Can Big Oil be made to pay like Big Tobacco?

The bills are coming due. Over the past 15 years, Canada's annual cost of insurance claims related to extreme weather events has risen to nearly $2 billion. That’s up from between $250 million and $400 million from 1983 to 2008.

A 2022 report from the Canadian Climate Institute warned that Canada must brace for annual disaster recovery costs of $17 billion by 2050. B.C. spent at least $770 million on wildfire suppression in 2023, after the province’s worst-ever wildfire season (so far). Alberta’s drought and wildfire expenses for fiscal 2023-24 came to $2.9 billion.

Governments aren’t shouldering these costs alone, either. Extreme weather events, which are increasing in severity and frequency due to climate change, helped drive a 7.7 per cent average spike in home insurance rates across the country this year.

Climate change threatens to make almost everyone poorer. So, naturally, some governments and individuals are looking to the courts to make fossil fuel companies pony up. And they just got billions of dollars worth of encouragement.

In October, a mediator filed a proposal with an Ontario court that would see three large tobacco companies pay $24 billion to provinces and territories to partly compensate them for the cost of treating tobacco-related illnesses, and more than $4 billion to tens of thousands of Quebec smokers and their heirs.

The first lawsuit in Canada seeking to recover tobacco-related health care costs was launched in British Columbia in 1998, prompting nearly every other province and territory to follow suit quickly. B.C. rooted its claim in new provincial legislation — the Tobacco Damages and Health Care Costs Recovery Act. The law created a direct action against tobacco companies to retroactively recoup healthcare costs incurred by tobacco consumption, using statistical and epidemiological data to establish causation based on the companies’ market share.

The law — upheld as constitutional by the Supreme Court of Canada in 2005 — filled in what Martin Olszynski and two academic colleagues described in a 2018 paper as a causation “gap.” It did so by allowing provinces and territories to use data to prove on an aggregate basis that any population would suffer disease through cigarette exposure. It also relieved the province of the burden of proving that British Columbians were made sick by the actions of tobacco companies within the province.

Olszynski, an associate professor at the University of Calgary Faculty of Law, and other legal experts argue that what worked for tobacco could work for climate, Specifically, that provincial or federal laws cut along the lines of the Tobacco Damages and Health Care Costs Recovery Act could help those governments sue fossil fuel companies to recoup the costs of climate change adaptation and infrastructure damage.

“Legislation accelerates the process of accountability,” says Olszynski, adding that the pressure on governments to recover the money spent on climate mitigation and disaster recovery will only increase as those costs mount.

“With climate change, it’s safe to say we’re about a decade into the ‘FAFO’ period. We’ve just entered the phase where the cost of disasters driven by climate change is obvious to everyone, everywhere.”

Climate change damages and adaptation costs recovery legislation could build on precedent and speed up the proceedings in a climate class action. It could allow claims to proceed under the torts of private and public nuisance, the failure to warn, conspiracy, or strict liability.

It would also be politically vulnerable, says Camille Cameron, who studies class action law and climate change litigation at Dalhousie University’s Schulich School of Law.

“The advantage of legislation is, if it survives the court challenges, it can define causality and apportionment for the class action claims. It would make things easier,” she says.

“On the other hand, passing the legislation could take a very long time. It would be challenged all the way up to the Supreme Court. And then you have to consider the vagaries of politics — governments change hands, priorities change.”

Class-actions targeting fossil fuel companies have been moving forward outside Canada without specialized legislation. The number of climate change-related court claims globally topped 2,000 last year. More than two dozen U.S. cities and states are suing oil companies, alleging they knew for decades about the dangers of burning fossil fuels and actively hid that information from consumers and investors.

“I’m a big believer in litigation,” Cameron says.

“In the U.S., multiple claims are going ahead without legislation. Legislation would make these claims easier, but they’re not impossible without it.”

In Canada, West Coast Environmental Law (WCEL) has launched a campaign encouraging municipalities to back a class action targeting the fossil fuel industry. Nine municipalities have signed up so far.

“This type of case has never been brought before in Canada, so there’s no case law specifically on this,” says Andrew Gage, a staff lawyer at WCEL.

“Legislation would answer some questions about how these claims could be made, but we think this has a strong basis in Canadian law regardless, focusing on private and public nuisance.”

WCEL’s campaign is ramping up just as fossil fuel companies are gauging the impact of new federal legislation that targets “greenwashing” — false claims about the environmental effects of products.

“That expansion of the Competition Act is going to lead to an increase in the number of class action lawsuits based on misrepresentation,” says Andrew Pozzobon, a partner at BLG in Calgary who specializes in the energy sector and commercial litigation.

He says fossil fuel companies will likely defend themselves from claims focused on nuisance by arguing that provincial governments have authorized and regulated their products.

Matthew Huys, a partner at Osler specializing in corporate litigation and the energy sector, says WCEL's campaign is a “novel” approach modelled after U.S.-based litigation.

For that reason, it’s hard to predict how Canadian courts might receive it.

“I can see some problems up front, including the fact that a duty of care can’t be owed to an unlimited class of plaintiffs,” he says, noting Canadian courts have also been reluctant to address what they consider to be political decisions in a legal claim.

“As we see greater scientific consensus on the effects of climate change, courts might become less reluctant to address these claims themselves.”

Of course, there’s one big difference between tackling Big Tobacco and taking on Big Oil: the oil patch is vastly more important to Canada’s economy than tobacco was at the industry’s peak. That gives it more political clout and makes governments less enthusiastic about suing.

But Cameron says lawsuits have a way of cutting through the fog of politics that so often obscures questions of corporate liability. Exhibits are tabled, memos are unearthed, and the nature of an industry’s approach to the dangers associated with their products becomes public knowledge.

“As more and more evidence comes out in discovery about what these companies knew about what their products do to the climate, and when, that’s going to change the nature of the public conversation,” she says.

“That could push governments to act.”

And while the proposed tobacco settlement allows tobacco companies to continue operating, Gage argues the negative publicity they experienced forced them to change how they do business.

“At least some of the tobacco industry’s current business is focused on new products that do not cause, or contribute less to, lung cancer — the primary harm that they were sued for,” he says, noting that most likely would not have occurred but for the lawsuits.

“If litigation against fossil fuel companies similarly creates economic incentives in favour of energy sources that do not degrade the global atmosphere, then that’s a benefit for the planet.”