Climate Change as Unjust Enrichment

Maytal Gilboa is an Assistant Professor at the Faculty of Law at Bar-Ilhan University, Yotam Kaplan is an Assistant Professor at the Faculty of Law at Bar-Ilhan University, and Roee Sarel is Junior Professor of Private Law and Law & Economics at the University of Hamburg. This post is based on their recent paper, forthcoming in the Georgetown Law Journal.

The climate crisis represents a stark clash between short-term and long-term interests. Governments prioritize short-term economic growth over long-term climate stability, and are hesitant to comply with their international obligations, which involve costly short-term concessions. Powerful industry lobbyists push for policies that guarantees immense short-term profits, at the expense of future generations. Regulatory mechanisms and international law treaties seem unable to provide effective legal responses to the crisis.

Climate litigation, operating through the court system, aims to fill the gaps left by national and international regulation. Unfortunately, litigation has so far also proven largely ineffective. Currently, climate litigation is primarily based on tort principles, which necessitate a clear showing of harm, attributed to a specific injurer under a “but-for” test for causation. This formulation puts plaintiffs at a structural disadvantage when it comes to climate litigation. The harms of climate change entail unique features: most of them will only materialize in the medium-to-far future, they are highly dispersed, non-monetary by nature, and difficult to attribute to specific actors. Identifying, quantifying, and proving such harms in courts is near-impossible, and claims are systematically rejected by courts. Additionally, tort liability is typically available only following some “wrong” by the defendant. In the context of the climate crisis, polluters who contribute significantly to global warming may not necessarily be committing a wrong, i.e., breaching any identifiable legal duty. Even those who strictly adhere to all legal requirements and regulatory standards, and therefore commit no apparent “wrong,” still contribute to global warming. Thus, the focus of tort law on wrongdoing fails to fully capture the nature of the problem.

In a recent article (forthcoming in the Georgetown Law Journal), we explore an alternative approach: using the law of unjust enrichment as a basis for climate litigation. This doctrinal and conceptual shift carries significant advantages. First, an unjust enrichment claim does not rely on a showing of harm, but rather focuses on the unjust gains acquired by the defendant. Key industry players are making immense profits off the climate crisis. And while the harms of the climate crisis are widely dispersed, non-monetary, and occur in the future, profits are immediate, monetary, and highly concentrated. Because gains are monetary and held by identifiable individuals or entities, it is relatively easy to translate them into straightforward and impactful remedies, circumventing the challenges of proving harm in a tort claim. Of course, the general harmfulness of the defendant’s conduct can be relevant in an unjust enrichment claim, in supporting the injustice of the enrichment, but the claim does not necessitate the plaintiff to establish, identify, and quantify a specific harm that is attributed to the actions of the defendant in the sense of a causal link.

Second, a claim in unjust enrichment is not necessarily based on a wrongdoing by the defendant. We offer doctrinal and theoretical justifications for holding polluters liable for unjust climate enrichment also absent a wrong, under certain conditions we delineate. The basic rationale for this form of liability is simple: climate stability, like clean air or water, has long been recognized as public property. And the law of unjust enrichment has long recognized that one who uses another’s property is unjustly enriched and must make restitution. The combination of these two ideas brings about the concept of unjust climate enrichment: those who have used the property of others by taking more than their fair share of the public good of climate stability, have been unjustly enriched. We further develop and illustrate these concepts in the article and show they can support liability when the defendant made an oversized contribution to climate change and attained large profits that are concentrated with the defendant.

We demonstrate that our proposals are not only legally sound but also justified and effective in terms of incentives and outcomes. The application of unjust enrichment doctrine offers a necessary remedy. First, it enables the recovery of unjustly acquired gains from polluters, thereby eliminating their incentive to engage in environmentally harmful behavior. This element is critical in any legal response to the climate crisis: as long as the crisis remains highly profitable for influential commercial entities, significant improvement is unlikely. Second, as a theory of recovery designed to address gaps left unaddressed by traditional legal categories, the law of unjust enrichment presents adaptable solutions to issues that other legal domains struggle to resolve effectively.

Alongside the potential benefit to climate mitigation, our proposal holds some important implications for corporate governance. The obvious impact is the need for firms to prioritize environmental responsibilities and abstain from practices that either constitute a clear environmental wrong or generate large profits while disproportionally contributing to climate change. What is less obvious is perhaps how this change would complement existing regulatory initiatives. For instance, a newly proposed EU directive on Corporate Sustainability Due Diligence seeks to induce firms to monitor their supply chains for unsustainable practices, accompanied by civil liability in torts for harms. The unjust enrichment addition would complement this by ensuring that corporations also monitor how their profits are derived, irrespective of the exact harm caused to victims. Similarly, the unjust enrichment framework would also complement the new Corporate Sustainability Reporting Directive, which imposes disclosure requirements of ESG practices. Due to exposure to unjust enrichment lawsuits, corporations would be effectively required to disclose precisely what they are doing to ensure that profits are not unjust. While certainly costly, such adjustments may also entail the benefit of attracting new investors—those with strong preferences for environmental, social, and governance (ESG) projects. Hence, our proposal to apply unjust enrichment might be beneficial for corporate governance as well.

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