Ten Legal Consequences of Climate Change

Climate refugees, agricultural revolution, flooding of historical heritage and other legal risks of natural disasters on a planetary scale

In January 2020, McKinsey released a report with forecasts for 2050 due to climate change. And Egor Larichkin, a lawyer at Buzko Legal, looked at them from the point of view of legal consequences.

What can happen: The conditions for farming will change, in some regions they will improve, in others they will worsen. There will be changes in the business structure, especially in cases of seasonal business. Roads are profitable to build in cold weather, and sales of air conditioners increase if the temperature is above the summer norm. Seasonal business will become less predictable.

What are the possible consequences: In the northern regions, the question of the abolition of the “northern” coefficients will arise, as conditions for farming may improve. We are talking about multiplying factors used in the calculation of wages in difficult climatic conditions, for example, in the regions of the Far North. However, the need for surcharges can be justified by the number of sunny days per year, which will remain the same. In addition, it is possible that certain regions, which previously seemed quite prosperous, will begin to face desertification and extreme heat, lack of water and food. There may be a need for opposite measures – “southern” allowances aimed at compensating for the inconvenience of living in regions with high temperatures. Companies whose business depends on climate and weather factors will begin to think about mechanisms to protect against losses. As a result, there will be a real flourishing of the weather derivatives market – a tool that allows you to compensate for your own losses by withdrawing part of the money from the profits of another company, which, under similar conditions, makes super profits.

What can happen: Today, not a single person lives in areas with the likelihood of deadly heat waves. A lethal heat wave is an increase in air temperature above 37,5 ºС, at which a healthy adult dies after being outside for more than 4-5 hours.

What are the possible consequences: The most important legal concept – the right to life – can receive a new content. In the poorest countries, lawsuits against companies and governments to install air-conditioning systems in public spaces and workplaces will gain popularity. Compulsory health insurance will have to cover cases of deterioration in health due to heat.

What can happen: The average annual damage to residential property due to hurricanes in Florida (USA) today is 2 billion US dollars. By 2050, this figure is projected to increase to about $3-4,5 billion. And flood damage could devalue homes for sale by $2050-30 billion, or 80-15%, by 35. The Center for Climate Integrity estimates that $2040 billion worth of seawalls will need to be built to protect Florida by 76.

What are the possible consequences: The damage may be higher than the amount of insurance. Banks lending to owners of affected real estate will face bankruptcy of debtors. The value of real estate decreases due to depreciation, and tax revenues to the budget are reduced. The state will be forced to provide support to banks and insurance companies in order to avoid their bankruptcy, and act as an insurer and guarantor for affected citizens.

What can happen: The working capacity of a person depends on the air temperature. If we take as 100% the ability to work outdoors for an hour at a temperature of 20 ºС, then at 25 ºС this indicator practically does not change, however, a further increase by 1 ºС reduces the ability to work by 20%. At a temperature of 30 ºС, work capacity is reduced to 40%.

What are the possible consequences: This can exacerbate conflicts between employers, workers and trade unions. It will require a review of working conditions at high air temperatures, the introduction of amendments for downtime in case of temperature anomalies and guarantees of the level of wages. Mechanisms will be required on the part of employers to minimize losses as a result of prolonged heat.

What can happen: Renewable energy sources such as solar panels and windmills will become even more widespread. However, solar panels tend to reduce their efficiency due to heat. It is estimated that the loss is 0,1-0,5% for every degree increase in air temperature.

What are the possible consequences: Abnormal heat can lead to an increase in utility bills. As the temperature rises, the cost of electricity generation increases.

However, an alternative scenario is also possible. Already today, in most countries, the sun and wind are the cheapest sources of energy, and the average cost of their production is constantly falling. Governments are encouraging households to produce their own electricity and even sell surplus back to the grid, which could spark a boom in microgeneration and lower the cost of electricity to citizens.

What can happen: By 2050, the US is expected to experience a decline in statistically expected yields of more than 10%. In Canada, yields will increase by 50%, and the total yield in the European part of Eurasia – by 4%.

What are the possible consequences: In regions that are more successful in terms of agriculture, this will lead to a decrease in support for producers, and a number of subsidies and subsidies will be canceled. In previously inaccessible regions for agriculture, a real agrarian revolution will take place, which can become a new driver of regional growth.

What can happen: At a temperature of 18-20 ºС, the yield of corn reaches its maximum. A 2°C increase in temperature will result in a 20% loss of corn. At 25°C, half of the crop will be lost. Starting from 30 ºС, the entire crop will be lost. By 2050, some parts of the world are projected to have periods of drought as high as 80% of the year, affecting the Mediterranean, southern Africa, and Central and South America. Historical precedents show that prices can rise sharply by 100% or more in the short term if global food supplies fall by more than 15%.

What are the possible consequences: Additional regulation of global food exporters and the formation of an international antimonopoly body will be required. Now each country has its own antimonopoly body and does not fight competition in the markets of neighboring countries.

What can happen: Environmental disasters can have a significant impact on historical and cultural heritage sites located in the central areas of cities.

Now, in the event of an average flood, 23% of the territory of Ho Chi Minh City is flooded, while in 2050 already 36% of the territory may be flooded. The average depth of flooding from the current 10 cm will grow to 30 cm by 2050, and by the end of the century it will be 90 cm. In this case, 66% of the territory of Ho Chi Minh City will be flooded. As a result, a huge layer of culture can be destroyed.

What are the possible consequences: It will be necessary to tighten the legislation on the protection of cultural property, increase the requirements for building codes, and revise outdated standards. Companies that cannot provide improved energy efficiency, durability, heat resistance of their buildings will be forced to leave the market.

What can happen: It is expected that in countries such as our country, Germany and the UK, there will be a strong change in biomass. On average, about 40% of the land surface of these countries will change climatic zones, which in turn will lead to a change in the composition of animals and plants living in these territories in comparison.

What are the possible consequences: New species of animals will be in the red book. There will be a tightening of legislation on hunting, the fight against poaching will be more intensive. It is likely that a new type of lawsuit will appear – in connection with the extinction of species.

What can happen: Between 2008 and 2018, natural disasters displaced 265 million people, according to the Center for Monitoring Internal Displacement. The World Bank predicts that by 2050 in Latin America, South Asia and sub-Saharan Africa, 140 million people will have to migrate within their countries, from areas with lower water availability and crop yields or prone to frequent floods and storms.

What are the possible consequences: Migration will dramatically affect human rights around the world. The Convention on the Status of Refugees will be reinterpreted, a new type of refugee will appear – climate refugees.

Most forecasts are disappointing for humanity. The consensus is that rich countries are taking steps to adapt to climate change now, while poor countries cannot afford it. As a result of climate change, it is the poorest countries and the poorest segments of the population that will suffer the most. The result may be an increase in social inequality and a complication of the geopolitical situation, while one of the main challenges facing modern society is the reduction and elimination of social inequality.

Force majeure clause in contracts

Standard force majeure clauses in contracts become ineffective because they do not take into account changed realities. Even now, the courts refuse to recognize floods as force majeure, pointing out that such phenomena can be predicted, especially as society acquires new knowledge about the processes in nature.

Emission reduction requirements

Companies are tightening requirements for suppliers and contractors, obliging them to be more attentive to greenhouse gas emissions. This is becoming a common practice due to changing customer needs, government pressure, or companies’ own concerns about climate change.

Climate risks as a new fiduciary duty

The concept of fiduciary duties is widely used in all areas of the economy, where we are talking about relationships of trust. For example, it is impossible to manage a company if there is no trust between the CEO and investors. The normal functioning of the banking system is impossible if the society does not trust the banks when deciding where to invest the population’s funds on deposits. As public attention to the problem of global warming increases every year, it becomes a fiduciary duty of companies to respect the environment in all decisions.

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