinion and the Ninth Circuit upheld the dismissal by the Village of
20 Scott Gallisdorfer, Clean Air Act Preemption of State Common Law: Greenhouse Gas Nuisance
Claims After AEP v. Connecticut, 99 VA. L. REV. 131, 146–47 (2013) (citing Ouellette, 479 U.S. 481,
494 (1987)).
21 615 F.3d 291 (4th Cir. 2010).
22 Id. at 302.
23 Id. at 296.
24 Id. at 301, 308.
25 Id. at 300 (“The Clean Air Act requires each state to ensure that its SIP ‘contain[s] adequate
provisions prohibiting [air pollution] . . . which will contribute significantly to nonattainment in . . . any
other State . . . .’”).
26 See Tracy Hester, Climate Tort Federalism, 13 FIU L. REV. 79, 84 (2018).
27 585 F.3d 855, 859 (5th Cir. 2009), vacated en banc, 598 F.3d 208, 210 (5th Cir. 2010), dismissed
for lack of quorum, 607 F.3d 1049, 1055 (5th Cir. 2010).
28 Hester, supra note 26, at 84.
29 696 F.3d 849 (9th Cir. 2012).
30 Id. at 853.
31 Hester, supra note 26, at 84.
Kivalina trial court.32 These cases also had state tort claims, but the courts
dismissed these claims once the federal tort claims failed.33
Certiorari was denied in TVA II34 and so neither it nor the above federal cases
are the final word on preemption under the Clean Air Act. In TVA II, the court
distinguishes Ouellette because the district court had applied “in-state” nuisance
law as opposed to the out of state law required.35 Applying “in-state” nuisance law
is more likely to be preempted when an activity has been “considered and
specifically authorized by the government.” 36 Nevertheless, the court recognized its
prior holding in North Carolina ex rel. Cooper v. Tennessee Valley Authority37
(TVA I ) that “the savings clause of the Clean Air Act may allow for some common
law nuisance suits,”38 but that such claims may survive only if they do not
“undermine [the] regulatory structure.” 39
More importantly, the Fourth Circuit’s reasoning only applies to injunctive
relief. It is the concern over “a number of different states . . . [having] independent
and plenary regulatory authority over a single discharge” that drives the holding in
TVA II.40 This issue is absent in state common law public nuisance law damage
suits. Suing for damages does not dictate what regulation is required.
Moreover, greenhouse gas regulation under the Clean Air Act is far from
comprehensive. In Utility Air Group v. EPA,41 the Supreme Court explicitly held
that Clean Air Act provisions that apply to common criteria pollutants do not apply
to greenhouse gases. 42 This makes the role of state common law even more
important to fill in the gaps where persons are harmed.
Given the outcomes in American Electric Power Co., Comer, Village of
Kivalina, and TVA, groups are now focusing on bringing claims based on state tort
law, and courts are split on how these cases should be decided.43 Specifically, local
governments in California, Colorado, New York, Washington, and Rhode Island
have all brought tort lawsuits under their respective state laws against energy
producers.44 In California, San Mateo County, Marin County, and the City of
Imperial Beach all alleged public nuisance, strict liability, failure to warn, private
32 Id. at 85.
33 Id.
34 615 F.3d 291 (2010), cert denied, 564 U.S. 1054 (2011).
35 See id. at 297.
36 Id. at 309 (quoting New England Legal Found. v. Costle, 666 F.2d 30, 33 (2nd Cir. 1981)).
37 515 F.3d 344 (4th Cir. 2008).
38 615 F.3d at 302–03.
39 Id. at 303 (quoting Ouellette, 479 U.S. 481, 497 (1987)).
40 Id. at 301 (quoting Ouellette, 479 U.S. at 496–97).
41 573 U.S. 302 (2014).
42 Id. at 333–34.
43 Hester, supra note 26, at 79–82.
44 Cty. of San Mateo v. Chevron Corp., 294 F. Supp. 3d 934 (N.D. Cal. 2018); Complaint, Cty. of
Marin v. Chevron Corp., No. 17-CIV-02586 (Cal. Super. Ct. July 17, 2017); Complaint, City of Imperial
Beach v. Chevron Corp., No. C17–01227 (Cal. Super. Ct. July 17, 2017); Complaint, State v. BP P.L.C.,
No. CGC–17–561370 (Cal. Super. Ct. Sept. 19, 2017); Complaint, City of Richmond v. Chevron Corp.,
No. C18–00055 (Cal. Super. Ct. Jan. 22, 2018); City of New York v. BP P.L.C., 325 F.Supp.3d 466,
468 (S.D.N.Y. 2018); Complaint, Bd. of Cty. Comm’rs of Boulder Cty. v. Suncor Energy (U.S.A.), Inc.,
No. 18–cv–030349 (Colo. Dist. Ct. Apr. 17, 2018); King Cty. v. BP P.L.C., No. C18–758–RSL, 2018
U.S. Dist. LEXIS 178873 (W.D. Wash. Oct. 17, 2018).
45 Complaint at 79–98, Cty. of San Mateo v. Chevron Corp., 294 F.Supp.3d 934 (Cal. Super. Ct.
July 17, 2017) (No. 17-CIV-03222); Complaint at 79–87, Cty. of Marin, No. 17-CIV-02586 (Cal. Super.
Ct. July 17, 2017); Complaint at 75–95, City of Imperial Beach, No. C17-01227 (Cal. Super. Ct. July 17,
2017).
46 Complaint at 98, Cty. of San Mateo, 294 F.Supp.3d 934 (Cal. Super. Ct. July 17, 2017) (No. 17-
CIV-03222); Complaint at 99, Cty. of Marin, No. 17-CIV-02586 (Cal. Super. Ct. July 17, 2017);
Complaint at 95, City of Imperial Beach, No. C17-01227 (Cal. Super. Ct. July 17, 2017).
47 Hester, supra note 26, at 82.
48 Order, No. 18-15499, (9th Cir. Aug. 20, 2018).
49 Complaint and Jury Demand, Bd. of Cty. Comm’rs of Boulder Cty. v. Suncor Energy (U.S.A.),
Inc., No. 18-cv-030349 (Colo. Dist. Ct. Apr. 17, 2018); Complaint, King County v. BP P.L.C., No. 18-
2-11859-0 (Wash. Super. Ct. May 9, 2018); Complaint for Public Nuisance, State v. BP P.L.C., No.
CGC-17-561370 (Cal. Super. Ct. Sept. 19, 2017).
50 See Complaint for Public Nuisance at 39, State v. BP P.L.C., No. CGC-17-561370 (Cal. Super.
Ct. Sept. 19, 2017) (seeking an order to create an abatement fund).
51 John Schwartz, Judge Dismisses Suit Against Oil Companies Over Climate Change Costs, N.Y.
TIMES (June 25, 2018), https://perma.cc/ALJ8-WW8Q.
52 King Cty. v. BP P.L.C., No. C18-758-RSL, 2018 U.S. Dist. LEXIS 178873, at *4 (W.D. Wash.
Oct. 17, 2018).
53 Complaint at 13–14, City of New York v. BP P.L.C., 325 F.Supp.3d 466, (S.D.N.Y Jan. 9, 2018)
(No. 18-cv-182).
54 Hester, supra note 26, at 90.
55 Complaint, Rhode Island v. Chevron Corp., 115–38, No. PC-2018-4716 (R.I. Super. Ct. July 2,
2018).
range from public nuisance, trespass, negligent failure to warn, negligent design
defect, and strict liability failure to warn and design defect. 56 The complaint seeks
abatement of the nuisance, compensatory damages, disgorgement of profits,
punitive damages, and attorney’s fees and costs of suit. 57 In July of 2018, the
defendants removed the case to federal court particularly arguing federal question
jurisdiction because of the implications the case could have nationally and
internationally.58 Rhode Island moved to remand the case back to state court in
August of 2018, and most recently, the defendants filed opposition to the motion
for remand.59
While there is no definitive answer concerning greenhouse gas state common
law nuisance law suits for damages, the trend seems to be towards dismissing the
cases. We believe this is misguided as these courts have ignored one factor that we
believe should influence these state law nuisance cases. The damages remedies that
could be awarded in climate change nuisance suits are economically efficient under
all circumstances.
56 Id.
57 Id. at 140.
58 Notice of Removal by Defendants Shell Oil Products Co. L.L.C. at 2, Rhode Island v. Chevron
Corp., No. 2018-4716 (R.I. Super. Ct. July 13, 2018).
59 Plaintiff’s Motion to Remand to State Court, Rhode Island v. Chevron Corp., No. 2018-4716
(D.R.I. Aug. 17, 2018); Defendant’s Opposition to Plaintiff’s Motion to Remand to State Court, Rhode
Island v. Chevron Corp., No. 2018-4716 (D.R.I. Sep. 14, 2018).
60 RESTATEMENT (SECOND) OF TORTS, supra note 10, at § 822.
61 Id. § 826(a).
62 57 Pa. 105, 113–14 (Sup. Ct. 1868).
63 George P. Smith II, Re-Validating the Doctrine of Anticipatory Nuisance, 29 VT. L. REV. 687,
693 (2005) (quoting Paul M. Kurtz, Nineteenth Century Anti-Entrepreneurial Nuisance Injunctions –
Avoiding the Chancellor, 17 WM. & MARY L. REV. 621, 658 (1976)).
With respect to balancing the social utility against the gravity of the anticipated harm,
it is true that carbon dioxide released from fossil fuels has caused (and will continue
to cause) global warming. But against that negative, we must weigh this positive: our
industrial revolution and the development of our modern world has literally been
fueled by oil and coal. Without those fuels, virtually all of our monumental progress
would have been impossible. All of us have benefitted. . . . Is it really fair, in light of
those benefits, to say that the sale of fossil fuels was unreasonable?64
While declining to answer that question, Judge Alsup has no problem in laying out
the framework and the test. As Professor Seiler notes, a judge may be better placed
than legislatures to make such an efficiency determination. 65 Some recent scholars
have noted that in dynamic fields, determining economic efficiency in context can
be difficult.66 While we recognize that the energy and climate systems are dynamic
and it may not be completely possible to predict that exact point of interdiction to
stop global warming, such issues fall away when looking at damages only. Our
economic analysis demonstrates, that at least as to damages, allowing the
imposition of strict liability under common law nuisance for greenhouse gas
emissions is economically efficient under all circumstances.
There has been a tension since the nineteenth century, between regulation and
private rights of action, recognizing on the one hand the inefficiency of private
rights where regulation achieves the desired result, and on the other hand
recognizing that the regulation may be insufficient. In Vaughan v. Taff Vale
Railway Co.67 it was held:
[W]hen the legislature has sanctioned and authorized the use of a particular thing, and
it is used for the purpose for which it was authorized, and every precaution has been
observed to prevent injury, the sanction of the legislature carries with it this
consequence, that if damage results from the use of such thing independently of
negligence, the party using it is not responsible.68
64 City of Oakland v. BP P.L.C., 325 F. Supp. 3d 1017, 2023–24 (N.D. Cal. 2018).
65 Bryan M. Seiler, Moving from “Broken Windows” to Healthy Neighborhood Policy: Reforming
Urban Nuisance Law in Public and Private Sectors, 92 MINN. L. REV. 883, 902–03 (2008).
66 See David M. Driesen, Legal Theory Lessons from the Financial Crisis, 40 J. CORP. L. 55, 56
(2014).
67 (1860) 157 Eng. Rep. 1351
68 Id. at 1354 (substituting a negligence rule for strict liability where plaintiff operated its railroad
pursuant to statue); see also Powell v. Fall [1880] QB 428, 428–30 (Eng.) (determining a defendant was
not negligent after having constructed an engine in compliance with the Locomotives Act).
69 Id.
70 Id. at 429.
damages action provided a test for efficiency that should not be surrendered
lightly.”71 He found that the damage action provided a test for efficiency, holding:
It seems to me a just and reasonable enactment that, if a man for his own advantage
uses a dangerous machine on the highway, he should pay damages for injury caused
thereby. If the profit which he obtains from using it is not enough to enable him to pay
for the damage he causes, the loss is not one to which the community or the injured
person ought to be subject, and it is for the public benefit that the use of the machine
should be suppressed.72
Consider the four tort constructs and two liability rules famously discussed by
Calabresi and Melamed.73 These are:
1. No remedy exists
2. A liability rule under which victims receive compensation, but no
injunctive relief
3. A property rule in which victims have the right to abate the nuisance
4. An injunction abating the nuisance but in which victims must compensate
the polluter for the losses due to the injunction. 74
We suggest an additional sub-rule as follows:
5. A liability rule in which damages are awarded to the state for public
nuisance on the basis of whether or not a performance standard has been
met.75
In determining damages, we suggest that rules two and five have a salience
based on considerations of efficiency. Richard Epstein notes:
Let the regulations in question be too stringent, and the tort suit will have little effect
on overall safety levels. Let the regulations in question be too lenient, and defendants
will find unjustified safe harbors from litigation. The preferred strategy within a
unified system is to treat regulations and litigation as operating in separate spheres so
that each responds solely to its own imperatives. 76
Thus, absent an explicit preemption (which does not exist in the Clean Air Act),
state common law damage actions should survive without regard to the standards
set out by direct federal regulation. This efficiency gain should not be ignored in
courts’ climate nuisance analyses. Strict liability through nuisance with damages is
superior to negligence or optimal cost-benefit regulation as it gives a more efficient
incentive for innovation. The efficiency gain lies in the role damages play in
encouraging the development of efficient control technology.
71 Richard A. Epstein, Federal Preemption, and Federal Common Law, in Nuisance Cases, 102
NW. U. L. REV. 551, 560 (2008).
72 Powell, [1880] QB 428 at 429.
73 Guido Calabresi & A. Douglas Melamed, Property Rules, Liability Rules, and Inalienability:
One View of the Cathedral, 85 HARV. L. REV. 1089, 1115–16 (1972).
74 See, e.g., Spur Indus., Inc. v. Del E. Webb Dev. Co., 494 P.2d 700, 708 (Ariz. 1972).
75 A sixth rule can also be suggested: An injunction whose conditions require the meeting of
specified standards. The problem with rule six is that there may be conflicting performance standards.
76 Epstein, supra note 71, at 560.
Figure One: The Efficiency Argument Under Correct and Incorrect Standards
MCC
77 There is some evidence that the current rate of innovation may be below the socially desirable
level. See Todd Gerarden, et al., Assessing the Energy-Efficiency Gap, 55 J. ECON. LITERATURE 1486,
1487 (2017).
the damages. The efficiency argument has been favorably considered by Richard
Epstein, who notes:
[S]uppose that the regulation is not efficient, for example, because it was passed in
response to interest group pressures. At this juncture, the preservation of the private
right of action has positive allocative consequences, and not just distributional ones.78
The gains do not end there. The analysis thus far is static, only comparing
gains with existing technologies. Payment of damages also provides a proper
incentive to innovate. Even where the standards are set correctly at JR, levying
damages of areas B+C on the polluter creates an incentive to innovate to reduce
these damages. These areas represent the wealth or damages transferred from the
tortfeasor to the plaintiffs. The tortfeasor has no incentive to invest in new control
technology unless the expected gains are greater than the cost of innovation, where
expected gains are the reduction in damages. With strict liability, the courts would
not set performance standards but rather set damages to the extent proved by the
plaintiff. With strict liability, the plaintiff can recover all provable damages.
Imposing the costs of B+C on the polluter instead of the victim would seem to be
neutral for social utility as we have just reshuffled where the damage costs fall.
However, shifting the costs to the polluter better aligns incentives for cost (damage)
reduction on who is more likely to do so efficiently: the polluter.
Presumably, whoever bears the cost of B & C would want to reduce these
costs (damages) if that could be done efficiently (for less than the MCC), but only
the polluter has a method for doing so. The victim has no way to reduce aggregate
climate change damages (the transaction costs of organizing all plaintiffs would be
very high), but the polluter can reduce by innovation and will choose to do so when
controlling the pollution becomes less costly than paying the damages. This
innovation incentive is, we suggest, of major importance yet is rarely considered by
any of the courts’ preemption arguments nor in arguments for standard setting as
opposed to damages.
How often is the correct standard set? Rarely of course! Even where the
standard is set too severely at TS, there will still be a gain of innovation incentive
represented in Figure One by area C. The most likely performance standards are
those represented by TL or TS.79 We assume that TL is the more likely. In this case
the innovative gain is a function of B+C, [f(B+C,)]. This social gain under strict
78 Epstein, supra note 71, at 560. Epstein notes that: In this context, there are two possible sources
of error.
The statutory rules could be either too strong or too weak. If the former holds, the tort system
will not supply the reason for conformity, but the threat of fines or criminal sanctions will. Once
that happens, the likelihood of injury drops. The role of the statute in private litigation
consequently becomes less important because the frequency of suit drops. If the latter holds so
that the statutory standard is too low, then a regulated firm has a strong incentive to
underprovide safety to strangers because it can take advantage of the statutory bar. Under this
scenario, we get too little safety in the system.
Id.
79 See generally Richard O. Zerbe, Theoretical Efficiency in Pollution Control, 8 W. ECON. J. 364
(1971) (discussing which liability levels for polluters can achieve optimized levels of pollution).
liability would be lost under a negligence rule, in which courts find negligence only
in those cases in which injurer’s performance is not cost justified, that is, the harm
caused is greater than the costs of prevention, the Hand Rule for liability. 80
Damages with strict liability play a more powerful role than either negligence or
performance standards. With the existence of government performance standards,
negligence is unlikely to be found as long as the defendant meets the standards,
reducing the innovation incentive as compared with damages under strict liability.
The gains from innovation are illustrated in Figure Two below. The figure shows
the control cost function MCC1 shifting to the right (down) to become MCC2, so
that the expected gross gains are represented by area E, the savings in control costs.
In all of these cases, the ability to bring common law public nuisance suits is
more likely than not to improve economic efficiency. When no regulations exist,
the case for public nuisance tort is clear. Damages will tend to be reduced towards
the optimal point and the firm(s) will pay for damages beyond the optimal point of
damage control as a distributive transfer. That this transfer is not welfare neutral is
a crucial fact not generally noted in the literature. The transfer creates an additional
incentive to invest in damage control technology to reduce the expenses of the tort
action. Thus, this investment will be socially efficient, since, under profit
maximization, the investment will only be made if its expected cost is less than the
expected reduction in damages. When the regulations are unenforced or under-
enforced the same analysis holds, but with the caveat that the damages saved by
tort action are reduced, but not eliminated, by the probability of future regulation
enforcement.
Although the EPA is still engaged in setting performance standards for
existing sources of GHGs under section 111(d) of the Clean Air Act, damage
80 Barbara Ann White, Risk-Utility Analysis and The Learned Hand Formula: A Hand That Helps
or a Hand That Hides?, 32 ARIZ. L. REV. 77, 103–05 (1990).
liability and standards can operate together, and it is efficient that they do so. 81
Even if the standard set by EPA were correct,82 there remains an efficiency
argument for allowing damages, even for companies meeting the standard.
Moreover, regulations are unlikely to be optimal due to the lack of
information and the presence, perhaps, of political pressures. Yet, when the
regulation is either too lenient or too severe, the presence of a nuisance action will
promote efficiency, especially in situations in which regulations are too lenient.
Where the regulation is too lenient, the possibility of such action will tend to move
towards the optimal level of regulation. Damages beyond the optimal point will
provide a distributional transfer that also provides an additional incentive to invest
in new technology for pollution control. This investment is efficient as the firm will
only make such investment when the expected gains in the reduction exceeds the
expected costs of technological development. Since there is liability in any event,
the tortfeasor doesn’t suffer from “over-regulation.” When the regulation is too
severe, the effect of allowing a nuisance suit is to reduce the size of the transfer
required. Yet if damages remain, the possibility of a tort or nuisance action will still
create an additional and efficient incentive to invest in new control technology,
though this incentive is reduced as compared with the other cases.
The major efficiency arguments for not allowing common law damage suits
concurrent with regulation are that the courts have neither the expertise nor the
experience to suggest performance standards and that, if they did, the results would
be confusing.83 The argument suggests that allowing plaintiff’s claims could lead to
alternative standards and resultant confusion. This only speaks to suits that attempt
to set standards, but not to suits for damages, and does not apply with any force
against the setting of continuing damages under strict liability. In determining
damages, courts routinely rely on the testimony of expert witnesses. Indeed, EPA
already has estimates of U.S. damages that could be brought to bear as we will
show.
Moreover, it is the common law that is more likely to accurately assess
community desires through efficiency. Efficiency is almost wholly defined by
community values. Tilley, in a recent article, finds that scrutinizing tort doctrine
yields “a surprising insight”: tort law is primarily concerned with community. 84 She
notes that “[a] linguistic study of the Restatement of Torts reveals that doctrine
alludes to the concept of community more frequently and more comprehensively
than it does to any other justificatory concept.” 85 She goes on to note that,
throughout the Restatement’s discussion of negligence, strict liability, and
intentional wrongs, doctrine disfavors stating interpersonal duties in positive terms,
preferring to let them float with community values. Thus, she sees tort as a vehicle
81 Jeannine Anderson, Court issues indefinite hold in 111(b) litigation, AM. PUB. POWER ASS’N
(Aug. 11, 2017), https://perma.cc/V9JU-ALZH (“In contrast to the 111(d) rule, the 111(b) rule has never
been stayed and remains in effect.”).
82 Which is highly unlikely. Note the difference in reductions between the Clean Power Plan under
the Obama EPA and the Affordable Clean Energy Plan under the Trump EPA. See Niina Heikkinen,
Clean Power Plan Replacement Could Lead to Increased Emissions, SCI. AM. (Jan. 16, 2019),
perma.cc/2UXD-LDJN.
83 See Massachusetts v. U.S. Envtl. Prot. Agency, 549 U.S. 497, 533–34 (2007).
84 Cristina Carmody Tilley, Tort Law Inside Out, 126 YALE L.J. 1320, 1324 (2017).
85 Id.
V. DAMAGE CALCULATIONS
In response to the Court’s decision in Massachusetts v. EPA,87 EPA in 2009
formally found that GHGs from transportation sources “contribute to the total
greenhouse gas air pollution, and thus to the climate change problem, which is
reasonably anticipated to endanger public health and welfare.”88
The information EPA collects—along with other organizations—provides a
substantial base of factual material for accessing damages.89 For 2016, for example,
EPA set the total volume of carbon dioxide equivalents emitted in the United States
at 6,511 million metric tons. The electric power industry produced 28.4% of that
amount, or 1,849 million metric tons. Plaintiffs in the American Electric Power Co.
case alleged that the defendants at the time of the suit emitted about 650 million
metric tons of carbon dioxide each year, roughly one-third of the total ascribed to
the U.S. electric power industry.90
The Obama Administration Interagency Working Group established a price
for GHG impacts, called the social cost of carbon, which was to be used when
federal agencies were attempting to weigh costs and benefits of their decisions. 91
86 Richard O. Zerbe, Well Defined Efficiency and the Common Law (May 29, 2019),
perma.cc/K5GH-D8LF.
87 549 U.S. 497 (2007).
88 Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202(a) of
the Clean Air Act, 74 Fed. Reg. 66,496, 66,499 (Dec. 15, 2009) (to be codified at 40 C.F.R. ch.1).
89 In addition, the Second Circuit accepted plaintiffs’ assertion that defendants’ contributions to
global warming satisfied the “fairly traceable” element of standing. Connecticut v. Am. Elec. Power Co.,
582 F.3d 309, 345 (2nd Cir. 2009). The contribution to harm was held to be actionable under the law of
public nuisance. The Second Circuit held that the triviality of injuries was no bar to suit because the size
of the injury is not germane to standing analysis. Id. at 347.
90 “Plaintiffs allege defendants emit 650 million metric tons of CO 2 per year, 406 F.Supp.2d 265,
268 (S.D.N.Y. 2005), which is alleged to constitute 25% of U.S. electric power industry’s emissions,
which them-selves are said to be 10% of global CO2 emissions. Id. According to the complaint,
therefore, defendants are responsible for approximately 2.5% of all human emissions.” Brief of
Southeastern Legal Found. in Support of Petitioners at 10, American Electric Power Co., 564 U.S. 410
(2011) (No. 10-174); U.S. ENERGY INFO. ADMIN., FREQUENTLY ASKED QUESTIONS: HOW MUCH OF
U.S. CARBON DIOXIDE EMISSIONS ARE ASSOCIATED WITH ELECTRICITY GENERATION (Jun. 2018)
https://perma.cc/BEQ6-L22T.
91 See INTERAGENCY WORKING GRP. ON SOC. COST OF GREENHOUSE GASES, TECHNICAL SUPPORT
DOCUMENT: TECHNICAL UPDATE OF THE SOCIAL COST OF CARBON FOR REGULATORY IMPACT
ANALYSIS UNDER EXECUTIVE ORDER 12,866, U.S. ENVTL. PROTECTION AGENCY 3 (2016),
https://perma.cc/HTL5-4RHH [hereinafter TECHNICAL SUPPORT DOCUMENT]
Though this figure has been rejected by the Trump administration, EPA’s website
still maintains detailed lists of the social cost of carbon. 92
EPA notes that given current modeling and data limitations, their estimates
“do not include all important damages.” 93 The figures represent the long-term
damage done to agricultural productivity, human health, property values and
energy costs, and other damages from the addition of a metric ton of carbon dioxide
to the atmosphere.94 The calculations also represent the benefits of not producing an
additional metric ton of greenhouse gases. We add in the 7% discount rate as a
comparison based on prior work by one of the authors suggesting that this is the
appropriate discount rate to use.
Table One: Discount Rates and the Social Costs of Carbon per Metric Ton
Discount Rates and The Social Cost of Carbon Per Metric Ton95
Year 7% 7% 5% 3.00% 2.50%
The figures are calculated in terms of social costs per metric ton of carbon
dioxide.96 Table One shows their figures. These figures are the discounted values of
yearly damages over the period 2015 through 2050. The higher the discount rate
the lower the present value of damages. EPA highlights the 3% discount rate. Even
92 The Social Cost of Carbon: Estimating the Benefits of Reducing Greenhouse Gas Emissions,
U.S. ENVTL. PROTECTION AGENCY (Jan. 19, 2017), https://perma.cc/Q2HD-L5V5 [hereinafter Social
Cost of Carbon 2017].
93 Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility
Generating Units, 80 Fed. Reg. 64,662, 64,751 n.434 (Oct. 23, 2015) (codified at 40 C.F.R. pt. 60).
94 Social Cost of Carbon 2017, supra note 92.
95 Id.; see also TECHNICAL SUPPORT DOCUMENT, supra note 91, at 4.
96 In calculating these figures, EPA relies on the IPCC 2015 Report. Social Cost of Carbon 2017,
supra note 92.
using the 7% discount rate (which one of the authors demonstrates may be more
appropriate),97 damages are substantial and calculable.
The figures can be extrapolated into the future and discounted back into their
present value. The figures vary from year to year and according to the discount rate
used. For example, the damage done by a metric ton of carbon dioxide emitted in
2015 at a discount rate of 7% is $10.60 in 2015. (At the discount rate of 3%, the
social cost is $36 per metric ton.) As years pass and emissions accumulate, the
social costs of additional emissions expand. In 2055, for a 7% discount rate social
costs reach $45 per metric ton at the average estimate, and $55 at the higher
estimate, which EPA believes to be less probable. The damages increase “because
future emissions are expected to produce larger incremental damages as physical
and economic systems become more stressed in response to greater climatic
change, and because GDP is growing over time and many damage categories are
modeled as proportional to gross GDP.”98
In sum, there are four points to be made here: 1) damages from an additional
ton increase each year; 2) without further innovation the costs of reducing a given
amount of damage will increase; 3) with innovation the costs of controlling each
ton will decrease; 4) the net result can be either increasing or decreasing costs per
unit of damage.
An alternative to these figures may be found by using the Intergovernmental
Panel on Climate Change (IPCC) report directly which takes into account damages
from GHGs more generally than just CO2.99 This approach gives damages in 2015
of between $10 and $15 billion per year, or between about $17 and $23 per metric
ton.
Carrying the example forward, can the power industries that were sued in the
American Electric Power Co. case afford to pay for the damages caused by their
emissions? At the lower end of the damage estimates—say $11 per ton—a
judgment would be onerous but within the capacity of the companies to pay. (A
judgment of damages at $11 per ton imposed on emissions of 650 million metric
tons could produce an award in the $7 billion range.) This is far less than the net
income (profits) for 2017 received by the organizations named in the suit.
However, by 2030, damages will be higher by a factor of 63% and in the $12
billion range.
97 David F. Burgess & Richard O. Zerbe, Appropriate Discounting for Benefit-Cost Analysis, 2 J.
BENEFIT-COST ANALYSIS, Apr. 2011, at 10.
98 Social Cost of Carbon 2017, supra note 92.
99 INTERGOVERNMENTAL PANEL ON CLIMATE CHANGE, CLIMATE CHANGE 2014: IMPACTS,
ADAPTATION, AND VULNERABILITY. CONTRIBUTION OF WORKING GROUP II TO THE FIFTH ASSESSMENT
REPORT OF THE INTERGOVERNMENTAL PANEL ON CLIMATE CHANGE (Christopher B. Fields et al. eds.,
2014), https://perma.cc/K8MG-C9XF.
Table Two: Revenue and Net Revenue from American Electric Power
Defendant
Defendants 2017 2017
Revenues Profits or
in Billions Net
Income
(XcelEnergy NA 11.39
Inc. of Minn.) (company
bought by
Duke
Power)
TVA 15
Total 76.994 24.842
VI. CONCLUSION
Federal common law nuisance suits for injunctive relief are preempted by
American Electric Power Co. Possibilities remain for state common law nuisance
actions from damages associated with greenhouse gas emissions. Such actions have
not been expressly barred by the current jurisprudence. This Article provides a
compelling reason why they should not be barred.
Nuisance jurisprudence has long relied on the importance of economic
efficiency in the justification for why such lawsuits should be cognizable. In this
Article we demonstrate that allowing common law nuisance suits for damages is
economically efficient in all situations, even if it co-exists with a regulatory