The climate crisis has contributed to every environmental disaster Australia has faced in recent years. The Australian government now faces legal repercussions for its lack of action on climate change.
2020 has brought Australia a year of hell: fires, floods, continued drought, a pandemic and economic chaos. While the response to the coronavirus pandemic continues to dominate political and economic headlines globally, the climate crisis continues. A case filed last month by Kathleen “Katta” O’Donnell, a 23-year-old student of La Trobe University, against the Australian Commonwealth government recognises the acute adversity presented by climate change to all facets of human society. It is the first of its kind in the world and symbolises the burden now placed on Australia’s next generation to challenge, modernise and overhaul contemporary climate policy – changes which current political leaders have so far been either unwilling or unable to accomplish.
Equity Generation Lawyers, the firm representing Katta, filed a lawsuit against the Commonwealth in the Federal Court of Australia on 22 July 2020. The case concerns the Australian government’s obligation to disclose material financial risks to the sovereign bonds it issues. Katta’s argument is that risks arising from the climate crisis must be included in these disclosures. Katta is the face of this class action, which also represents other investors who trade bonds on the Australian Stock Exchange. They seek declarations that the Commonwealth has breached the law and an injunction to “prevent further promotion of bonds without informing investors about climate change risks.”
Sovereign bonds are debt securities issued by the Australian government that are backed and secured by the wealth of the country. Generally, they are considered safe investments with a guaranteed, albeit limited, return. Equity Generation Lawyers claim that countless retail investors, pension funds, central banks, insurers, and hedge funds combined have loaned the Australian government a sum of over $700 billion. Katta’s case argues that climate change, or more specifically, Australia’s lack of effective climate policy, calls the security of these bonds into question. Physical risks to these bonds include the exposure and susceptibility of Australia to climate-related crises such as the recent drought, fires, or floods. These have and will continue to impact the Australian economy. Further risks identified by Equity Generation Lawyers include risk of stranded assets, the risk of changing markets and demand for fossil fuel products, and changes to the economy transitioning to low carbon. Experts have warned that if a country is not prepared for making genuine steps to transition to a low-carbon economy, the economy will ultimately suffer more as a result of an abrupt and disorderly transition. Thus, the crux of Katta’s case is that these are risks that the Australian government is, by law, required to disclose.
As the Climate Reality Project puts it, few countries see the results of the climate crisis as clearly – and have as much to lose – as Australia. According to the Commonwealth Scientific and Industrial Research Organisation (CSIRO), Australia’s temperature has warmed by just over 1°C since 1911. There has been a long-term increase in extreme fire weather and the length of the fire season. Australia’s rainfall patterns are changing, and over half of the Great Barrier Reef’s corals have been bleached. Many people, particularly young Australians, rightly label this as an emergency. Those not concerned by a desire to save our planet should at least be alarmed by the fiscal impacts of climate change. The Reserve Bank of Australia, joined by the country’s corporate and financial regulators, has warned that the climate crisis poses an increasing risk to financial stability.
Due to the term of Katta’s bonds, she won’t be able to sell or receive hoped-for capital gains until 2050. Notably, this date is one which has been marked worldwide as the benchmark for signifying one of two climate outcomes. In one scenario, 2050 could be a historic milestone of a near-miraculous turnaround in global carbon emissions. The other, far more likely scenario is that 2050 is the year by which the Intergovernmental Panel on Climate Change (IPCC) has predicted world temperature averages to have increased by as much as 3.5 degrees, a change that will irrefutably have frightening implications for humanity.
As part of the 2016 Paris Agreement, the Morrison government committed to a target of reducing carbon emissions by 26-28 percent below 2005 levels by 2030. According to the Climate Action Tracker, an independent scientific analytic group that tracks government climate action, Australia’s current policies will see only a seven percent reduction below 2005 levels. Katta has acknowledged that the current government will have long relinquished power by the time her bond matures. However, she argues that her financial security “will bear the brunt of [the Morrison government’s] climate legacy.” Over the course of last year, the Australian government has dismissed the findings of the IPCC’s Special Report on Global Warming of 1.5°C, discontinued its funding to the Green Climate Fund, ignored calls by the UN secretary general for more action, and approved the construction of the highly controversial Adani coal mine in Central Queensland.
As a “world-first” legal case, there are sure to be ramifications that reach beyond the success of Katta’s case. Katta O’Donnell represents a new generation of students and young people who are becoming increasingly aware of the greater stake they have in climate policy than their parents or grandparents. The use of the Australian legal system to generate, as a minimum, greater dialogue around environmental policy is an innovative method of climate activism. Katta’s suit, if successful, could set a new, much-needed precedent of demanding greater responsibility from Australian political leaders for their government’s climate response. Furthermore, its outcome will attract close attention internationally, as other states and climate action groups look to evaluate whether a similar lawsuit could be brought within their own domestic jurisdictions.
Moreover, the fiscal nature of this case may force wilfully blind portions of the wider population to consider the climate implications of their long-term choices. The initiation of litigation is a nod to the multifarious impacts of global climate change, which is starting to seep into the corporate world of business, trade, and stock exchange. With the world currently facing what is arguably the greatest economic crisis in recent memory, it is not a stretch to assume that the desire to avoid climate-induced financial catastrophe is great. Factoring in material risks to Australia’s economy and financial institutions because of its environmental policy choices may be the next step in avoiding this circumstance.
When considered in its broader context this case, irrespective of its outcome, is wholly indicative of a nascent generation of young people who are acutely aware of the disastrous consequences of inaction and lethargy in climate policy reform. Ultimately, this case brings to the forefront of Australian politics the long overdue fact that, as put by Katta “it’s time the government told the public about the impact climate change will have on our future and the economy.”
Grace Underhill is a second year Tuckwell Scholar at the Australian National University. She studies a double degree of Arts/Law and has a keen interest in Asia-Pacific affairs.
This article is published under a Creative Commons Licence and may be republished with attribution.