The Rol of Law Responding To Climate Change 2008 Teza Doctorat PDF

THE ROLE OF LAW IN
RESPONDING TO CLIMATE
CHANGE:
EMERGING REGULATORY,
LIABILITY AND MARKET
APPROACHES
NICOLA ANNA MAY DURRANT
BSc (Env)/LLB (Hons)(GU); Grad DipLP (ANU)
Thesis submitted in fulfilment of the requirements

for the degree of
Doctor of Philosophy
Faculty of Law/Institute for Sustainable Resources

Queensland University of Technology
Brisbane
2008
KEYWORDS
Climate Change,
Climate Law,
Climate Liabilities,
Carbon Trading,
Environmental Governance,
Environmental Law,
Environmental Policy,
International Law.
ABSTRACT
Climate change presents as the archetypal environmental problem with short-term

economic self-interest operating to the detriment of the long-term sustainability of
our society. The scientific reports of the Intergovernmental Panel on Climate
Change strongly assert that the stabilisation of emissions in the atmosphere, to avoid
the adverse impacts of climate change, requires significant and rapid reductions in
business as usual global greenhouse gas emissions. The sheer magnitude of
emissions reductions required, within this urgent timeframe, will necessitate an
unprecedented level of international, multi-national and intra-national cooperation
and will challenge conventional approaches to the creation and implementation of
international and domestic legal regimes.
To meet this challenge, existing international, national and local legal systems must
harmoniously implement a strong international climate change regime through a
portfolio of traditional and innovative legal mechanisms that swiftly transform
current behavioural practices in emitting greenhouse gases. These include the
imposition of strict duties to reduce emissions through the establishment of strong
command and control regulation (the regulatory approach); mechanisms for the
creation and distribution of liabilities for greenhouse gas emissions and climaterelated harm (the liability approach) and the use of innovative regulatory tools in the
form of the carbon trading scheme (the market approach). The legal relations
between these various regulatory, liability and market approaches must be managed
to achieve a consistent, compatible and optimally effective legal regime to respond
to the threat of climate change.
The purpose of this thesis is to analyse and evaluate the emerging legal rules and
frameworks, both international and Australian, required for the effective regulation
of greenhouse gas emissions to address climate change in the context of the urgent
and deep emissions reductions required to minimise the adverse impacts of climate
change. In doing so, this thesis will examine critically the existing and potential role
of law in effectively responding to climate change and will provide
recommendations on the necessary reforms to achieve a more effective legal
response to this global phenomenon in the future.
TABLE OF CONTENTS
KEYWORDS. 2
ABSTRACT...3
TABLE OF CONTENTS ............................................................................................................... 4
LIST OF FIGURES...................................................................................................................... 10
TABLE OF CASES ...................................................................................................................... 11
TABLE OF LEGISLATION........................................................................................................ 20
TABLE OF TREATIES AND INTERNATIONAL..................................................................... 27
LIST OF ACRONYMS ................................................................................................................ 31
STATEMENT OF ORIGINAL AUTHORSHIP ......................................................................... 33
ACKNOWLEDGMENTS...34
CHAPTER ONE INTRODUCTION ..................................................................................... 35

RESEARCH TOPIC .................................................................................................................... 35
REVIEW OF EXISTING LITERATURE ON LAW AND CLIMATE CHANGE .................... 40
A
B
C
RELATIONSHIP OF RESEARCH TO EXISTING LITERATURE ..................................................... 40

EXISTING LITERATURE ON LAW AND CLIMATE CHANGE ..................................................... 41
IDENTIFIED GAP IN THE LITERATURE .................................................................................. 45
SCOPE OF THIS RESEARCH STUDY...................................................................................... 46

STRUCTURE OF THIS THESIS ................................................................................................ 48
CHAPTER TWO CLIMATE CHANGE IN CONTEXT:SCIENCE, ECONOMICS AND LAW .... 54

INTRODUCTION ........................................................................................................................ 54
THE PHENOMENON OF CLIMATE CHANGE....................................................................... 55
CLIMATE CHANGE IMPACT PREDICTIONS ....................................................................... 57
A
B
C
D
E
F
THE FIRST IPCC ASSESSMENT REPORT .............................................................................. 59

THE SECOND IPCC ASSESSMENT REPORT ........................................................................... 61
THE THIRD IPCC ASSESSMENT REPORT ............................................................................. 61
THE FOURTH IPCC ASSESSMENT REPORT .......................................................................... 63
REGIONAL PROJECTIONS AND THE CLIMATE CHANGE IMPACTS FOR AUSTRALIA .................. 67
THE IMPACTS OF CLIMATE CHANGE ON THE ECONOMY....................................................... 71
INTERNATIONAL RESPONSES TO THE IMPACTS OF CLIMATE CHANGE .................. 73

A
B
C
GENERAL OBLIGATIONS UNDER THE UNFCCC................................................................... 73

SPECIFIC EMISSION REDUCTION OBLIGATIONS UNDER THE KYOTO PROTOCOL .................... 76
THE CREATION OF FLEXIBILITY MECHANISMS: ENGAGING THE MARKET ............................. 78
COMPARATIVE MODELS OF ATMOSPHERIC REGULATION ......................................... 79

A
THE INTERNATIONAL COMPLIANCE MODEL: PROTECTION OF THE ATMOSPHERIC COMMONS 79
B
THE DOMESTIC MARKET MODEL: TRADEABLE EMISSION INSTRUMENTS AND ATMOSPHERIC
POLLUTION ................................................................................................................................ 84
KEY PRINCIPLES FOR AN EFFECTIVE LEGAL REGIME ................................................. 89
A
B
C
REGULATION..................................................................................................................... 89
LIABILITY ......................................................................................................................... 90
MARKET MECHANISMS...................................................................................................... 92
CONCLUDING COMMENTS .................................................................................................... 96
CHAPTER THREE - THE ARCHITECTURE OF THE CLIMATE CHANGE REGIME: AN

ANALYSIS AND CRITIQUE OF THE INTERNATIONAL REGULATION OF GREENHOUSE GAS
EMISSIONS ....................................................................................................................... 98
INTRODUCTION ........................................................................................................................ 98
THE OBJECTIVES OF THE REGIME: AVOIDING ADVERSE CLIMATE CHANGE ...... 101
THE REGULATORY APPROACH OF THE CLIMATE CHANGE REGIME...................... 107
THE STRUCTURE OF THE CLIMATE CHANGE REGIME ................................................ 109
A
B
C
D
JURISDICTIONAL SCOPE OF THE COP/MOP ....................................................................... 112

DISCRETIONARY DEPTH OF THE COP/MOP ...................................................................... 114
RULE MAKING DISCRETION OF THE COP/MOP ................................................................. 115
SUBSIDIARY BODIES WITHIN THE CLIMATE CHANGE REGIME ............................................ 117
FRAGMENTED REGULATION OF THE FLEXIBILTY MECHANISMS............................ 119

A
B
C
D
E
F
OPERATION OF THE CDM ................................................................................................. 119

OPERATION OF THE JI MECHANISM................................................................................... 123
THE ROLE OF THE HOST COUNTRY ................................................................................... 127
THE ROLE OF PRIVATE VERIFIERS .................................................................................... 129
INTERNATIONAL REGULATION OF PRIVATE ENTITIES ........................................................ 130
INTERNATIONAL TRADE IN EMISSION INSTRUMENTS ......................................................... 132
DEFICIENCIES IN THE MONITORING AND ENFORCEMENT OF THE

INTERNATIONAL REGIME ................................................................................................... 135
A
B
DUE PROCESS AND NON-COMPLIANT STATE PARTIES ....................................................... 143

THE TREATMENT OF PRIVATE PARTICIPANTS .................................................................... 147
INTERNATIONAL STATE RESPONSIBILITY AND CLIMATE HARM............................. 148

CLIMATE CHANGE IMPACTS AND HUMAN RIGHTS PRINCIPLES .............................. 156
THE FUTURE INTERNATIONAL REGULATION OF CLIMATE CHANGE ..................... 163
THE STRENGTHS AND DEFICIENCIES OF THE CLIMATE CHANGE REGIME........... 167
A
B
C
D
THE FLEXIBILITY MECHANISMS ....................................................................................... 168

THE EMISSION REDUCTION DUTIES .................................................................................. 169
INTERACTION WITH DOMESTIC RESPONSES TO CLIMATE CHANGE ..................................... 170
TREATMENT OF NON-COMPLIANCE WITH THE REGIME ...................................................... 172
CONCLUSION ........................................................................................................................... 173
CHAPTER FOUR - THE AUSTRALIAN LEGAL RESPONSE TO CLIMATE CHANGE ........... 175
INTRODUCTION ...................................................................................................................... 175
NATIONAL RESPONSES TO CLIMATE CHANGE .............................................................. 179
STATE-BASED RESPONSES TO CLIMATE CHANGE ........................................................ 185
EXISTING EMISSIONS TRADING INITIATIVES................................................................. 187
EMISSIONS TRADING PROPOSALS FOR AUSTRALIA ..................................................... 190
THE REGULATION OF ENERGY SOURCES IN AUSTRALIA ........................................... 193
THE RESPONSE OF THE ASIA PACIFIC PARTNERSHIP TO CLIMATE CHANGE....... 196
A
B
OBJECTIVES OF THE AP6 .................................................................................................. 197

AP6 AND THE INTERNATIONAL RESPONSE TO CLIMATE CHANGE ....................................... 200
THE POTENTIAL IMPACT OF AUSTRALIAN REGULATION ON NATIONAL

EMISSIONS................................................................................................................................ 202
COMPARATIVE DOMESTIC REGULATORY APPROACHES ........................................... 204
A
B
C
D
E
THE EUROPEAN UNION .................................................................................................... 204

THE UNITED KINGDOM .................................................................................................... 206
CANADA ......................................................................................................................... 206
THE UNITED STATES OF AMERICA.................................................................................... 207
NEW ZEALAND ................................................................................................................ 208
CONCLUDING COMMENTS .................................................................................................. 208
CHAPTER FIVE - THE ROLE OF ENVIRONMENTAL REGULATION, IN AUSTRALIA, IN

RESPONDING TO THE IMPACTS OF CLIMATE CHANGE .................................................. 211
INTRODUCTION ...................................................................................................................... 211
ADDRESSING CLIMATE CHANGE AND THE PROMOTION OF SUSTAINABLE
DEVELOPMENT: INTERNATIONAL PRINCIPLES ............................................................ 212
ENVIRONMENTAL PROTECTION AND AVOIDANCE OF HARM: NATIONAL
PRINCIPLES IN AUSTRALIA ................................................................................................. 216
DOMESTIC REGULATION UNDER THE CLIMATE CHANGE REGIME: DUTIES AND
DISCRETION ............................................................................................................................ 219
GREENHOUSE GASES, CLIMATE CHANGE AND HARM: THE SCIENTIFIC FINDINGS
.................................................................................................................................................... 222
REGIMES TO PROTECT THE ENVIRONMENT: THE THEORETICAL REGULATION OF
EMISSIONS ............................................................................................................................... 223
REQUIREMENTS TO ASSESS THE ENVIRONMENTAL IMPACTS OF GREENHOUSE
GAS EMISSIONS ...................................................................................................................... 231
A
B
THE PROPER ROLE OF EIA PROCESS IN ASSESSING EMISSIONS .......................................... 231

DUTIES TO ASSESS IMPACTS IN STATE PLANNING REGIMES............................................... 233
EVALUATING EMISSIONS AND ENVIRONMENTAL EFFECTS: THE LAW IN

PRACTICE ................................................................................................................................ 239
A
B
C
THE TREATMENT OF CAUSATION IN ENVIRONMENTAL CASE LAW ..................................... 240

THE ABSENCE OF CLIMATE CHANGE REGULATION AS A DETERMINING FACTOR................ 246
THE XSTRATA COAL MINE: A CASE STUDY ..................................................................... 248
I
The Nature of the Objection to the Mining Expansion ................................................. 248
II
The Nature of the Evidence Before the Tribunal .......................................................... 250
III The Decision of the Land and Resources Tribunal ...................................................... 251
IV The Findings of the Court of Appeal ........................................................................... 252
V
The Governmental Response: Validating Legislation .................................................. 254
D
THE ROLE OF JUDICIAL APPEAL IN REGULATING CLIMATE CHANGE ................................. 257
POTENTIAL COMMONWEALTH REGULATION OF GREENHOUSE GAS EMISSIONS

.................................................................................................................................................... 259
A
B
THE THEORETICAL SCOPE AND OPERATION OF THE EPBC ACT ......................................... 259
THE PRACTICAL APPLICATION OF THE EPBC ACT TO CLIMATE CHANGE ........................... 263
AUSTRALIAS LEVEL OF COMPLIANCE WITH THE CLIMATE CHANGE REGIME . 269

THE ROLE OF LAW IN FACILITATING ADAPTATION TO CLIMATE CHANGE......... 270
A
B
C
D
THE DUTY TO ADAPT TO CLIMATE CHANGE ..................................................................... 271

ADAPTATION AND COASTAL DEVELOPMENT .................................................................... 273
ADAPTATION AND RENEWABLE ENERGY PROJECTS .......................................................... 279
ADAPTATION TO CLIMATE CHANGE AND COMMON LEGAL TRANSACTIONS ....................... 282
I
Climate Change and Sustainable Building Design ...................................................... 282
II
Adaptation to Climate Change and Green Leasing...................................................... 285
III Adaptation to Climate Change and Contracts for the Sale of Land .............................. 290
CONCLUSION........................................................................................................................... 292
CHAPTER SIX - THE POTENTIAL ROLE OF THE COMMON LAW OF TORTS IN

ADDRESSING CLIMATE CHANGE HARM IN AUSTRALIA ................................................ 295
INTRODUCTION ...................................................................................................................... 295
CLIMATE CHANGE AND THE LAW OF TORTS ................................................................. 296
THE HYPOTHETICAL CLIMATE SUIT: ACTIONS IN NEGLIGENCE............................. 298
DUTY OF CARE AND THE EMISSION OF GREENHOUSE GASES ................................... 299
A
B
C
DUTY OF CARE AND PHYSICAL HARM .............................................................................. 299

DUTY OF CARE AND PURE ECONOMIC LOSS ...................................................................... 300
DUTY OF CARE AND PUBLIC AUTHORITIES ....................................................................... 303
CAUSATION AND LIABILITY IN CLIMATE SUITS............................................................ 305

A
B
THE STANDARD OF CARE AND EMISSIONS OF GREENHOUSE GASES ................................... 305

CALCULUS OF BREACH OF DUTY AND CLIMATE HARM...................................................... 305
BREACH OF DUTY AND DAMAGE IN CLIMATE SUITS ................................................... 313

A
ESTABLISHING FACTUAL CAUSATION IN CLIMATE SUITS ................................................... 313

Causation and the Climate System .............................................................................. 313
Increase in the Risk of Harm from Climate Change ..................................................... 318
Relevance of Environmental Principles ....................................................................... 321
B
SCOPE OF LIABILITY IN NEGLIGENCE ................................................................................ 323
I
Intervening Causes and Climate Change Harm ........................................................... 323
II
Policy Considerations in Climate Suits........................................................................ 324
I
II
III
THE HYPOTHETICAL CLIMATE SUIT: PROFESSIONAL LIABILITY FOR CLIMATEAFFECTED ADVICE ................................................................................................................ 325
A
B
C
D
E
F
PROFESSIONAL ADVISORS, CLIMATE CHANGE AND NEGLIGENCE ...................................... 326

ARCHITECTS, ENGINEERS, DEVELOPERS AND CLIMATE CHANGE ....................................... 327
SURVEYORS, VALUERS AND CLIMATE ADVICE.................................................................. 329
PUBLIC AUTHORITIES AS ADVISORS ................................................................................. 331
LEGAL ADVISORS AND CLIMATE ADVICE ......................................................................... 333
DUTIES OF DIRECTORS AND AVOIDING CLIMATE RISKS..................................................... 334
POTENTIAL DEFENCES TO CLIMATE SUITS IN NEGLIGENCE .................................... 335

THE HYPOTHETICAL CLIMATE SUIT: ACTIONS IN PUBLIC AND PRIVATE
NUISANCE ................................................................................................................................. 337
A
B
C
D
E
ELEMENTS OF NUISANCE ................................................................................................. 338

POTENTIAL CLIMATE ACTIONS IN PRIVATE NUISANCE ...................................................... 339
POTENTIAL CLIMATE ACTIONS IN PUBLIC NUISANCE ........................................................ 341
UNREASONABLE INTERFERENCE AND PRIVATE NUISANCE ................................................. 342
EXAMPLES OF CLIMATE CHANGE NUISANCE ACTIONS IN THE UNITED STATES ................... 347
ADEQUACY OF REMEDIES IN NEGLIGENCE AND NUISANCE ...................................... 349

THE ROLE OF INSURANCE IN ADDRESSING CLIMATE HARM .................................... 350
PROSPECTS OF SUCCESS OF CLIMATE ACTIONS........................................................... 354
THE FUTURE OF TORT-BASED CLIMATE LITIGATION ................................................. 356
CHAPTER SEVEN THE ROLE OF LAW IN A MULTI-NATIONAL GLOBAL CARBON

MARKET: RIGHTS, DUTIES AND LEGAL INNOVATION ................................................... 359
INTRODUCTION ...................................................................................................................... 359
THE STATUS OF THE ATMOSPHERE UNDER INTERNATIONAL LAW........................ 361
COMMODIFICATION OF THE ATMOSPHERIC COMMONS: RIGHTS TO EMIT AND
THE CLIMATE CHANGE REGIME ....................................................................................... 365
A
B
C
LEGAL INNOVATION IN PROTECTING THE ATMOSPHERIC COMMONS .................................. 365

RIGHTS TO EMIT AND ASSIGNED AMOUNT UNITS ............................................................. 370
CDM PROJECTS AND CERTIFIED EMISSION REDUCTION UNITS .......................................... 373
I
Temporary and Long-Term Instruments for Forestry .................................................. 376
D
JI PROJECTS AND EMISSION REDUCTION UNITS ................................................................ 379
EFFECTIVENESS OF THE EMERGING GLOBAL CARBON MARKET ........................... 380

A
B
C
D
E
CLEAR DEFINITION OF TRADEABLE EMISSION INSTRUMENTS ............................................ 383

CLEAR, TRANSPARENT AND CONSISTENT RULES .............................................................. 387
ACCESS TO THE MARKET AND MINIMAL RESTRICTIONS ON TRADE.................................... 388
COMPATIBLE DESIGN OF INTERNATIONAL AND DOMESTIC MARKET SYSTEMS ................... 389
APPROPRIATE MONITORING, VERIFICATION AND ENFORCEMENT PROCESSES..................... 390
LEGAL FEATURES OF THE EMERGENT CARBON MARKETS ...................................... 392

A
B
C
D
E
F
G
H
THE INTERNATIONAL CLIMATE MARKET .......................................................................... 392

THE EMERGENCE OF DOMESTIC CARBON TRADING SYSTEMS............................................ 394
EUROPEAN UNION EMISSIONS TRADING SCHEME ............................................................. 396
UNITED KINGDOM EMISSIONS TRADING SCHEME ............................................................. 400
NEW ZEALAND EMISSIONS TRADING SCHEME .................................................................. 401
US STATE-BASED TRADING SCHEME ............................................................................... 403
VOLUNTARY CARBON TRADING SCHEMES ....................................................................... 403
DESIGNING AN EMISSIONS TRADING SYSTEM FOR AUSTRALIA ......................................... 410
I
Setting the Emission Reduction Target ........................................................................ 412
II
Identifying the Participants ........................................................................................ 413
III Defining the Tradeable Emission Instruments ............................................................. 415
IV The Legal Infrastructure............................................................................................. 415
V
The Use of Offsets and CCS in the System................................................................... 417
VI Linkages with Other International and Regional Carbon Markets ............................... 417
I
REQUIREMENTS FOR AN EFFECTIVE MULTI-NATIONAL GLOBAL MARKET ......................... 418
AN EFFECTIVE LEGAL REGIME FOR THE CREATION OF CARBON OFFSETS:

RIGHTS TO STORE IN THE EARTHS SINKS ..................................................................... 422
A
B
BIOSEQUESTRATION: STORAGE IN FORESTS AND SOILS ...................................................... 423

CARBON SEQUESTRATION AND AUSTRALIAN LAWS .......................................................... 424
AN EFFECTIVE LEGAL REGIME FOR CCS: RIGHTS TO STORE GASES IN THE

EARTHS SUB-SURFACE ........................................................................................................ 430
A
B
SEQUESTRATION WITHIN THE HIGH SEAS ......................................................................... 431

REGULATION OF GEOSEQUESTRATION PROJECTS IN AUSTRALIA ....................................... 436
I
Environmental Assessments and Approval Processes .................................................. 438
II
Access to Property and Property Rights ...................................................................... 439
III Liabilities Associated with the Stored Carbon Dioxide ................................................ 440
C
RECOMMENDATIONS FOR THE CONSISTENT REGULATION OF CCS ..................................... 442
RECOMMENDATIONS FOR A MORE EFFECTIVE LEGAL REGIME TO COMPLEMENT
THE USE OF MARKET MECHANISMS ................................................................................ 444
CHAPTER EIGHT CONCLUSION446

THE ROLE OF LAW IN RESPONDING TO CLIMATE CHANGE ...................................... 447
EFFECTIVENESS OF EXISTING LEGAL RESPONSES....................................................... 449
A
I
II
B
C
REGULATORY APPROACHES........................................................................................... 449

International .............................................................................................................. 449
Within Australia ......................................................................................................... 450
LIABILITY APPROACHES ................................................................................................ 451
MARKET APPROACHES .................................................................................................. 452
RECOMMENDATIONS FOR A MORE EFFECTIVE LEGAL RESPONSE......................... 453

CONCLUDING COMMENT..................................................................................................... 458
BIBLIOGRAPHY .............................................................................................................. 460
LIST OF FIGURES
FIGURE 1: THE GREENHOUSE EFFECT. ................................................................. 56

FIGURE 2: ATMOSPHERIC CONCENTRATIONS OF CO2 FROM MANUA LOA. ........... 57
FIGURE 3: THE REGULATORY ARCHITECTURE OF THE CLIMATE CHANGE REGIME
..................................................................................................................... 111
FIGURE 4: CLIMATE CHANGE: PROCESSES, CHARACTERISTICS AND THREATS. . 317
FIGURE 5: THE FUTURE MULTI-NATIONAL GLOBAL CARBON MARKET? .......... 421
10
TABLE OF CASES
AUSTRALIA
Anvil Hill Project Watch Association Inc v Minister for Environment and Water
Resources [2007] FCA 1480 (20 September 2007, Justice Stone).
Australian Conservation Foundation v Latrobe City Council (2004) 140 LGERA
100.
Australian Iron & Steel Ltd v Krstevski (1973) 128 CLR 666.
Ball v Consolidated Rutile Ltd [1991] 1 Qd R 524.
Bendix Mintex Pty Ltd v Barnes (1997) 42 NSWLR 307.
Bennett & Anor v Livingstone Shire Council & Ors (1985) QPLR 214.
Bentley v BGP Properties Pty Ltd (2006) 145 LGERA 234.
BGP Properties v Lake Macquarie City Council (2004) 138 LGERA 237.
Bonnici v Ku-Ring-Gai Municipal Council [2001] NSWSC 1124; (2001) 121
LGERA 1.
Booth v Bosworth (2001) 114 FCR 39.
Briginshaw v Briginshaw (1938) 60 CLR 336.
Brodie v Singleton Shire Council (2001) 206 CLR 512.
Bryan v Maloney (1995) 182 CLR 609.
BT Goldsmith Planning Services Pty Ltd v Blacktown City Council [2005] NSWLEC
210.
Caledonian Collieries Ltd v Speirs (1957) 97 CLR 202.
Caltex Oil (Aust) Pty Ltd v The Dredge "Willemstad" (1976) 136 CLR 529.
Capebay Holdings Pty Ltd v Sands [2002] WASC 287 (4 December 2002).
11
Carstens v Pittwater Council (1999) 111 LGERA 1 at 25.

Castro v Douglas Shire Council (1992) QPLR 146.
Challen v Mcleod Country Golf Club (2004) Aust Torts Reports 81-760.
Charles & Howard Pty Ltd v Redland Shire Council [2007] QCA 200.
Cohen v City of Perth (2000) 112 LGERA 234.
Comkey Pty Ltd v Caboolture Shire Council (2006) QPELR 399.
Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1.
Daniels (formerly practising as Deloitte Haskins and Sells) v Anderson (1995) 37
NSWLR 438.
Deepcliffe Pty Ltd v The Council of the City of the Gold Coast [2001] QCA 342 (31
August 2001)).
Deasy Investments Pty Ltd v Monrest Pty Ltd [1996] QCA 466 (22 November 1996).
Drake Brockman v Minister For Planning [2007] NSWLEC 490.
Elston v Dore (1982) 149 CLR 480.
Friends of Hinchinbrook Society Inc v Minister for Environment (No 2) (1997) 69
FCR 28.
Gartner v Kidman (1962) 108 CLR 12.
Grant Pastoral Co Pty Ltd v Thorpe's Ltd (1953) 54 SR (NSW) 129.
Gray v Minister for Planning and Others (2006) 152 LGERA 258, [2006] NSWLEC
720.
Greenpeace Australia Ltd v Redbank Power Company Pty Ltd and Singleton Council
(1994) 86 LGERA 143.
Gutteridge, Haskins & Davey Pty Ltd [1993] 1 VR 27.
H v Royal Alexandra Hospital for Children (1990) Aust Torts Reports 81-000.
12
Halverson v Dobler [2006] NSWSC 1307.

Hargrave v Goldman (1963) 110 CLR 40.
Heydon v NRMA Ltd (2000) 51 NSWLR 1.
Kempsey Shire Council v Lawrence (1996) Aust Torts Reports 81-375.
Kraemers v Attorney-General (Tas) [1966] Tas SR 113.
Jackson Teece v Waverley Council [2007] NSWLEC 69.
John Van Haandel v Byron Shire Council [2006] NSWLEC 394 (unreported)
(Commissioner Brown, Land and Environment Court, 20-21 June 2006).
Joslyn v Berryman (2002) 214 CLR 552.
Laferriere v Lawson (1991) 78 DLR (4th) 609; [1991] 1 SCR 541.
Luke v Maroochy Shire Council & Watpac Developments Pty Ltd (2003) QPELR
447.
Lynch v Mudgee Shire Council (1981) 46 LGRA 204.
Madell v Metropolitan Water Sewerage and Drainage Board (1936) 36 SR 68.
Maguire v Makaronis (1997) 188 CLR 449.
March v E & M H Stramare Pty Ltd (1991) 171 CLR 506.
MGICA (1992) Ltd v Kenny & Good Pty Ltd (1996) 140 ALR 313.
Mid Density Developments Pty Ltd v Rockdale Municipal Council (1993) 44 FCR
290.
Minister for Environment and Heritage v Queensland Conservation Council [2004]
FCAFC 190.
Munro v Southern Dairies [1955] VLR 332.
13
Mutual Life & Citizens' Assurance Co Ltd v Evatt (1968) 122 CLR 556; (1970) 122
CLR 628.
Northern Territory v Shoesmith (1996) Aust Torts Reports 81-385.
Oldham v Lawson (No 1) [1976] VR 654.
Orica Limited and Anor v CGU Insurance Limited [2003] NSWCA 331.
Painter v Reed [1930] SASR 295.
Parkes v Byron Shire Council [2003] NSWLEC 104 (unreported) (Justice Lloyd,
Land and Environment Court, 5 May 2003).
Parkes v Byron Shire Council [2004] NSWLEC 92 (unreported) (Commissioner
Tuor, Land and Environment Court, 15 June 2004).
Perre v Apand Pty Ltd (1999) 198 CLR 180.
Pisano v Fairfield City Council [1991] Aust. Torts R. 69.
Polkinghorne v Holland (1934) 51 CLR 143.
Puntoriero v Water Administration Ministerial Corporation (1999) 199 CLR 575.
Queensland Adult Deaf and Dumb Society (Incorporated) v Brisbane City Council
(1972) 26 LGRA 380.
Queensland Conservation Council Inc v Xstrata Coal Queensland P/L & Ors [2007]
QCA 338.
Re Xstrata Coal Queensland Pty Ltd & Ors [2007] QLRT 33.
Ruthning v Ferguson (1930) 45 CLR 604.
Scurr v Brisbane City Council (No 6) (1975) QPLR 162.
Seltsam Pty Ltd v McGuiness (2000) 49 NSWLR 262.
Shaddock v Parramatta City Council (1981) 150 CLR 225.
14
St George Club Ltd v Hines (1961) 35 ALJR 106.

Stockwell v Victoria [2001] VSC 497.
Sullivan v Moody (2001) 207 CLR 562; 183 ALR 404.
Sutherland Shire Council v Heyman (1985) 157 C.L.R. 424.
Symons Nominees Pty Ltd v Road & Traffic Authority New South Wales (1991) Aust
Torts Reports 81-081.
Ta Ho Ma Pty Ltd v Allen (1999) 47 NSWLR 1
Taralga Landscape Guardians Inc v Minister for Planning and Res Southern Cross
Pty Ltd [2007] NSWLEC 59.
Telstra Corporation Ltd v Hornsby Shire Council (2006) 67 NSWLR 256.
The Aborigines and Islanders Alcohol Relief Service Limited v Mareeba Shire
Council & Ors (1985) QPLR 292.
TNT Management Pty Ltd v Brooks (1979) 23 ALR 345.
Vincent v Peacock [1973] 1 NSWLR 466.
Voli v Inglewood Shire Council (1963) 110 CLR 74.
Walker v Minister for Planning [2007] NSWLEC 741; (2007) LGERA 124.
Wallaby Grip (BAE) Pty Ltd (in liq) v Macleay Area Health Service (1998) 17
NSWCCR 355 (CA).
Wallace v Powell [2000] NSWSC 406; (2000) 10 BPR 18,481.
Welbridge Holdings v Greater Winnipeg [1971] S.C.R 957.
Wildlife Preservation Society of Queensland (WPSQ) Proserpine/Whitsunday
Branch Inc v Minister for the Environment and Heritage (2006) 232 ALR 510.
Woollahra Municipal Council v Sved (1996) 40 NSWLR 101; 91 LGERA 361.
15
Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515.
Wyong Shire Council v Shirt (1980) 146 CLR 40.
Yanner v Eaton (1999) 201 CLR 351.
UNITED KINGDOM
A-G v PYA Quarries Ltd [1957] 2 QB 169.
Alfred F. Beckett Ltd v Lyons [1967] Ch 449 at 482B.
Allen v Gulf Oil Refining Ltd [1981] AC 1001.
Barker v Corus UK Ltd; Murray v British Shipbuilders (Hydrodynamics) Ltd;
Patterson v Smiths Dock Ltd [2006] All ER (D) 23 (May).
Barnett v Chelsea and Kensington Hospital Management Committee [1969] 1 QB
428.
Bolam v Friern Hospital Management Committee [1957] 1 W.L.R. 582.
Bonnington Castings Ltd v Wardlaw [1956] AC 613.
Bowater v Rowley Regis Corporation [1944] KB 476.
Bury v Pope (1586) Cr Eliz 118; 78 ER 375.
Cambridge Water Co. Ltd v Eastern Counties Leather plc [1994] 2 AC 264.
Caparo Industries PlC v Dickman [1990] 2 AC 605.
Daborn v Bath Tramways Motor Co Ltd [1946] 2 All ER 333.
Davies v Swan Motor Company (Swansea) Limited [1949] 2 KB 291.
Delaware Mansions Ltd v Westminster City Council [2001] 4 All ER 737.
Donoghue v Stevenson [1932] AC 562.
16
Earl of Harrington v Derby Corporation [1905] 1 Ch 205.

East Suffolk Catchment Board v Kent [1941] AC 74.
Edward Wong Finance Co Ltd v Johnson Strokes and Master [1984] AC 296.
Electrochrome Ltd v Welsh Plastics Ltd [1968] 1 QB 569.
Entick v Carrington (1765) 19 St. Tr. 1029 (K.B).
Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32.
Geddis v Proprietors of Bann Reservoir (1878) 3 App. Cas. 430.
Goldman v Hargrave [1967] 1 AC 645.
Greaves & Co (Contractors) Ltd v Baynham Meikle & Partners [1975] 1 WLR 1095.
Hedley Byrne v Heller [1964] A.C. 465.
Henderson v Merrett Syndicates Ltd [1995] 2 A.C. 145.
Home Office v Dorset Yacht Company Ltd [1970] AC 1004.
Hunter v Canary Wharf Ltd [1997] AC 655.
Julius v Lord Bishop of Oxford (1880) 5 App Cas 214.
Leakey v National Trust [1980] QB 485.
Malone v Laskey [1907] 2 KB 141.
McGhee v National Coal Board [1973] 1 WLR 1.
Merivale Moore Plc v Strutt & Parker [1999] Lloyd's Rep. P.N 734.
Midland Bank Trust Co Ltd v Hett, Stubbs and Kemp [1979] Ch 384.
Midwood & Co Ltd v Manchester Corporation [1905] 2 KB 597.
Miller v Jackson [1977] QB 966.
17
MLC v Evatt [1971] AC 793.

Moss v Christchurch Rural District Council [1925] 2 KB 750.
Pride of Derby and Derbyshire Angling Association Ltd v British Celanese [1953]
Ch 149.
Robinson v Kilvert (1889) 41 Ch D 88.
Roe v Minister of Health [1954] 2 QB 66.
Sedleigh-Denfield v O'Callaghan [1940] AC 880.
Smith v Baker and Sons [1891] AC 325.
Smith v Eric S Bush [1990] 1 AC 831.
Spartan Steel & Alloys Ltd v Martin & Co [1973] 1 QB 27.
Stapley v Gypsum Mines Ltd [1953] AC 663.
Sturges v Bridgman (1879) 11 Ch D 852.
Tate & Lyle Industries Pty Ltd v Greater London Council [1983] 2 AC 509.
Tetley v Chitty [1986] 1 All ER 663.
The Wagon Mound (No 2) [1967] 1 AC 617.
Watt v Hertfordshire County Council [1954] 2 All ER 368.
Wilsher v Essex Health Authority [1988] AC 1074.
Woodridge v Sumner [1963] 2 QB 43.
X (minors) v Bedfordshire County Council [1995] 2 AC 633.
NEW ZEALAND
Greenpeace New Zealand v Northland Regional Council [2007] New Zealand
Resource Management Appeals 87.
18
UNITED STATES OF AMERICA

Korsinksky v United States EPA, 192 Fed. Appx. 71 (United States Court of Appeals
for the Second Circuit, 10 August 2006).
Massachusetts v Environmental Protection Agency 549 US (2007) (Supreme Court
of the United States, decided 2 April 2007).
People of the State of California v General Motors Corporation et al (Case No. C0605755 MJJ, 2007, United States District Court for the Northern District of
California).
State of Connecticut et al v American Electric Power Company et al 406 F. Supp.
2d 265; 2005 U.S. Dist. LEXIS 19964; 35 ELR 20186 (United States District Court
For the Southern District of New York,15 September 2005).
INTERNATIONAL
Barcelona Traction Case, Barcelona Traction and Light and Power Co, ICJ Reports
(1970) 3.
Chorzow Factory Case, Permanent Court of International Justice Ser. A. No. 13.
East Timor (Portugal v Australia) 1995 International Court of Justice Reports 90.
Lac Lanoux case, Spain v France, UNRIAA, XII, 281 at 315-317; 24 ILR 101
(English version).
Monetary Gold Removed From Rome (Italy v France, Great Britain, USA) 1954
International Court of Justice Reports 19.
The Corfu Channel case, Great Britain v Albania, ICJ, Reports (1949).
Trail Smelter Arbitration, United States v Canada (1931-1941) 3 RIAA 1905; (1939)
33 AJIL 182; (1941) 35 AHIL 716.
19
TABLE OF LEGISLATION
AUSTRALIA
Commonwealth
Commonwealth of Australian Constitution Act (Cth).
Corporations Act 2001 (Cth).
Energy Efficiencies Opportunities Act 2006 (Cth).
Environmental Protection and Biodiversity Conservation Act 1999 (Cth).
Seas and Submerged Lands Act 1973 (Cth).
Trade Practices Act 1974 (Cth).
Queensland
Civil Liability Act 2003 (Qld).
Clean Energy Act 2008 (Qld).
Domestic Building Contracts Act 2000 (Qld).
Environmental Protection Act 1994 (Qld).
Environmental Protection (Waste Management) Regulation 2000 (Qld).
Fair Trading Act 1989 (Qld).
Forestry Act 1959 (Qld).
Integrated Planning Act 1997 (QLD).
Land Act 1994 (Qld).
Law Reform Act 1995 (Qld).
20
Land Title Act 1994 (Qld).

Limitation of Actions Act 1974 (Qld).
Petroleum and Gas (Production and Safety) Act 2004 (Qld).
Water Act 2000 (Qld).
New South Wales

Byron Local Environmental Plan 1988 (NSW).
Byron Development Control Plan 2002 (NSW).
Civil Liability Act 2002 (NSW).
Coastal Protection Act 1979 (NSW)
Conveyancing Act 1919 (NSW).
Environmental Planning and Assessment Act 1979 (NSW).
Fair Trading Act 1987 (NSW).
Home Building Act 1989 (NSW).
Limitation Act 1969 (NSW).
Local Government Act 1919 (NSW).
Local Government Act 1993 (NSW).
North Coast Regional Environmental Plan 1988 (NSW).
Protection of the Environment Operations Act 1997 (NSW).
State Environmental Planning Policy No 71 Coastal Protection (NSW).
State Environmental Planning Policy (Building Sustainability Index: BASIX) 2004
(NSW).
21
Victoria
Domestic Building Contracts Act 1995 (Vic).
Environmental Effects Act 1978 (Vic).
Environment Protection Act 1970 (Vic).
Fair Trading Act 1999 (Vic).
Forestry Rights Act 1996 (Vic).
Limitations of Actions Act 1958 (Vic).
Planning and Environment Act 1987 (Vic).
Wrongs Act 1958 (Vic).
Australian Capital Territory

Building Act 1972 (ACT).
Civil Law (Sale of Residential Property) Act 2003 (ACT).
Civil Law (Wrongs) Act 2002 (ACT).
Fair Trading Act 1992 (ACT).
Limitation Act 1985 (ACT).
South Australia
Building Work Contractors Act 1995 (SA).
Civil Liability Act 1936 (SA).
Climate Change and Greenhouse Emissions Reduction Act 2007 (SA).
22
Development Act 1993 (SA).

Environmental Protection Act 1993 (SA).
Fair Trading Act 1987 (SA).
Forest Property Act 2000 (SA).
Limitation of Actions Act 1936 (SA).
Mining Act 1971 (SA).
Petroleum Act 2000 (SA).
Western Australia
Barrow Island Act 2003 (WA).
Carbon Rights Act 2003 (WA).
Civil Liability Act 2002 (WA).
Environmental Protection Act 1986 (WA).
Environmental Protection (Unauthorised Discharges) Regulations 2004 (WA).
Fair Trading Act 1987 (WA).
Limitation Act 1935 (WA).
Petroleum Pipelines Act 1969 (WA).
Planning and Development Act 2005 (WA).
Tasmania
Civil Liability Act 2002 (Tas).
23
Environmental Management and Pollution Control Act 1994 (Tas).

Fair Trading Act 1990 (Tas).
Forestry Rights Registration Act 1990 (Tas).
Limitation Act 1974 (Tas).
Northern Territory
Consumer Affairs and Trading Act (NT).
Limitation Act 1981 (NT).
CANADA
Climate Change and Emissions Management Act 2003 (Alberta).
Climate Change and Emissions Management Act: Specified Gas Emitters Regulation
(Alberta Regulation 139/2007).
EUROPEAN UNION
Single European Act 1986 (EU).

European Union, Commission Regulation (EC), No 2216/2004 of 21 December
2004 for a standardised and secured system of registries pursuant to Directive
2003/87/EC of the European Parliament and of the Council and Decision No
280/2004/EC of the European Parliament and of the Council, Official Journal
of the European Union L. 386/1 (29.12.2004).
European Union, Directive 2003/87/EC of the European Parliament and of the
Council of 13 October 2003 establishing a scheme for greenhouse gas
emission allowance trading within the Community and amending Council
24
Directive 96/61/EC (entry into force 25.10.2003) published in OJL of the

25.10.2003.
European Union. Directive 2004/101/EC of the European Parliament and of the
Council as of 27 October 2004 amending Directive 2003/87/EC establishing
a scheme for greenhouse gas emission allowance trading within the
Community in respect of the Kyoto Protocol's project mechanism (entry into
force 13.11.2004) published in OJL 338 of 13.11.2004.
NEW ZEALAND
Climate Change Response Act 2002 (NZ).

Climate Change (Emissions Trading and Renewable Preference) Bill 2007 (NZ):
Explanatory Note' (2007).
Resource Management Act 1991 (NZ).
UNITED KINGDOM
Climate Change Bill [HL] 2007-2008 (UK).

Company law Reform Act 2006 (UK).
Greenhouse Gas Emissions Trading Scheme Regulations 2005 (Statutory Instrument
2005 No. 925)(UK).
Greenhouse Gas Emissions Trading Scheme (Approved National Allocation Plan)
Regulations 2005 (Statutory Instrument 2005 No. 1387)(UK).
UNITED STATES OF AMERICA

California Global Warming Solutions Act 2006 (AB 32).
25
Clean Air Act (CAA) 42 USC s/s 7401 et seq. (1970).

Connecticut Climate Change Act 2004 (Connecticut Public Act No. 04-252).
26
TABLE OF TREATIES AND INTERNATIONAL

LEGAL INSTRUMENTS
TREATIES
Charter of the United Nations (opened for signature 26 June 1945, San
Francisco)(entry into force 24 October 1945).
Convention on Wetlands of International Importance especially as Waterfowl
Habitat (the Ramsar Convention) (adopted 2 February 1971, Ramsar, Iran)(entry
into force 1975).
Kyoto Protocol to the United Nations Framework Convention on Climate Change,
opened for signature 16 March 1998 (entered into force on 16 February 2005).
IMO, Convention on the Prevention of Marine Pollution by Dumping of Wastes and
Other Matter, the London Convention 1972 (entered into force 1975).
IMO, Protocol on the Prevention of Marine Pollution by Dumping of Wastes and
Other Matter, the London Protocol 1996 (entered into force 2006).
International Covenant on Civil and Political Rights 1966, 999 U.N.T.S. 171;
U.K.T.S. 6 (1977), Cmnd. 6702; (1967) 61 A.J.I.L. 870.
International Covenant on Economic, Social and Cultural Rights 1966, 993 U.N.T.S.
3; U.K.T.S. 6 (1977), Cmnd. 6702; (1967) 6 I.L.M. 360.
United Nations Convention on the Law of the Sea 1982 (UNCLOS) (Agreed 10
December 1982, Entered into force, 16 November 1994).
United Nations Framework Convention on Climate Change, opened for signature on
4 June 1992, 31 ILM 849 (entered into force on 21 March 1994).
27
DECISIONS UNDER THE UNFCCC AND KYOTO PROTOCOL

UNFCCC, Compendium of Draft Decisions Forwarded for the Adoption by the
Conference of the Parties serving as the first meeting of the Parties to the Kyoto
Protocol at its first session (advance version)(FCCC/KP/CMP/2005/3/Add.3).
UNFCCC, 2005, Decision 1/CMP.1 'Consideration of commitments for subsequent
periods for Parties included in Annex 1 to the Convention under Article 3, paragraph
9 of the Kyoto Protocol'(FCCC/KP/CMP/2005/8/Add.1).
UNFCCC, 'Decision 2/ CMP. 1 Principles, nature and scope of the mechanisms
pursuant to Articles 6, 12 and 17 of the Kyoto Protocol',
(FCCC/KP/CMP/2005/8/Add 1).
UNFCCC, Decision 3/CMP.1: 'Modalities and Procedures for a Clean Development
Mechanism as Defined in Article 12 of the Kyoto Protocol. Annex: Modalities and
Procedures for a Clean Development Mechanism', (FCCC/KP/CMP/2005/8/Add 1).
UNFCCC, 'Decision 3/CMP. 1: Modalities, Rules and Guidelines for Emissions
Trading under Article 17 of the Kyoto Protocol, Annex: Modalities, Rules and
Guidelines for Emissions Trading under Article 17 of the Kyoto Protocol',
UNFCCC, Decision 5/CMP. 1 'Modalities and Procedures for Afforestation and
Deforestation Project Activities under the Clean Development Mechanism in the
First Commitment Period of the Kyoto Protocol, Annex: Modalities and Procedures
for Afforestation and Deforestation Project Activities under the Clean Development
Mechanism' (FCCC/KP/CMP/2005/8/Add.1).
UNFCCC, 'Decision 9/CMP.1: Guidelines for the Implementation of Article 6 of the
Kyoto Protocol. Annex: Guidelines for the Implementation of Article 6 of the Kyoto
Protocol', (FCCC/KP/CMP/2005/8/Add 2).
UNFCCC Decision 11/CMP 1: Modalities, Rules and Guidelines for Emissions
Trading under Article 17 of the Kyoto Protocol, Annex: Modalities, Rules and
Guidelines for Emissions Trading under Article 17 of the Kyoto Protocol,
28
UNFCCC, 'Decision 13/CMP.1:Modalities for the Accounting of Assigned Amounts

under Article 7, paragraph 4, of the Kyoto Protocol' (FCCC/KP/CMP/2005/8/Add.2).
UNFCCC, Decision 4/CMP.2: Compliance Committee, Annex: Rules and
Procedures
of
the
Compliance
Committee
of
the
Kyoto
Protocol
(FCCC/KP/CMP/2006/6)
UNFCCC, 'Decision 5/CMP. 3: Compliance under the Kyoto Protocol'
(FCCC/KP/CMP/2007/9/Add.1).
UNFCCC, 'Decision 7/CMP. 3: Demonstration of progress in achieving
commitments under the Kyoto Protocol by Parties included in Annex I to the
Convention' (FCCC/KP/CMP/2007/9/Add.1).
UNFCCC, Decision 27/CMP. 1 'Procedures and
Mechanisms Relating to
Compliance under the Kyoto Protocol, Annex: Procedures and
Mechanisms
Relating to Compliance under the Kyoto Protocol' (FCCC/KP/CMP/2005/8/Add 3).

UNFCCC, Decision 22/CP. 5 ' Institutional Linkage of the Convention Secretariat to
the United Nations' (FCCC/CP/1999/6/Add 1).
UNFCCC, Decision 5/CP.6 'The Bonn Agreements on the Implementation of the
Buenos Aires Plan of Action', (FCCC/CP/2001/5).
UNFCCC, Decision 15/CP. 7 'The Marrakesh Accords' (FCCC/CP/2001/13/Add.2).
UNFCCC, Decision 25/CP. 8 ' Demonstrable Progress under Article 3, Paragraph 2
of the Kyoto Protocol' (FCCC/CP/2002/7 Add 3).
UNFCCC, 2005, Decision 1/ CP.11, 'Dialogue on long-term cooperative action to
address climate change by enhancing implementation of the Convention'
(FCCC/CP/2005/5/Add.1).
UNFCCC,
'Decision
1/CP.
13:
Bali
FCCC/CP/2007/6/Add.1).
29
Action
Plan'
(December
1,
INTERNATIONAL LEGAL INSTRUMENTS
United Nations General Assembly, Universal Declaration of Human Rights 1948,

Adopted and proclaimed by General Assembly resolution 217 A (III) of 10
December 1948.
UNCED, 'United Nations Conference on Environment and Development: Agenda
21' (1992).
UNCED, 'United Nations Conference on Environment and Development: The Rio
Declaration' ((1992) 31 ILM 874).
United Nations Economic Commission for Europe, Aarhus Convention on Access to
Information, Public Participation in Decision-making and Access to Justice
in Environmental Matters, opened for signature 25 June 1998 (entered into
force 30 October 2001).
WMO/UNEP, 'Informal Meeting of Experts on Legal Aspects of Weather
Modification: Draft Principles of Conduct for the Guidance of States
Concerning Weather Modification' (1978) Digest of US Practice in
International Law 1204.
World Summit on Sustainable Development, 'Johannesburg Declaration on
Sustainable Development' (2002).
30
LIST OF ACRONYMS
AAU
Assigned Amount Unit
AIE
Accredited Independent Entity
CDM
Clean Development Mechanism
CER
Certified Emission Reduction
COP
Conference of the Parties to the UNFCCC
DFP
Designated Focal Point
DNA
Designated National Authority
DOE
Designated Operation Entity
EER
Energy Efficiency Rating
ERU
Emission Reduction Unit
ESD
Ecologically Sustainable Development
EU
European Union
GDP
Gross Domestic Product
GEC
Gas-fired electricity certificate
ICJ
International Court of Justice
IPCC
Intergovernmental Panel on Climate Change
ITL
International Trading Log
JI
Joint Implementation
31
lCER
Long-term certified emission reduction unit (issued for afforestation

or deforestation activities)
LULUCF
Land Use, Land-Use Change, and Forestry
MOP
Meeting of the Parties to the Kyoto Protocol
NGAC
NSW Greenhouse Gas Abatement Certificate
PPM
Parts Per Million
REC
Renewable Energy Certificate
RMU
Removal Unit (issued in respect of LULUCF activities)
SBI
Subsidiary Body for Implementation
SBSTA
Subsidiary Body for Scientific and Technological Advice
tCER
Temporary certified emission reduction unit (issued for afforestation

or deforestation activities)
UK
United Kingdom
UN
United Nations
UNFCCC
UN Framework Convention on Climate Change
US
United States of America
VER
Verified Emission Reduction Unit
VREC
Victorian Renewable Energy Certificate
32
STATEMENT OF ORIGINAL AUTHORSHIP
The work contained in this thesis has not been previously submitted to meet
requirements for an award at this or any other higher education institution. To the
best of my knowledge and belief, this thesis contains no material previously
published or written by another person except where due reference is made.
Signed:
Date:
33
ACKNOWLEDGEMENTS
Completing a PhD thesis is no easy feat especially when dealing with the
dynamic area of climate change law and policy. I could not have completed this
challenge within the three year period, as I did, without the encouragement and
support of a number of people. My sincere thanks and appreciation go to:
o my principal supervisor, Professor Fisher (Professor of Law), whos unfailing
confidence in my abilities provided me with the blank canvas on which to
create my work;
o my associate supervisor, Professor Grace (Director, Institute for Sustainable
Resources), who taught me the fine art of profiling and networking in the
international arena;
o my mentor and strategic-thinking buddy, Professor Duncan (Assistant Dean,
Research), who kept me on the straight and narrow and made the PhD
journey fun;
o my mother, Maria Durrant (J.P. Qual.), whos encouragement, interest in my
work, and research assistance were vital in enabling me to remain
motivated;
o my father, the brilliant Dr Durrant, who wisely encouraged me to start a PhD
in the first place and kept me on my toes by remaining a climate sceptic
throughout;
o my siblings, whose wit and cheerful dispositions helped me to find my inner
zen when the going got tough; and
o my fellow PhD scholars (past and present), our coffee breaks, Friday night
drinks and other procrastination techniques were necessary reminders that life
still functioned outside of the PhD room.
Finally, my appreciation goes to the Faculty of Law and the Institute for
Sustainable Resources for providing the funding that made all this possible.
Thank-you to you all.
Niki Durrant
November 2008.
34
Chapter One Introduction

The Role of Law in Responding to Climate Change: Emerging Regulatory,
Liability and Market Approaches
RESEARCH TOPIC
The purpose of this thesis is to analyse and evaluate the emerging legal rules and
frameworks, both international and Australian, required for the effective
regulation of greenhouse gas emissions to address climate change in the context
of the urgent and deep emission reductions required to minimise the adverse
impacts of climate change. In doing so, this thesis will examine critically the
existing and potential role of law in responding to climate change through the
integration of effective regulatory, liability and market mechanisms. It will
provide recommendations on the necessary reforms to achieve a more effective
and integrated legal response to this global phenomenon.
Humankinds industrial and post-industrial society has been based upon activities
and processes that rely heavily on the burning of fossil fuels leading to a
mutually antagonistic relationship between continued economic growth and
development on the one hand and environmental protection and sustainability on
the other.1 Climate change presents as the archetypal environmental problem
with short-term economic self-interest operating to the detriment of the long-term
sustainability of our society.
Until recently, our fossil fuel dependence and
greenhouse gas emitting activities have been regarded as not only lawful but
socially and economically desirable within our society. 2 However, following
increasingly persuasive scientific evidence regarding the real and urgent threat of
1
Andrew Gouldson and Joseph Murphy, Regulatory Realities: the implementation and impact of
industrial environmental regulation (1998) London, Earthscan at 1.
2
Nigel Bankes, 'Legal Prescriptions for an Atmosphere That Will Sustain the Earth' in J Owen
Saunders (ed), The Legal Challenge of Sustainable Development: Essays From the Fourth Institute
Conference on Natural Resources Law (1990) Ottawa, Canadian Institute of Resources Law, 155 at
160.
35
climate change, the international community agreed to the United Nations

Framework Convention on Climate Change (UNFCCC) in 1992.3 The UNFCCC
included the overriding objective of stabilising greenhouse gas concentrations in
the atmosphere at a level that would prevent dangerous anthropogenic
interference with the climate system. 4 More specific emission reduction duties
for developed nations were agreed through the Kyoto Protocol to the UNFCCC
(Kyoto Protocol) in 1997.
Together, these international agreements
acknowledge that climate change is a global problem requiring a global solution,

and that it has become the common concern and the common responsibility of
humankind.6
The scientific reports of the Intergovernmental Panel on Climate Change (IPCC)

strongly assert that the stabilisation of emissions in the atmosphere, to avoid the
adverse impacts of climate change, requires significant and rapid reductions in
business as usual global greenhouse gas emissions. Previously, international
debate centred on whether stringent reductions in emissions should be adopted to
limit global warming to less than 2 degrees Celsius above pre-industrial levels.
According to the IPCC report in 2007, that is no longer an option:
achieving a target of 2C (above the pre-industrial level), at equilibrium, is already
outside the range of scenarios considered.whilst a target of 3C (above the preindustrial level) would imply stringent mitigation scenarios, with emissions peaking
within 10 years.7
To minimise the adverse impacts of climate change, nation States must

implement domestic regimes to rapidly reduce their national greenhouse gas
United Nations Framework Convention on Climate Change, opened for signature on 4 June 1992,
31 ILM 849 (entered into force on 21 March 1994) (the UNFCCC).
4
UNFCCC, ibid, Article 2.
5
Kyoto Protocol to the United Nations Framework Convention on Climate Change, opened for
signature 16 March 1998 (entered into force on 16 February 2005) (the Kyoto Protocol).
6
Together, these international agreements are referred to as the international climate change regime.
7
B.S. Fisher et al, 'Issues related to mitigation in the long term context' in B. Metz et al (eds), Climate
Change 2007: Mitigation. Contribution of Working Group III to the Fourth Assessment Report of the
Inter-governmental Panel on Climate Change (2007) Cambridge, Cambridge University Press at 173.
36
emissions in order to achieve global reductions in atmospheric concentrations of

greenhouse gases of the following magnitude and timescale:
using the best estimate assumption of climate sensitivity, the most stringent
scenarios (stabilizing at 445490 ppmv CO2-equivalent) could limit global mean
temperature increases to 22.4C above the pre-industrial level, at equilibrium,
requiring emissions to peak before 2015 and to be around 50% of current levels by
2050.8
In assisting the global community to achieve these reductions, and stabilise

atmospheric emissions at 450 ppm by 2050, it would be necessary for Australia
to reduce its national emissions by approximately 90 per cent below 2000 levels
by 2050.9 Moreover, the IPCC has warned the international community that:
decisions to delay emission reductions seriously constrain opportunities to achieve
low stabilization targets (e.g. stabilizing concentrations from 445535 ppmv CO2equivalent), and raise the risk of progressively more severe climate change impacts
and key vulnerabilities occurring.10
The sheer magnitude of emission reductions required within this urgent

timeframe will necessitate an unprecedented level of international, multi-national
and intra-national cooperation and will challenge conventional approaches to the
creation and implementation of international and domestic legal regimes. To
meet this challenge, existing international, national and local legal systems must
harmoniously implement a strong international climate change regime through a
portfolio of legal mechanisms that transform swiftly current behavioural practices
in emitting greenhouse gases. However, the incremental evolution of our legal
systems means that, historically, the law has not responded swiftly to sudden
societal transformations. The common law, in particular, is not well equipped to
accommodate the urgency of such abrupt social and legal transformations. This
inertia in the legal system has been described as follows:
8
Ibid.
Garnaut Climate Change Review, 'Emissions Trading Scheme Discussion Paper' (2008) at 39.
10
Ibid.
37
in all cases development of the common law, as a response to changed conditions,

does not come like a bolt out of a clear sky. Invariably the clouds gather first, often
from different quarters, indicating with increasing obviousness what is coming. 11
The purpose of this thesis is to examine critically the role of law in responding to
the urgent global threat posed by climate change.
The innovative legal
mechanism adopted by the international community, to achieve the necessary

reductions in global emissions, in the most cost-effective manner, is the artificial
construct of tradeable emission instruments within a carbon market system. 12
However, there are significant legal challenges in incorporating these market
mechanisms into existing domestic legal systems and in facilitating the optimal
operation of the emerging carbon markets.
Moreover, these innovative and
largely untested market instruments are unlikely, alone, to be sufficient to

achieve all reductions in emissions necessary to respond to climate change. It is
argued that the current law does not adequately respond to the significant
temporal and spatial challenges of climate change.
Rather, the current
international approach to the regulation of greenhouse gas emissions is weak and

inadequate while the domestic regulatory approach, in particular, is fragmented,
inconsistent and legally discordant. Such fragmentation results in lawmaking
with a fundamental disconnect from the international objectives of the climate
change regime.
Moreover, the incremental evolution of the existing legal
systems is ineffective and inefficient for the significant temporal and spatial
adjustments required to address promptly the consequences of climate change.
Within this context, this thesis will address particularly the following questions:
What role can the law effectively perform in achieving the significant and
rapid reductions in global greenhouse gas emissions required to respond
to the consequences of climate change?
11
Re Spectrum Plus Ltd (in Liq) [2005] 2 AC 680 at [33] per Lord Nicholls.
The term carbon market is used in this thesis to refer to those markets trading in carbon emission
instruments as well as those trading in greenhouse gas emission instruments more generally.
12
38
Are the existing principles, rules and procedures of international law

effective in responding to the consequences of climate change?
Can the Australian domestic legal system effectively respond to the

international imperatives required of it?
What changes should be made to the international and Australian legal

frameworks to achieve a more effective legal response to climate change?
It is submitted that the appropriate role of law will include the creation and
implementation of an effective international regime to address the global
phenomenon of climate change and the development of a consistent domestic
legal system aligned with a nation States international obligations. Furthermore,
the deep, short-term, reductions in emissions required will necessitate the
creation and implementation, within the domestic sphere, of a combination of
traditional and innovative legal mechanisms. These include the imposition of
strict duties to reduce emissions through the establishment of strong command
and control regulation (the regulatory approach); mechanisms for the creation
and distribution of liabilities for greenhouse gas emissions and climate-related
harm (the liability approach); and the use of innovative regulatory tools in the
form of tradeable emission instruments within a carbon market (the market
approach). The legal relations between these various regulatory, liability and
market approaches must be managed to achieve a consistent, compatible and
optimally effective legal regime to respond to the threat of climate change.
The mutually complementary roles of the legislature, executive and judiciary will
all be significant in the effective creation, implementation and enforcement of
these legal mechanisms. The legislature must establish clear guiding principles
regarding the rapid and urgent response to climate change and these must be
implemented through the establishment of specific standards and ad hoc
determinations of the executive. The judiciary will also play an important role in
the application, interpretation and enforcement of such standards and principles.
39
Together, these essential mechanics of the legal system may effectively facilitate
rapid emission reductions through their influence upon the emitting behaviours of
all members of the community.
REVIEW OF EXISTING LITERATURE ON LAW AND CLIMATE

CHANGE
A Relationship of Research to Existing Literature
There is no shortage of published literature addressing the science, economics,
policy and legal implications of climate change in our modern society. The
challenge in reviewing this vast expanse of literature has been the identification
of commentary that reflects a considered and informed analysis of the
interactions between the emerging scientific, economic, policy and legal
implications of climate change. For example, there is a significant volume of
literature regarding the Kyoto Protocol. However, much of this has been written
primarily by economists and environmental policy advisors with little or no legal
analysis. The majority of identified economic literature, predominantly from the
1990s onwards, focuses on the advantages and disadvantages of particular
emission reduction pathways and the costs and benefits of using market
mechanisms in that context. 13 By contrast, the policy work in this field has
tended to focus on future negotiations regarding the features of the Kyoto
Protocol, and post-2012 treaty options, rather than on the legal mechanisms for
the practical achievement of the goals of the climate change regime. 14
13
For example, William D Nordhaus, 'To Slow or Not to Slow: the Economics of the Greenhouse
Effect' (1991) 101(July 1991) The Economic Journal 920; David Pearce, 'The Role of Carbon Taxes
in Adjusting to Global Warming' (1991) 101(July 1991) The Economic Journal 938.
14
For example, Michael Grubb, 'Options for an International Agreement' in United Nations
Conference on Trade and Development (ed), Combating Global Warming: study on a global system
of tradeable carbon emission entitlements (1991) New York, United Nations, 11;Michael Grubb and
Adam Rose, 'Nature of the Issue and Policy Options' in United Nations Conference on Trade and
Development (ed), Combating Global Warming:study on a global system of tradeable carbon
entitlements, UNCTAD/RDP/DFP/1 (1992) New York, United Nations Conference on Trade and
Development, 1;Deborah Stowell, Climate Trading: Development of Greenhouse Gas Markets (2005)
Hampshire, Great Britain, Palgrave Macmillan.
40
No sustained academic legal research has been undertaken on the implementation

of an effective integrated legal response to climate change, via the international
and domestic sphere, in the context of utilising effective regulatory, liability and
market mechanisms. In-depth legal analysis of any aspect of climate change
regulation is relatively scarce and is generally limited to discrete areas of law and
policy in a particular jurisdiction. Such analysis in the Australian regulatory
context is rarer still. There is no published, comprehensive, evaluation of the
international and domestic legal frameworks required to regulate greenhouse gas
emissions, and respond to the consequences of climate change effectively, within
the Australian context.
B Existing Literature on Law and Climate Change

The status of international law relating to climate change, prior to the
commencement of negotiations to the Kyoto Protocol, was identified and
assessed in the edited collection of Churchill and Freestone.15 This collection
considered the potential international law issues in attempting to regulate the
global atmosphere and to control the emission of greenhouse gases.16 The early
design of the climate change regime, and potential institutional issues, were later
assessed in the edited collection of works of Luterbacher and Sprinz during the
early negotiation of the Kyoto Protocol.17 The policy implications of the Kyoto
Protocol were also considered in the edited collected of Cameron and Zillman.18
This collection of commentaries considered the key features of the Kyoto
15
Robin Churchill and David Freestone (eds), International Law and Global Climate Change (1991)
London, Graham and Trotman.
16
For example, Alan Boyle, 'International Law and the Protection of the Global Atmosphere:
Concepts, Categories and Principles' in Robin Churchill and David Freestone (eds), International Law
and Global Climate Change (1991) London, Graham and Trotman, 7; R Churchill, 'Controlling
Emissions of Greenhouse Gases' in R Churchill and David Freestone (eds), International Law and
Global Climate Change (1991) London, Graham & Trotman, 147 and Jill Barrett, 'The Negotiation
and Drafting of the Climate Change Convention' in R Churchill and David Freestone (eds),
International Law and Global Climate Change (1991) London, Graham & Trotman, 183.
17
Urs Luterbacher and Detlef F. Sprinz (eds), International Relations and Global Climate Change
(2001).
18
Peter D. Cameron and Donald Zillman (eds), Kyoto: From Principles to Practice. (2001) The
Netherlands, Kluwer Law International.
41
Protocol and possible policy implications for international and regional energy
sectors.19
The legal rules and institutions of the agreed international climate change regime
were analysed and presented in the text of Yamin and Depledge. 20
This
commentary focuses on the application of public international law to nation

States in relation to climate change.21 In doing so, the guide focuses on the key
institutions and substantive rules developed under the climate change regime, as
they were in 2004, as well as the processes for the ongoing negotiation and
evolution of the Kyoto Protocol.22
Legal works by Freestone and Streck 23 and Yamin24, published in 2005, attempt
to highlight some of the discrete legal issues and uncertainties within the legal
framework of the Kyoto Protocol. The edited collection by Freestone and Streck
contains papers addressing a range of discrete topics relating to the Kyoto
Protocol including the implementation of emission reduction projects,
contractual, property rights, accounting and taxation issues and embryonic
examples of regional and domestic emissions trading. The brevity of the analysis
in these chapters makes it difficult for the authors to substantively analyse the
legal issues. The work of Yamin focuses primarily on the rules and institutional
features of the market mechanisms under the climate change regime and
highlights a number of the early institutional deficiencies in the operation of the
19
For example, Peter D. Cameron, 'The Kyoto Process: Past, Present and Future' in Peter D. Cameron
and Donald Zillman (eds), Kyoto: From Principles to Practice (2001) The Netherlands, Kluwer Law
International, 3, Peter G. Davies, 'Climate Change and the European Community' in Peter D. Cameron
and Donald Zillman (eds), Kyoto: From Principles to Practice (2001) The Netherlands, Kluwer Law
International, 27 and Gillian Triggs, 'The Kyoto Protocol and the Energy Industry: Australia and the
Asian Pacific' in Peter D. Cameron and Donald Zillman (eds), Kyoto: From Principles to Practice
(2001) The Netherlands, Kluwer Law International, 299.
20
Farhana Yamin and Joanna Depledge, The International Climate Change Regime: A Guide to Rules,
Institutions and Procedures (2004) Cambridge, Cambridge University Press.
21
Ibid, 3.
22
Ibid.
23
David Freestone and Charlotte Streck (eds), Legal Aspects of Implementing the Kyoto Protocol
Mechanisms: Making Kyoto Work (2005) Oxford, Oxford University Press.
24
Farhana Yamin (ed), Climate Change and Carbon Markets: A Handbook of Emission Reduction
Mechanisms (2005) London, Earthscan.
42
regime. However, not all of the key institutional and interactive deficiencies are
identified. The work of Stowell is also intended to analyse the features of the
carbon markets. 25 However, this work is limited by a focus on the broad policy
principles, national strategies and preferred outcomes of the negotiators to the
Kyoto Protocol rather than a consideration of the specific legal mechanisms
required to create, monitor and enforce the market systems.
Broader international compliance issues with the Kyoto Protocol are considered
in the edited collection of Schram Stokke, Hovi and Ulfstein26 and in the work of
Doelle. 27 The former collection describes the design of the Kyoto Protocol
compliance regime, identifies challenges to the effective operation of the regime,
and considers the potential for external enforcement measures, including trade
sanctions and responses by non-governmental organisations. The work of Doelle
provides in-depth consideration of a range of issues associated with compliance
with the climate change regime. The text presents an overview of the compliance
system under the Kyoto Protocol, analyses the potential impact of the World
Trade Organisation on the climate change regime and the potential role of the
dispute settlement provisions under the United Nations Convention on the Law
of the Sea. The role of human rights principles, in relation to the impacts of
climate change, is also considered. The purpose of the text is to assess the
effectiveness of these various mechanisms in motivating States to take action on
greenhouse gas emissions and comply with the climate change regime. 28
The work of Verheyen provides a detailed analysis of the application of general

international law principles, including the principle of State responsibility for
25
Deborah Stowell, Climate Trading: Development of Greenhouse Gas Markets (2005) Hampshire,
Great Britain, Palgrave Macmillan.
26
Olav Schram Stokke, Jon Hovi and Geir Ulfstein (eds), Implementing the Climate Regime:
International Compliance (2005) London, Earthscan.
27
Meinhard Doelle, From Hot Air to Action? Climate Change, Compliance and the Future of
International Environmental Law (2005).
28
Ibid, xxii.
43
environmental harm, to the particular issue of climate change damage. 29 Liability

issues associated with the environmental, social and economic harm of climate
change are also analysed in the relatively brief works of Grossman,30 Allen31 and
Smith and Shearman.32
The papers of Grossman and Allen both focus on the
potential for tortious actions for climate harm based on the United States of
America (US) jurisdiction while Smith and Shearman assess the role of climate
change litigation in the Australian environment. The purpose of the latter text is
to provide a detailed overview and analysis of the legal and scientific issues at
the core of climate change litigation. 33
Smith and Shearman specialise
particularly in the areas of public health and the law and it is from this particular
background that this overview is presented with an emphasis on liability for
adverse impacts on human health.
Works specifically addressing the domestic regulation of climate change are

more limited. Recent legal texts comprehensively analysing the provisions of the
European Union and United Kingdom laws relating to carbon trading include the
text of Robinson, Barton, Dodwell, Heydon and Milton34 while an overview of
the various aspects of US law relating to climate change is provided in the edited
text of Gerrard.35 The recent edited collection of Australian papers by Bonyhady
and Christoff identify some of the emerging legal issues in Australian domestic
law and present examples of climate related litigation in Australia and initiatives
29
Roda Verheyen, Climate Change Damage and International Law: Prevention Duties and State
Responsibility, Developments in International Law: Volume 54 (2005) Leiden, Martinus Nijhoff
Publishers.
30
David A. Grossman, 'Warming Up to a Not-So-Radical Idea: Tort-Based Climate Change
Litigation, 28 Colombia Journal of Environmental Law 1 (2003)' in Durwood Zaelke, Donald Kaniaru
and Eva Kruzikova (eds), Making Law Work: Environmental Compliance and Sustainable
Development: Volume 1 (2005) 505.
31
Myles Allen, 'The Spectre of Liability: Part 1-Attribution' in Kenny Tang (ed), The Finance of
Climate Change: A Guide for Governments, Corporations and Investors (2005) 367. Myles Allen,
'The Spectre of Liability: Part 2-Implications' in Kenny Tang (ed), The Finance of Climate Change: A
Guide for Governments, Corporations and Investors (2005) 381.
32
Joseph Smith and David Shearman, Climate Change Litigation: Analysing the Law, Scientific
Evidence and Impacts on the Environment, Health and Property (2006).
33
Ibid, xxi.
34
J Robinson et al, Climate Change Law: Emissions Trading in the EU and the UK (2007) London,
Cameron May.
35
Michael B. Gerrard (ed), Global Climate Change and U.S. Law (2007) Chicago, American Bar
Association.
44
to regulate greenhouse gas emissions. 36 Policy issues associated with the risk of
liability of other Australian public authorities are considered in the work of
McDonald37 while litigation as a general policy response to climate change is
considered in the work of Peel.38 Other works include an overview of public and
private responses to climate change in Australia by Lyster,39 and the regulation of
greenhouse gases, in the existing environmental regulatory context, by Fisher.40
C Identified Gap in the Literature

The gap in the existing literature is significant. No legal analysis has been
identified in the existing literature which addresses the implementation of an
effective integrated legal response to climate change, via the international and
domestic sphere, in the context of utilising effective regulatory, liability and
market mechanisms.
As the above review illustrates, there is limited legal
analysis that comprehensively critiques the rules, processes and institutional

characteristics of the international climate regime. Moreover, the regulation of
climate change is in a constant state of flux and much of the published literature,
preceding 2007, no longer represents an accurate assessment of the current
international and domestic regimes.
The literature also frequently omits to
consider the implementation of the regime, from the global to the local, and the
interaction between the emerging legal rules and carbon markets.
Furthermore, much of the existing Australian legal climate change literature

addresses only discrete areas of climate change regulation from a singular
36
Tim Bonyhady and Peter Christoff (eds), Climate Law in Australia (2007) Sydney, The Federation
Press.
37
Jan McDonald, 'A Risky Climate for Decision-Making: The liability of development authorities for
climate change impacts' (2007) 24(6) Environmental and Planning Law Journal 405.
38
Jacqueline Peel, 'The Role of Climate Change Litigation in Australia's Response to Global
Warming' (2007) 24 Environmental and Planning Law Journal 90.
39
Rosemary Lyster, 'Chasing Down the Climate Change Footprint: Forces Converge' (2007) 24(4)
Environmental and Planning Law Journal 281; Rosemary Lyster, 'Chasing Down the Climate Change
Footprint: Forces Converge-Part II' (2007) 24(6) Environmental and Planning Law Journal 450.
40
Douglas E Fisher, 'The Statutory Relevance of Greenhouse Gas Emissions in Environmental
Regulation' (2007) 24(3) Environmental and Planning Law Journal 210.
45
jurisdictional perspective. The practical implications of the national regulation of

greenhouse gas emissions and the establishment of a functional carbon markets,
in a manner compatible with the international climate change regime, is also
generally overlooked in such works.
SCOPE OF THIS RESEARCH STUDY

The purpose of this thesis is to address this identified gap in the existing literature.
This thesis will analyse and evaluate the emerging legal rules and frameworks,
both international and Australian, required for the effective regulation of
greenhouse gas emissions to address climate change in the context of the urgent
and deep emission reductions required to minimise the adverse impacts of
climate change. It will do so through the parameters of the emerging regulatory,
liability and market responses to climate change.
This thesis will focus on the role of law in responding to climate change through
the international and domestic jurisdictions. Given the breadth of legal issues in
the regulation of the impacts of climate change, only one domestic jurisdiction
has been chosen as the primary subject for analysis. This thesis analyses the
domestic implementation of the climate change regime and regulation of
greenhouse gas emissions through the parameters of the Australian regulatory
environment. Accordingly, it will focus primarily on international and Australian
climate change related laws with a few key comparative examples from other
developed common law countries which have recently considered legal
initiatives to address climate change, such as the United Kingdom, New Zealand,
Canada and the United States of America (with reference to the European Union
in the context of the United Kingdom).
46
Australia is representative of the inherent tension between the emergent

international climate change science and global consensus to reduce emissions,
on the one hand, and, on the other, the political and economic resistance to the
imposition of strict environmental protection standards which may adversely
affect domestic economies. The legal response to climate change, in such a
political environment, places even greater emphasis on the effectiveness of the
role of law in overcoming such resistance to achieve actual reductions in
greenhouse gas emissions.
An analytical approach has been adopted in this research and reference has been
made to published treaties, legislation, caselaw and government policy and to
reports containing collated data regarding the science of climate change, status of
national emissions and operation of the carbon market mechanisms. Accordingly,
this assessment is based on publicly available data, that had been collated and
reported, with an appreciation of the dynamic nature of the subject. Given the
difficulties in accessing and collating data, at a national and an international
level, empirical data has not been collected.
The primary focus of this thesis is the effectiveness of the existing legal
framework for responding to the implications of climate change and the potential
role for the law, in terms of regulation, liability and markets, in achieving rapid
reductions in greenhouse gas emissions at the global and national scales. Such an
analysis requires an understanding of the key issues relating to the science, the
economics and the politics of climate change. However, this thesis does not
purport to critique the climate change science and the required level of emission
reductions; the economic impacts of climate change and the introduction of
emissions trading; or the political influences behind the regulation of greenhouse
gas emissions. In addition, it does not purport to analyse the ethical, social or
cultural dimensions to the development and implementation of any legal
responses.
47
The thesis has been written in a highly dynamic political and legal environment.
Consequently, although this thesis evaluates and critiques currently available
materials regarding the emerging legal response to climate change, the findings
of this thesis have been deliberately presented with an emphasis on the creation
of broad guiding principles.
These principles are intended to be of a more
enduring nature to assist in the creation of a more effective future response to this
continuing global issue.
STRUCTURE OF THIS THESIS

To respond effectively to climate change on a global scale, the international
community must obtain full political cooperation to the establishment of
compatible international and national legal responses to greenhouse gas
emissions and the impacts of climate change. This thesis analyses critically the
current approach of the law to greenhouse gas emissions including the duties and
principles established under the international climate change regime and the
national implementation of those duties through domestic legal responses in
Australia. In examining the current status of the law in responding to climate
change, internationally and nationally, one would expect to encounter a range of
legal instruments including some form of regulatory duty to reduce emissions;
liability provisions to import responsibility for unauthorised emissions; and some
form of market mechanism to incentivise emission reductions and promote
technological innovation within the private sphere. Moreover, there would be an
expectation that the legal relationships between those regulatory, liability and
market approaches would be integrated to create a complementary, holistic, and
effective legal framework to address the challenges of climate change.
The thesis commences with a critical assessment of the contextual background to

the international climate change regime in Chapter Two. It does so via an
analysis of the science of climate change; the economics; and the law. All of
which influenced the ultimate regulatory design of the international regime. The
momentum towards reducing greenhouse gas emissions and addressing climate
48
change was driven from a global level, in response to international scientific

reports. The consensus adoption of the UNFCCC, and later, the Kyoto Protocol
was in response to global concern regarding the phenomenon of climate change
from global greenhouse gas emissions. Scientific reports identifying the causes
of climate change, and the predicted impacts, influenced the political negotiation
and adoption of specific emissions reduction duties. This included the presence
of high levels of scientific uncertainty which resulted in an emphasis on
flexibility and cost-effectiveness in achieving the relatively modest emission
reduction targets under the Kyoto Protocol. The legal framework of the Kyoto
Protocol was also based, in part, on two dominant success stories of modern
environmental governance, namely, the tradeable instruments of the US SO2
trading scheme and the compliance mechanisms of the international ozone
regime.41 However, the faith placed in the combined experience of a tradeable
emission scheme within a single domestic jurisdiction, and successful
compliance with an individual international environmental agreement appears
excessive. As a result, the agreed climate change regime does not appear to
embody the critical regulatory components required to reduce global greenhouse
gas emissions successfully and avoid the adverse impacts of climate change.
Chapter Three analyses the key features of regulatory design considered

necessary for the international climate change regime to respond effectively to
climate change. This chapter analyses critically the effectiveness of the existing
regulatory institutions, rules, liabilities and markets established under the climate
change regime. The climate change regime represents an ambitious attempt to
achieve global behavioural adjustments in the face of societys historic, and
ongoing, dependence on fossil fuels and emitting activities.
This chapter
concludes that the regulatory design of this regime appears to be innovative,

sophisticated and complex but it is fragmented and weak with limited powers in
relation to the achievement of emission reductions. The complex myriad of
41
Title IV of the Clean Air Act, enacted as part of the Clean Air Act Amendments of 1990, Pub. L. No.
101-549, 104 Stat. 2399 (1990); Clean Air Act, 401 et seq.; 42 United States Congress 7651 et seq.;
Montreal, 16 September 1987, 26 International Law Materials 1550 (1987) (entered into force 1
January 1989).
49
institutional bodies and rules established through this regime lack any solid
regulatory core to drive substantial changes in national emitting behaviour.
There is an absence of strict, universal, duty to reduce emissions by sufficient
amounts, and within the necessary timeframes, to avoid the adverse impacts of
climate change. Moreover, the sanctions for non-compliance are lacking in any
clear deterrent value which will prevent the essential global behavioural shift
from occurring.
This thesis analyses the domestic implementation of the climate change regime
and regulation of greenhouse gas emissions through the Australian regulatory
environment.
The Australian government had, until recently, affirmed and
reaffirmed its commitment to achieving Australias allocated domestic emission

reduction target under the Kyoto Protocol but would not ratify the agreement.
Against this background of economic, scientific and social tension, the Australian
government had purported to comply with the spirit and text of its international
obligations through the domestic regulation of greenhouse gas emissions. That
political position changed in late 2007. Australia is now a ratified party to the
Kyoto Protocol and is obliged to comply with its international duties including
meeting its emission reduction obligations from 2008 to 2012. In this context,
Chapter Four analyses the domestic legal response to the consequences of climate
change in Australia and considers the compatibility of that approach with the
objectives and duties of the UNFCCC and Kyoto Protocol.
The chapter
concludes that there have been limited regulatory initiatives implemented in

Australia to address climate change effectively and the emphasis on voluntary, ad
hoc, programs has had little substantive legal effect on business as usual
In the absence of the comprehensive regulation of Australias greenhouse gas

emissions, it is necessary to consider the surrogate legal mechanisms that may
operate within the Australian legal system to respond to the impacts of climate
change.
The range of federal, state and local environmental protection and
50
planning regulations have the potential to play a significant role through the
evaluation of major projects, minimisation of greenhouse gas emissions and
avoidance of environmental harm. Such a role falls well within the scope and
purpose of these regimes which include the objectives of achieving the principles
of ecologically sustainable development (ESD). Embedded within the principles
of ESD are the critical concepts of the precautionary principle and intergenerational equity.
Thus, environmental sustainability seeks to manage
societys use of the Earths natural energy sources and sinks and to maintain
optimal and sustainable ecological systems for the benefit of present and future
generations.
Under an effective regulatory environment, such principles would operate to

minimise emissions and the adverse impacts of climate change. However, this
outcome is far from evident in the analysis of the current Australian approach to
environmental protection and planning regulation presented in Chapter Five. A
critical analysis of the current treatment of significant greenhouse gas emissions
from major projects concludes that the multiple federal, state-based and local
council policies, rules and decision-making principles are legally discordant and
predominantly ineffective. The presented case studies highlight the prevailing
dichotomy between the interpretation of laws to avoid environmental harm, in
theory, and their application, in practice, to permit continuing emissions from
Australias major industries.
This regulatory approach is yet another
manifestation of the inadequacy of the domestic Australian legal response to the

serious implications of climate change.
The absence of any significant mitigation and adaptation scheme in Australia, in

conjunction with the inertia of the international community towards the adoption
and achievement of deep emission reductions, means that some adverse climate
change impacts are now inevitable.
Indeed, society has already begun to
experience the harm and losses of climate change through the increased
incidences of heatwaves, droughts, storms and flooding. As the costs associated
51
with these losses continue to mount, there is an important question to be asked.

Who is responsible for the harm? The international climate change regime is
silent on the allocation of responsibility for climate change harm. In the absence
of sanctions through domestic regulation, it will fall to the Australian common
law to act as a distributive mechanism for such liabilities.
In this context,
Chapter Six examines the practical application of the existing common law
principles of negligence and nuisance to a series of hypothetical climate suits in
Australia. In particular, this chapter addresses the significant legal issues to be
addressed in the successful establishment of a causative link between the
emission of greenhouse gases, resulting climatic changes, and eventual localised
harm or loss. This chapter concludes that current Australian tort law principles
are poorly equipped to accommodate the unique temporal and spatial issues
presented by climate change torts. Accordingly, statutory intervention will be
necessary to create an appropriate test for establishing causation, incorporating
the scientific uncertainty of post-normal climate change science and embracing
the precautionary principle, in order to fairly distribute responsibility for the
harm caused by the impacts of climate change.
The traditional regulatory mechanisms of the law reside in command and control
regulation based in statute and backed by the operation of the principles of the
common law. However, there is also a range of innovative regulatory tools at the
disposal of the legislature to address novel legal concerns. This includes the
innovation of harnessing the financial incentives of the market through the
creation of tradeable emission instruments, to achieve global greenhouse gas
emission reductions at the location at which it is most cost-effective to do so.
This innovation was adopted in the international climate change regime and has
acted as a catalyst for the design and implementation of a mosaic of emerging
domestic, regional and global markets, both voluntary and mandatory, which are
intended to link into a multi-national global carbon market.
52
The purpose of Chapter Seven is to analyse critically the legal characteristics of

these emerging tradeable emission instruments; their potential effectiveness as a
regulatory tool to reduce emissions and the essential elements for an effective
legal framework to facilitate the future Australian and multi-national, global,
carbon market. This chapter concludes that the emerging global carbon market
is a disparate collection of immature, legally incompatible, regulated and
voluntary trading schemes at international, regional and domestic levels which, if
merged, would create only a legally dysfunctional and ineffective market system.
To achieve the objectives of the international climate change regime of reducing
emissions in the most flexible, cost-effective manner, these regimes must be
manipulated to evolve into a compatible and effective carbon trading market.
The central legal feature in all of these regimes must be a strict, enforceable and
deep emission reduction set in accordance with the recommendations of the IPCC.
In addition, these tradeable emission instruments have been arbitrarily fused onto
existing domestic legal systems with little regard for their impact on, and
interaction with, existing laws and property law principles. Consequently,
traditional concepts of property rights must be transformed radically to
accommodate these new artificial rights in relation to the sequestration, storage
and emission of greenhouse gases.
In concluding this thesis, Chapter Eight provides a synthesis of the key findings
of this thesis regarding the existing role of law, internationally and domestically,
in restricting greenhouse gas emissions and responding to the global impacts of
climate change. A series of recommendations is also presented for the realisation
of a more effective role for the law in responding to this unique, urgent, global
phenomenon though the integration of effective regulatory, liability and market
measures.
53
Chapter Two Climate Change in Context:

Science, Economics and Law
INTRODUCTION
The regulation of the consequences of climate change is driven, at an
international level, by the United Nations Framework Convention on Climate
Change (UNFCCC) and the Kyoto Protocol. 2 Together, these international
agreements make up the international climate change regime.
The global
objectives, legal principles and regulatory mechanisms adopted in that regime

were influenced by a number of scientific, economic and legal parameters. The
purpose of this chapter is to identify those relevant scientific, economic and legal
factors and how these factors might influence the ultimate design, scope and
character of the international and national regimes to regulate greenhouse gas
emissions. Chapter Three will then analyse critically, in detail, the operation of
the established rules and mechanisms of the international climate change regime.
This chapter commences with a discussion of the phenomenon of climate change

and a brief overview of the scientific predictions of the impacts of climate change.
This is followed by an introduction to the key features of the international climate
change regime including the use of tradeable market mechanisms. This chapter
then considers two earlier legal regimes for protecting the atmospheric commons
which influenced the regulatory design of the climate change regime, namely, the
international convention to protect the ozone and the United States of America
A short summary of the analysis of the scientific and economic predictions in this chapter was
published in Nicola Durrant, 'The Science and Economics of Climate Change: An Update' (2007)
Summer 2006(Issue 4) National Environmental Law Review 39.
2
31 ILM 849 (entered into force on 21 March 1994); Kyoto Protocol to the United Nations
Framework Convention on Climate Change, opened for signature 16 March 1998 (entered into force
on 16 February 2005)(together the Climate Change Regime).
54
(US) SO2 trading scheme.3 Finally, this chapter examines the key principles to be
taken into consideration in the design of an effective legal regime to respond to
the impacts of climate change.
THE PHENOMENON OF CLIMATE CHANGE
The Earth possesses a natural greenhouse effect which is enhanced by human

emissions of greenhouse gases. Figure One depicts these interactions which
result in the enhanced greenhouse effect. Naturally occurring greenhouse gases,
principally water vapour, carbon dioxide, and ozone, absorb thermal from the
Earth and atmosphere. 4 As a result, the atmosphere is warmed and the mean
temperature of the Earth is approximately 33 degrees Celsius higher than it
would be without this atmospheric absorption and re-radiation of infrared
energy. 5
This warms the Earth sufficiently for it to be habitable by humans.6
However, the activities of our industrialised society, including the combustion of

fossil fuels, agriculture, desertification and deforestation, have contributed to
increased concentrations of atmospheric greenhouse gases in the atmosphere.
These greenhouse gases include: carbon dioxide (CO2); methane (CH4); nitrous
oxide (N2O); hydrofluorocarbons (HFCs); perfluorocarbons (PFCs); and sulphur
hexafluoride (SF6) (the greenhouse gases).
The significant increase in
concentrations of these gases has led to an enhanced greenhouse effect which

itself has led to global warming and climate change impacts. Carbon dioxide has
markedly increased over the industrial period and has risen in the atmosphere
Vienna Convention for the Protection of the Ozone Layer (the Vienna Convention) Vienna, 22
March 1985, 26 International Law Materials 1529 (1987),(entered into force 22 September 1988).
Montreal Protocol on Substances that Deplete the Ozone Layer (the Montreal Protocol) Montreal, 16
September 1987, 26 International Law Materials 1550 (1987) (entered into force 1 January 1989);
Title IV of the Clean Air Act, enacted as part of the Clean Air Act Amendments of 1990, Pub. L. No.
101-549, 104 Stat. 2399 (1990); Clean Air Act, 401 et seq.; 42 United States Congress 7651 et seq.
4
IPCC, WMO and UNEP, 'Climate Change: The IPCC Scientific Assessment, Report Prepared for
Intergovernmental Panel on Climate Change by Working Group I' (Cambridge University Press, 1990)
at xiii.
5
Ibid, xix. Tamara S. Ledley et al, 'Climate Change and Greenhouse Gases' (1999) 80(39) Eos
Transactions American Geophysical Union Electronic Supplement 453
http://www.agu.org/eos_elec/99148e.html at 11 June 2008.
6
IPCC, WMO and UNEP, n4, xiv.
55
from approximately 280 parts per million (ppm) in the 1700s to 364 ppm in 1997
and approximately 380 ppm in 2005. 7 And that emissions growth rate is
continuing to rise. 8 Moreover, carbon dioxide, chlorofluorocarbons and nitrous
oxide are long life gases and may take from decades to centuries to fully dissipate
from the atmosphere. 9
In 1990, it was predicted that if all human-made
emissions of carbon dioxide were immediately ceased then half of all human
induced carbon dioxide concentrations would still remain in the atmosphere by
2100.10 Accordingly, it is now inevitable that some changes in climate will result
from these atmospheric concentrations of greenhouse gases.
Figure 1: UNEP/GRID-Arendal, 'Greenhouse Effect' (2002) UNEP/GRID-Arendal

Maps and Graphics Library at: http://maps.grida.no/go/graphic/greenhouse_effect
accessed 11 June 2008.
Michael R. Raupach et al, 'Global and regional drivers of accelerating CO2 emissions' (2007)
Proceedings of the National Academy of Sciences http://www.pnas.org/cgi/content/full/104/24/10288
at 11 June 2008.
8
Ibid.
9
IPCC, WMO and UNEP, n4, xvii.
10
Ibid.
56
CLIMATE CHANGE IMPACT PREDICTIONS

The possible adverse impacts of climate change have presented an inherent
tension between achieving reductions in greenhouse gases and ensuring the
continuation of economic growth and development in both developed and
developing nations. This tension prompted intense global debate regarding the
accuracy of those climatic predictions, the level of reductions required and the
likely impacts on economic growth from emission mitigation compared to
responsive adaptation.
It was predicted, as early as 1896, that carbon dioxide released to the atmosphere
would cause radiative effects and lead to a warming of the Earths surface. 11
From 1958, Dr Keeling measured the atmospheric carbon dioxide concentrations
in Hawaii which demonstrated, through the now infamous Keeling curve, the
continual increase in the earths carbon dioxide concentrations (see Figure
Two).12
Figure 2: Atmospheric concentrations of CO2 from Manua Loa, Hawaii. C.D.

Keeling and NOAA.
11
S Arrhenius, 'On the Influence of Carbonic Acid in the Air upon the Temperature of the Ground'
(1896) 5(251) Philosophers Magazine 237.
12
Daniel Bodansky, 'The History of the Global Climate Change Regime' in Urs Luterbacher and
Detlef F. Sprinz (eds), International Relations and Global Climate Change (2001) Cambridge, The
MIT Press, 201 at 205.
57
The Declaration of the United Nations Conference on the Human Environment,

in 1972, includes the common conviction that the discharge of substances at such
concentrations that exceed the capacity of the environment to render them
harmless must be halted to ensure that serious or irreversible damage is not
inflicted upon ecosystems. 13
The concept of human induced climate change, and the potential for humans to
cause adverse environmental impacts, was considered in the international
principles addressing weather modification in 1978:
States shall in good faith and in the spirit of good neighbourliness give adequate and
timely
notification
of
prospective
major
weather
modification
activities[and]shall take all reasonable steps to ensure that weather

modification activities under their jurisdiction or control do not cause adverse
environmental effects in areas outside their national jurisdiction. 14
Parties to the first World Climate Conference, held in 1979, expressed concern
that the continued expansion of mans activities on earth may cause significant
extended regional and even global changes of climate.15 Accordingly, the World
Climate Conference called for the prevention of potential man-made changes in
climate that might be adverse to the well-being of humanity. 16
Almost a decade later, in 1988, the Intergovernmental Panel on Climate Change

(IPCC) was created by the World Meteorological Organization (WMO) and
United Nations Environment Programme (UNEP) to provide independent
13
Adopted at Stockholm, 16 June 1972, Principle 6.

WMO/UNEP, 'Informal Meeting of Experts on Legal Aspects of Weather Modification: Draft
Principles of Conduct for the Guidance of States Concerning Weather Modification' (1978) Digest of
US Practice in International Law 1204 Principles IV-VI.
15
IPCC, 16 Years of Scientific Assessment in Support of the Climate Convention (2004)
http://www.ipcc.ch/pdf/10th-anniversary/anniversary-brochure.pdf at 11 June 2008 at 2.
16
Ibid.
14
58
scientific advice regarding human-induced climate change through the peer

review and assessment of existing scientific information.17
At the same time, the United Nations General Assembly resolved that climate
change was a common concern of humankind, since climate is an essential
condition which sustains life on earth 18 and called for necessary and timely
action to deal with climate change within a global framework.19 That same year,
participants at the Toronto Conference on the Changing Atmosphere called for a
comprehensive international framework that can address the interrelated
problems of the global atmosphere and recommended the reduction of carbon
dioxide emissions by 20 per cent below 1998 levels by 2005. 20 The Australian
government agreed to this aspirational target but did not back this with policy or
legislation to achieve such substantive changes.21
The First IPCC Assessment Report
The First Assessment Report of the IPCC was released in 1990 and confirmed
that emissions resulting from human activities were substantially increasing the
atmospheric concentrations of greenhouse gases which would enhance the
greenhouse effect and lead to additional warming of the Earths surface.22 The
report concluded that carbon dioxide was responsible for over half of the
enhanced greenhouse effect. 23 It also concluded that atmospheric levels of
certain gases, including carbon dioxide and nitrous oxide, will adjust slowly
17
Ibid.
UN General Assembly, 1988 Resolution A/RES/43/53:Protection of global climate for present and
future generations of mankind. http://www.un.org/documents/ga/res/43/a43r053.htm at 11 June 2008.
19
Ibid.
20
Daniel Bodansky, 'The History of the Global Climate Change Regime' in Urs Luterbacher and
Detlef F. Sprinz (eds), International Relations and Global Climate Change (2001) Cambridge, The
MIT Press, 201 at 25.
21
Tim Bonyhady and Peter Christoff, 'Introduction' in Tim Bonyhady and Peter Christoff (eds),
Climate Law in Australia (2007) Sydney, The Federation Press, 1 at 1-2.
22
IPCC, WMO and UNEP, n4, Policymakers Summary, xi.
23
Ibid.
18
59
committing society to increased concentrations for centuries ahead.24 The First

Assessment Report asserted that immediate reductions in emissions of long lived
gases of over 60 per cent was necessary to stabilise the concentrations of
greenhouse gases in the atmosphere at 1990 levels. 25 The report also predicted
that the impacts of continued business as usual emissions would include an
increase in global mean temperature during the 21st century of approximately 0.3
degrees Celsius per decade. 26 This could result in increases in global mean
temperatures of approximately 1 degree Celsius above 1990 levels by 2025 and 3
degrees Celsius by 2099. 27
This would be higher than the global mean
temperatures of the previous 150,000 years. 28 Sea levels were also predicted to
rise by 20 centimetres by 2030 and 65 centimetres by 2099 and the report
asserted that: even if greenhouse forcing increased no further, there would still
be a commitment to a continuing sea level rise for many decades and even
centuries, due to delays in climate, ocean and ice mass responses.29
Other predicted impacts included diminution of the agricultural resource base,

ecosystem biodiversity loss, water resource problems, adverse health impacts,
spread of infection, threats to low lying islands and coastal zones with population
displacement, regional shifts in marine organisms and productive fisheries zones
and substantial reductions in seasonal snow cover, permafrost and ice. 30 The
release of these serious predictions acted as a catalyst for the initiation of
international negotiations to the terms of an international convention to reduce
emissions and avoid these predicted adverse impacts of climate change.
24
Ibid.
Ibid.
26
Ibid.
27
Ibid.
28
Ibid, xxviii.
29
Ibid, xxx.
30
IPCC, 'Policymakers' Summary of the Potential Impacts of Climate Change, Report from Working
Group II to the Intergovernmental Panel on Climate Change' (Australian Government Publishing
Service, 1990) at 2-4.
25
60
The Second IPCC Assessment report
The Second Assessment Report of the IPCC, released in 1995, concluded that
atmospheric concentrations of greenhouse gases including carbon dioxide,
methane and nitrous oxide had continued to increase significantly, by
approximately 30 per cent, 145 per cent, and 15 per cent, respectively. 31
Furthermore, the assessment concluded that these trends could be attributed
largely to human activities, mostly fossil-fuel use, land-use change and
agriculture. 32
In this respect, the report stated, the balance of evidence
suggestsa discernible human influence on global climate. 33 The report further

submitted that if carbon dioxide emissions were maintained at 1994 levels, they
would lead to a nearly constant rate of increase in atmospheric concentrations for
at least two centuries, reaching approximately 500 ppm by the end of the 21st
century.34 As a result of these increasing greenhouse gas concentrations in the
atmosphere, the assessment found that the temperature of the Earth had increased
between 0.3 and 0.6 degrees Celsius during the previous one hundred and fifty
years. 35 That temperature increase was stated as being largely responsible for the
rise in global sea levels of between 10 and 25 centimetres over the previous one
hundred years. 36
The Third IPCC Assessment Report
The Third Assessment Report of the IPCC, released in 2001, revised its previous
estimates of likely global average surface temperature increases and concluded
that these were likely to increase by 1.4 to 5.8 degrees Celsius between 1990 and
2100.37 The assessment further asserted that there is new and stronger evidence
31
Working Group I to the Second Assessment of the Intergovernmental Panel on Climate Change,
'Second Assessment Report: Climate Change 1995; Climate Change 1995: The Science of Climate
Change - Summary for Policy-Makers' (Cambridge University Press, 1995) Section 1.
32
Ibid.
33
Ibid, Section 4.
34
Ibid, Section 1.
35
Ibid, Section 3.
36
Ibid.
37
IPCC, 'Climate Change 2001: Synthesis Report to the Third Assessment Report of the
Intergovernmental Panel on Climate Change' (Cambridge University Press, 2001) at 8.
61
that most of the warming observed over the last 50 years is attributable to human
activities.38
In relation to the effects of this warming, the assessment stated that changes in
sea level, snow cover, ice extent, and precipitation are consistent with a warming
climate near the Earths surface including:
a more active hydrological cycle with more heavy precipitation events and shifts in
precipitation, widespread retreat of non-polar glaciers, increases in sea level and
ocean-heat content, and decreases in snow cover and sea-ice extent and thickness.39
The climatic effects from this warming were predicted to include sea-level rises,
precipitation changes, more intense storms, increased intensity of droughts and
floods and loss of farming productivity. 40 The assessment further stated that
ecological productivity and biodiversity will be altered by climate change and sea
level rise, with an increased risk of extinction of some vulnerable species. 41
These increased risks would result from significant disruptions of ecosystems
from disturbances such as fire, drought, pest infestation, invasion of species,
storms, and coral bleaching events.42 Impacts on human health would include
direct impacts such as reduced cold stress in temperate countries and increased
heat stress, loss of life in floods and storms and indirect impacts from changes in
the ranges of disease vectors, water-borne pathogens, water quality, air quality,
and food availability and quality. 43
Moreover, the assessment stated that
populations that inhabit small islands and low-lying coastal areas would be at
particular risk of severe social and economic effects from sea-level rise and storm
surges:
38
Ibid, 5.
Ibid, 6.
40
Ibid, 3.
41
Ibid, 9.
42
Ibid, 9, 12.
43
Ibid, 9.
39
62
many human settlements will face increased risk of coastal flooding and erosion,
and tens of millions of people living in deltas, in low-lying coastal areas, and on
small islands will face risk of displacement. Resources critical to island and coastal
populations such as beaches, freshwater, fisheries, coral reefs and atolls, and
wildlife habitat would also be at risk.44
The Third IPCC Assessment Report considered three global emissions reduction
scenarios: stabilisation at 450 ppm; stabilisation at 650 ppm; and stabilisation at
1,000 ppm. All of these scenarios would require emissions to be reduced below
1990 levels. 45 The IPCC predicted temperature increases from stabilisation at
450 ppm of 1.5 to 3.9 degrees Celsius above 1990 levels and increases of 3.5 to
8.7 degrees Celsius for stabilisation at 1,000 ppm. 46 Therefore, even at 450 ppm
some temperature increase would occur with resulting climatic impacts. The
report stated that even if carbon dioxide emissions were reduced and atmospheric
concentrations stabilised, the Earths surface air temperature would continue to
rise slowly for a century or more due to the inertia of the climate system. 47
Accordingly, it was evident that some anthropogenic climate change was
inevitable.
The Fourth IPCC Assessment Report
The Fourth IPCC Assessment Report was released in February 2007 and made a
number of strong findings regarding emerging and future changes in the climate
system.48 The report stated that its findings were based on increased scientific
certainty regarding the science of climate change compared to previous IPCC
assessment reports.
44
Ibid, 12.
Ibid, 19.
46
Ibid, 21.
47
Ibid, 17.
48
IPCC, 'Climate Change 2007: The Physical Science Basis: Summary for Policy Makers,
Contribution of Working Group I to the Fourth Assessment report of the Intergovernmental Panel on
Climate Change' (IPCC Secretariat Geneva, 2007).
45
63
In relation to climate warming, the IPCC concluded that:

warming of the climate system is unequivocal, as is now evident from observations
of increases in global average air and ocean temperatures, widespread melting of
snow and ice, and rising global mean sea level.49
The IPCC found that the linear warming trend over the previous 50 years had
been approximately 0.13 degrees Celsius per decade, nearly twice that for the
previous one hundred years. 50 Eleven of the previous twelve years ranked as the
twelve warmest years on record. 51 The report further predicted a warming of
approximately 0.2 degrees Celsius per decade for the next two decades with a
warming of approximately 1.8 to 4 degrees Celsius by 2099. 52
The IPCC identified a clear link between temperature increases and greenhouse
gas emissions and concluded that:
most of the observed increase in globally average temperatures since the mid-20th
century is very likely due to the observed increase in anthropogenic greenhouse gas
concentrations.53
The IPCC estimated that sea levels had risen by 0.17 metres during the 20th
century.54 Those sea levels were predicted to rise again between 0.18 metres to
0.59 metres by 2099. 55
49
Ibid, 4.
Ibid.
51
Ibid. Records commenced in 1850.
52
Compared to 1999. Ibid, 10-11.
53
Ibid, 8.
54
Ibid, 5.
55
Compared to 1999. Ibid, 11.
50
64
According to the IPCC, mountain glaciers and snow cover had declined with
decreases in glaciers and ice caps contributing to sea level rise. 56 The Greenland
and Antarctica ice sheets were also experiencing increased mass losses.57 Longterm changes identified in the climate system included changes in Arctic
temperatures and ice, widespread precipitation amounts, ocean salinity, wind
patterns and aspects of extreme weather including droughts, heavy precipitation,
heat waves and intensity of tropical cyclones.58
The predictions of adverse impacts did not stop there. The IPCC concluded that
continued emissions at or above current rates would, very likely, cause further
warming and induce larger changes in the climate system than those observed
during the 20th century. 59 Moreover, past and future emissions were predicted to
continue to contribute to warming and sea level rises for more than a millennium
to come due to the timescales required to remove the gases from the
atmosphere.60
It is now inevitable that humankind will experience some adverse impacts of

climate change. Previously, political debate has centred on whether stringent
reductions in emissions should be adopted to limit global warming to less than 2
degrees Celsius above pre-industrial levels. According to the IPCC report in
2007, that was no longer an option:
achieving a target of 2C (above the pre-industrial level), at equilibrium, is already
outside the range of scenarios considered.whilst a target of 3C (above the preindustrial level) would imply stringent mitigation scenarios, with emissions peaking
within 10 years.61
56
Ibid, 5.
Ibid.
58
Ibid.
59
Ibid, 10.
60
Ibid, 13.
61
B.S. Fisher et al, 'Issues related to mitigation in the long term context' in B. Metz et al (eds),
Climate Change 2007: Mitigation. Contribution of Working Group III to the Fourth Assessment
Report of the Inter-governmental Panel on Climate Change (2007) Cambridge, Cambridge University
Press at 173.
57
65
Accordingly, the IPCC report made the following strong statements regarding the
magnitude and timescale for achieving the necessary reductions in global
greenhouse gas emissions:
using the best estimate assumption of climate sensitivity, the most stringent
scenarios (stabilizing at 445490 ppmv CO2-equivalent) could limit global mean
temperature increases to 22.4C above the pre-industrial level, at equilibrium,
requiring emissions to peak before 2015 and to be around 50% of current
levels by 2050. Scenarios stabilizing at 535590 ppmv CO2-equivalent could limit
the increase to 2.83.2C above the pre-industrial level and those at 590710 CO2equivalent to 3.24C, requiring emissions to peak within the next 25 and 55 years,
respectively (high agreement, medium evidence)(emphasis added).62
Moreover, the IPCC warned the international community that:

decisions to delay emission reductions seriously constrain opportunities to achieve
low stabilization targets (e.g. stabilizing concentrations from 445535 ppmv CO2equivalent), and raise the risk of progressively more severe climate change impacts
and key vulnerabilities occurring.63
It should be noted that the IPCC predictions are based on those scientific
parameters that have met the threshold of consensus agreement within the IPCC
scientific community resulting in quite conservative predictions. Moreover, these
predictions do not incorporate the implications of a number of events which have
the potential to trigger much more drastic and abrupt changes in the climate
system. These potential occurrences include:
abrupt changes in ocean circulation patterns including changes in the gulf

stream;
62
63
significant increases in methane emissions from melting permafrost;
Ibid.
Ibid.
66
significant and sudden sea level rises from the break-up of polar ice caps
such as the West Atlantic Ice Shelf; and
other carbon feedback responses. 64
Regional Projections and the Climate Change Impacts for Australia
A number of regionally specific climate change predictions have been undertaken

for Australia including the Australia State of the Environment Report 2006 (SoE
2006)65 and the CSIRO and Australia Bureau of Meteorology, Climate Change in
Australia: Technical Report 2007 (Technical Report).66
SoE 2006 made the following blunt statements in relation to the existence of
climate change; climate change has always been a reality . the question, then,
is not if but how much.67 And:
climate change is undoubtedly a threat to Australias environment. Although
Australias climate is so variable that the extent of change is uncertain, there is clear
evidence for some warming and changes to rainfall distribution.68
Reports suggest that Australia is experiencing the impacts of climate change at a

slightly elevated level to the rest of the world. According to the Garnaut Review
Interim Report, Australias climate is hot, dry and variable making Australia
more exposed to the impacts of climate change than other developed countries.69
64
Donald A. Brown, 'The Precautionary Principle as a Guide to Environmental Impact Analysis:

Lessons Learned from Global Warming' in Joel A. Tickner (ed), Precaution, Environmental Science,
and Preventive Public Policy (2003) Washington, Island Press, 141 at 146.
65
RSJ (Bob) Beeton et al, 'Australia State of the Environment 2006: Independent Report to the
Australian Government Minister for the Environment and Heritage, Department of the Environment
and Heritage, Canberra' (Australia State of the Environment Committee, 2006),
http://www.environment.gov.au/soe/2006/index.html at 11 June 2008.
66
CSIRO and Australia Bureau of Meteorology, 'Climate Change in Australia: Technical Report
2007' (Commonwealth Scientific and Industrial Research Organisation, 2007).
67
SoE 2006, n65, 31.
68
Ibid, 19.
69
Garnaut Climate Change Review, 'Interim Report to the Commonwealth, State and Territory
Governments of Australia' (2008) at 22.
67
According to the IPCC the Australian climate of the 21st century is virtually
certain to be warmer, with changes in extreme events and:
heatwaves and fires are virtually certain to increase in intensity and

frequency;
floods, landslides, droughts and storm surges are very likely to become
more frequent and intense;
snow and frost are very likely to become less frequent;
large areas of mainland Australia are likely to have less soil moisture;
as a result of reduced precipitation and increased evaporation, water

security problems are projected to intensify by 2030 in southern and
eastern Australia;
ongoing coastal development and population growth is projected to

exacerbate risks from sea-level rise and increases in the severity and
frequency of storms and coastal flooding by 2050;
risks to major infrastructure are likely to increase. By 2030, design

criteria for extreme events are very likely to be exceeded more frequently.
Risks to infrastructure include failure of floodplain protection and urban
drainage and sewerage, increased storm and fire damage, and more
heatwaves, causing more deaths and more blackouts;
production from agriculture and forestry is projected to decline by 2030

over much of southern and eastern Australia; and
significant loss of biodiversity is projected to occur by 2020 in some

ecologically rich sites, including the Great Barrier Reef and Queensland
Wet Tropics. 70
70
IPCC, 'Climate Change 2007: Impacts, Adaptation and Vulnerability, Contribution of Working
Group II to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change' (IPCC
Secretariat, 2007) at 509.
68
The IPCC 2007 described Australias adaptive capacity to climate change as

follows:
the region has well-developed economies, extensive scientific and technical
capabilities, disaster mitigation strategies, and biosecurity measures. However, there
are likely to be considerable cost and institutional constraints to the implementation
of adaptation options...Indigenous communities have low adaptive capacity...Water
security and coastal communities are the most vulnerable sectors ...Natural systems
have limited adaptive capacity.. Projected rates of climate change are very likely to
exceed rates of evolutionary adaptation in many species.
Habitat loss and
fragmentation are very likely to limit species migration in response to shifting

climatic zones.71
Reports have shown that Australian temperatures are already increasing and are
doing so at a more rapid rate than the global average. 72 According to SoE 2006,
the average temperature across Australia rose by 0.82 degrees Celsius between
1910 and 2004.73 Since 1950, that temperature increase was almost 0.2 degrees
Celsius per decade.74
Since 1950, the east coast, Victoria and south-west Australia have all experienced
substantial rainfall decline. 75 According to the Technical Report, Australian
average temperatures have increased by 0.9 degrees Celsius since 1950. 76 This
has exacerbated the recent Australian droughts where warming increases water
demand and surface water loss. 77
71
Ibid.
SoE 2006, n65, 27.
73
Ibid, 25. According to the Australian Bureau of Meteorology Annual Australian Climate Statement
2006, issued 3 January 2007, Australian annual mean temperatures have now increased by
approximately 0.9C since 1910,
http://www.bom.gov.au/announcements/media_releases/climate/change/20070103.shtml at 11 June
2008.
74
SoE 2006, n65, 27.
75
CSIRO and Australia Bureau of Meteorology, n66, 6.
76
Ibid, 6.
77
Ibid, 8.
72
69
Sea surface temperatures have also risen by up to 0.28 degrees Celsius since
1950.78 Future increases in ocean acidity are predicted in the Australian region.79
Over the period 1920-2000, Australian sea levels have risen by an estimated
1.2mm per year and there is potential for significant increases in inundation due
to higher mean sea level and more intense weather systems.80
The Technical Report also estimated that annual warming over Australia by 2030,
compared to 1990, would be approximately 1 degree Celsius with warmings of
0.7 to 0.9 degrees Celsius in coastal areas and 1 to 1.2 degrees Celsius inland.81
Projected warming for Australia by 2050 and 2070 respectively are
approximately 1.2 and 1.8 degrees Celsius under a low emissions scenario and
2.2 and 3.4 degrees Celsius under a high emissions scenario. 82 The Technical
Report identified a 30 per cent probability of warming above 4 degrees Celsius
for inland Australia, in 2070, under a high emissions scenario.83
According to the Garnaut Review Interim Report the challenge of climate

change will be severe for Australia. 84 As noted, the predicted physical and
economic losses from climate change could include loss of homes; livestock and
other property; damage to public infrastructure and to coastal settlements;
impaired agricultural yields; loss of livelihoods; and population displacement.
Accordingly, the impacts of climate change pose a significant and immediate risk
to the Australian community.
78
SoE 2006, n65, 31.

CSIRO and Australia Bureau of Meteorology, n66, 12.
80
Ibid, 7, 11. Especially along the Victorian and Queensland coasts where storm surge studies were
undertaken.
81
Ibid, 9.
82
Ibid.
83
Ibid.
84
Garnaut Review, n69, 26.
79
70
The Impacts of Climate Change on the Economy

The economic costs of unabated climate change have been made clear. The Stern
Review on the Economics of Climate Change was released in October 2006.85
The terms of reference of that review included an examination of the evidence on
the economic, social and environmental consequences of climate change and the
costs and benefits of actions to reduce the net global balance of greenhouse gas
emissions.
The Stern Review asserted that climate change..is the greatest and widestranging market failure ever seen. 86 The Stern Review concluded that the stocks
of greenhouse gases in the atmosphere were rising and that this was the result of
human activity.87 Levels of greenhouse gases in the atmosphere were estimated
to be around 430 ppm carbon dioxide equivalent.88 The Stern Review estimated
that concentrations of 550 ppm, double pre-industrial levels, could be reached by
as early as 2035.89 At that level, the Stern Review concluded that there was at
least a 77 per cent chance, and up to a 99 per cent chance, of a global average
temperature rise exceeding 2 degrees Celsius. 90
Some of the predicted impacts of that warming are rising sea levels, increased
incidences of floods and declining crop yields. The Stern Review estimated that
up to 200 million people could become displaced by the middle of the century
due to climatic impacts.91 The economic cost of warming of 2-3 degrees Celsius
was predicted to be 3 per cent of global world output.92 With 5-6 degrees Celsius
85
Nicholas Stern The Economics of Climate Change: The Stern Review (Cabinet Office, HM
Treasury 2006), http://www.hmtreasury.gov.uk/independent_reviews/stern_review_economics_climate_change/sternreview_index.cf
m, at 11 June 2008.
86
Ibid, i.
87
Ibid, iii.
88
Ibid.
89
Ibid.
90
Ibid.
91
Ibid, vi.
92
Ibid, ix.
71
warming, that cost could be up to 10 per cent of global gross domestic product
(GDP) and could involve reductions of up to 20 per cent in consumption per
head. 93
The Stern Review estimated that to stabilise greenhouse gases at 550 ppm,
emissions would be need to be reduced by 25 per cent below current levels by
2050.94 The Stern Review predicted that the annual cost of emissions reductions
consistent with a trajectory leading to stabilisation at 550 ppm would be
approximately 1 per cent of GDP by 2050. 95 In comparison, the social cost of
carbon emitted today, if society remained on the business as usual trajectory, was
estimated to be approximately US$85 per tonne of carbon dioxide.96 Moreover,
the Stern Review concluded that shifting to a lower emissions trajectory would
have global net benefits of around US$2.5 trillion. 97 It further estimated that
markets for low-carbon energy products are likely to be worth at least US$500
billion per year by 2050. 98
93
Ibid.
Ibid, xi. Sir Nicholas Stern has since stated that effective action to respond to climate change
requires global emissions to fall by at least 50% relative to 1990 levels by 2050[and] agreement by
developed countries to take on immediate and binding national targets of 20% to 40% by 2020, and
to commit to reductions of at least 80% by 2050 with an expectation that developing countries would
take on binding national targets by 2020. Nicholas Stern, 'Key Elements of a Global Deal on Climate
Change' (London School of Economics and Political Science, 2008) at 5-6.
95
Ibid, xiii.
96
Ibid.
97
Ibid, xvii.
98
Ibid, xvi.
94
72
INTERNATIONAL RESPONSES TO THE IMPACTS OF CLIMATE

CHANGE
A General Obligations under the UNFCCC
The UNFCCC was adopted at the Rio Earth Summit on 9 May 1992 and
acknowledged that change in the Earths climate and its adverse effects are a
common concern of humankind and determined to protect the climate system
for present and future generations. 99
The Preamble acknowledged that human activities had been substantially

increasing atmospheric concentrations of greenhouse gases and that the largest
share of historical emissions originated in developed countries.
It further
recognised the need for developed countries to take immediate action, in a

flexible manner, based on relevant scientific, technical and economic
considerations. The Preamble specifically affirmed the need for climate change
responses to be integrated so as to avoid any adverse impacts on social and
economic development.
The UNFCCC was the first binding, international legal instrument to address the
issue of climate change and it has established the overarching principles and
institutional arrangements for a regime to address climate change. There are
currently 192 parties to the UNFCCC including Australia and the US.100 The
ultimate objective of the UNFCCC is the:
stabilisation of greenhouse gas concentrations in the atmosphere at a level that
would prevent dangerous anthropogenic interference with the climate system. Such
a level should be achieved within a time-frame sufficient to allow ecosystems to
adapt naturally to climate change, to ensure that food production is not threatened
99
UNFCCC, n2, Preamble.

United Nations Climate Change Secretariat,
http://unfccc.int/essential_background/convention/status_of_ratification/items/2631.php as at 11 June
2008.
100
73
and to enable economic development to proceed in a sustainable manner (emphasis

added).101
Greenhouse gases are defined in the convention as those gaseous constituents of

the atmosphere, both natural and anthropogenic, that absorb and re-emit infrared
radiation102 whilst the UNFCCC defines climate change itself as:
a change of climate which is attributed directly or indirectly to human activity that
alters the composition of the global atmosphere and which is in addition to human
activity that alters the composition of the global atmosphere and which is in
addition to natural climate variability observed over comparable time periods.103
The term global atmosphere is not defined in the convention while the climate
system is described as the totality of the atmosphere, hydrosphere, biosphere and
geosphere and their interactions. 104
The UNFCCC requires parties to adopt precautionary measures to prevent or

minimise the causes of climate change and to mitigate its adverse effects. 105
These obligations specifically recognise the common but differentiated
responsibilities and capacities of the parties to the UNFCCC and greater
mitigation responsibilities are imposed on those developed country parties. 106
The UNFCCC includes the duty imposed on all developed countries to take
measures to reduce their greenhouse gas emissions to 1990 levels by the year
2000. 107 That commitment was not met by the parties and no enforcement action
was taken. This was largely due to the renegotiation of precise, quantitative
101
UNFCCC, n2, Article 2.

Ibid, Article 1(5).
103
Ibid, Article 1(2).
104
Ibid, Article 1(3).
105
Ibid, Article 3.
106
Ibid, Article 3.
107
Ibid, Articles 4(2)(a), 4(2)(b).
102
74
mitigation obligations for developed countries through the Kyoto Protocol to the
UNFCCC in 1997.
In terms of the economic costs of the general duty to reduce emissions, the
UNFCCC states that polices and measures which address climate change should:
be cost-effective so as to ensure global benefits at the lowest possible cost. To
achieve this, such policies and measures should take into account different socioeconomic contexts, be comprehensive, cover all relevant sources, sinks and
reservoirs of greenhouse gases and adaptation, and comprise all economic
sectors.108
Furthermore, the UNFCCC states that parties have a right to, and should,
promote sustainable development; that economic development is essential for
adopting measures to address climate change; and that parties should promote an
open international economic system that would lead to sustainable economic
growth and development.109
There are only two particular references to the requir ement for domestic
emissions reductions policies in the text of the UNFCCC.
The UNFCCC
requires all parties to formulate programmes containing measures to mitigate

climate change by addressing anthropogenic emissions by sources and removals
by sinks of all greenhouse gases. 110 The UNFCCC also requires all developed
country parties listed in Annex 1 of the UNFCCC (Annex-1 parties) to adopt
national policies and take corresponding measures on the mitigation of climate
change, by limiting their anthropogenic emissions of greenhouse gases and
protecting and enhancing their greenhouse gas sinks and reservoirs. 111
108
Ibid, Article 3(3).

Ibid, Articles 3(4), 3(5).
110
Ibid, Article 4(1)(3).
111
Ibid, Article 4(2).
109
75
The decision-making powers of the parties reside in the Conference of the Parties
(COP) which meets annually to discuss implementation issues relating to the
UNFCCC. The UNFCCC also establishes a United Nations secretariat to support
the administration of the climate change regime (UNFCCC Secretariat). 112
Progress towards the objectives of the UNFCCC is monitored through the regular
submission of national greenhouse gas inventories and progress reports on
policies and measures, known as National Communications, to the COP which
are reviewed and made publicly available. 113 Developing countries are provided
with the agreed full costs of incurred in providing this national information. 114
The UNFCCC further commits the parties to the development and transfer of
technologies, practices and processes that reduce greenhouse gas emissions.115 In
addition, and in conformity with the notion of common but differentiated
responsibilities, developed country parties are responsible for the provision of
financial resources, environmentally sound technological and adaptation
assistance to participating developing countries. 116
B Specific Emission Reduction Obligations under the Kyoto Protocol

At the First Conference of the Parties to the UNFCCC (COP 1), in 1995, the
parties launched negotiations to agree on stricter, specific, greenhouse gas
emissions reduction commitments for industrialised countries.
These were
contained in the Kyoto Protocol to the UNFCCC which was adopted

unanimously on 11 December 1997.117 The Kyoto Protocol came into force on
16 February 2005, 118 following intense international debate as to the economic
112
These institutional arrangements are discussed in Chapter Three.

UNFCCC, n2, Articles 12, 4(1)(a), 4(2)(a), (2)(b).
114
Ibid, Article 4(3).
115
Ibid, Article 4(1)(c).
116
Ibid, Article 4(3).
117
Kyoto Protocol, n2.
118
Following ratification by the Russian Federation in November 2004.
113
76
costs and benefits of the agreement.119 The Kyoto Protocol has currently been
ratified by 181 countries and one regional economic integration organisation.120
Australia is now a party to, and bound by, the UNFCCC and the Kyoto
Protocol. 121 The US is a party to the UNFCCC and is bound by its general
obligations to reduce global greenhouse gas emissions. However, the US is not a
party to the Kyoto Protocol and is not obliged to comply with the quantitative
emissions reduction commitments under that agreement.122
The first Commitment Period, under the Kyoto Protocol, will run from 2008 to
2012. 123
The Kyoto Protocol contemplates additional commitment periods
beyond 2012. Those remain under negotiation by the parties. 124 Annex-1 parties
are allocated emissions reductions targets during the first commitment period.
The targets for the first commitment period vary from 92 per cent to 110 per cent
of reported 1990 greenhouse gas emission levels according to the circumstances
negotiated by each Annex-1 party. 125 Overall, the Kyoto Protocol seeks to
achieve a minimum global emissions reduction of 5 per cent below 1990 levels
by 2012. Parties were obliged to make demonstrable progress towards their
targets by 2005 although this duty was not enforced.126
119
Vincent Cusack, 'Perceived Costs versus Benefits of Meeting the Kyoto Target for Greenhouse
Gas Emission Reduction: the Australian Perspective' (1999) 16(1) Environmental and Planning Law
Journal 53 at 54-55.
120
UNFCCC, Status of Ratification - as at 13 May
2008http://unfccc.int/kyoto_protocol/background/status_of_ratification/items/2613.php at 11 June
2008.
121
Australia signed the Kyoto Protocol on 29 April 1998. Following the change of government in
2007, the instrument of ratification was deposited with the UNFCCC Secretariat on 12 December
2007 and entered into force on 11 March 2008.
122
The US signed the Kyoto Protocol on 12 November 1998 but did not ratify the agreement.
http://unfccc.int/files/kyoto_protocol/status_of_ratification/application/pdf/kp_ratification.pdf at 11
June 2008. As a non-party, the US is also not able to use the flexibility mechanisms under the Kyoto
Protocol to assist it in meeting the general emissions reduction obligation under the UNFCCC.
123
Kyoto Protocol, n2, Articles 3.1 and 3.7.
124
In order to commence in 2012, it is envisaged that parties will reach agreement on the terms of the
Post 2012 agreement by the end of 2009.
125
Ibid, Annex B. Australia, for example, was allocated a target of 110 per cent of 1990 levels whilst
the EU Bubble must achieve 92 per cent. The targets are therefore based primarily on political
bargaining rather than on a mathematical calculation of required emissions reductions.
126
Ibid, Article 3.2.
77
C The Creation of Flexibility Mechanisms: Engaging the Market

The Kyoto Protocol contains a range of innovative policy tools which are aimed
at assisting parties to meet flexibly their emission reduction obligations at the
least economic cost.
Known as the flexibility mechanisms, these elective
measures encompass, emissions trading, the Clean Development Mechanism

(CDM) and Joint Implementation (JI).
At the beginning of the first commitment period, each Annex-1 party will be
assigned a number of Assigned Amount Units (AAUs) calculated in accordance
with its permitted level of emissions for the commitment period. Each AAU
represents a permit to emit one tonne of carbon dioxide equivalent. Eligible
Annex-1 parties may then buy or sell their AAUs through emissions trading.127
Parties may also create additional allowances through the implementation of
eligible emissions reductions projects in developing countries under the CDM.128
Furthermore, Annex-1 parties may chose to implement such emission reduction
projects in other developed party countries, such as the economies in transition,
in return for allowances (JI). 129
The use of these mechanisms is limited to the extent that the Kyoto Protocol
rules require that domestic actions constitute a significant element of the
efforts made by each parties to meet its target under the Kyoto Protocol. 130
Significant element is not yet defined although parties must demonstrate in
their national communications how their use of the mechanisms is supplemental
to domestic action. 131
127
Ibid, Article 17.

Ibid, Article 12.
129
Ibid, Article 6.
130
UNFCCC, Decision 15/CP 7 'The Marrakesh Accords' (FCCC/CP/2001/13/Add.2).
131
Kyoto Protocol, n2, Articles 5,7,8.
128
78
COMPARATIVE MODELS OF ATMOSPHERIC REGULATION
Some components of the international climate change regime were based on

existing international and domestic models of atmospheric regulation.
In
particular, the compliance model of the climate change regime was based on an
existing international agreement to regulate the atmosphere. The concept of
tradeable instruments as a regulatory mechanism was also derived from
experiences in the US SO2 Trading Scheme.
Given this, it is beneficial to
analyse the features and effectiveness of those models prior to an analysis of the
effectiveness of the overall climate change regime.
A The International Compliance Model: Protection of the Atmospheric

Commons
The template for the compliance regime to the Kyoto Protocol was based on the
compliance model established for another international environmental regime:
namely, the 1985 Vienna Convention for the Protection of the Ozone Layer (the
Vienna Convention) 132 and the 1987 Montreal Protocol on Substances that
Deplete the Ozone Layer (the Montreal Protocol).133
The aim of the Montreal Protocol was to achieve the global phase-out of the
production of certain substances harmful to the ozone layer including
chlorofluorocarbons and halons.
Similar to the UNFCCC, the Vienna
Convention contained the overarching principles and administrative structure for

the regime which led to the negotiation of substantive obligations in a subsequent
132
Vienna Convention for the Protection of the Ozone Layer (the Vienna Convention ) Vienna, 22
March 1985, 26 International Law Materials 1529 (1987),(entered into force 22 September 1988).
133
Montreal Protocol on Substances that Deplete the Ozone Layer (the Montreal Protocol) Montreal,
16 September 1987, 26 International Law Materials 1550 (1987) (entered into force 1 January 1989).
79
Protocol. 134 The specific target requirements for the phase-out of harmful
substances were contained in the Montreal Protocol in the form of calculated
levels of consumption and production of ozone-depleting substances. 135 Similar
to the Kyoto Protocol, the means for achieving the level of reductions was left to
the discretion of each party. 136 Unlike the Kyoto Protocol, the Montreal Protocol
also included a provision for the acceleration of those targets during a
commitment period without the full consensus of the parties.137
Interestingly, the Montreal Protocol also included a ban on trade between parties
and non-parties to the treaty for the import and export of ozone-depleting
substances and products containing, or made with, ozone depleting substances.138
This provision was designed to overcome concerns regarding free-riders and the
potential export of production to non-signatory countries. 139 It is unfortunate that
a similar provision was not included in the climate change regime as this has
resulted in a loophole whereby non-parties may benefit from the production and
sale of high emissions intensity goods and services.
The Montreal Protocol made special provision for the treatment of developing
countries by providing a ten year grace period where the calculated level of
consumption was less than 0.2 kilograms per capita.140 Implementation of the
elimination of harmful substances, by developing countries, was then linked to
134
191 countries ratified the Vienna Convention and Montreal Protocol. United Nations Environment
Programme Ozone Secretariat, Status of Ratification, http://ozone.unep.org/Ratification_status/ at
11 June 2008.
135
Montreal Protocol, n133, Articles 2 and 3.
136
The similarities and differences between the Montreal Protocol and the Kyoto Protocol are
discussed further at page 81 of this thesis.
137
Montreal Protocol, n133, Article 2(9). Where consensus has failed the decision may be taken by
two thirds of the parties present and voting where 50 per cent of total consumption is represented.
Meinhard Doelle, From Hot Air to Action? Climate Change, Compliance and the Future of
International Environmental Law (2005) Toronto, Thomson Canada at 14.
138
Duncan Brack, 'The Use of Trade Measures in the Montreal Protocol' in Phillipe G. Le Prestre,
John D. Reid and E. Thomas Morehouse Jr (eds), Protecting the Ozone Layer: Lessons, Models and
Prospects (1998) Boston, Kluwer Academic Publishers, 99 at 100. However, due to the practicalities
of detection, the ban on products made with ozone-depleting substances was not implemented.
139
Ibid, 101.
140
1990 Amendment to the Montreal Protocol (entered into force 7 March 1991), Article 5(1).
80
the provision of financial co-operation and the transfer of best available,

environmentally safe, substitutes and technologies.141 Accordingly, the Montreal
Protocol was universal in that it imposed elimination obligations on all nations.
The same cannot be said of the Kyoto Protocol.
The financial mechanism introduced in the 1990 Amendments to the Montreal

Protocol established a Multilateral Fund to meet, on a grant or concessional basis,
all agreed incremental costs of those parties operating under Article 5(1) of the
Montreal Protocol. 142 This Multilateral Fund was financed by contributions from
non-Article 5(1) parties to the Montreal Protocol. This was the first time that an
international
environmental
agreement
had
linked
pollution
reduction
commitments by developing countries with the provision of financial aid and

technology transfers from developed nations. 143 This incentive-based approach
was subsequently adopted in both the UNFCCC and Kyoto Protocol.
The compliance mechanisms established under the Montreal Protocol were

considered the most sophisticated to-date and were regarded as a success due to
their achievement of the environmental objectives of the regime in an effective,
coordinated and timely manner. 144 The regime included requirements for the
regular reporting of implementation progress including baseline and annual data
on production, imports and exports of each controlled substance.145 The unique
features of this pioneering regime also included the creation of an
Implementation Committee to assist in the identification and rectification of noncompliance in a non-confrontational manner. 146 The Implementation Committee
141
Ibid, Article 5(5).

Ibid, Article 10.
143
Philippe Sands, Principles of International Environmental Law 1: Frameworks, Standards and
Implementation, Studies in International Law (1995) Manchester, Manchester University Press at 269.
144
Meinhard Doelle, n137, 13 ;Patrick Szell, 'The Montreal Protocol: A New Legal Model for
Compliance Control' in Phillipe G. Le Prestre, John D. Reid and E. Thomas Morehouse Jr (eds),
Protecting the Ozone Layer: Lessons, Models and Prospects (1998) Boston, Kluwer Academic
Publishers, 93 at 93.
145
Montreal Protocol, n133, Article 7.
146
David G. Victor, 'The Operation and Effectiveness of the Montreal Protocol's Non-Compliance
Procedure' in David G. Victor, Kal Raustiala and Eugene B. Skolnikoff (eds), The Implementation
142
81
may receive submissions from the parties themselves regarding implementation

issues and potential non-compliances and all decisions of non-compliance were
made public.
This facilitative model of compliance management was
incorporated into the Kyoto Protocol compliance regime.
The overall effectiveness of the ozone regime is well demonstrated by the

achievement of the phase-out of ozone-depleting substances by the parties. 147
The initial success of the Montreal Protocol was reaffirmed in the four
subsequent adjustments and reductions of production and consumption of the
controlled substances listed in the Annexes of the Montreal Protocol. 148 It is
reported that, by 2005, the parties to the Montreal Protocol had phased out the
production and consumption of over 95 per cent of all of the chemicals controlled
by the Protocol. 149 Furthermore, it is estimated that, with implementation of the
environmental agreement, the ozone layer should return to pre-1980 levels by
2050 to 2075. 150
The effectiveness of the Montreal Protocol also enhances the global achievement
of greenhouse gas emissions reductions. Ozone-depleting substances are also
greenhouse gases that contribute to the radiative forcing of climate change.151 In
and Effectiveness of International Commitments: Theory and Practice (1998) Cambridge, The MIT
Press, 137 at 137.
147
Ibid, 147.
148
The 1990 Amendment to the Montreal Protocol (the London Amendment); the 1992 Copenhagen
Amendment to the Montreal Protocol (the Copenhagen Amendment); the 1997 Amendment to the
Montreal Protocol (the Montreal Amendment) and the 1999 Amendment to the Montreal Protocol
(the Beijing Amendment). These adjustments entered into force on 7 March 1991, 23 September 1993,
5 August 1996, 4 June 1998 and 28 July 2000, respectively. United Nations Environment Programme
Ozone Secretariat, Evolution of the Montreal Protocol
http://ozone.unep.org/Ratification_status/evolution_of_mp.shtml at 11 June 2008.
149
United Nations Environment Programme, 'Key Achievements of the Montreal Protocol To Date'
(UNEP, 2007), http://ozone.unep.org/Publications/MP_Key_Achievements-E.pdf at 11 June 2008.
See also United Nations Environment Programme, 'A Success in the Making: The Montreal Protocol
on Substances that Deplete the Ozone Layer' (UNEP, 2007).
150
Ibid.
151
GJM Velders et al, 'The Importance of the Montreal Protocol in Protecting Climate' (2007)
104(12) Proceedings of the National Academy of Science 4814,
http://www.mnp.nl/en/publications/2007/The_importance_of_the_Montreal_Protocol_in_protecting_
climate.html at 11 June 2008.
82
addition, in 2007, the parties agreed to the accelerated phase out of

hydrochlorflurocarbons under the Montreal Protocol as part of twin efforts to
address climate change and to eliminate ozone depleting substances. 152
So what is the relevance of the Montreal Protocol to the likely effectiveness of

the climate change regime? As outlined above, a number of the key features of
the Montreal Protocol have been utilised in the Kyoto Protocol model. However,
it should be noted that the success of the Montreal Protocol will not necessarily
be replicated in the climate change regime. There are a number of key political
differences between the ozone regime and the climate change regime. The first
relates to the clarity of scientific evidence present at the time of the
implementation, if not the adoption, of the Montreal Protocol which provided a
much clearer link between the use of identified substances and the deterioration
of the ozone layer. This scientific clarity has been absent during much of the
negotiation of the Kyoto Protocol and appears to have hindered the adoption of
more stringent emission reduction obligations. The second difference relates to
the availability of cost-effective substitutes for ozone-depleting substances which
were identified through public-private partnerships and provided net savings to
the companies involved. 153
Accordingly, the elimination objectives of the
Montreal Protocol were realistically achievable as substitute materials were

reasonably available to the parties. In contrast, cost-effective technological
substitutes for greenhouse gas emissions are still being developed for commercial
deployment which will have significant implications on the success of the
climate change regime.
152
United Nations Environment Programme, Combating Climate Change Given Big Confidence
Boost in Canada (Montreal/Nairobi, 22 September 2007),
http://new.unep.org/Documents.Multilingual/Default.asp?DocumentID=517&ArticleID=5671&l=en
at 11 June 2008.
153
Maryanne Macleod, The Regulatory Process and Linkages Between the Montreal Process and the
Kyoto Protocol, Ozone, UV and Climate (2006)
<http://www.niwa.cri.nz/__data/assets/pdf_file/0018/41256/Macleod.pdf> at 11 June 2008 at 2; Tim
Flannery, The Weather Makers: The History and Future Impact of Climate Change (2005) Melbourne,
The Text Publishing Company at 220.
83
B The Domestic Market Model: Tradeable Emission Instruments and

Atmospheric Pollution
The emissions trading mechanism, under the Kyoto Protocol, has been modelled
on the sulphur dioxide cap and trade scheme under Title IV to the US Clean Air
Act (SO2 Scheme).154 The US has demonstrated experience in implementing cap
and trade initiatives since the 1970s.155
The Clean Air Act amendment was part of the US Acid Rain Programme aimed
at reducing the cost of curbing sulphur dioxide emissions whilst requiring the
power sector to reduce sulphur dioxide emissions by 50 per cent over 15 years to
8.95 million tonnes per year. 156 The Acid Rain Programme was enacted through
Federal legislation and implemented by State-based environmental agencies.
Phase 1 of the SO2 Scheme ran from 1995 to 1999 with Phase 2 running from
2000 onwards. Phase 1 addressed the largest SO2 emitting sources with further
units added in Phase 2. 157 Small emitters were able to opt-in to the SO2
Scheme.158
The SO2 Scheme was based on a cap and trade system with an allocated, absolute
emissions ceiling.159 The cap and trade system created a market in tradeable SO2
emissions instruments with an imposed limit on the total permitted emissions
based on the desired environmental outcome. The use of a cap and trade system
154
Title IV of the Clean Air Act, enacted as part of the Clean Air Act Amendments of 1990, Pub. L.
No. 101-549, 104 Stat. 2399 (1990); Clean Air Act, 401 et seq.; 42 United States Congress 7651 et
seq. Stephen Harper, 'Tradeable Permits: Practical Lessons from the U.S. Experience' in Akihiro
Amano et al (eds), Climate Change: Policy Instruments and their Implications, Proceedings of the
Tsukuba Workshop of the Intergovernmental Panel on Climate Change Working Group III, Tsukuba
(1994) Tsukuba, World Meteorological Organization/United Nations Environmental Programme, 132.
155
LECG Economics Finance, 'Emissions Trading Market Study: Report to the Ontario Ministry of
Environment' (2003) at 66.
156
International Energy Agency, International Emission Trading: From Concept to Reality (2001)
France, Organisation for Economic Development/ International Energy Agency at 30.
157
LECG, n155, 10.
158
Ibid, 10.
159
Markus W. Gehring and Charlotte Streck, 'Emissions Trading: Lessons from SOx and NOx
Emissions Allowance and Credit Systems Legal Nature, Title, Transfer, and Taxation of Emission
Allowances and Credits' (2005) 35(4) Environmental Law Reporter 10219 at 10220.
84
was intended to provide entities with a financial incentive to reduce emissions by

permitting those who had modified their practices, and reduced emissions, to sell
their excess instruments to those entities that had not met their emission
reduction obligations.
Under the SO2 Scheme, each utility received a number of free allowances based
on a legislative formula although the number of allowances could be adjusted by
Congress. 160 Additional allowances were able to be purchased through an annual
auction held by the US Environmental Protection Agency (US EPA).161 The SO2
Scheme permitted unrestricted emissions trading and allowances were valued
equally regardless of location. 162 Allowances were able to be traded nationally
with no requirements for prior approval or restrictions on the type of purchaser
provided that they were registered. 163 Trades were recorded by the US EPA
through an Allowance Tracking System with each allowance identified through a
unique serial number. 164
Allowances were specifically defined as a limited authorization to emit sulphur

dioxide with the proviso that such allowance does not constitute a property
right.165 This specification was included to overcome claims for compensation
under the takings provision of the US Constitution for loss of property rights in
the event of a reduction in permitted emissions levels. 166 For the sake of
completeness, the rather lengthy provision further states that nothing in this
subchapter or in any other provision of law shall be construed to limit the
160
LECG, n155, 10.

Ibid, 10.
162
A. Denny Ellerman et al, Markets for Clean Air: The U.S. Acid Rain Program (2000) Cambridge,
Cambridge University Press at 130.
163
Ibid, 167.
164
LECG, n155, 11.
165
1990 Amendments to the Clean Air Act, n154, section 403 (f).
166
United States Environmental Protection Agency, Tools of the Trade: a Guide to Designing and
Operating a Cap and Trade Program for Pollution Control (2003)
http://www.epa.gov/airmarkets/resource/docs/tools.pdf at 11 June 2008 at 3-23. The Fifth
Amendment of the US Constitution prevents the taking of private property without just compensation.
161
85
authority of the US to terminate or limit such authorization. 167
This is
characteristic of the general difficulties in defining the rights and duties

associated with tradeable allowances in circumstances in which the status of the
environment will vary over short and long timescales. Whether these allowances
do, in fact, possess property rights characteristics has been the subject of some
debate. 168 SO2 allowances were able to be received, held and temporarily or
permanently transferred
in accordance with this subchapter
and
the
regulations.169 Accordingly, the holder of those allowances was, subject to the

legislation, able to exercise certain property rights in respect of the allowances.
The compliance regime to the SO2 Scheme included the compulsory installation
of Continuous Emissions Monitoring Systems (CEMS) at emissions sources to
record hourly emissions. 170 Emission of excess SO2 resulted in a penalty liability
of US$2000 per tonne, adjusted annually for inflation, plus an obligation to
submit an equal number of allowances to cover the excess emissions. Similarly,
the Kyoto Protocol requires excess allowances to be surrendered to rectify the
non-compliance. However, no financial penalty is imposed under the Kyoto
Protocol. The operation of this penalty scheme remained largely untested due to
the high level of compliance with the scheme by participants.171 For the initial
three year period in Phase 1, it was reported that all required allowances were
surrendered with no violations or exemptions from the Title IV requirements.172
Moreover, there was over 7.6 million tonnes of aggregate over-compliance by
Phase 1 participants.173 The high level of compliance with this regime may be
explained by the availability of cost-effective alternatives to address SO2
emissions. Sources had the option of switching to a fuel with reduced sulphur
content or installing scrubbers both of which required lower than anticipated
167
Markus W. Gehring and Charlotte Streck, 'Emissions Trading: Lessons from SOx and NOx
Emissions Allowance and Credit Systems Legal Nature, Title, Transfer, and Taxation of Emission
Allowances and Credits' (2005) 35(4) Environmental Law Reporter 10219 at 10222, 10223. Cf Ormet
Corp v Ohio Power Co 98 F.3d 799, 27 ELR 20302 (4th Cir. 1996).
169
170
US EPA, n166, 3-13.
171
LECG, n155, 11.
172
A. Denny Ellerman et al, n162, 109.
173
Ibid, 110.
168
86
capital investment.174 In particular, the deregulation of the railroads allowed for

the competition of low-sulphur coal from the Powder River Basin which was
provided at a lower cost and became more economically attractive than the highsulphur fuel. 175
The United Nations Conference on Trade and Development, in 1999, described

the SO2 Scheme as the largest and most successful emissions cap and allowance
trading programme in the world and the US EPA reported emission reductions at
compliance costs of less than half of those predicted prior to the commencement
of the regime. 176 An in-depth economic study of the market established as a
result of the Clean Air Act estimated that the cost savings from the use of a
trading programme, rather than a regulatory programme without trade, was
US$358 million per year during Phase 1 and US$2,282 million during Phase 2.177
The overall performance of the trading scheme was summarised as follows:
the allowance market has been characterized by transparent prices, ease of price
discovery, low transaction costs, and substantial trading volumes since mid-1994.178
It must be noted, though, that the initial performance of the market in allowances
was subject to criticism due to its lack of cost-effectiveness.179 This was largely
blamed on the bubble policy under the trading scheme which allowed those
large firms with multiple emission points to be subject to a single, overall,
174
Ibid, 88.
Ibid, 319.
176
Tom Tietenberg et al, 'International Rules for Greenhouse Gas Emissions Trading: Defining the
principles, modalities, rules and guidelines for verification, reporting and accountability'
(UNCTAD/GDS/GFSB?Misc.6, United Nations Conference on Trade and Development, 1999) at 27;
US EPA, n166, 1-3. See also Richard B Stewart and Phillipe Sands, 'The Legal and Institutional
Framework for a Plurilateral Greenhouse Gas Emissions Trading System' in Greenhouse Gas Market
Perspectives Trade and Investment Implications of the Climate Change Regime: Recent Research on
Institutional and Economic Aspects of Carbon Trading, UNCTAD/DITC/TED/Misc.9 (2001) United
Nations, 5 at 14.
177
A. Denny Ellerman et al, n162, 282, Table 10.4.
178
Ibid, 255.
179
A. Denny Ellerman, Paul L Joskow and David Harrison Jr, 'Emissions Trading in the U.S.:
Experience, Lessons and Consideration for Greenhouse Gases' (Pew Center for Global Climate
Change, 2003) at 32.
175
87
emissions limit.180 This resulted in a significant number of internal trades within

large corporations and few actual trades on the market. 181 The bubble approach
has also been adopted in the Kyoto Protocol and the members of the European
Union have elected to be subject to a single emissions target.
So what is the relevance of the design and implementation of the US SO2

Scheme to the likely effectiveness of the climate change regime? The US SO2
Scheme is significant given its role as a model for the establishment of the
trading system under the Kyoto Protocol. Accordingly, it is important to be
cognisant of both the framework for the SO 2 Scheme and discussions of its
financial and environmental successes. However, beyond this, the successes or
failures of this US-based trading scheme are of little relevance to the global
Kyoto Protocol trading market. There are fundamental differences between the
domestic establishment and implementation of a trading initiative in a single
pollutant and the creation of a linked multi-national regime of global proportions.
The latter is unique. Indeed, it is unchartered territory. The climate change
regime will ultimately succeed, or fail, on its own merits regardless of the
success of its template predecessors.
Given the ambitious nature of this
endeavour, it is therefore crucial to identify the design elements necessary for the
successful creation and implementation of the climate change regime. These
fundamental concepts are discussed in the following paragraphs.
180
Stephen Harper, 'Tradeable Permits: Practical Lessons from the U.S. Experience' in Akihiro
Amano et al (eds), Climate Change: Policy Instruments and their Implications, Proceedings of the
Tsukuba Workshop of the Intergovernmental Panel on Climate Change Working Group III, Tsukuba
(1994) Tsukuba, World Meteorological Organization/United Nations Environmental Programme, 132
at 133.
181
Scott Atkinson and Tom Tietenberg, 'Market Failure in Incentive Based Regulation: The Case of
Emissions Trading' (1991) 21(1) Journal of Environmental Economics and Management 17 at 18.
88
KEY PRINCIPLES FOR AN EFFECTIVE LEGAL REGIME
This thesis seeks to analyse the effectiveness of the existing legal response to
climate change and to identify aspects for enhancement or reform. To do so, it is
necessary to identify those key principles of effectiveness against which these
emerging legal approaches may be critiqued.
The effective legal response to the global environmental problem of climate

change will require the adoption of a series of cohesive legal instruments and
mechanisms, internationally and nationally, to create legal rights and duties
(regulation); penalise non-compliance and other unlawful acts (liability); and
promote innovation to minimise global greenhouse gas emissions (market
mechanisms). Furthermore, the legal framework must be developed to ensure the
proper integration of these three mechanisms within the legal regime in order to
achieve consistency and effectiveness in the implementation of these measures.
Regulation
Since the 1970s, regulators have relied upon direct regulation, or command and
control, to respond to instances of environmental degradation by prohibiting or
placing restrictions on the carrying out of environmentally harmful activities.182
Given the urgency of the need to respond to climate change, and achieve
significant domestic reductions in emissions, direct regulation has a critical role
to play in any effective legal regime. An effective regulatory approach should
impose environmental standards, or emission targets, on liable emitting entities
as well as using land use controls and environmental impact assessment to assess
and minimise significant emissions from proposed development and other
182
Neil Gunningham, Peter Grabosky, and Darren Sinclair, Smart Regulation: Designing
Environmental Policy (1998) Oxford, Clarendon Press at 38.
89
activities. 183 To be effective, such regulation must establish clear and direct,
legally enforceable, duties to restrict emissions in conjunction with a system for
the accurate monitoring and supervision of actual levels of emissions. 184 As noted
by one commentator, laws on the book are one thing. Laws implemented and
enforced are another. 185
The creation of broad guiding directions falls within the role of the legislature
while the creation of more specific standards and responsibility for
implementation falls within the realm of the executive. As commented:
much of the legal work in moving beyond the carbon economy falls on national
legislatures and their designated agents in the executive branch...The judiciary also
has a role to play.186
Such a regulatory system must be implemented by an independent executive

authority with sufficient legal powers and adequate resourcing and technical
expertise to address the complexities of climate change issues and the inevitable
resistance from within the corporate community.
Liability
An effective legal regime to respond to climate change must also provide a series
of civil and criminal liability provisions to penalise unlawful emissions and
allocate responsibility for the harmful impacts of greenhouse gas emissions.
With respect to present day emissions, graded sanctions must be provided for
identified instances of non-compliance with emission restrictions which are able
to be varied in severity according to the level of inadvertence or recklessness of
183
Ibid, 39.
These regulatory issues are considered in further detail throughout this thesis.
185
Donald N Zillman et al, 'Overview and Conclusion' in Donald N Zillman et al (eds), Beyond the
Carbon Economy: Energy Law in Transition (2008) Oxford, Oxford University Press, 543 at 551
186
Ibid, 550.
184
90
the wrongdoing. 187 The effective interpretation of the law, and imposition of these
liabilities, will generally fall within the realm of the domestic judiciary. The
judicial interpretation and application of these regulations and liability provisions
will play a significant role in the ultimate effectiveness of these regimes in
promoting the reduction of emissions and responding to the impacts of climate
change. Accordingly, those judicial determinations may be a help or a hindrance
to the implementation of the overall legal regime:
typically the courts take legislative or executive enactments and give them a broad
interpretation to allow the consideration of carbon issues. Less optimistic
perspectives on the judiciary come from authors..who question the independence of
courts especially in their inability to force members of the bureaucracy to comply
with what the legislature has written down.188
In the context of climate change, financial liabilities must also accrue for the past
emission of greenhouse gases. Until recently, the emission of greenhouse gases
into the atmosphere was largely unfettered and, given the cumulative nature of
atmospheric concentrations, these emissions contributed to the emergent adverse
impacts of climate change.
The polluter pays principle emphasises the responsibility of polluters for the full
environmental and social cost of their polluting activities. Moreover:
forcing those who create environmental risks to bear the costs of damage can create
incentives for efficient precaution.189
187
Ian Ayres and John Braithwaite, Responsive Regulation: Transcending the Deregulation Debate
(1992) New York, Oxford University Press; Clifford S Russell, 'Environmental Enforcement' in Tom
Tietenberg (ed), Innovation in Environmental Policy: Economic and Legal Aspects of Recent
Developments in Environmental Enforcement and Liability (1992) Hants, Edward Elgar, 215.
188
Zillman et al, n185, at 550.
189
Tom Tietenberg, 'Introduction and Overview' in Tom Tietenberg (ed), Innovation in
Environmental Policy: Economic and Legal Aspects of Recent Developments in Environmental
Enforcement and Liability (1992) Hants, Edward Elgar, 1 at 5.
91
Accordingly, a fair and equitable system of legal principles should be

implemented to address the distribution of liability for the loss or harm incurred
as a result of climate change. This would traditionally fall within the realm of the
common law of tort. 190 However, the complexity and scientific uncertainty
associated with this unique environmental pollution will challenge the operation
of the traditional principles of tort law in identifying the existence of a causal link
between emissions and harm suffered. 191 Given this unpredictability of the
common law as an effective deterrent mechanism, statutory intervention may be
preferable to provide clarity, certainty and transparency in the treatment of such
private liabilities. 192
Market Mechanisms
It must be accepted that there is no single legal instrument which will be effective
in addressing all environmental concerns in all contexts. As noted:
despite decades of experimentation, the holy grail of optimal environmental
regulation has continued to elude policy makers and regulatory theoristsneither
traditional command and control regulation nor the free market provide satisfactory
answers to the increasingly complex and serious environmental problems which
confront the world. This has led to a search for alternatives more capable of
addressing the environmental challenge and, in particular, to the exploration of a
broader range of policy tools such as economic instruments, self-regulation and
information-based strategies. 193
Regulation alone is not necessarily the most effective tool by which to address
urgent international environmental concerns. Indeed, in some circumstances it
190
Although, in recent years there has been a remarkable convergence of tort law and statutory law in
the environmentalarea, Susan Rose-Ackerman, 'Environmental Liability Law' in Tom Tietenberg
(ed), Innovation in Environmental Policy: Economic and Legal Aspects of Recent Developments in
Environmental Enforcement and Liability (1992) Hants, Edward Elgar 223 at 223.
191
The application of tortious principles to climate change related harm is discussed further in
Chapter Six.
192
See Donald Dewees, 'Tort Law and the Deterrence of Environmental Pollution' in Tom Tietenberg
(ed), Innovation in Environmental Policy: Economic and Legal Aspects of Recent Developments in
Environmental Enforcement and Liability (1992) Hants, Edward Elgar, 139.
193
Neil Gunningham, Peter Grabosky, and Darren Sinclair, n182, 37.
92
can be counterproductive, inefficient and innovation stifling.194 Responding to

the threat of climate change requires rapid and urgent transformations in the
selection of energy sources, energy use and treatment of emissions across the
global community. Achieving such behavioural transformations requires that, in
the first instance, new energy sources and clean energy technologies are readily
available for uptake. 195 An effective regulatory and liability system, alone, will
not be sufficient to promote the levels of private engagement required globally to
achieve such rapid innovation.
Consequently, a portfolio of complementary
measures will be necessary including the creation of some catalytic mechanism

to stimulate engagement and promote the development and deployment of new
energy sources and technologies to facilitate the pathway to a low carbon society.
The legal instrument selected by the international community to achieve such

innovation is the tradeable emission instrument within an optimal carbon trading
market. Accordingly:
the economic rationale for creating an artificial market for pollution permits is to
effectively exploit differences in the marginal cost of abatement.196
However, for these tradeable emission instruments to be effective in promoting

the objectives of the climate change regime, and assisting the community to
respond to climate change, the market mechanisms must be supported by an
effective legal framework. The objective of the climate change regime is to
reduce emissions to such levels, and within necessary timeframes, so as to avoid
adverse anthropogenic interference with the climate system. To be effective in
achieving this objective, the legal framework for these market mechanisms must
194
David M Driesen, The Economic Dynamics of Environmental Law (2003) Cambridge,

Massachusetts, The MIT Press at 49,53; Gerry Bates, 'Legal Perspectives' in Stephen Dovers and Su
Wild River (eds), Managing Australia's Environment (2003) Sydney, The Federation Press, 255 at
295.
195
Of course, technological innovation alone will not be sufficient without strong drivers for change
in community preferences to promote the use of the technology. David M Driesen, ibid, 89-90.
196
Neil Gunningham, Peter Grabosky, and Darren Sinclair, n182, 72. See also David M Driesen, The
Economic Dynamics of Environmental Law (2003) Cambridge, Massachusetts, The MIT Press at 5455.
93
include strong duties to reduce emissions, within a capped market, and the
selected cap must accord with scientific recommendations.197 In this respect, a
strong regulatory approach is able to serve as the backbone to the optimal
operation of the carbon market system and, together, these mechanisms may
complement one another in reaching common environmental, economic and legal
goals.
Consequently,
an effective
legal response
to the challenging
global
environmental problem of climate change will require a deliberate selection of a

combination of legal instruments including a mix of direct regulation and
economic instruments to lower the cost of achieving the common environmental
goal. Cohesiveness in the regulatory design of such a legal approach will be
critical to its ultimate effectiveness and efficiency:
sometimes, mixes of instruments..are invoked, but often with little awareness of the
need for conscious regulatory design. Far worse, some mixes, put together with
insufficient thought as to their likely consequences or undesirable side effects, are
likely to be counterproductive or dysfunctional.198
To achieve the effective operation of the carbon market mechanisms, a number

of key features must also be included in the design of the legal system.199 These
can be synthesised into the following guiding principles of effectiveness:
clear, transparent and consistent rules and duties for participants in the
carbon market;200
197
A stringent cap is also necessary to create demand, and promote trade, in the market system.
Driesen, ibid, 59.
198
Neil Gunningham, Peter Grabosky, and Darren Sinclair, n182, 90.
199
These features are discussed in detail in Chapter Seven.
200
Richard F. Kosobud, 'Emissions Trading Emerges from the Shadows' in Richard F. Kosobud (ed),
Emissions Trading: Environmental Policy's New Approach (2000) New York, John Wiley and Sons,
3 at 29; Robert Stavins, 'What Do We Really Know About Market-Based Approaches to
Environmental Policy? Lessons from Twenty-Five Years of Experience' in Richard F. Kosobud (ed),
49 at 55.
94
clear definition of the legal nature of the tradeable emission instruments

with the provision of appropriate legal protections under domestic legal
systems;201
an open access market with minimal restrictions on trade and an open

flow of information to the market;202
compatible design and implementation of international, regional and

domestic carbon markets in all participating jurisdictions;203 and
appropriate legal powers and instruments for the effective implementation,

administration and enforcement of the legal regime (including stringent
monitoring and verification processes and appropriate enforcement
mechanisms).
201
Richard B Stewart and Phillipe Sands, 'The Legal and Institutional Framework for a Plurilateral
Greenhouse Gas Emissions Trading System' in Greenhouse Gas Market Perspectives Trade and
Investment Implications of the Climate Change Regime: Recent Research on Institutional and
Economic Aspects of Carbon Trading, UNCTAD/DITC/TED/Misc.9 (2001) United Nations, 5 at 10
and Tom Tietenberg 'Implementation Issues: A General Survey' in United Nations Conference on
Trade and Development (ed), Combating Global Warming: study on a global system of tradeable
carbon emission entitlements (1992) New York, United Nations, 127 at 133. See also Joe Motha,
'Tradeable Permits: Terms and Taxonomy' in Bureau of Transport Economics (ed), Trading
Greenhouse Emissions: Some Australian Perspectives (1998) Canberra, Bureau of Transport
Economics, 25; Zhong Xiang Zhang, 'The Design and Implementation of an International Trading
Scheme for Greenhouse Gas Emissions' (2002) 39(4) Peace Research Abstracts 459 and Kjell Roland,
'From Offsets to Tradeable Entitlements' in United Nations Conference on Trade and Development
(ed), Combating Global Warming: study on a global system of tradeable carbon emission
entitlements (1992) New York, United Nations, 23.
202
Richard F. Kosobud, n200, 25.
203
Richard Baron and Stephen Bygrave, 'Towards International Emissions Trading: Design
Implications for Linkages' (OECD, IEA, 2002) at 38-39 and 58. Erik Haites, 'Harmonisation Between
National and International Tradable Permit Schemes' (Paper presented at the OECD Global Forum on
Sustainable Development: Emissions Trading 17-18 March 2003 Paris, Greenhouse Gas Emissions
Trading and Project Based Mechanisms, Paris, 2003) at 108.
95
CONCLUDING COMMENTS
The purpose of this chapter was to provide an essential contextual background to

the design and implementation of the current climate change regime. The climate
change regime was strongly influenced by the prevailing scientific, economic and
legal influences which existed at the time of the negotiation of these international
agreements. The phenomenon of climate change is global in scope yet appears to
be regional in the frequency and severity of its impacts. The result is a situation
in which the magnitude of greenhouse gas emissions, and experiences of the
impacts of climate change, is not necessarily proportionate.
Vulnerable
communities are more at risk from the threat of climate change caused by these
global concentrations of greenhouse gases in the atmosphere yet the majority of
emissions have originated historically in less vulnerable, developed nations. This
differs to other environmental pollution problems whereby emissions, even
through primarily causing transboundary harm, nevertheless do have some direct,
localised, adverse impact.
This absence of a negative feedback loop for large scale emitters appears to have
been a significant factor in negotiations as to the specific levels of emission
reductions imposed under the Kyoto Protocol. In addition, the global nature of
climate change was harnessed to provide justification for the use of tradeable
emission instruments as a primary tool for achieving global reductions in
emissions.
The promise that these market mechanisms would achieve the
avoidance of adverse climate change, at the least economic cost, also played a
significant role. The regulatory design of the climate change regime was driven
by the need to facilitate the operation of these flexible market mechanisms. The
publicised success of the US SO2 Scheme in using these tradeable instruments,
combined with the stories of success of the compliance regime to the Montreal
Protocol, were together regarded as an optimal regulatory framework for
achieving necessary emission reductions at a global level.
Such optimism
prevented the negotiating parties from looking beyond the commercial gimmick
96
and potential dollar value of the future carbon market to consider whether
sufficient duties, obligations and enforcement mechanisms were in place to
achieve the ambitious reductions actually required to avoid adverse
anthropogenic climate change. The optimism of negotiators also appears to have
prevented the parties from considering whether an effective framework had been
created, between the UNFCCC and the Kyoto Protocol, to optimise the operation
of the carbon markets within an effective legal framework for the implementation,
operation and enforcement of the emission reduction duties.
97
Chapter Three - The Architecture of the Climate Change Regime:

an Analysis and Critique of the International Regulation of
Greenhouse Gas Emissions
INTRODUCTION
The architecture of the international climate change regime has been designed to
address the environmental and social concerns of adverse climate change through
the imposition of obligations to lower global greenhouse gas emission levels.
The United Nations (UN) Framework Convention on Climate Change (the
UNFCCC) 2 was the first binding international legal instrument to address the
issues of climate change.
The ultimate objective of the UNFCCC, and any
related legal instrument adopted by the parties, is the stabilisation of greenhouse

gas concentrations, in the atmosphere, at a level that would prevent dangerous
anthropogenic interference with the climate system. 3
At the first Conference of the Parties (COP) to the UNFCCC, in 1995, the parties
launched negotiations to agree on specific greenhouse gas emissions reduction
commitments for industrialised countries. The Kyoto Protocol to the UNFCCC4
was later adopted on 11 December 1997 and came into force on 16 February
2005 following worldwide debate as to the global economic implications of
This chapter expands upon previous analysis of the international climate change regime researched
and written by this author in the following papers: Nicola Durrant and Rowena Maguire, An
Integrated Legal Approach to Global Environmental Governance: Combating Climate Change,
Drought and Deforestation, (2007) Volume 9: Special Edition on Global Governance, Canberra Law
Review 65; Donald Feaver and Nicola Durrant, Architectures of International Regulation(2007)
Working Paper, Queensland University of Technology; Brisbane and Donald Feaver and Nicola
Durrant, A Regulatory Analysis of International Climate Change Regulation (forthcoming 2008)
Special Issue on Global Warming, Law & Policy Journal.
2
31 ILM 849 (entered into force on 21 March 1994) (the UNFCCC).
3
4
signature 16 March 1998 (entered into force on 16 February 2005) (the Kyoto Protocol).
98
mitigating greenhouse gas emissions. 5 The Kyoto Protocol contains specific

greenhouse gas emissions reduction commitments for industrialised countries for
the first commitment period from 2008 to 2012.
The UNFCCC and Kyoto Protocol are both international agreements, reached
through international consensus, that are aimed at reducing anthropogenic
greenhouse gas emissions to avoid or reduce the adverse effects of climate
change (together the climate change regime). These agreements recognised that
climate change is an international environmental concern and requires
cooperative global efforts to minimise its adverse effects. Although global, the
problem is not homogeneous.
Consequently, the regime is based on an
understanding of the differing social, economic and environmental circumstances

of each country including differences in their contributions to the global warming
problem.
The climate change regime adopts a principle of common but
differentiated responsibilities, in line with equitable principles, and imposes

customised emission reduction obligations on the various developed country
parties.
It also recognises that policies and measures to protect the climate
system against climate change should be appropriate for the specific conditions
of each party and does not dictate the specific method of domestic attainment of
those emission reductions targets. 6 Parties are able to choose which of the
greenhouse gases, from the collection of six regulated gases, they will emphasise
in their domestic mitigation activities. Parties may also elect to manage domestic
land use management practices and carbon sinks to control net national
emissions. 7
This provides parties with a significant range of choice and
flexibility regarding the nature and extent of domestic behavioural modification

whilst acknowledging the inherent sovereignty of nation States.
William D Nordhaus, 'To Slow or Not to Slow: the Economics of the Greenhouse Effect' (1991) 101
(July 1991) The Economic Journal 920; Alan Manne and Richard Richels, Buying Greenhouse
Insurance: The Economic Costs of Carbon Dioxide Emission Limits (1992) Cambridge, England, The
MIT Press; Samuel Frankhauser, Valuing Climate Change: The Economics of the Greenhouse (1995)
London, Earthscan Publications.
6
UNFCCC, n2, Article 3(4).
7
Kyoto Protocol, n4, Article 3(3).
99
The Kyoto Protocol also contains a range of innovative policy tools which are
aimed at assisting parties to meet their emission reduction obligations flexibly at
the least economic cost. Known as the flexibility mechanisms, these elective
measures encompass international emissions trading, the Clean Development
Mechanism (CDM) and Joint Implementation (JI). The mechanism of emissions
trading has been described as the cornerstone of the Kyoto Protocol and is
intended to facilitate the abatement of emissions in the most cost-effective
manner.8 The climate change regime is designed to harness financial instruments
to address the inherent tension between the immediate priorities of society in its
use of goods and services that use fossil fuels, and generate greenhouse gas
emissions, and the long-term imperatives of maintaining a sustainable
environment to support humankind. As noted by one commentator:
the Kyoto Protocol is both innovative and groundbreaking. There is no other treaty
which defines a new international commodity; sets the rules on how this commodity
can be created, transferred, used; harnesses market forces by creating supply and
demand through binding targets; and finally involves the private sector in the
implementation of the Mechanism. The Kyoto Protocol makes us embark on an
international market experiment.9
Accordingly, the overriding objectives of the climate change regime are to

achieve actual reductions in the greenhouse gas emissions of the State parties but
to do so in the most cost-effective manner by harnessing the innovation of the
global carbon market. For these objectives to be attainable, the design and
implementation of the climate change regime must incorporate the appropriate
regulatory architecture, legal rules, liabilities and trading instruments to facilitate
an effective regulatory response to climate change. In this context, the purpose
of this chapter is to assess and critique the effectiveness of the current regulatory
Benjamin Richardson, 'Climate Law and Economic Policy Instruments: A New Field of
Environmental Law' (2004) [2004](1) Environmental Liability 19 at 22; Annie Petsonk, Daniel J
Dudek and Jospeh Goffman, 'Market Mechanisms and Global Climate Change: An Analysis of Policy
Instruments' (Paper presented at the Trans-Atlantic Dialogues on Market Mechanisms: Bonn 23
October 1998 and Paris, 27 October 1998, 1998) at 3.
9
Charlotte Streck, 'The Governance of the Clean Development Mechanism: The case for strength and
stability' (2007) 2(Special Issue: The Kyoto Protocol and Carbon Finance) Environmental Liability 91
at 91.
100
approach to the control of greenhouse gas emissions under the international

climate change regime.
The chapter analyses and critiques the architecture of the international climate
change regime.
It does so through a critical assessment of the regulatory
objectives, structure and composition of the climate change regime in terms of its
jurisdictional scope, discretionary depth, rule-making, adjudication and
enforcement functions. Potential grounds for liability for unrestricted greenhouse
gas emissions, under international law, are also considered briefly in respect of
state responsibility for transboundary harm and international human rights
principles. This analysis concludes that the architecture of the climate change
regime is extraordinarily complex.
Institutionally and instrumentally, it is a
myriad of institutional structures and procedural rules. However, upon closer

examination, it becomes clear that these institutions are primarily designed to
facilitate the implementation of the market mechanisms and little substantive
powers have been provided with respect to the core function of the regime,
namely, the enforcement of duties to reduce greenhouse gas emissions.
Ultimately, this weak regulatory structure is fundamentally disconnected from its
primary purpose of reducing global emissions by sufficient levels to avoid
adverse anthropogenic interference with the climate system.
THE
OBJECTIVES
OF
THE
REGIME:
AVOIDING
ADVERSE
CLIMATE CHANGE
At the time of creation of the UNFCCC, in 1992, there was significant scientific
and political doubt that climate change was a threat to modern society. In the face
of this uncertainty, the UNFCCC established broad, overarching principles and
institutional arrangements for the climate change regime. Accordingly, the parties
101
to the climate change regime are bound by the ultimate objective of achieving
the:
stabilisation of greenhouse gas concentrations in the atmosphere at a level that
would prevent dangerous anthropogenic interference with the climate system. Such
a level should be achieved within a time-frame sufficient to allow ecosystems to
adapt naturally to climate change, to ensure that food production is not threatened
and to enable economic development to proceed in a sustainable manner (emphasis
added).10
Little definition is given for this broad and ambitious environmental objective.
Greenhouse gases are defined in the convention as those gaseous constituents of
the atmosphere, both natural and anthropogenic, that absorb and re-emit infrared
radiation11 whilst climate change is defined as:
a change of climate which is attributed directly or indirectly to human activity that
alters the composition of the global atmosphere and which is in addition to human
activity that alters the composition of the global atmosphere and which is in
addition to natural climate variability observed over comparable time periods.12
Moreover, no threshold is given for what constitutes adverse climate change.

The term global atmosphere, referred to in the above definition, is also not
defined in the convention. However, climate system is described as the totality
of the atmosphere,
hydrosphere,
biosphere
and
geosphere and
their
interactions.13
The Preamble to the UNFCCC specifically acknowledges that human activities

have been substantially increasing atmospheric concentrations of greenhouse
gases and that the largest share of historical emissions originated in developed
10

12
13
11
102
countries. 14 The UNFCCC acknowledges that change in the Earths climate and
its adverse effects are a common concern of humankind and states that the
parties were determined to protect the climate system for present and future
generations. 15 It further recognises the need for developed countries to take
immediate action, in a flexible manner, based on relevant scientific, technical and
economic considerations whilst ensuring that responses are integrated so as to
avoid any adverse impacts on social and economic development. In terms of the
economic costs of the general mitigation obligation, the UNFCCC states that
polices and measures which address climate change should:
be cost-effective so as to ensure global benefits at the lowest possible cost. To
achieve this, such policies and measures should take into account different socioeconomic contexts, be comprehensive, cover all relevant sources, sinks and
reservoirs of greenhouse gases and adaptation, and comprise all economic sectors.16
Furthermore, the UNFCCC states that parties have a right to, and should,
promote sustainable development that economic development is essential for
adopting measures to address climate change and that parties should promote an
open international economic system that would lead to sustainable economic
growth and development. 17 The UNFCCC also commits the parties to the
development and transfer of technologies, practices and processes that reduce
greenhouse gas emissions.18 In addition, and in conformance with the notion of
common but differentiated responsibilities, developed country parties are
responsible for the provision of financial resources, environmentally sound
technology and adaptation assistance to participating developing countries. 19
Through the UNFCCC and, more significantly, the Kyoto Protocol the parties
have agreed to a fetter on their sovereign rights to emit greenhouse gases. As a
14

16
17
UNFCCC, n2, Article 3(4), Article 3(5).
18
UNFCCC, n2, Article 4(1)(c).
19
15
103
result, the climate regime imposes restrictions on the actions of nations within
their territorial jurisdictions by imposing limits on the amount of emissions
which can be created during a set time period. In furtherance of its objectives, the
UNFCCC requires parties to adopt precautionary measures to prevent or
minimise the causes of climate change and to mitigate its adverse effects. 20
These obligations specifically recognise the common but differentiated
responsibilities and capacities of the parties to the UNFCCC and greater
mitigation responsibilities are imposed on those developed countries parties. 21
The UNFCCC includes the agreed aim that all developed countries will take
measures to reduce their greenhouse gas emissions to 1990 levels by the year
2000.
22
However, that commitment was not met by the parties and no
enforcement action was taken. This was largely because of the agreement to
precise, quantitative mitigation obligations adopted in the Kyoto Protocol to the
UNFCCC in 1997.
In terms of domestic activities, the UNFCCC requires all parties to formulate

programmes containing measures to mitigate climate change by addressing
anthropogenic emissions by sources and removals by sinks of all greenhouse
gases as well as measures to facilitate adequate adaptation to climate change.23
Annex-1 parties are further obliged to adopt national policies and take
corresponding measures on the mitigation of climate change, by limiting
anthropogenic emissions of greenhouse gases and protecting and enhancing
greenhouse gas sinks and reservoirs. 24
As it became apparent that the general emission reduction obligations of the

parties were not being met, the parties agreed to establish more specific targets
for each Annex-1 party under the Kyoto Protocol. The Kyoto Protocol to the
20

Ibid.
22
UNFCCC, n2, Article 4(2)(a), Article 4(2)(b).
23
UNFCCC, n2, Article 4(1)(b).
24
21
104
UNFCCC aims to achieve the global reduction of greenhouse gas emissions

through committing Annex-1 parties to individual binding targets to limit or
reduce their greenhouse gas emissions. The targets for the first commitment
period from 2008 to 2012 vary from 92 per cent to 110 per cent of reported 1990
greenhouse gas emission levels according to the circumstances negotiated by
each party. 25 Therefore the Kyoto Protocol imposes an obligation on those
parties to:
individually or jointly, ensure that their aggregate anthropogenic carbon dioxide
equivalent emissions of the greenhouse gases listed...do not exceed their assigned
amountswith a view to reducing their overall emissions of such gases by at least
5% below 1990 levels in the commitment period 2008 to 2012.26
Surprisingly, the Kyoto Protocol does not specify the manner in which the
emission reductions targets must be achieved by the parties. It acknowledges the
unique characteristics which are present in each nation State and permits the
parties to achieve their emission obligations in the manner which best fits their
national circumstances. Therefore, the Kyoto Protocol is silent on the method of
reduction beyond broad references to sustainable development and the
implementation of certain policies and measures according to the national
circumstances of each party. 27
Accordingly, the Kyoto Protocol provides
flexibility in the achievement of the emission reductions through the imposition

of a country-wide target and the creation of adaptable mechanisms aimed at
achieving cost-effective global reduction in emissions. The target itself applies
to a group of six greenhouse gases, including carbon dioxide, and provides the
parties with a choice regarding the combination of gases to be lowered by
domestic mitigation. This is a significant feature of the climate change regime in
terms of the broad range of mitigation options made available to the States in
conjunction with a firm obligation to achieve a set environmental target.
25
Kyoto Protocol, n4, Annex B. Australia, for example, was allocated a target of 110 per cent of 1990
levels whilst the EU Bubble must achieve 92 per cent. The targets are therefore based primarily on
political bargaining rather than on a mathematical calculation of required emission reductions.
26
Kyoto Protocol, n4, Article 3(1). The Kyoto Protocol contemplates additional commitment periods
beyond 2012. However, those remain under negotiation by the parties.
27
Kyoto Protocol, n4 Article 2(1)(a).
105
Parties to the Kyoto Protocol were concerned about the potential negative
impacts, on their national economies and international competitiveness, from the
imposition of emission reduction duties.
As a concession to address these
concerns, the Kyoto Protocol established market mechanisms to enable the

flexible implementation of emissions reduction projects, in return for the transfer
of carbon credits, and international trade in those credits. The potential value of
these credits is intended to act as a financial carrot to government actors and
private business to encourage the creation of low-carbon technologies and
implementation of emission reduction projects. 28 The resulting global regulatory
model is intended to reduce net global greenhouse gas emissions through this
combination of cooperative governance and market based incentives.
Accordingly, the Kyoto Protocol has adopted a unique and innovative regulatory
approach in its international creation of the flexibility mechanisms and use of
tradeable emission instruments. At the beginning of the first commitment period,
parties are allocated a number of tradeable emission instruments, known as
Assigned Amount Units (AAUs), which are able to be transferred between
eligible parties. Parties may also create additional credits through the
implementation of emission reduction projects in developing countries (CDM) or
they can convert credits from implementing projects in other Annex-1 countries
(JI). These mechanisms together allow parties to elect as to the proportion of
domestic mitigation which they will implement compared to international
abatement activities.29
28
Tom Tietenberg, 'Economic Instruments for Environmental Regulation' (1990) 6(1) Oxford Review
of Economic Policy 17; Peter H Sand, 'International Economic Instruments for Sustainable
Development: Sticks, Carrots and Games' in Daniel Bodansky and David Freestone (eds),
Transnational Environmental Law: Lessons in Global Change, International Environmental Law and
Policy Series (1999) London, Kluwer Law International, vol 53, 331.
29
This choice is somewhat limited to the extent that domestic actions must constitute a significant
element of the efforts made by a party to meet its emission reduction obligations but this concept is,
as yet, undefined and untested; UNFCCC, Decision 15/CP 7 'The Marrakesh Accords'
(FCCC/CP/2001/13/Add.2).
106
THE REGULATORY APPROACH OF THE CLIMATE CHANGE

REGIME
For the international climate change regime to be effective in reducing global

greenhouse emissions and addressing climate change, it must achieve a number
of differing objectives including environmental effectiveness in solving the
environmental problem; market effectiveness in achieving economic efficiency;
and institutional effectiveness with respect to the optimal combination of legal,
normative and political feasibility outcomes. Accordingly, the climate change
regime should incorporate:
a problem-solving approach to the environmental problem of humaninduced climate change;
a legal approach to achieve compliance with the regime and

achievement of the regime objectives through valid delegations, rulemaking processes and enforcement protocols;
an economic approach to achieve emissions reductions in accordance

with the principles of economic efficiency;
the creation of normative principles to create an environment for the

global adherence to, and achievement of, the agreed environmental
values; and
the political feasibility approach to achieve such outcomes, through

behavioural adjustments and ongoing agreement to restrain emitting
behaviours, within accepted methods of global governance. 30
30
Oran R Young and Marc A Levy, 'The Effectiveness of International Environmental Regimes' in
Oran R Young (ed), The Effectiveness of International Environmental Regimes: Causal Connections
and Behavioral Mechanisms (1999) Cambridge, The MIT Press, 1 at 4-6; see also Alina Averchenko,
Factors of Effectiveness of the International Climate Change Regime (PhD Thesis, University of Bath,
2004) at 73.
107
An effective legal regime to manage climate change should integrate all of the
legal
components
necessary
to
enable
the
effective
implementation,
administration and enforcement of a legally enforceable international regime

including clear duties and liabilities, mechanisms to facilitate trade, stringent
monitoring
and
verification
processes
and
appropriate
enforcement
mechanisms. 31 If properly designed and implemented, the institutions of the

climate change regime should function effectively to achieve its global
objectives.
32
To be effective in achieving its regulatory objectives, the
international climate change regime must possess a sound regulatory scheme

with sufficient regulatory coherence. 33
An effective regulatory scheme is
dependent on the choice of appropriate institutional structures, procedural and

managerial systems and legal instruments to be used in achieving the regulatory
goals of the climate change regime. 34
Accordingly, an assessment of the
presence, or absence, of such regulatory coherence requires an analysis of the

institutional structure, regulatory composition, procedural systems and legal
instruments adopted under the climate change regime. 35 The regulatory structure
and composition of the regime will be critiqued in terms of the scope and depth
of the substantive rule-making, adjudication and enforcement powers of the
established institutions.
31
See, for example, Sonja Peterson, 'Monitoring, Accounting and Enforcement in Emissions Trading
Regimes' (Paper presented at the OECD Global Forum on Sustainable Development: Emissions
Trading 17-18 March 2003 Paris, Greenhouse Gas Emissions Trading and Project Based Mechanisms,
Paris, 2003);Gregory Rose, 'A Compliance System for the Kyoto Protocol' (2001) 7(2) New South
Wales Law Journal 37.
32
See Barbara Koremenos, Charles Lipson and Duncan Snidal, 'The Rational Design of International
Institutions' (2001) 55(4) International Organization 761.
33
For a discussion of structural coherence generally and legal coherence more specifically see Joseph
Raz, 'The Relevance of Coherence' (1992) 72 Buffalo University Law Review 273 and Jack Balkin,
'Understanding Legal Understanding: The Legal Subject and the Problem of Legal Coherence' (1993)
103 Yale Law Journal 105 respectively.
34
In the domestic regulatory context see Anthony Ogus, 'Comparing Regulatory Systems:
Institutions, Process and Legal Forms in Industrialised Countries' (Centre on Regulation and
Competition Working Paper Series No. 35, 2002) at 1.
35
Owing to word restrictions, the theories of international regulation and global governance are not
described in this chapter. This theoretical approach is discussed in detail in Donald Feaver and Nicola
Durrant, Architectures of International Regulation(2007) Working Paper, Queensland University of
Technology and Donald Feaver and Nicola Durrant, A Regulatory Analysis of International Climate
Change Regulation (forthcoming 2008) Special Issue on Global Warming, Law & Policy Journal.
108
THE STRUCTURE OF THE CLIMATE CHANGE REGIME
The two primary regulatory bodies to the climate change regime are the
Conference of the Parties to the UNFCCC (COP) and the Meeting of the Parties
to the Kyoto Protocol (MOP). The climate change regime is characterised by a
fragmented series of multiple, upward, delegations from the parties to a number
of different regulatory bodies.
The regulatory bodies to the climate change
regime include the:

COP
MOP
Executive Board to the Clean Development Mechanism (CDM);
Joint Implementation (JI) Supervisory Committee; and
Compliance Committee.36
The sources of power for the bodies to the climate change regime are derived
from the provisions of the UNFCCC and the Kyoto Protocol to the UNFCCC.
The architecture of the climate change regime is depicted in Figure Three below.
Under this model, the primary transfer of power takes place through the pooling
of sovereign authority from the parties to the COP and MOP. Those bodies
maintain ultimate decision-making functions over the climate change regime.
However, multiple delegations of regulatory functions also take place. Clear
regulatory powers are transferred to the Executive Board o f the CDM and Joint
Implementation Supervisory Committee to facilitate the use of the flexibility
mechanisms. Authority is also divested to the Compliance Committee to address
issues in implementation and non-compliance.
36
This functions through a Plenary, Bureau, Facilitative Branch and an Enforcement Branch.
109
The institutional bodies of the UNFCCC and Kyoto Protocol are serviced by the
UNFCCC Secretariat which is institutionally linked to the UN system but is not
fully integrated into the work programme or management structure of any UN
department.37 Limited administrative functions, but not discretions, are allocated
to the established UNFCCC Secretariat. The UNFCCC Secretariat is responsible
for, inter alia, the International Transaction Log (ITL) and the national registries
for international emissions trading. Under the UN headquarters agreement, the
Secretariat has legal capacity to contract, acquire and dispose of property and
institute legal proceedings in fulfilment of those duties.
38
The UNFCCC
Secretariat utilises UN resources and, as part of the UN system, is required to

report to the UN Secretary General. However, the Secretariat does possess a
level of independence from the UN system and is bound, ultimately, to promote
and uphold the objectives of the climate change regime. 39
37
UNFCCC, Decision 22/CP 5 ' Institutional Linkage of the Convention Secretariat to the United
Nations' (FCCC/CP/1999/6/Add 1).
38
Farhana Yamin and Joanna Depledge, The International Climate Change Regime: A Guide to Rules,
Institutions and Procedures (2004) Cambridge, Cambridge University Press at 501, 505.
39
Ibid.
110
ITL
CDM
Executive
Board
JI Supervisory
Committee
National
Registries
UNFCCC
Secretariat
Compliance
Committee
UNFCCC
Kyoto Protocol
(General Duties)
(Specific Targets)
Nation
COP
MOP
(Regulator)
(Regulator)
Nation
Nation
Nation
Domestic
Regulator
(optional)
Domestic Jurisidiction
Private Entities/Individuals
Figure 3: Feaver and Durrant, The Regulatory Architecture of the Climate Change
Regime (2008).40
40
This figure created by this author. Modified version published in Donald Feaver and Nicola Durrant,
A Regulatory Analysis of International Climate Change Regulation (forthcoming 2008) Special
Issue on Global Warming, Law & Policy Journal.
111
CRITICAL ANALYSIS OF THE COMPOSITION OF THE CLIMATE

CHANGE REGIME
A Jurisdictional Scope of the COP/MOP
The urgency and scope of the global problem of climate change requires an
unprecedented depth and breadth of global cooperation to avoid the adverse
impacts of climate change that has not been previously observed in the
environmental arena. 41 Nations may elect to respond to a global problem through
the pooling of their sovereign authority in an institutional agent which regulates
participants through consensus-based decision making and rule setting.
42
Consequently, the authority of the climate change regime is established through

the legal fiction of the sovereignty of nations through which the States agree to a
particular international regime. Under the UNFCCC, the core body of pooled
authority is the COP, an association of representatives from all parties to the
convention. The COP is the primary decision making body, the supreme body
of the convention and, officially, remains the ultimate authority under the
Convention.43
Accordingly, Article 7 of the UNFCCC states that:

the Conference of the Parties, an association of representatives of the members to
the treaty, shall keep under regular review the implementation of the Convention
and any related legal instruments that the Conference of the Parties may adopt, and
shall make, within its mandate, the decisions necessary to promote the effective
implementation of the Convention.
41
Heleen de Coninck, 'Designing Institutions for Climate Change: Why rational design involves
technology' (Paper presented at the Amsterdam Conference on Human Dimensions of Global
Environmental Change, Amsterdam, May 2007) at 7.
42
See, for example, Mancur Olson, The Logic of Collective Action: Political goods and the theory of
groups (1965) Cambridge, Harvard University Press.
43
112
Membership of the Kyoto Protocol does not include all of the members of the
UNFCCC. Accordingly, the Kyoto Protocol establishes the MOP but states that
the COP shall serve as the MOP and any non-parties to the COP will participate
as observers for the purposes of the Kyoto Protocol. 44
Therefore, the climate
change regime has two core regulators, each with authority over their respective
agreements and each with the power to establish and enforce new rules against
the respective parties. In practical terms, the COP and MOP meet concurrently to
reach decisions in respect of the UNFCCC and Kyoto Protocol.
The ultimate purpose of the UNFCCC is to achieve the stabilisation of

greenhouse gas concentrations in the atmosphere at a level that would prevent
dangerous anthropogenic interference with the climate system. That purpose is
translated into specific emission reduction targets in the Kyoto Protocol. The
COP and MOP bodies are collective decision-making bodies comprised of
representatives of the parties to these international agreements. They are
empowered with the broad mandate to review and promote the effective
implementation of the UNFCCC and Kyoto Protocol respectively.45
Accordingly, the COP and MOP is mandated to:

keep under regular review the implementation of the [UNFCCC/Kyoto
Protocol] and any related legal instruments ., and shall make, within its
mandate, the decisions necessary to promote the effective implementation
of the [UNFCCC/Kyoto Protocol] .. and may .. exercise such other
functions as are required for the achievement of the objective of the
[UNFCCC/Kyoto Protocol].46
44
Kyoto Protocol, n4 Article 13.1.

UNFCCC, n2, Article 7. Kyoto Protocol, n4, Article 13.
46
UNFCCC, n2, Article 7. Article 13 of the Kyoto Protocol, n4, is similarly worded.
45
113
The jurisdiction of the COP and MOP relates to the performance of regulatory
functions regarding the relatively broad subject-matter of climate change. This
includes the functions under the Kyoto Protocol of:
monitoring domestic mitigation programmes and climate related

initiatives;
monitoring and approving emission reduction projects implemented

within domestic jurisdictions by State and private entities;
monitoring and approving market transactions in tradeable emission

instruments by State and private entities; and
imposition of the agreed sanctions for non-compliance.
Accordingly, the MOP appears to have been granted a broad discretionary power
in respect of the implementation of the climate change regime.
B Discretionary Depth of the COP/MOP

The specific delegations of power to the COP and MOP can be found in Article
7(2) of the UNFCCC and Article 13(4) of the Kyoto Protocol. The UNFCCC
states that the COP shall:
(e) assess the implementation of the Convention by the Parties [and] the
overall effects of measures taken pursuant to the Convention, in particular
environmental, economic and social effects;
(g) make recommendations on any matters necessary for the implementation
of the Convention;
(i) establish such subsidiary bodies as are deemed necessary for the
implementation of the Convention;
(k) agree upon and adopt, by consensus, rules of procedure.. for itself and
for any subsidiary bodies;
114
(m) exercise such other functions as are required for the achievement of the
objective of the Convention.
The mandate of the MOP is cast in similar terms including that the MOP shall
keep under regular review the implementation of the Kyoto Protocol and shall
make, within its mandate, any decisions necessary to promote its effective
implementation. 47 Accordingly, the MOP maintains a high level regulatory
function in respect of the implementation of the international components of the
climate change regime. However, many of the technical functions of the MOP
are delegated to the subsidiary regulatory bodies as illustrated in Figure Three.
Those bodies are responsible for the direct day-to-day supervision of the
flexibility mechanisms. As a result, these bodies have a high level of regulatory
involvement in the abatement projects and other activities of private entities and
private individuals.
C Rule Making Discretion of the COP/MOP

The UNFCCC and Kyoto Protocol both impose greenhouse gas emission
mitigation obligations on the parties.48 However, the UNFCCC and the Kyoto
Protocol contain only the bare bones of the climate change regime. The MOP
has been empowered to develop and expand upon the rules, modalities and
procedures required for the practical implementation of the regime. This has
been achieved through the establishment of multiple subject specific subsidiary
bodies which develop and apply the necessary rules, in an ad-hoc basis, and
recommend them to the MOP for adoption. Consequently, the climate change
regime has created relatively autonomous institutional arrangements which are
empowered to create and enforce rules against the parties without the immediate
need for the full consensus agreement of all the parties to the regime.
47
Kyoto Protocol, n4 Article 13(4). The Kyoto Protocol contains an additional Article 8(6) The
MOP..shall take decisions on any matter required for the implementation of this Protocol.
48
UNFCCC, n2, Article 4(2)(a); Kyoto Protocol, n4, Article 3.
115
The subject matter of the regime, climate change, is itself wide ranging in scope
and extends beyond the broad range of environmental concerns to issues of
trade and development, human health, food security, energy security, access to
technologies and financial aid. Decisions regarding climate change mitigation
will also impact on a wide range of environmental sustainability issues.
Therefore, in principle, the COP and MOP hold a wide discretion to establish
policy directions, create new environmental rules and standards required for the
achievement of the objectives of the regime and make adjudicative decisions
affecting sovereign rights and interests. This rule-making discretion of the
climate change regime extends to the domestic sphere and to private individuals
and firms. Private individuals and firms may elect, following initial authorisation
from their State, to participate in the market mechanisms as project developers,
carbon traders and accredited experts. 49 Where this occurs, those participants
become subject to the jurisdiction of the regulatory bodies under this global
regime. Accordingly, the MOP and its subsidiary bodies may reach decisions
affecting private interests and can enforce the rules of the regime against those
private interests without any nation State involvement in that process.
Decisions of the COP and MOP are considered to be legally binding and in
certain instances could amount to an agreement modifying or supplementing the
text of the UNFCCC and Kyoto Protocol.50 However, it is questionable whether
decisions which are inconsistent with the text of the treaty are able to vary the
original agreement without adherence to the specified processes for amendment
contained within that treaty. Whether the COP and MOP possess a separate legal
personality is also a matter of some contention. Some commentators conclude
that the COP possesses a separate legal personality and is a self governing
49
For CDM, Kyoto Protocol, n4, Article 12(9). For JI, Kyoto Protocol, n4, Article 6(3). For
Emissions Trading, UNFCCC, Decision 11/CMP 1: Modalities, Rules and Guidelines for Emissions
Trading under Article 17 of the Kyoto Protocol, Annex: Modalities, Rules and Guidelines for
Emissions Trading under Article 17 of the Kyoto Protocol, (FCCC/KP/CMP/2005/8/Add 2) at [5].
50
Farhana Yamin and Joanna Depledge, n38, 404-405.
116
autonomous body heading the UNFCCC hierarchy. 51 However, according to

UNOLA, the COP and MOP have not been duly vested with a clear juridical
personality on the international plane. 52
D Subsidiary Bodies within the Climate Change Regime

In addition to the COP and MOP, the UNFCCC and Kyoto Protocol establish a
number of subsidiary bodies and expert groups to assist with the implementation
of the climate change regime. These bodies do not sit within the UNFCCC
Secretariat and are directly accountable to the COP and MOP.
The UNFCCC establishes two permanent advisory bodies known as the

Subsidiary Body for Implementation (SBI) and the Subsidiary Body for
Scientific and Technological Advice (SBSTA) to provide advice as requested.
The SBSTA provides the COP with advice on scientific, technological and
methodological matters. This includes advice regarding the development and
transfer of technologies and improvement of the guidelines for preparing national
communications and emission inventories. 53 SBSTA also acts as a line of
communication between expert bodies, including the Intergovernmental Panel on
Climate Change (IPCC), and the COP. The SBI advises to the COP on matters
concerning the implementation of the UNFCCC and undertakes examinations of
national communications and emission inventories submitted by parties in order
to assess the overall effectiveness of the UNFCCC.54 The SBI also advises the
COP on the provision of financial assistance to non Annex-1 parties and on
budgetary and administrative matters. A range of temporary bodies and expert
groups have also been established to assist with the implementation of the
Convention.
51
Ibid, 400, 404.

UNOLA (1995) cited in Yamin and Depledge, n38, 403.
53
UNFCCC (2006) Essential Background: Convention Bodies,
http://unfccc.int/essential_background/convention/convention_bodies/items/2629.php at 11 June 2008.
54
Ibid.
52
117
In addition, the Kyoto Protocol necessitated the establishment of a range of

bodies to facilitate the operation of the flexibility mechanisms. Significantly,
these include the Executive Board to the CDM and the JI Supervisory
Committee. International emissions trading is managed through the creation of
national registries to hold allowances and through the control of transactions via
the ITL managed by the UNFCCC Secretariat. These subsidiary bodies are able
to exercise public power in relation to the domestic activities of nation States and
private entities but are not directly subject to the control of national governments
or national legal systems. 55
Unlike the bodies to the UNFCCC, these institutions have received a level of
delegated power to enable them to administer the Kyoto Protocol without
constant approval from the MOP. This direct upwards delegation enables these
bodies to create their own rule-making processes, to reach decisions regarding
the rights and liabilities of the parties and third party individuals and to police the
level of compliance with the rules of the regime. These bodies act under the
direction of the MOP but have been allocated decision-making power and are
able to issue binding decisions on the parties. Accordingly, they have been
delegated procedural functions with respect to the monitoring and supervision of
the CDM/JI projects as well as substantive decision making, rule-making and
approval or adjudicative functions in respect of those projects.
55
Streck, n9, 96.
118
FRAGMENTED REGULATION OF THE FLEXIBILTY MECHANISMS

A Operation of the CDM
Developed country parties listed in Annex-1 can create additional credits by
implementing eligible emission reductions projects in developing countries under
the CDM. This mechanism is intended to assist parties to reach their emission
reduction targets in a cost-effective manner whilst assisting developing nations to
achieve sustainable development. Participation in the CDM must be voluntary
and the project must demonstrate not only that it achieves real, measurable and
long-term benefits related to climate change mitigation but also that the
reductions in emissions are additional to those that would have occurred in the
absence of the project.56
Article 12(4) of the Kyoto Protocol states that:

the clean development mechanism shall be subject to the authority and guidance of
the Conference of the Parties serving as the meeting of the Parties and be supervised
by an executive board of the clean development mechanism.
Accordingly, the CDM Mechanism is supervised by the CDM Executive Board

(Executive Board) and the Executive Board acts under the authority and guidance
of the MOP and remains fully accountable to that association.57 In relation to the
supervision of the CDM, the MOP is specifically empowered to:
elaborate modalities and guidelines with the objective of ensuring transparency,
efficiency and accountability through independent auditing and verification of
project activities.58
56
Kyoto Protocol, n4, Article 12.5.

UNFCCC, Decision 3/CMP.1: Modalities and Procedures for a Clean Development Mechanism as
Defined in Article 12 of the Kyoto Protocol. Annex: Modalities and Procedures for a Clean
Development Mechanism, (FCCC/KP/CMP/2005/8/Add 1) section C at [5].
58
57
119
The primary role of the Executive Board is to recommend modalities and

procedures for the operation of the CDM for approval by the MOP and to address
issues of non-observance of those modalities and procedures by project
participants or operational entities.
59
Those modalities include rules and
requirements for the approval of new methodologies for CDM project baselines,
registration and approval of project designs, approval and implementation of
monitoring plans, verification and issue of credits and the accreditation of
operational entities. 60
The Executive Board appears to have been granted a high level of autonomy and
is able to create and apply new modalities and procedures to proposed emission
reduction projects. This is designed to allow the practical, commercial
application of the flexibility mechanisms without the impracticability and delay
of reverting to the MOP for approval.
Accordingly, the Executive Board
determines the appropriate policy direction, creates the necessary rules, and
reaches decisions regarding compliance with those rules prior to recommending
the adoption of these rules to the subsequent meeting of the MOP.
However, the ability of the Executive Board to elaborate on the rules of the
climate change regime has resulted in a complex system heavy in rules and
requirements. As noted by one commentator:
the designers of the Kyoto Protocol..and..the..subsequent decisions..have built into
the CDMs project cycle an impressive, but so far mostly untested, set of
institutions and safeguards designed to ensure clear and consistent standards for
calculating the environmental additionality of CDM projects, processes for
encouraging technical assessments, transparency and public scrutiny of CDM
operations, and mechanisms for rejecting or discounting CERs when problems
emerge.61
59
UNFCCC, Decision 3/CMP.1, n57, section C at [5](a),(n).

Ibid, section C at [5](d),(f).
61
Ernestine Meijer and Jacob Werksman, 'CDM - Concepts, Requirements and Project Cycle' (2007)
2(Special Issue: The Kyoto Protocol and Carbon Finance) Environmental Liability 81 at 83.
60
120
The Executive Board is comprised of ten members from the parties to the Kyoto
Protocol including one from each of the five UN regional groups, two from
Annex-1 parties, two members from non-Annex-1 parties and one representative
from the small island developing States.62 These members act on the Executive
Board in their personal capacity and must take an Oath of Service which states
that they will provide their function impartially and conscientiously. 63 The Oath
further requires that the members have no financial interest in any aspect of the
CDM and that confidential information transferred to the Executive Board is
maintained.64
The Executive Board may also establish subsidiary committees, panels or

working groups to assist it in the performance of its functions. To-date, the
Executive Board has established three panels and two working groups. The
Accreditation Panel was established to assist in preparing the Executive Board
for its decisions regarding the accreditation of designated operational entities.65
The Methodologies Panel was established to develop recommendations to the
Executive Board on guidelines for methodologies for baselines and monitoring
plans and on submitted proposals for new baseline and monitoring methodologies.
The Small-Scale Panel was also operational during 2002 and recommended draft
simplified modalities and procedures for small-scale CDM project activities. The
Executive Board has also established the working group on afforestation and
reforestation for CDM project activities and the small scale working group CDM
small scale project activities.
In terms of the principles of due process, decisions made by the Executive Board
are deemed final unless a request for review is made regarding issues associated
62
UNFCCC, Decision 3/CMP.1, n57, section C, [7].

Ibid, section C, [8](e).
64
Ibid, section C, [10] (2).
65
UNFCCC, CDM: Panels: Working Groups, http://cdm.unfccc.int/Panels at 11 June 2008.
63
121
with the validation requirements. That request for review is limited and may only
be made by the project participants or the members of the Executive Board.66
Although interested stakeholders are able to be present at the review hearing,
they can only provide information if requested by the Executive Board.
Moreover, the climate change regime does not articulate an avenue of recourse
from a decision of the Executive Board to the MOP (although in practical terms
this is likely to occur where a nation State has been aggrieved). The Executive
Board has been criticised for the tardiness and unpredictability of its decisions
and some commentators have called for the appointment of a professional
regulatory body with more appropriate resourcing and technical expertise to
manage the increasing complexities of the CDM. 67
The use of the CDM
mechanism itself has also been criticised for the emerging geographical bias by
which project developers appear to be favouring Asia, and China in particular, as
host countries for their projects to the exclusion of other more vulnerable
developing countries. 68 The technological and economic outcomes of the CDM
process have also been described as follows:
the CDM in its current form is not able to generate or absorb the financial and
technological flows needed under a global deal.. Moreover, the.nature of
the CDM, and the measurement of emission reductions against an unobservable, projectspecific, baseline impose substantial transaction costs in terms of validation, verification
and independent scrutiny.69
66
UNFCCC, Decision 4/CMP 1: Guidance to the Executive Board of the Clean Development
Mechanism. Annex 2: Procedures for Review as Referred to in Paragraph 41 of the Clean
Development Mechanism Modalities and Procedures (FCCC/KP/CMP/2005/8/Add 1), section A at
[2].
67
Streck, n9, 97,100.
68
Armin Sandhoevel and Ingo Ramming, 'Joint Implementation - A Catalyst for Change' in David
Lunsford (ed), Greenhouse Gas Market 2007 Building Upon A Solid Foundation: The Emergence of a
Global Emissions Trading System (2007) Geneva, International Emissions Trading Association, 92 at
92.
69
Nicholas Stern, 'Key Elements of a Global Deal on Climate Change' (London School of Economics
and Political Science, 2008) at 15.
122
B Operation of the JI Mechanism

Emission reduction projects may also be implemented by developed parties, in
other developed party countries, under the JI mechanism. 70 In return for the
implementation of projects, the host country may transfer a proportion of its
AAUs to the project developer. JI projects are overseen by the JI Supervisory
Committee which, like the Executive Board, is responsible for the establishment
of new modalities and procedures for the implementation of projects.71 However,
the powers of this body are more limited than those of the Executive Board.
The JI mechanism is implemented through similar procedures to the CDM.

Indeed, many of the modalities and procedures are modified from those
established under the CDM. The key difference is that, in certain specified
circumstances, the local host country is permitted to take full responsibility for
approving eligible projects and for verifying the level of reductions achieved by
the project without recourse to the JI Supervisory Committee (Track 1 JI). 72
Those requirements include the establishment of: a designated focal point;
national system for the estimation of national emissions and a national registry. 73
In such circumstances, the approval of the JI Supervisory Committee is not
required. 74 Where these pre-requisites are not met, emission reductions are
reviewed and verified by an independent entity (Track II JI).75 The JI Supervisory
Committee supervises the certification of credits generated by project activities
70
Kyoto Protocol, n4, Article 6.

UNFCCC, Decision 9/CMP.1: Guidelines for the Implementation of Article 6 of the Kyoto
Protocol. Annex: Guidelines for the Implementation of Article 6 of the Kyoto Protocol,
(FCCC/KP/CMP/2005/8/Add 2), Section C. The JI Supervisory Committee was established in 2006.
72
Ibid.
73
Ibid.
74
Ibid.
75
Ibid. Australia is not currently eligible to utilise the flexibility mechanisms under Articles 6, 12 and
17 of the Kyoto Protocol. It is estimated by the UNFCCC Secretariat that Australia will become
eligible to utilise these mechanisms in July 2009. Whether Australia is eligible to use Track 1/Track 2
will depend upon the progress made during that time in establishing the necessary monitoring and
supervisory processes within Australia. Enforcement Branch, Eligibility of Annex I Parties to
participate in the mechanisms under Articles 6, 12 and 17,
http://unfccc.int/files/kyoto_protocol/compliance/enforcement_branch/application/pdf/eligibility_list_
080422.pdf at 11 June 2008.
71
123
and is responsible for, inter alia, the elaboration of any rules of procedure for
consideration by the MOP. 76
The creation of Track I JI is intended to result in a faster approval process for

abatement projects. However, Track I may also introduce increased transaction
costs and risks for project developers who must contend with the particular
eccentricities of each national JI legal framework rather than the more familiar
UN approval system. 77 There are also significant resourcing concerns regarding
the expertise of host countries in approving these projects and verifying that the
emission reductions have actually occurred.78 A trend may eventuate in which
elements of Track I approval processes are merged with the independent
verification process under Track II JI.79 In addition, it should be noted that AAUs
can be transferred through less cumbersome options outside of the JI
mechanism including green investment schemes (GIS).80
The most likely locations for JI projects are the Ukraine and the Russian
Federation given their status as economies in transition and the resulting excess
supply of AAUs. JI approval procedures have been adopted by a number of
countries including both the Ukraine and the Russian Federation.81 The Ukraine
introduced its approval processes in 2006 and began to approve JI projects in mid
2007. 82
Project developers must obtain a Letter of Endorsement from the
76
Ibid, section C.
Dane Ratliff, 'Joint Implementation: Tracking Recent Developments' (2007) 2(Special Issue: The
Kyoto Protocol and Carbon Finance) Environmental Liability 56 at 58.
78
Ibid.
79
Jane Ebinger and Jari Vayrynen, 'The Greening of AAUs and the Interface with Joint
Implementation' (2007) 2(Special Issue: The Kyoto Protocol and Carbon Finance) Environmental
Liability 73 at 79.
80
These could also potentially result in more sustainable outcomes. See Ratliff, n77, 63.
81
UNFCCC, JI: Parties Involved in JI Projects http://ji.unfccc.int/JI_Parties/index.html at 11 June
2008. The Ukraine is expected to become eligible to use the flexibility mechanisms at the end of April
2008 while the Russian Federation is expected to become eligible in June 2008 see
http://unfccc.int/files/kyoto_protocol/compliance/enforcement_branch/application/pdf/eligibility_list_
080422.pdf at 11 June 2008.
82
Anna Korppoo, 'Briefing Paper: JI Approval System in Ukraine: Outline and Experiences' (Climate
Strategies, 2007) at 1; Tatiana Boldyreva and Dmitriy Timofeev, 'JI Approval Procedures in Russia
and Ukraine' in David Lunsford (ed), Greenhouse Gas Market 2007 Building Upon A Solid
77
124
Ukrainian government prior to the development of a project. The documentation

required as part of the application process for such endorsement:
is intended to show that the activity of the project does not contradict Ukrainian or
international law, and that the project will not cause adverse local environmental
impacts, as well as describing the investment measures leading to emissions
reductions.83
Projects must comply with Ukrainian Environmental Impact Assessment

requirements and public consultation must be undertaken. 84 To obtain a Letter of
Approval to proceed with the project, a full application must be submitted
complete with a verification report from an accredited independent verifier. 85 In
relation to the financial aspects of project, the application must demonstrate that:
ERUs from those projects which fulfil the investment requirements of the
company without ERUs must be sold at a price not less than 50 per cent
of the price in the EU emissions trading scheme; and
the revenue from ERUs must cover at least 10 per cent of the project
investment.86
Initial difficulties with the Ukrainian JI include delays in the approval system and
the ongoing absence of legislation to clarify the legal processes for transferring
ERUs, on how AAUs can be converted into ERUs or on how ERUs should be
deal with in taxation.87 Obviously, such legal mechanisms are critical to create
Foundation: The Emergence of a Global Emissions Trading System (2007) Geneva, International
Emissions Trading Association, 102. Cabinet of Ministers of Ukraine. 2006, Resolution dated
February 22, 2006 #206 On Approval of the Procedure for Consideration, Approval and
Implementation of Projects Aimed at Anthropogenic Emissions Reduction or Greenhouse Gas
Absorption Increase Pursuant to Kyoto Protocol to the United Nation Framework Convention on
Climate Change.
83
Korppoo, n82, 3-4.
84
Ibid, 5.
85
Ibid,3.
86
Ibid, 5.
87
Ibid,8.
125
legal certainty regarding the rights of ownership and the ability to transfer
ownership in these tradeable emission instruments.
Russia has also established a JI approval processes. The emerging requirements

appear to be more complicated than the Ukrainian approach. 88 The Ministry for
Economic Development and Trade of the Russian Federation is responsible for
receipt of applications for JI Projects in Russia and applications are approved by
the Commission and the national government.89 Enacting legislation was passed
in mid 2007 and general guidelines for approval and other administrative orders
were issued in late 2007 and early 2008. 90 The Russian government has indicated
that it will be working on a principle of rejection in considering applications for
JI projects in Russia. 91
Other economies in transition that form part of the EU may have less capacity to
host JI projects as a result of the lower baseline resulting from emission
restrictions under the acquis communautaire and EU emissions trading
directives. 92 Furthermore, an additional compliance stage will apply to the
implementation of a JI project, in an EU nation, as the nation is also responsible
for ensuring that the project complies with all EU law. 93
88
Tatiana Boldyreva and Dmitriy Timofeev, 'JI Approval Procedures in Russia and Ukraine' in David
Lunsford (ed), Greenhouse Gas Market 2007 Building Upon A Solid Foundation: The Emergence of a
Global Emissions Trading System (2007) Geneva, International Emissions Trading Association, 102
at 105. There are difficulties in accessing information on the Russian approval procedures. For
example, no English translation of the national procedures document is included on the UNFCCC
website. No additional information is included on the website for the Russian Ministry for Economic
Development and Trade.
89
Denton Wilde Sapte, Russian Legal Update: Kyoto: Russia ready to start realisation of Joint
Implementation Projects (JI Projects) (March 2008)
http://www.dentonwildesapte.com/assets/2/20306.pdf at 11 June 2008.
90
Ibid.
91
Simon Shuster, 'Russia Says Will be Strict Approving Kyoto Projects', Planet Ark 14 March 2008.
92
Ebinger and Vayrynen, n79, 63.
93
Leonardo Massai, 'Joint Implementation In an Enlarged EU: Recent Developments and Outstanding
Legal Issues' (2007) 2(Special Issue: The Kyoto Protocol and Carbon Finance) Environmental
Liability 65 at 69-70.
126
C The Role of the Host Country

In the interests of global engagement, the Kyoto Protocol defines a role for local
host countries in relation to the implementation of emission reduction projects.
The creation of a formal decision-making function for the host country is a direct
acknowledgment of the sovereign rights of nations to regulate development
within their national territory according to their particular national priorities.
Consequently, projects implemented under the CDM and JI are subject to
approval locally in the country where the emission reduction projects are to be
implemented. In the case of the CDM, this is done through the designation of a
nationally established body known as the Designated National Authority
(DNA).
94
Project participants must undertake an environmental impact
assessment in accordance with the procedures required by the host party.95 Prior
to validation, all of the parties must provide written approval of voluntary
participation in the project and confirmation must be provided from the host
party that the project activity assists the nation in achieving sustainable
development.96 These project participants are also required to comply with all
applicable national laws. In the case of each nation proposing to host JI projects,
the Annex-1 party must establish a Designated Focal Point (DFP) for approving
projects pursuant to Article 6 of the Kyoto Protocol. 97
Consequently, the DNA or DFP for the host country of the CDM or JI project
plays a significant decision making role in the selection of projects for approval,
specification of the level of environmental assessment required and in
determining whether the principles of sustainable development have been met.
This allows the host country to deal with projects within its national territory as it
chooses and according to its own set of priorities. This is particularly significant
in developing countries under the CDM.
However, it appears that these
provisions were drafted with the perception that these host nations would have
94
UNFCCC, Decision 3/CMP.1, n57, section F, [29].

Ibid, section G, [37](c).
96
Ibid, section G, [40](a).
97
UNFCCC, Decision 9/CMP.1, n71, section D at [20].
95
127
their own systems in place to assess adequately the environmental outcomes of a

proposed project. In practice this is not always the case and no provision is made
for the situation in which there are no local laws on environmental impact
assessment.98
In terms of consultation with local communities, the project design documents

must identify that local consultation has been carried out. 99 Regretfully, the
project design requirements are silent on the actual level of consultation required
and the extent to which submissions must be addressed by the project
proponents. 100 In this respect, the climate change regime is quite deficient in
establishing processes, including the approval or modification of project
specifications, without the full engagement of those directly affected by those
decisions such as host country institutions and local communities. In response to
these deficiencies, some project participants and CER purchasers may elect to
use the CDM Gold Standard, developed by non-governmental organisations,
which applies additional criteria to ensure that meaningful consultation with local
stakeholders is carried out and that projects assist in achieving sustainable
development in developing nations.101
The operation of these mechanisms to-date have demonstrated the difficulties of

achieving the objectives of the CDM where developing hosts lack the necessary
institutional, financial and other capabilities to fulfil their role in the decisionmaking process. The critical need for new infrastructure in these developing
98
2(Special Issue: The Kyoto Protocol and Carbon Finance) Environmental Liability 81 at 84.
99
Institute for Global Environmental Strategies and Japan Ministry of the Environment, CDM and JI
in Charts (4 ed, 2005) Japan, Ministry of the Environment Attachment 1: Contents of the Project
Design Documents (v3) at section F (regarding the processes required to be undertaken according to
host country requirements).
100
This deficiency raises issues of adequacy of host country consultation and local community
involvement in the project development process.
101
Only project activities involving renewable energy and energy efficiency measures which promote
sustainable development are eligible for accreditation under the CDM Gold Standard. The Gold
Standard, 'The Gold Standard: Manual for CDM Project Developers' (2006 (version 3)) at 9, 11;
www.cdmgoldstandard.org at 11 June 2008.
128
countries is also often a key factor in host-country decision-making rather than

the result of objective environmental analysis. Moreover, the type of emission
reduction projects which are mobilised and presented to the host country for
approval have themselves been filtered on the basis of global investment
priorities.
The investment policies of the World Bank, for example, may
significantly affect the choice of location and type of emission reduction projects
which are planned and implemented under the CDM.
The UNFCCC created an expectation that all parties to the Convention would
have enacted appropriate environmental legislation at the domestic level. 102
However, this deference to national sovereignty diminishes the ability of the
parties and the UN to ensure that the climate change regime leads to the
enhancement of environmental sustainability whilst achieving envisaged
emission reductions. Indeed, the UNFCCC states that parties should promote
sustainable development. 103
However, measuring the level of compliance with
this provision is virtually impossible. The provision of greater guidance, as to

the notion of sustainability in practical terms, would enhance implementation
given ambiguity of the elements needed to achieve sustainable development.
D The Role of Private Verifiers

The CDM and JI mechanisms both create a role for accredited private expert
advisors who are responsible for the review and verification of projects submitted
under the CDM and JI mechanisms. 104 The accredited entity under the CDM is
known as the Designated Operational Entity (DOE). The independent entity for
Track II JI is known as the Accredited Independent Entity (AIE).
These
accredited entities can be either a domestic legal entity or an international

organization accredited and designated by the Executive Board or JI Supervisory
Committee. These entities are responsible for the validation and subsequent
102
UNFCCC, n2, Article 2 (10).

Ibid, Article 4.1(b).
104
Kyoto Protocol, n4, Article 12(5); UNFCCC, Decision 9/CMP.1, n71, section D, [20].
103
129
request for registration of a proposed project activity and the verification of

emission reduction of a registered project activity, certification and request for
the issue of CERs or ERUs.105 The DOE is accountable to the MOP through the
Executive Board and is required to comply with all approved modalities and
procedures issued by the Board. The AIE is accountable to the MOP through the
JI Supervisory Committee. 106
The Executive Board and JI Supervisory Committee have power to suspend or

remove the accreditation of an independent entity. 107 If an accredited private
expert is found to have verified credits in excess of those created by the project,
be it through fraud, malfeasance or incompetence, then the expert is held liable
for this error and must acquire credits from the market equivalent to the excess
and surrender these to the Secretariat. 108 Unusually, this penalty holds private
experts accountable for the real ramifications from their failure to perform their
duties properly by requiring the purchase of credits at market rates, which are
subsequently cancelled from the market, rather than simply requiring the
payment of financial compensation. This is another remarkable feature of the
climate change regime, in the empowerment of subsidiary bodies to impose
sanctions directly against private entities without prior recourse to the State.
E International Regulation of Private Entities

All of the flexibility mechanisms provided in the Kyoto Protocol are able to be
utilised by the parties at a State level. State parties may also provide consent for
domestic private entities to engage in these mechanisms independently of the
State.109 Therefore, approved private entities may implement emission reduction
projects in other countries and engage in international emissions trading without
105
Ibid, Article 12(5).

The MOP provides guidance regarding the implementation of the JI and exercises authority over
the JI Supervisory Committee. UNFCCC, Decision 9/CMP.1, n68, section B.
107
Ibid,[42]-[43].
108
UNFCCC, Decision 3/CMP.1, n57, section D, [22].
109
Kyoto Protocol, n4, Articles 12(9) and 6(3).
106
130
the ongoing supervision of their national government. Consequently, the climate

change regime creates incentives, for both public and private entities, to
participate in the research and development of innovative emission reduction
technologies and to gain from the potential rewards of tradeable credits from
those technologies.
To properly supervise these initiatives, the adjudicative
discretion of the approval bodies to the CDM and JI mechanisms must span
public and private interfaces as well as international and domestic spheres. As
noted by one commentator, there are very few other examples of mechanisms
where private entities come into such intimate contact with the sphere of
international law. 110 In particular, the CDM is presented as an example of the
increase of global administrative law, which is characterised by a vast increase in
the reach and form of transgovernmental regulation. 111
The climate change regime is quite unique in its use of direct State commitments,
combined with the flexibility mechanisms, which enable private entities to elect
to assist in the implementation of emission reduction activities. In addition, by
creating tradeable rights in emissions, the regime provides financial incentives
for greater public and private engagement in achieving the emission reduction
objectives of the climate change regime. The regime is by no means perfect and
there are several key areas in which improvements can be made. Moreover,
given the multi-layers of regulation of these projects, the use of the CDM and JI
are not without their risks.
These projects must be successfully navigated
through a time consuming and potentially costly process prior to the actual
implementation of the project and ultimate issue of credits.112 There is also little
protection offered to private entities against the making of adverse decisions with
serious financial repercussions.
110
Streck, n9, 95.

Ibid, 96.
112
2(Special Issue: The Kyoto Protocol and Carbon Finance) Environmental Liability 81 at 86-87.
111
131
Consequently, improvements are needed in relation to the streamlining of

approval process and provision of rights of appeal from decisions for private
entities and in enhancing the quality of community participation in the decisionmaking process. Nevertheless, this regime does set the groundwork for future,
enhanced, environmental models which utilise complementary public/private
expertise and resources and benefit from market mechanisms acting as a catalyst
for technology diffusion and behavioural modification. 113
F International Trade in Emission Instruments

Through their agreement to the UNFCCC and the Kyoto Protocol, the parties
have exercised their sovereign rights to create a regulatory system to respond to
climate change and, in doing so, they have accepted a fetter on their prior
sovereign right to emit an unspecified quantity of greenhouse gas emissions into
the atmosphere. In return for this restriction, they also agreed to the creation and
allocation of tradeable emission instruments with inherent economic value to
incentivise the achievement of global emission reductions.
The parties also
agreed to the establishment of an artificial international market framework to

enable public and private trade in these emission instruments.
To implement a system of such an innovative and novel scale required the

creation of additional supervisory bodies. These bodies were created to establish
rules of procedure and to exercise administrative powers in relation to the
establishment of projects and the issuance of these tradeable emission
instruments. The creation of tradeable mechanisms also necessitated the creation
of an international entity to monitor the operation of this new global climate
market and to act as a check and balance to ensure legitimacy in the system.
113
See Thorstern Benner, Wolfgang Reinicke and Jan Martin Witte, 'Multiple Networks in Global
Governance: Towards a Pluralistic System of Accountability' (2004) 39(2) Government and
Opposition 191 at 193 and 197. Those authors promote the emergence of new forms of governance
along the public-private frontier which harness the transfer and use of knowledge and resources.
132
This function is fulfilled by the UNFCCC Secretariat through the creation of

national and individual registries in conjunction with an ITL.
At an international level, each party is allocated an electronic national registry

which holds its AAUs. Credits created through the CDM mechanism are issued
through the CDM Registry and later transferred to the national registry. Credits
issued through the JI mechanism are issued through the national registry of the
host country and transferred directly in the national registry of the transacting
party. The ability to engage in international emissions trading is dependant on
the party meeting certain eligibility requirements. These include requirements to
have in place a national system for the estimation of emissions; to submit annual
estimates of emissions and to maintain a specified level of reserve emission
instruments within the partys national registry. 114 The Kyoto Protocol permits
the trade of emission instruments by private entities where they are authorised to
trade on behalf of a State. 115
In this case, the State remains ultimately
responsible for compliance with its obligations and with the pre-requisites for
eligibility to trade.116
Whether a party is eligible to trade is determined by the Facilitative Branch of the

Compliance Committee and is communicated to the UNFCCC Secretariat. In the
event of a proposed private or public transaction of allowances between
registries, the ITL verifies the validity of the transactions prior to allowing them
114
The requirements specify that each Party included in Annex I shall maintain, in its national
registry, a commitment period reserve which should not drop below 90 per cent of the Partys
assigned amount calculated pursuant to Article 3, paragraphs 7 and 8, of the Kyoto Protocol, or 100
per cent of five times its most recently reviewed inventory, whichever is lowest.The commitment
period reserve shall consist of holdings of ERUs, CERs, AAUs and/or RMUs for the relevant
commitment period which have not been cancelled in accordance with decision 13/CMP.1. This
restriction does not apply to the transfer of ERUs for JI projects under Article 6 of the Kyoto Protocol.
UNFCCC Decision 11/CMP 1: Modalities, Rules and Guidelines for Emissions Trading under
Article 17 of the Kyoto Protocol, Annex: Modalities, Rules and Guidelines for Emissions Trading
under Article 17 of the Kyoto Protocol, (FCCC/KP/CMP/2005/8/Add 2) at [6]-[11].
115
UNFCCC, Decision 3/CMP.1, n57, [2].
116
UNFCCC, Decision 11/CMP.1, n114, [5].
133
to proceed. 117 The ITL is an automated system which checks for discrepancies
in the transaction including, for example, checking whether the selling party is
eligible to trade on the market. In the event of an identified discrepancy by this
automated system, such as the ineligibility of a State to trade, the transaction will
be cancelled.
118
Any resulting losses to transacting parties, from the
cancellation, will prima facie lie where they fall and affected entities will have to
rely on contractual provisions and national administrative law principles to
address any resulting inequities. 119
A great deal of faith appears to have been placed in the infallibility of this
software to detect discrepancies and to prevent ineligible transactions from
proceeding. 120 Once the confirmation message has been sent from the ITL to the
national registry, all processes will be considered final. 121 No directions have
been issued as to the financial consequences from server faults or other failures
of this system and these matters will have to be addressed on a case by case basis.
The international climate regime has adopted an umbrella arrangement and

superimposed an emissions trading market above the existing domestic legal
systems. In this approach, the climate change regime does not directly regulate at
a local level, no role is established for local scheme administration and domestic
laws remain unaffected. However, the international carbon market has acted as a
catalyst for the emergence of a range of domestic and regional carbon trading
schemes. To achieve the optimal performance of the international climate market,
117
UNFCCC, Decision 13/CMP.1: Modalities for the Accounting of Assigned Amounts under
Article 7, paragraph 4, of the Kyoto Protocol: Annex II: Registry Requirements
(FCCC/KP/CMP/2005/8/Add.2), section D [38].
118
Ibid, Section D [43].
119
The lack of definition regarding liability places great emphasis on the drafting of appropriate
warranties and indemnities in the contractual agreements to avoid reliance on local laws to resolve
liability issues.
120
Such servers will be subject to the same risks and weaknesses as other online servers including, for
example, risks of fraud and unauthorised access.
121
Anthony Hobley and Peter Hawkes, 'GHG Emissions Trading Registries' in David Freestone and
Charlotte Streck (eds), Legal Aspects of Implementing the Kyoto Protocol Mechanisms: Making
Kyoto Work (2005) Oxford, Oxford University Press, 127 at 140.
134
there should be a large number of players and volumes of trade. Accordingly, it

was envisaged that these emerging trading schemes would establish linkages to
form a compatible and optimally efficient multi-national, global, carbon market.
However, not all of these emerging carbon trading schemes are compatible with
the key design features of the climate market and the climate change regime fails
to dictate the form and content of those domestic market systems.
The weakness of this regulatory approach lies in the absence of clear and
consistent regulation, across domestic jurisdictions, in imposing individual duties
to reduce emissions and individual rights to trade in compatible emission
instruments. Ironically, it is this flexibility in domestic implementation that will
ultimately undermine the operation of the climate change regime. Consequently,
the effectiveness of the international climate market, and its ultimate evolution
into a multi-national carbon market, will succeed or fail on the basis of those
domestic legal systems.122
DEFICIENCIES IN THE MONITORING AND ENFORCEMENT OF THE

INTERNATIONAL REGIME
Compliance and enforcement is an essential part of ensuring the environmental

integrity and credibility of international environmental agreements and for
securing ongoing player confidence in the international climate market.123 The
Vienna Convention on the Law of Treaties expresses the international maxim
pacta sunt servanda, that is that each treaty in force is binding upon the parties
122
Legal issues in the operation of the multi-national global carbon market are assessed in Chapter
Seven.
123
(UNCTAD/GDS/GFSB/Misc.6, United Nations Conference on Trade and Development, 1999) at 84.
135
and must be performed by them in good faith. 124 International treaties present
unique problems for regulators in ensuring compliance as they must balance the
need to respect sovereignty with the need to promote compliance.125 The now
infamous quote of Professor Henkin describes the compliance behaviours of
nation States as follows almost all nations observe almost all principles of
international law and almost all of their obligations almost all of the time.126
However, this statement has been criticised by one commentator who submits
that estimations of compliance are systematically overstated and that Henkins
comment is surely premature and probably exaggerated. 127
A number of factors have been identified as impacting on the potential

compliance of a State party to international agreements and conventions. These
include State financial, administrative and technological capacities as well as
differing interpretations as to the meaning of treaty obligations.128 Ambiguity in
the provisions of the treaty is also a prime concern in impeding cohesive
implementation, exacerbating transaction costs associated with compliance and in
making allegations of violation more difficult to prove. 129 As commented:
the incertitude and indeterminacy of most treaty texts is notorious and frequently
deliberate - consensus often being attainable only at the price of constructive
ambiguity.130
124
Vienna Convention on the Law of Treaties, U.K.T.S. 58 (1980); (1969) 63 A.J.I.L. 875 (opened for
signature 22 May 1969)(entered into force 1980). Accession by Australia 13 Jun 1974. Article 26.
125
Tietenberg et al, n123, 91.
126
Louis Henkin, How Nations Behave: Law and Foreign Policy (2 ed, 1979) New York, Praeger at
47.
127
Peter M. Haas, 'Choosing to Comply: Theorizing from International Relations and Comparative
Politics' in Dinah Shelton (ed), Commitment and Compliance: The Role of Non-Binding Norms in the
International Legal System (2000) New York, Oxford University Press, 43 at 44.
128
Ronald B. Mitchell, 'Compliance Theory: an Overview' in James Cameron, Jacob Werksman and
Peter Roderick (eds), Improving Compliance with International Environmental Law (1996) London,
Earthscan Publications, 3 at 12-13.
129
Peter H Sand, 'Institution-building to Assist Compliance with International Environmental Law:
Perspectives 56(3) Heidelberg Journal of International Law 774 (1996)' in Durwood Zaelke, Donald
Kaniaru and Eva Kruzikova (eds), Making Law Work: Environmental Compliance and Sustainable
Development: Volume 1 (2005) London, Cameron May, 209 at 333.
130
Ibid.
136
This is particularly so under the UNFCCC which contains a very broad

obligation to stabilise emissions at an unspecified level, namely, the level which
will prevent dangerous anthropogenic interference with the climate system. No
definition was given to assist in identifying the threshold for non-compliance
with this duty. The COP is empowered to review the implementation of the
UNFCCC but it has not been empowered to enforce its implementation. 131
Parties in dispute regarding the interpretation or application of the UNFCCC can
merely request the creation of a conciliation commission to make a
recommendatory award.132
In contrast, the Kyoto Protocol does establish a relatively sophisticated process

for monitoring compliance with the rules and obligations by nation States
participating in the regime. The monitoring and enforcement mechanisms under
the Kyoto Protocol have built upon the model established under the Montreal
Protocol on Substances that Deplete the Ozone Layer. 133 The Compliance
Committee under the Kyoto Protocol functions through a Plenary, a Bureau, a
Facilitative Branch and an Enforcement Branch. 134
Under Article 18 of the Kyoto Protocol, the MOP is empowered to approve

appropriate and effective procedures and mechanisms to determine and address
cases of non-compliance including through the development of an indicative list
of consequences taking into account the cause, type, degree and frequency of
non-compliance.
131
Parties were able to elect, at the time of deposit of the instrument of ratification, to recognise the
compulsory jurisdiction of the ICJ under Article 14.2 of the UNFCCC, n2.
132
UNFCCC, n2, Article 14.6.
133
Agreed at Montreal, 16 September 1987, 26 International Law Materials 1550 (1987) (entered into
force 1 January 1989). The features of that international regime are discussed in Chapter Two.
134
UNFCCC, Decision 27/CMP. 1: Procedures and Mechanisms Relating to Compliance under the
Kyoto Protocol, Annex: Procedures and Mechanisms Relating to Compliance under the Kyoto
Protocol, (FCCC/KP/CMP/2005/8/Add 3) section 2 at [2].
137
Parties are required to establish national systems for estimating their greenhouse
gas emissions and removals by sinks and must submit regular National
Communications outlining those estimates.135 The submission of these reports is
a pre-requisite to engaging in trade in the international climate market under the
Kyoto Protocol.
It is also used to demonstrate progress in achieving the
implementation of the emission reduction obligations, and other duties, under the
climate change regime. The effectiveness of the reporting obligations, as part of
the monitoring and enforcement of the regime, is dependent on the quality and
timeliness of the submission of national communications by the parties. The
plenary to the Compliance Committee has noted with concern that a significant
number of national communications have not been submitted in a timely manner
with some being more than twenty months overdue. 136 The powers of the
Compliance Committee in relation to such tardiness are unclear.137 The review of
national communications by expert teams is also crucial to the monitoring
process. 138 However, the Compliance Committee has warned the parties that
reduced resourcing and lack of proper expertise and training of experts, will all
undermine the effective functioning of that monitoring process.139
The Facilitative Branch of the Compliance Committee is responsible for

providing advice and facilitation to parties in implementing the Kyoto Protocol
and for promoting compliance by the parties. 140 The role of the Facilitative
Branch is to act as an early warning system and to assist parties which have the
potential to be in non-compliance with their obligations. This body is specifically
aimed at addressing non-compliance through inadvertence resulting from lack of
institutional or financial capacities and to provide clarification regarding the
135
Kyoto Protocol, n4, Articles 5 and 7.

UNFCCC, 'Compliance Committee Facilitative Branch: Fifth Meeting: Report on the Meeting' (6
September 2007, Bonn)(CC/FB/5/2007/2), Other Matters. UNFCCC, 'CMP 3: Annual Report of the
Compliance Committee to the Conference of the Parties Serving as the Meeting of the Parties to the
Kyoto Protocol' (FCCC/KP/CMP/2007/6, 26 September 2007), at III, [22]. See also UNFCCC,
'Decision 5/CMP. 3: Compliance under the Kyoto Protocol'(FCCC/KP/CMP/2007/9/Add.1).
137
UNFCCC, 'CMP 3, n136, [22].
138
139
UNFCCC, 'CMP 3, n136, [23].
140
UNFCCC, Decision 27/CMP. 1, n134, section 4 at [4].
136
138
interpretation and application of treaty principles. 141 The MOP recently noted
that there has been a decrease in the total reported aggregate greenhouse gas
emissions of Annex-1 parties to the Kyoto Protocol but noted with concern that
this decrease had mainly resulted from decreases in emissions by parties with
economies in transition while emissions from other Annex-1 parties have
continued to increase above their base year or target. 142 In the event that the
emissions of the parties are not sufficiently reduced by 2012, then these parties
will fall into non-compliance with the regime. 143 The parties have agreed to a
strict liability penalty to be applied by the Enforcement Branch in the event of
any identified non-compliance of the parties with their emission reduction
duties.144 The automatic penalty comprises of the following components:
deduction from the partys assigned amount for the second commitment
period of a number of tonnes equal to 1.3 times the amount in tonnes of
excess emissions;
development of a compliance action plan; and
suspension of the eligibility to make transfers under Article 17 of the

Kyoto Protocol until the party is reinstated.145
141
Ibid, section 4. Jacob Werksman, 'Designing a Compliance System for the UN Framework
Convention on Climate Change' in James Cameron, Jacob Werksman and Peter Roderick (eds),
Improving Compliance with International Environmental Law (1996) London, Earthscan Publications,
85 at 93-94.
142
Based on reported emissions for 2003/2004 compared to 1990 levels (or the base year as adjusted
for the economies in transition). UNFCCC, 'Decision 7/CMP. 3: Demonstration of progress in
achieving commitments under the Kyoto Protocol by Parties included in Annex I to the Convention'
(FCCC/KP/CMP/2007/9/Add.1).
143
Parties may also acquire credits from the market to submit in compliance provided that the use of
such mechanisms is supplementary to domestic reductions in emissions. At the end of the first
commitment period, Annex I parties are granted 100 days following the completion of the expert
review of their final annual emissions inventory to make-up any shortfall in compliance through the
purchase of additional emission instruments.
144
For other instances of non-compliance, the consequences of non-compliance applied by the
Enforcement Branch must be aimed at the restoration of compliance to ensure environmental
integrity, and shall provide for an incentive to comply. UNFCCC, Decision 27/CMP. 1, n134,
section 5, [6].
145
UNFCCC, Decision 27/CMP.1, n134, section 15,[5]. Accordingly, the deterrence effect of these
provisions is based on the assumption that the non-compliant nation will choose to continue to be a
party to the Kyoto Protocol for the second commitment period.
139
This determinative mechanism was designed to minimise the discretion of the

compliance body to determine the non-compliance ramifications for each party.
In reality, a certain level of discretion is involved in determining whether a party
is, in fact, non-compliant with its obligations. This determination will rely, to a
large extent, on the analysis of information provided by the parties in their
national reports. These reports are based predominantly on indirect estimates of
emissions by sources and each of those estimates will be subject to varying levels
of scientific uncertainty.
The presence of significant rates of scientific
uncertainty in these estimates will play a significant part in any determination of

non-compliance especially given that the required emission reductions are
themselves only 6-8 per cent of reported 1990 emissions.
Accordingly, the
Enforcement Branch will possess some discretion in determining the level of

non-compliance and the actual tonnage of carbon dioxide equivalent repayable
by the non-compliant party. This strict liability approach means that the Kyoto
Protocol does not provide graded sanctions to address varying types of noncompliance. 146 Non-compliance may vary from deliberate and reckless noncompliance to inadvertent non-compliance resulting from, for example, natural
disasters, Acts of God and other force majeure events which may, in fact, be
caused by the impacts of climate change. Despite the agreement of the parties to
these penalties, this failure to import discretionary considerations of
reasonableness and fairness, into the determination of penalties for noncompliance, has the potential to emerge as a major point of contention with noncompliant parties.
The Kyoto Protocol is exceptional in applying strict penal mechanisms to States

for
non-compliance
with
an
international
environmental
agreement.
Unfortunately, those penalty provisions have been undermined by the failure of

the MOP to comply with its own agreed amendment procedures. The Kyoto
Protocol required these penalty provisions to be adopted through an ordinary
session of the MOP and the deposit of instruments of acceptance of the
146
See Edith Brown Weiss, 'Conclusions: Understanding Compliance with Soft Law' in Dinah
Shelton (ed), Commitment and Compliance: The Role of Non-Binding Norms in the International
Legal System (2000) New York, Oxford University Press, 535 at 544 where the author emphasises the
importance of graduated sanctions.
140
amendment from at least three quarters of the parties to the Protocol. 147 Instead,
they were simply adopted by a decision of the parties. 148 Consequently, there are
concerns that these provisions are not legally binding on the parties and could
become a significant issue of contention as the Enforcement Branch seeks to
enforce these provisions. 149 One commentator also asserts that the imposition of
this compliance mechanism will, in fact, have a greater adverse welfare affect on
compliant countries that it will on the non-compliant party due to the impact on
the international price of greenhouse gas emission allowances. 150 Finally, the
regime fails to impose any deterrent on parties discontinuing their membership to
the regime. Accordingly, a non-compliant party may simply elect to withdraw
from the Kyoto Protocol or UNFCCC or both, after providing one years notice,
without incurring any penalty. 151
On an objective reading, the normative value of the climate change regime is

highly questionable. The emission reduction provisions of the UNFCCC are
deliberately drafted in broad, ambiguous terms with heavy emphasis on duties to
consider, take into account and be guided by certain principles. In particular,
identifying the threshold for non-compliance with the overriding obligation of the
UNFCCC is problematic.
The threshold for dangerous anthropogenic
interference with the climate system is largely indeterminate and the subject of
ongoing political and scientific debate. The obligations of the Kyoto Protocol are
worded in slightly stricter terms, with agreed repercussions for non-compliance,
and appear to have greater normative value. However, the small quantum of
specified emission reductions in the treaty actually acts to undermine any
argument that, under the UNFCCC, States must significantly reduce their
147

Article 18 of the Kyoto Protocol, n4, provides that measures with binding consequences may only
be adopted through an amendment to the Protocol itself.
149
Yamin and Depledge, n38, 397; Jon Hovi, Olav Schram Stokke and Geir Ulfstein, 'Introduction
and Main Findings' in Olav Schram Stokke, Jon Hovi and Geir Ulfstein (eds), Implementing the
Climate Regime: International Compliance (2005) London, Earthscan, London, Earthscan at 5.
150
Jon Hovi, Olav Schram Stokke and Geir Ulfstein, 'Introduction and Main Findings' in Olav Schram
Stokke, Jon Hovi and Geir Ulfstein (eds), Implementing the Climate Regime: International
Compliance (2005) London, Earthscan, London, Earthscan at 5.
151
UNFCCC, n2, Article 25. Kyoto Protocol, n4, Article 27. This provision applies three years from
the date on which the UNFCCC or Kyoto Protocol, respectively, entered into force. A party cannot
withdraw from the UNFCCC and remain a party to the Kyoto Protocol.
148
141
emissions in order achieve the objective of avoiding adverse anthropogenic

interference with the climate system.
The Vienna Convention on the Law of Treaties contains a number of principles

that apply to the interpretation of international agreements and provides that:
a treaty shall be interpreted in good faith in accordance with the ordinary meaning
to be given to the terms of the treaty in their context and in the light of its object and
purpose.152
However, these provisions are unlikely to provide much clarification or certainty

in the climate change context. Even if this difficulty were not present, there are
no specific provisions addressing non-compliance within the UNFCCC. As a
result, enforcement of the UNFCCC falls under general international law
principles. Under Article 60 of the Vienna Convention on the Law of Treaties, a
material breach of a multilateral treaty by one party, entitles the other parties, by
unanimous agreement, to suspend the operation of the treaty in whole or in part
or to terminate it.153 However, this provision is of little assistance in relation to
climate change where the overriding objective is to keep the treaty on foot and to
achieve actual emission reductions. The breach of a multilateral treaty by a State
party constitutes a legal injury, that is an injury to a collective legal right or
interest, to all other State parties and redress for may be found before the
International Court of Justice (ICJ).
152
154
This is subject to establishing a
Vienna Convention on the Law of Treaties, n124, Article 31.1. Recourse may be had to the
supplementary means of interpretation including the preparatory work of the treaty when the meaning
is ambiguous or obscure or leads to a result that is manifestly absurd or unreasonable, Article 32.
153
Ibid, Article 60(2). A material breach of a treaty includes a repudiation of the treaty not sanctioned
by the present Convention or the violation of a provision essential to the accomplishment of the object
or purpose of the treaty. Article 60(3).
154
Barcelona Traction Case, Barcelona Traction and Light and Power Co, ICJ Reports (1970) 3 at 32.
Jonathan Charney, 'Third State Remedies for Environmental Damage to the World's Common Spaces'
in Francesco Francioni and Tullio Scovazzi (eds), International Responsibility for Environmental
Harm (1991) London, Graham & Trotman, 149 at 152.
142
sufficiently tangible injury to establish standing and assert a claim before the ICJ
and to seek reparation for the harm done. 155
Consequently, despite the ratification of these obligations under both the

UNFCCC and the Kyoto Protocol by most nations, customary State practice
appears to affirm the global acceptance of continued, unabated greenhouse gas
emissions which continue to elevate year by year without the instigation of any
enforcement action by other nations.
A Due Process and Non-Compliant State Parties

In the event of an unresolved dispute regarding the implementation or
interpretation of the UNFCCC and Kyoto Protocol, the climate change regime
provides that, at the time of ratification, parties may declare whether they
recognise the jurisdiction of the ICJ and/or arbitration in accordance with
procedures adopted by the COP. 156
The jurisdiction of the ICJ was not
recognised in any instruments of ratification to the climate change regime but a

handful of States did recognise the procedures of arbitration to be developed by
the COP. 157 The COP and MOP are yet to approve such dispute resolution
procedures but it is anticipated that the parties will eventually adopt procedures
which refer to the Permanent Court of Arbitration; Environmental Arbitration
and Conciliation Rules.
The Kyoto Protocol seeks to provide procedural protection, similar to due

process in domestic judicial hearings, for those parties who may be found to be
155
Jonathan Charney, 'Third State Remedies for Environmental Damage to the World's Common
Spaces' in Francesco Francioni and Tullio Scovazzi (eds), International Responsibility for
Environmental Harm (1991) London, Graham & Trotman, 149 at 159.
156
UNFCCC, n2, Article 14, Kyoto Protocol, n4, Article 19.
157
UNFCCC Status of Ratification,
http://unfccc.int/files/essential_background/convention/status_of_ratification/application/pdf/unfccc_
conv_rat.pdf at 11 June 2008.
143
non-compliant under the Protocol. 158 As noted, where a party falls into noncompliance with the Kyoto Protocol, the Compliance Branch is responsible for
applying the consequences of non-compliance. State parties are also able to
approach the Enforcement Branch to consider the potential non-compliance of
other State parties. The potentially non-compliant party has a right to be
represented before a hearing of the Enforcement Branch and to have access to
and respond to information provided by others. 159
The Enforcement Branch is composed of members from parties to the Kyoto

Protocol including one member from each of the five regional groups of the
United Nations, one member from the small island developing States, two
developed country members (Annex-1) and two developing country members
(non-Annex-1).160 Each member of the Enforcement Branch must serve in his or
her individual capacity and must act in an independent and impartial manner. 161
In reaching its decision, the Enforcement Branch must seek to reach consensus. If
this does not occur then it may reach a decision by a three-quarters majority of
those members present and voting provided that decision amounts to a double
majority of both Annex-1 and non Annex-1 members. 162
In 2008, Greece was found to be in non-compliance with its obligations under the
Kyoto Protocol. 163 The non-compliance related to the requirement to have in
place a national system for the estimation and reporting of emissions under
158
Compliance (2005) London, Earthscan, at 3.
159
UNFCCC, Decision 27/CMP. 1' n134, Section 9. UNFCCC, Decision 4/CMP.2: Compliance
Committee, Annex: Rules and Procedures of the Compliance Committee of the Kyoto Protocol
(FCCC/KP/CMP/2006/10/Add.1), section 10.
160
UNFCCC, Decision 27/CMP. 1' n134, section 5, [1]. In electing members of the Enforcement
Branch, the MOP must be satisfied that the members have legal experience. This is not expanded
upon.
161
UNFCCC, Decision 4/CMP.2, n159, Section 3. This obligation of impartiality applies to all
members of the Compliance Committee including the Facilitative and Enforcement Branches.
162
UNFCCC, Decision 27/CMP. 1 ', n134, Section 2, [9].
163
UNFCCC, 'Enforcement Branch of the Compliance Committee: Final Decision' (17 April 2008,
CC-2007-1-8/Greece/EB) at [18].
144
Article 5 of the Kyoto Protocol and issues regarding the maintenance of

institutional and procedural arrangements; arrangements for the technical
competence of staff; and the capacity for timely performance of the national
system. 164 The question of implementation was referred to the Enforcement
Branch by the UNFCCC Secretariat following the receipt of a report from the
expert review team. 165 The hearing of the matter was held as part of the meeting
of the Enforcement Branch and comprised of submissions from Greece and
expert evidence from two experts who formed part of the expert review team and
two experts from the UNFCCC roster. 166
Following the hearing and written submissions by Greece, during which Greece
presented information on its transition to a new national system, the Enforcement
Branch of the Compliance Committee noted that the information submitted and
presented had not been sufficient for the Enforcement Branch to conclude that
the question of implementation had been fully resolved and indicated that
additional information was required. 167 It also noted that a further in-country
review of Greeces new national system, in conjunction with a review of an
annual inventory report generated by this national system, is required for the
enforcement branch to assess present compliance with the guidelines. 168 Despite
this absence of adequate information on which to make a determination,
following deliberations in private, the branch made an interim decision that
Greece was in non-compliance with its obligations.
Further submissions were made by Greece which asserted that: Greece had not
been treated consistently by the in-country expert review teams; other national
systems had identified deficiencies yet no questions of implementation had been
raised by those expert review teams; and the EU system (of which Greece is a
164
Ibid, [5], [17].

Ibid, [1].
166
Ibid, [7].
167
Ibid, [16].
168
Ibid.
165
145
part) had been found to be in compliance and able to produce reliable

inventories. 169 Greece also noted the inconsistency between the statement of the
Enforcement Branch that an in-country review was necessary to determine
whether Greece was compliant and the immediate decision of the Branch that
Greece was, in fact, non-compliant.170
A subsequent meeting of the Enforcement Branch made a final decision

declaring Greece to be non-compliant. No reference was made in the decision to
Greeces allegations of inequitable treatment by the expert review teams. The
Enforcement Branch directed Greece to prepare a compliance action plan that
demonstrated measures to ensure the maintenance of the national system through
transitions and support an in-country review of the new national system by the
expert review team. 171 Until such time as the Enforcement Branch deemed this
question of implementation to have been properly resolved, Greece would not be
eligible to participate in the flexibility mechanisms under the Kyoto Protocol.172
This initial application of the adjudicative authority of the climate change regime
demonstrates the tensions which will emerge regarding the roles of the regime in
facilitating the use of the market mechanisms to achieve emission reductions and
regulating to ensure the environmental integrity of these instruments and the
processes for monitoring and enforcement of the regime. In its current form, the
emphasis of the parties appears to be placed on the former role of the regime
rather than the latter which will undermine the deterrent effect of the enforcement
provisions.
This, in turn, requires a strong, independent, well-resourced
enforcement body to counter such lethargy and to resolve instances of noncompliance with well-informed and considered directions to the parties. In its
169
UNFCCC, 'Enforcement Branch of the Compliance Committee: Further Submission of Greece

Under Section X, Decision 27/CMP1' (9 April 2008, CC-2007-1-7/Greece/EB) at 1,3,4,5.
170
This raises questions regarding the standard of proof to be applied in these proceedings and who
bears the burden of proving guilt or innocence. Ibid, 1.
171
No reference was made in the decision regarding whether the same experts would serve on this in
country review team. UNFCCC, 'Enforcement Branch of the Compliance Committee: Final Decision'
(17 April 2008, CC-2007-1-8/Greece/EB) at [18].
172
Ibid.
146
current context, it is not clear that the Enforcement Branch can meet that
standard. Moreover, the Enforcement Branch is not the ultimate adjudicative
authority under the current climate change regime. Recourse is permitted from a
decision of the Enforcement Branch back to the MOP. If it is shown that due
process has not been followed by the hearing of the Enforcement Branch, the
MOP can act as an appeal body and override the decision of the Enforcement
Branch provided it obtains a three-quarters majority vote.173 Under the rules of
procedure, the MOP must not reach a decision on the merits of the matter but it
may agree to return the matter to the Enforcement Branch for a new
determination.174 Even a cursory review of these provisions reveals that these socalled appeal processes are fraught with legal difficulties, particularly given that
the MOP is not an independent, impartial arbitrator and there appears to be no
requirement to alter the constitution of the Enforcement Branch between the
initial and subsequent adjudicative determinations.
B The Treatment of Private Participants

In terms of the protection of procedural rights, the climate change regime
acknowledges the rights to due process of State parties in a reasonably
comprehensive manner.
A critical flaw in the decision-making and appeal
processes is found in the climate change regimes treatment of non-State entities.

No dispute resolution mechanisms are provided for those private individuals and
entities aggrieved by decisions made under the regime. These persons could
potentially include private participants authorised to participate in CDM or JI
activities, non-party investors, DOEs, AIEs, legal entities involved in the transfer
of allowances and persons directly or indirectly affected by the implementation
of projects within host countries.
These private entities do not have the
protection and support of the intermediation of their national governments nor
173
. An appeal must be lodged within 45 days of receipt of the decision of the Enforcement Branch
and will be considered at the following MOP (usually held annually). If an appeal is granted by the
MOP, the initial decision will stand pending that appeal. Consequently, a party could potentially be
held in non-compliance, and unable to trade, for a considerable period of time. UNFCCC, Decision
27/CMP. 1 n134, section 11
174
Ibid.
147
do they have the protection of constitutional or administrative law rights present

in a domestic setting. 175 This lack of regulatory and legal certainty regarding
rights of fairness and due process will undermine private player confidence in the
market mechanisms of the climate change regime and prevent its effective
operation. 176 Currently, it will be necessary for private persons and entities to
seek relief in domestic courts outside of the climate change regime which could
potentially result in a range of inconsistent interpretations and judicial
determinations, at a national level, regarding the operation of the international
legal regime. 177 Consequently, it is critical that the regime is reformed to provide
private entities engaged in the flexibility mechanisms with the same rights of
redress as those of State parties under the climate change regime.
INTERNATIONAL STATE RESPONSIBILITY AND CLIMATE HARM
The UNFCCC and Kyoto Protocol do not address liability issues from climaterelated damage so, by default, this will be governed by existing international law
principles.
However, the application of this doctrine of international law
principles to the complexities of attributing responsibility for climate change

harm is uncertain.
A State may be liable for transboundary damage where it has acted without due
care or diligence, in breach of a treaty or contrary to some prohibition on its
activities.178 This principle of State responsibility for transboundary harm was
first articulated in the now infamous Trail Smelter case which addressed a
175
Streck, n9, 95.

Ibid.
177
Ibid, 98.
178
Alan Boyle, 'Globalising Environmental Liability: The Interplay of National and International
Law' (2005) 17(1) Journal of Environmental Law 3 at 3.
176
148
Canadian smelting operation in Canada which caused injury to land and crops in
America. 179 The Tribunal held that:
no State has the right to use or permit the use of its territory in such a manner as to
cause injury by fumes in or to the territory of another or the properties of persons
therein, when the case is of serious consequence and the injury is established by
clear and convincing evidence.180
This principle has been the subject of little judicial exposition. In the Corfu
Channel case, Albania was found responsible for the harm caused from British
warships being struck by mines in Albanian waters. 181 The ICJ identified a due
diligence obligation of nations States and commented that it is every States
obligation not to allow knowingly its territory to be used for acts contrary to the
rights of other States. 182 These principles were affirmed in the Lac Lanoux case
which addressed the use of an international watercourse.
183
The tribunal
commented that a State must give sufficient consideration to the interests of all
affected States when undertaking activities.184
The principle of sic utere tuo ut alienum non laedas is another established
principle of international customary law 185 and is incorporated within treaties and
international declarations including Principle 21 of the 1972 Stockholm
Declaration which states that:
179
Trail Smelter Arbitration, United States v Canada (1931-1941) 3 RIAA 1905; (1939) 33 AJIL 182;
(1941) 35 AHIL 716.
180
Trail Smelter Arbitration, ibid, 1965.
181
Corfu Channel case, Great Britain v Albania, ICJ, Reports (1949) 3.
182
Corfu Channel case, ibid, 22.
183
Lac Lanoux case, Spain v France, UNRIAA, XII, 281; 24 ILR 101 (English version).
184
Lac Lanoux case, ibid, 315-317.
185
Riccardo Pisillo-Mazzeschi, 'Forms of International Responsibility for Environmental Harm' in
Francesco Francioni and Tullio Scovazzi (eds), International Responsbility for Environmental Harm,
International Environmental Law and Policy (1991) London, Graham & Trotman, 15 at 15; Jonathan
Charney, 'Third State Remedies for Environmental Damage to the World's Common Spaces' in
Francesco Francioni and Tullio Scovazzi (eds), International Responsibility for Environmental Harm
(1991) London, Graham & Trotman, 149 at 175; compare Karl Zemanek, 'State Responsibility and
Liability' in W. Lang, H. Neuhold and K. Zemanek (eds), Environmental Protection and International
Law (1991) London, Graham & Trotman, 187 at 187 who disputes the customary law status of this
principle.
149
States have, in accordance with the Charter of the United Nations and the principles
of international law, the sovereign right to exploit their own natural resources
pursuant to their own environmental policies and the responsibility to ensure that
activities within their jurisdiction or control do not cause damage to the
environment of other states or of areas beyond the limits of national jurisdiction.186
Accordingly, it is now part of the corpus of international law relating to the

environment that each State must prevent harm to its neighbours and the global
commons and must take appropriate steps to minimise the risk of foreseeable
harm. 187 The standard of due diligence required to reduce or minimise the harm
is not clearly defined in international law. 188 With respect to climate change,
reasonable due diligence measures could be interpreted to extend to the
mitigation of greenhouse gas emissions and increases in the capacity of domestic
carbon sinks.189 This obligation to take steps to reduce or minimise the risk of
climate change harm would apply to all nations regardless of whether or not they
are parties to the UNFCCC or the Kyoto Protocol. If climate change related
harm does occur, then the State at fault should be required to compensate the
other nations for their resulting losses.
Recoverable environmental damages
from a material injury can extend from the loss of resources of assessable
economic value to resources of intrinsic value such as biological diversity and
ecosystem function.190
186
United Nations Conference on the Human Environment, 'Declaration of the United Nations
Conference on the Human Environment (UN Doc A/CONF.48/14)' (16 June 1972), Principle 21.
187
Advisory Opinion on the Threat or Use of Nuclear Weapons, (1996) International Court of Justice
Reports 226 at 241 [29].
188
Alan Boyle, n178, 7.
189
Roda Verheyen, Climate Change Damage and International Law: Prevention Duties and State
Publishers at 315.
190
However, the injured State must be able to establish a causative link between the acts of the
responsible nation and the losses suffered. Alan Boyle, 'Reparation for Environmental Damage in
International Law: Some Preliminary Problems' in Michael Bowman and Alan Boyle (eds),
Environmental Damage in International and Comparative Law (2002) Oxford, Oxford University
Press, 17 at 20. See also Michael Bowman, 'Biodiversity, Intrinsic Value and the Definition and
Valuation of Environmental Harm' in Michael Bowman and Alan Boyle (eds), Environmental
Damage in International and Comparative Law: Problems of Definition and Valuation (2002) Oxford,
Oxford University Press, 41 and Louise de La Fayette, 'The Concept of Environmental Damage in
International Liability Regimes' in Michael Bowman and Alan Boyle (eds), Environmental Damage
in International and Comparative Law (2002) Oxford, Oxford University Press, 149 .
150
Accordingly, the practical operation of these international principles to the issue

of climate change remains unclear and it cannot be asserted that states are fully
responsible in international law for damage to neighbouring states.191 Indeed, it
has been commented that reliance on State responsibility to resolve
environmental degradation has serious deficiencies 192 and should be no more
than residual sources of redress. 193 Moreover, a detailed consideration of the
application of these principles to climate change harm concluded that, given the
uncertainty in the application of these principles, States should instead negotiate
a comprehensive scheme covering the costs of adaptation to the impacts of
climate change and any claims for residual damage occurring as a result of
climate change.194 Consequently, the practical application of these principles in
the context of transboundary harm caused by historic greenhouse gas emissions
and global warming is highly problematic. Any such action for transboundary
harm must address the following challenging legal and evidentiary issues:
identifying the responsible wrongdoer for the injury caused by their

greenhouse gas emissions and adverse impacts of climate change;
emissions accumulate in the atmosphere until the sink capacity of the Earths
atmosphere is exceeded and climatic changes occur.195 It will be necessary to
identify the point in time at which the cumulative emitting acts of the
defendant State amounted to a wrongful act. It is of some assistance that the
State is a long-term legal fiction and can be held accountable for wrongful
acts within its entire lifespan; 196
191

Jonas Ebbesson, Compatibility of International and National Environmental Law (1996) London,
Kluwer Law International at 37.
193
194
Roda Verheyen, n189, 364.
195
Intergovernmental Panel on Climate Change by Working Group I' (Cambridge University Press,
1990) at xi.
196
Alexandre Kiss, 'Present Limits to the Enforcement of State Responsibility for Environmental
Damage' in Francesco Francioni and Tullio Scovazzi (eds), International Responsibility for
Environmental Harm, International Environmental Law and Policy (1991) London, Graham &
Trotman, 3 at 5.
192
151
establishing fault; 197 establishing harm or damage; 198 and establishing a

causative link between the wrongful acts of the State and the injury
suffered;199
issues of jurisdiction and the need for all indispensable parties to submit to
the jurisdiction of the ICJ before the matter may be heard;200 and
adequacy of available remedies to provide redress for the continuing injury

of greenhouse gas emissions and the impacts of climate change.
In an effort to provide greater certainty and consensus to international liability,

the Draft Articles on the Responsibility of States for Internationally Wrongful
Acts (Draft Articles) were adopted by the International Law Commission in
August 2001. 201 Although not a source of international law, these principles restate much of the law on State responsibility and provide a forum for further
discussion of the potential for climate change liability.202 These principles assert
that every intentionally wrongful act of a state entails the international
responsibility of that state.203 The wrongful act must be carried out by an organ
or agent of the State not by a private entity. A wrongful act occurs when conduct
consisting of an action or omission that is attributable to the State under
international law; and constitutes a breach of an international obligation of the
State. 204
197

Jonas Ebbesson, n192, 36.
199
The challenges in establishing causation are considered in Chapter Six.
200
Monetary Gold Removed From Rome (Italy v France, Great Britain, USA) 1954 International
Court of Justice Reports 19 at 32 F; East Timor (Portugal v Australia) 1995 International Court of
Justice Reports 90 at 102; Statute of the International Court of Justice (United Nations Charter),
Article 47.
201
Draft Articles on the Responsibility of States for Internationally Wrongful Acts 2001, Article 1.
The General Assembly, in resolution 56/83 of 12 December 2001 and 59/35 of 2 December 2004 took
note of the articles on responsibility of States for internationally wrongful acts and commended them
to the attention of Governments without prejudice to the question of their future adoption or other
appropriate action.
202
For a comprehensive discussion of these principles see Roda Verheyen, n189, 234.
203
Draft Articles on the Responsibility of States for Internationally Wrongful Acts, n201, Article 1.
204
Ibid, Article 2.
198
152
There is a breach of an international obligation by a State when an act of that

State is not in conformity with what is required of it by that obligation, regardless
of its origin or character. 205 However, an act of a State does not constitute a
breach of an international obligation unless the State is bound by the obligation
in question at the time the act occurs. 206 Accordingly, the point in time for
determining whether there was an obligation for establishing State responsibility
is the time at which the greenhouse gas emitting activities took place rather than
when the harm occurred. 207 The question will be whether the State was in
compliance with international law at the point in time at which the greenhouse
gas emitting activity took place.
The status of international law principles regarding liability for injurious acts that
conform to international law is uncertain. 208 It is possible that the parties to the
climate change regime would be able to rely on their compliance with their
emission reduction obligations under those agreements in defending any claims
against them. Consequently, a key issue will be whether the State was strictly in
compliance with its obligations under the UNFCCC to avoid dangerous
anthropogenic interference with the climate system.
In addition, the Draft Articles make provision for injury caused as a result of
force majeure or necessity. Force Majeure is addressed as follows:
1. The wrongfulness of an act of a State not in conformity with an international
obligation of that State is precluded if the act is due to force majeure, that is the
occurrence of an irresistible force or of an unforeseen event, beyond the control of the
State, making it materially impossible in the circumstances to perform the obligation.
205
Ibid, Article 12.

Ibid, Article 13.
207
208
Riccardo Pisillo-Mazzeschi, 'Forms of International Responsibility for Environmental Harm' in
Francesco Francioni and Tullio Scovazzi (eds), International Responsbility for Environmental Harm,
International Environmental Law and Policy (1991) London, Graham & Trotman, 15 at 31.
206
153
2. Paragraph 1 does not apply if:

(a) The situation of force majeure is due, either alone or in combination
with other factors, to the conduct of the State invoking it; or
(b) The State has assumed the risk of that situation occurring (emphasis
added).209
It is possible that a State could argue that global warming and climate change are
themselves natural phenomenon, an irresistible force or unforseen event, that
acted to prevent them from avoiding dangerous anthropogenic climate change as
required under the UNFCCC. However, the obligation relates primarily to the
reduction of emissions which could be undertaken by the State regardless of this
natural phenomenon. The excuse of necessity would also provide little assistance
to States in excusing their failure to reduce emissions. With respect to acts of
necessity, the Draft Articles state that necessity may not be invoked by a State as
a ground for precluding the wrongfulness of an act not in conformity with an
international obligation unless the act:
is the only way for the State to safeguard an essential interest against a
grave and imminent peril; and
does not seriously impair an essential interest of the State(s) towards

which the obligation exists, or of the international community as a
whole. 210
However, this defence may be relevant if the State takes steps to adapt or
mitigate the effects of climate change, to safeguard an essential interest against a
grave and imminent peril, and in doing so, causes injury to another State.
An injured State may demand that there be cessation of the wrongful acts of the
State. 211 This is an absolute obligation with no embedded flexibility for the
209
Ibid, Article 25.
211
Ibid, Article 30.
210
154
manner and timing of cessation. 212 This may cause difficulties where the
wrongful act is the continued emission of greenhouse gases as States are unlikely
to possess the technological means to immediately cease all uses of fossil fuels
and all emissions from within its national boundaries.
The injured State may be able to take countermeasures to induce another State to
comply with its international obligations.213 Where a causal link is established,
States are required to provide full reparation for the injury caused (whether
material or moral) by the internationally wrongful act including the provision of
restitution, compensation and satisfaction. 214 In the determination of reparation,
account shall be taken of the contribution to the injury by wilful or negligent
action or omission of the injured State.215 Accordingly, the injured States own
historic greenhouse gas emissions may play a significant role in the
determination.
Restitution requires the re-establishment of the situation that
existed before the wrongful act was committed.216 This principle of reparation
for environmental damage is articulated in the Chorzow Factory case although it
appears practically impossible for full reparation to be obtained in the case of
greenhouse gas emissions and climate change.217 Under the Draft Articles the
State is under an obligation to provide compensation to cover any financially
assessable damage including loss of profits insofar as it is established. 218 A
State may also be required to provide satisfaction in the form of an
acknowledgement of the breach, an expression of regret or formal apology. 219
212

Draft Articles on the Responsibility of States for Internationally Wrongful Acts, n201, Part II.
214
Ibid, Articles 31 and 34.
215
Ibid, Article 39.
216
Ibid, Article 35.
217
Chorzow Factory Case, Permanent Court of International Justice Ser. A. No. 13 at 47. Alan Boyle,
'Reparation for Environmental Damage in International Law: Some Preliminary Problems' in Michael
Bowman and Alan Boyle (eds), Environmental Damage in International and Comparative Law (2002)
Oxford, Oxford University Press, 17 at 21-22.
218
219
Ibid, Article 37.
213
155
The application of these remedies to climate change related harm is highly

uncertain. There are significant challenges in establishing a specific causal link
between the emissions of the accused State and the harm suffered by the injured
State as a result of the impacts of climate change.
Moreover, the financial
ramifications of climate change are potentially unlimited and could result in a

windfall gain for the injured State. Accordingly, as the incidences of climate
change harm increase, international agreement to specific legal principles
regarding the causative linkages and distribution of responsibility for damage
caused by the emission of greenhouse gases will become critical to resolving
growing international tensions regarding this issue.
CLIMATE CHANGE IMPACTS AND HUMAN RIGHTS PRINCIPLES
In addition to liabilities under the principles of State responsibility, nation States

with large-scale unabated greenhouse gas emissions may be in breach of
international principles relating to the protection of human rights. The interrelationship between climate change and the well being of humankind was noted
by the UN General Assembly in 1988 as follows:
climate change is a common concern of humankind, since climate is an essential
condition, which sustains life on earth.220
The international community has acknowledged the following basic premises of

human rights in the context of the environment:
the right to a healthy and productive life is.. an integral component of the concept of
sustainable development:
220
United Nations General Assembly Resolution, Protection of Global Climate for Present and
Future Generations of Mankind 70th Plenary Meeting, 6 December 1988 (A/RES/43/53/).
156
human beings are at the centre of concerns for sustainable development.

They are entitled to a healthy and productive life in harmony with
nature.221
every State is responsible for guaranteeing the right to life:
the right to live is the right from which all other rights stem. Guaranteeing
this right is the paramount duty of those in charge of all States throughout
the world.222
Universal respect for the rights of humans are specifically acknowledged in the
United Nations Charter as follows:
with a view to the creation of conditions of stability and well-being which are
necessary for peaceful and friendly relations among nations based on respect for the
principle of equal rights and self-determination of peoples, the United Nations shall
promote:
a. higher standards of living, full employment, and conditions of economic and
social progress and development;
b. solutions of international economic, social, health, and related problems; and
international cultural and educational cooperation; and
c. universal respect for, and observance of, human rights and fundamental freedoms
for all without distinction as to race, sex, language, or religion.223
Implied in this, is the protection of the fundamental right to an environment

capable of supporting human society and the full enjoyment of human rights.224
221
UNCED, 'United Nations Conference on Environment and Development: The Rio Declaration'
((1992) 31 ILM 874), Principle 1.
222
The Hague Declaration on the Environment, 11 March 1989, The Hague, 28 I.L.M 1308 (1989).
223
Charter of the United Nations (opened for signature 26 June 1945, San Francisco)(entry into force
24 October 1945), Chapter IX, Article 55.
224
Universal Declaration of Human Rights 1948, adopted and proclaimed by General Assembly
resolution 217 A (III) of 10 December 1948.
157
The Universal Declaration of Human Rights recognises a range of rights of

humans which could be undermined by the adverse effects of climate change
from global greenhouse gas emissions. These include:
the right to life; 225
the right to own property and not be arbitrarily deprived of such property;
226
the right to a standard of living adequate for health and wellbeing

including food, clothing, housing, medical care and necessary social
services;227
the right to realization of economic, social and cultural rights

indispensable for the dignity and personality of a member of society;228
and
the right to freely participate in the cultural life of the community.229
These are reflected in the International Covenant on Economic, Social and

Cultural Rights 1966230 and the International Covenant on Civil and Political
Rights 1966231 including:
recognition that every human being has the inherent right to life;232
recognition of the right of everyone to the enjoyment of the highest

attainable standard of physical and mental health including taking steps
necessary for:
225
Ibid, Article 3.
Ibid, Article 17.
227
Ibid, Article 25.
228
Ibid, Article 22.
229
Ibid, Article 27.
230
International Covenant on Economic, Social and Cultural Rights 1966, 993 U.N.T.S. 3; U.K.T.S.
6 (1977), Cmnd. 6702; (1967) 6 I.L.M. 360.
231
International Covenant on Civil and Political Rights 1966, 999 U.N.T.S. 171; U.K.T.S. 6 (1977),
Cmnd. 6702; (1967) 61 A.J.I.L. 870.
232
Ibid, Article 6.
226
158
the reduction of infant mortality and for the healthy development

of the child;
the improvement of all aspects of environmental and industrial

hygiene;
the prevention, treatment and control of epidemic, endemic,

occupational and other diseases.233
the right to self-determination, the right to freely pursue their economic,

social and cultural development and the right to take part in cultural
life.234
The overriding imperative of protecting the right to life contrasts sharply with the
substantial risk to human life posed by the adverse impacts of climate change.
The predicted impacts of climate change include droughts, storms, flooding, loss
of crops, lack of fresh water and food shortages as well as increased surface
temperatures, sea level rises and the spread of disease. 235 Developing nations are
the most vulnerable to the effects of adverse climate change. Climate change is
likely to have an adverse impact on their local infrastructure and traditional
industry, and may deplete available fresh water, fish, crops and other food
supplies, and impact upon the local social and cultural practices and
livelihoods.236 This could lead to widespread humanitarian disasters, famine and
massive population displacement resulting in an influx of climate refugees to
developed nations. Small island, low-lying coastal, and atoll States are also
particularly vulnerable to climate change and are likely to be adversely affected
by alterations in ecosystems, changes in precipitation, rising sea-levels and
233
International Covenant on Economic, Social and Cultural Rights , n230, Article 12.
International Covenant on Civil and Political Rights ,n231, Article 1; International Covenant on
Economic, Social and Cultural Rights, n230, Article 15.
235
IPCC, 'Policymakers' Summary of the Potential Impacts of Climate Change, Report from Working
Group II to the Intergovernmental Panel on Climate Change' (Australian Government Publishing
Service, 1990) at 2-4; IPCC, 'Climate Change 2001: Synthesis Report to the Third Assessment Report
of the Intergovernmental Panel on Climate Change' (Cambridge University Press, 2001) at 3,9.
236
Intergovernmental Panel on Climate Change' (Cambridge University Press, 2001) at 12.
234
159
increased incidence of natural disasters.237 Indeed, the sheer magnitude of the

threat of climate change to the well-being of humankind has been described by
one international conference as follows:
humanity is conducting an unintended, uncontrolled, globally pervasive experiment
whose ultimate consequences could be second only to a global nuclear war. 238
The nation of Tuvalu in the South Pacific is one of the first islands to commence
evacuation owing to sea level rises. The collection of islands has an average
height of only 2 metres above sea level. 239 The land floods with each high tide
and its 11,000 residents will be evacuated by 2010.240 For the Tuvalu community,
climate change threatens a number of recognised human rights including the right
to a means of subsistence; the right to an adequate standard of living; and the
right to take part in cultural life. 241 The seriousness of the threat of climate
change to the human rights of small island developing States led to the release of
the Male Declaration on the Human Dimensions of Global Climate Change of
the Small Island Developing States. That declaration expressed the following
concern of the representatives as follows:
climate change has clear and immediate implications for the full enjoyment of
human rights including inter alia the right to life, the right to take part in cultural
life, the right to use and enjoy property, the right to an adequate standard of living,
the right to food, and the right to the highest attainable standard of physical and
mental health.242
237
Ibid, 12. Small Island Developing States, Male Declaration on the Human Dimensions of Global
Climate Change, Adopted at Male 13-14 November 2007.
238
World Conference on the Changing Atmosphere: Implications for Global Security, Toronto,
Canada 27-30 June 1988 (World Meteorological Organization, 1988).
239
Apisai Lelemia Prime Minister of Tuvalu, 'A Threat To Our Human Rights: Tuvalu's Perspective
On Climate Change', UN Chronicle Volume 2 2007.
240
Ibid.
241
Professor Jon Barnett, 'Climate Change and Human Rights', The Jakarta Post.com (Bali), 10
December 2007.
242
Small Island Developing States, Male Declaration on the Human Dimensions of Global Climate
Change, Adopted at Male 13-14 November 2007.
160
Small developing countries affected by the adverse impacts of climate change are
beginning to seek recourse against developed nations of the world. The most
likely defendants are the United States of America (US) and Australia who have
historically refused to acknowledge the threat of climate change and ratify the
Kyoto Protocol. An example of one such claim is that of the Inuit population
filed in the Inter-American Commission on Human Rights in 2005. The petition
sought relief for violations of their rights resulting from global warming caused
by US greenhouse gas emissions. They have asserted that the global warming
impacts on the Arctic have undermined their culture and economy and thus
breached their human rights.
The Inuits claim that global warming has resulted in less snow, thinner ice, less
ice, later freezes and earlier, more sudden thaws in the Arctic. 243 It has also
resulted in:
erosion, storms, floodingdamaged Inuit property, forcing relocation in some cases
and requiring many communities to develop relocation contingency plans. In
addition, these impacts have contributed to decreased water levels in rivers and
lakes, affecting natural sources of drinking water, and habitat for fish, plants, and
game on which Inuit depend.244
The Inuits claim that the culture, economy and identity of the Inuit as an
indigenous people depend upon the ice and snow.245 The Inuits have submitted
that this has breached their fundamental human rights including:
rights to the benefits of culture, to property, to the preservation of health, life,
physical integrity, security, and a means of subsistence, and to residence,
movement, and inviolability of the home.246
243
Sheila Watt-Cloutier with the support of the Inuit Circumpolar Conference on behalf of all Inuit of
the Arctic Regions of the United States and Canada, 'Petition to the Inter American Commission on
Human Rights Seeking Relief From Violations Resulting From Global Warming Caused By Acts and
Omissions of the United States' (2005) at 2.
244
Ibid, 3.
245
Ibid, 1.
246
Ibid, 5.
161
There will be significant evidentiary and procedural issues to be overcome in

successfully establishing State liability for breaches of human rights based on
historic greenhouse gas emissions and the resulting impacts of climate change.
These include jurisdictional issues with respect to large scale emitters, such as the
US, as well as issues regarding the enforceability of any judicial declaration
against such nations. An analysis of the prospects of success of such actions
requires a detailed analysis of the operation of international law principles which
lies outside the scope of this research. However, it is clear that the intensifying
impacts of climate change are adversely impacting on these fundamental
international principles regarding the sanctity and protection of the rights of
humankind.
Although it would be, from a practical perspective, almost impossible to attribute

responsibility for such human rights breaches to any one particular nation, these
claims do raise awareness of the urgency required in the international
communitys response to the threat of climate change and the need to create
distributive mechanisms to address liabilities associated with this emerging
climate change harm. This leads to the conclusion that the international climate
change regime has not adopted sufficiently stringent obligations for all nations to
urgently achieve the significant reductions in greenhouse gas emissions required
to cease such human rights abuses.
Nor has it created fair and equitable
mechanisms to allocating liability for such harm. This is clearly contrary to the
spirit and objectives of international cooperation in responding to the risks posed
to humankind.
162
THE FUTURE INTERNATIONAL REGULATION OF CLIMATE

CHANGE
The climate change regime has been created with a wide discretionary scope for
future evolution and expansion beyond its original regulatory blueprint. The
UNFCCC and Kyoto Protocol provide the COP and MOP with broad powers to
exercise such other functions as are required for the achievement of the
objective of the [Convention/Protocol]. 247 This provides the COP and MOP with
significant scope in setting future policy directions and in evolving the scope of
the regime beyond its original agreement to adapt to changing environmental,
economic and social circumstances. In addition, the UNFCCC permits the COP
to amend its own rules of procedure, through consensus decision-making, which
provides a wide flexibility in responding to climate change under the regime. 248
Since its initial creation, the climate change regime has also continued to evolve
through the further decisions of both the parties to the UNFCCC and the parties
to the Kyoto Protocol (COP/MOP). In the decade since the Kyoto Protocol was
concluded, the parties have continued to make additions to the existing
institutional and regulatory structures as new implementation issues and policy
objectives have been identified. This ad hoc approach to the evolution of the
climate change regime has, at times, aggravated an already complex and
convoluted approach to international regulation. Although not ideal from the
perspective of optimal regulatory models, these decisions of the COP/MOP have
enabled the parties to seek continual improvement in the regime and to attempt to
resolve issues in the approval and implementation of the flexibility
mechanisms.249
247
UNFCCC, n2, Article 7(2)(m) and Kyoto Protocol, n4, Article 13(4)(j).
UNFCCC, n2, Article 7(2)(k).
249
However, the constant expansion of decisions, obligations and rules by the multiple regulators may
lead to a lack of transparency and clarity. It now appears necessary for the regime to consolidate
these unwieldy rules into a single, clear and unambiguous format.
248
163
The parties to the climate change regime have also agreed to commence
dialogues on longer term climate change commitments, post-2012, and these
discussions will affect the future features of the climate change regime. As
required under the Kyoto Protocol, the parties have initiated discussions with
respect to emission reduction commitments under the Kyoto Protocol for future
commitment periods.250 In addition, parties to the UNFCCC agreed to engage in
an open and non-binding dialogue to analyse strategic options for long-term
cooperative action to address climate change. 251
This two-year dialogue
considered advancing development goals in a sustainable manner, addressing

action on adaptation, and realising the full potential of technology and marketbased opportunities. 252
In 2007, the parties agreed to a roadmap for future negotiations to urgently

enhance the implementation of the UNFCCC in order to achieve its ultimate
objective.253 The so-called Bali Action Plan agreed to enable the full, effective
and sustained implementation of the UNFCCC through long-term cooperative
action, both now and beyond 2012, and decided to reach an agreed outcome
addressing inter alia: 254
(a) a long-term global goal for emission reductions to achieve the ultimate objective
of the Convention in accordance with, inter alia, the principle of common but
differentiated responsibilities and respective capabilities;
(b) enhanced national/international action on mitigation of climate change,
including consideration of:
(i) measurable, reportable and verifiable nationally appropriate mitigation
commitments or actions including quantified emission limitation and
reduction objectives by all developed country parties; and
250
Kyoto Protocol, n4, Article 3.9 . UNFCCC, 2005, Decision 1/CMP.1Consideration of

commitments for subsequent periods for Parties included in Annex 1 to the Convention under Article
3, paragraph 9 of the Kyoto Protocol (FCCC/KP/CMP/2005/8/Add.1).
251
UNFCCC, 2005, Decision 1/ CP.1l, Dialogue on long-term cooperative action to address climate
change by enhancing implementation of the Convention (FCCC/CP/2005/5/Add.1). The first meeting
took place on 15-26 May 2006.
252
Ibid.
253
UNFCCC, Decision 1/CP 13: Bali Action Plan (December 1, FCCC/CP/2007/6/Add.1) at 1.
254
Ibid, 1-2.
164
(ii) measurable, reportable and verifiable nationally appropriate mitigation

actions by developing country parties, in the context of sustainable
development, supported and enabled by technology, financing and capacitybuilding;
(v) various approaches, including opportunities for using markets, to enhance
the cost-effectiveness of, and to promote, mitigation actions;
(vii) ways to strengthen the catalytic role of the Convention in encouraging
multilateral bodies, the public and private sectors and civil society, building
on synergies among activities and processes, as a means to support mitigation
in a coherent and integrated manner;
(c) enhanced action on adaptation, including consideration of:
(i) international cooperation to support urgent implementation of adaptation
actions, including ways to enable climate-resilient development and reduce
vulnerability of all parties, taking into account the urgent and immediate needs
of developing countries that are particularly vulnerable to the adverse effects of
climate change;
(ii) risk management and risk reduction strategies, including risk sharing and
transfer mechanisms such as insurance;
(iii) disaster reduction strategies and means to address loss and damage
associated with climate change impacts in developing countries; and
(d) enhanced action on technology development and transfer to support action on
mitigation and adaptation including consideration of ways to accelerate deployment,
diffusion and transfer of affordable environmentally sound technologies.
The parties have determined to reach an agreed outcome to be adopted by the

parties at the end of 2009. 255 To maintain continuity in the climate change regime,
such amendments would need to be ratified by the parties prior to the end of the
first commitment period in 2012.
255
At COP 15. Ibid, 1, 3.
165
In addition to this consensus-based evolution of a regime to respond to climate

change, as the symptoms of adverse climate change become more intense it will
create increasing tensions between nation States in terms of conflicting resource
use and economic impacts. The UN Chief recently stated that climate change
poses as much danger to the world as war and noted that:
the danger posed by war to all of humanity and to our planet is at least matched by
the climate crisis and global warming.256
In 2007, for the first time, the UN Security Council considered the relationship
between energy, security and climate change as part of its responsibility for the
maintenance of international peace and security. 257
An EU report on the
implications of climate change on international security noted that existing

conflicts in relation to the reduction of arable land, widespread shortage of
water, diminishing food and fish stocks, increased flooding and prolonged
droughts will be intensified as a result of climate change. 258 There will also be
intensified competition over energy resources and:
because much of the world's hydrocarbon reserves are in regions vulnerable to the
impacts of climate change and because many oil and gas producing states already
face significant social economic and demographic challenges, instability is likely to
increase (emphasis added).259
Further conflict is also likely to arise over energy resources in the Polar regions
which will become exploitable as a consequence of global warming.260
256
UN Secretary General Ban Ki-moon, BBC News Online, UN chief warns on climate change
(2007) http://news.bbc.co.uk/2/hi/in_depth/6410305.stm at 11 June 2008.
257
United Nations Charter, n223, Article 24(1). United Nations Security Council, Security Council
5663rd Meeting: Security Council Holds First-Ever Debate on Impact of Climate Change on Peace,
Security, Hearing Over 50 Speakers, Some Delegations Raise Doubts Regarding Councils Role on
Issue, While Others, Particularly Small Island States, Welcome Councils Consideration (17 April
2007, SC/9000) http://www.un.org/News/Press/docs/2007/sc9000.doc.htm at 11 June 2008.
258
European Council, 'Climate Change and International Security: Paper from the High
Representative and the European Commission to the European Council' (Brussels 3 March 2008,
7249/08) at 3.
259
Ibid, 4.
260
Ibid.
166
In this context, and in the absence of a strong regulatory response under the
climate change regime, it is not far-fetched to envisage that the UN Security
Council may well govern the threat to peace and security posed by the impacts
of climate change and the associated threats to human health, property, food,
water and energy supply. Should the UN Security Council choose to intervene it
has very strong powers at its disposal to control emissions and human responses
to the impacts of climate change including the use of armed forces with powers
of shoot to kill for non-compliance with the directions of the Security Council.261
THE STRENGTHS AND DEFICIENCIES OF THE CLIMATE CHANGE

REGIME
The architecture of the climate change regime has been heralded as being
innovative, ground-breaking and the most sophisticated example of an
international environmental regime to-date. 262
Through a complex web of
fragmented delegations from the sovereign parties, the climate change regime has
created a myriad of bodies, committees and other institutions responsible for the
implementation and operation of the regime. However, such innovation brings
with it significant challenges in implementation and raises a number of questions
regarding the effectiveness of such a regulatory model.
Some of the key
strengths and weaknesses of this international regime are highlighted in the

following paragraphs.
261
United Nations Charter, n223, Chapter VII.

Inter alia, Suzi Kerr, 'Additional Compliance Issues arising from Trading' in Suzi Kerr (ed), Global
Emissions Trading; Key Issues for Industrialized Countries, New Horizons in Environmental
Economics (2000) Cheltenham, UK, Edward Elgar, 85 at 90 and Streck, n9, 91.
262
167
A The Flexibility Mechanisms

Through the creation of the flexibility mechanisms, the climate change regime
intends to harness the innovation and cost-effectiveness of the domestic cap and
trade market model to achieve global emission reductions and address the
impacts of climate change. A great deal of emphasis has been placed on the
curative abilities of the international climate market in facilitating cost-effective
reductions in global greenhouse gas emissions. However, this optimism is not
supported by any actual evidence of the success of similar regulatory approaches
at the international level. It is not known how effective the market mechanisms
will actually be in achieving these emission reductions nor the timescales
required for the market to achieve optimal operation and performance. Moreover,
the creation of the international climate market has focused, primarily, on the
trade aspects of the flexibility mechanisms and omitted to consider properly the
integral role of the cap within that market system. This deficiency means that
these market mechanisms are unlikely to achieve their complementary goals of
redistribution and reduction under the climate change regime.
The long negotiation period, between the agreement of the text of the Kyoto
Protocol and the beginning of the first commitment period, has resulted in the adhoc addition of new regulators and rules to the regime without due regard for the
impact of those additions on the effectiveness of the overall institutional structure.
The result is a model of international regulation with multiple, fragmented,
limited delegations to the regulatory bodies.
Although superficially the
regulatory structure may appear innovative and sophisticated, in reality, many of

the regulatory bodies are little more than empty shells. The solution to rectify
these deficiencies will not be simple but appears to demand the return to a strong,
centralised, regulatory model, post-2012, with sufficient delegation of power to
regulate this broad global issue of climate change.
168
The establishment of multiple, regulatory subsidiary bodies has resulted in a

fragmented governance structure, heavy in complex rules and procedures, which
over-regulates the CDM/JI mechanisms without facilitating the emission
reduction objectives of the climate change regime. Furthermore, the CDM and JI
supervisory bodies currently suffer from insufficient resourcing, personnel and
technical expertise to carry out their complex regulatory functions.
These
supervisory bodies should, as a minimum, be merged into a single professional

body to regulate all emission reduction projects in a more streamlined fashion.
Indeed, it is recommended that governance of all of the Kyoto Protocol legal
instruments be regulated by a single climate change regulatory authority, such as
an enhanced UNFCCC Secretariat, in order to minimise the potential for overlap,
competition and inconsistencies between the various regulators. It would also
enable the strong regulation of emission reduction projects to ensure that, in
practice, they do assist in the global promotion of the principles of ecologically
sustainable development (ESD).
B The Emission Reduction Duties

The climate change regime has been clearly undermined by a lack of consensus
regarding the likelihood of, and impacts from, climate change and a lack of
political consensus regarding the adoption of stringent and rapid emission
reduction obligations. The climate change regime was established at a time when
the realities of adverse climate change were not fully acknowledged by the
international community. As a result, the model was designed with an emphasis
on flexibility of implementation rather than on the establishment of a strong
regulatory model. The model places great emphasis on competition within the
international climate market and uses financial incentives to encourage nations
and private industry to play a role in achieving emission reductions. However,
this excessive reliance on markets, incentives and flexibility, without a strong
disciplining force to drive emission reductions, results in an overly flexible
regime that can be criticised as being little more than smoke and mirrors.
169
Ultimately, the UNFCCC and Kyoto Protocol are together aimed at avoiding the
adverse effects of climate change through the reduction of greenhouse gas
emissions. However, the attainment of those objectives will be undermined by
the adoption of weak regulatory instruments within the international climate
change regime. The climate change regime will be instrumentally incoherent
where the choice of institutions and rules does not correspond with the
underlying policy goals of the regime. There appears to be ongoing tension in
the international community between growing scientific and community support
for strong action on the serious threat of climate change and political resistance to
the adoption of a strong regulatory approach to reduce global greenhouse gas
emissions. The UNFCCC does not specify the level, and timing, of abatement to
achieve its objectives. Moreover, the specific targets of the Kyoto Protocol are
clearly inadequate to avoid adverse climate change and will achieve no more than
a five per cent reduction in the greenhouse gas emissions of some developed
nations, compared to 1990 levels, by the end of the first commitment period in
2012.
Consequently, the climate change regime will be hindered by this
fundamental disconnect between the need for significant and rapid reductions in
emissions and the absence of consensus to a regime with a strong disciplining
force. Until such time as international consensus is achieved to a significant
quantum of emission reductions within a rapid timeframe, the regime will
continue to be ineffective in achieving its true objective of avoiding the adverse
impacts of climate change.
C Interaction with Domestic Responses to Climate Change

The overriding obligations of the regime relate to broad emission reductions with
no specific requirements for domestic abatement activities. Whilst this enables
parties to cater their policies according to their local emitting behaviours and
economic backgrounds this availability of choice also undermines the strength
and effectiveness of the regime.263
263
P E Morthorst, 'National Environmental Targets and International Emission Reduction

Instruments' (2003) 31(1) Energy Policy 73.
170
The success of the climate change regime in achieving reductions in greenhouse

gas emissions is dependent on the sum of all the State parties national
undertakings which, accordingly, requires that the national measures of each
State are compatible with the international regime. 264 Many factors will influence
the choice of domestic activities including the stringency and normative structure
of the international agreements as well as the political climate, public opinion,
economic and social circumstances and the state of the environment.
265
Accordingly:
the effectiveness of international regimes is not a one-way relationship from an
international institution to domestic policy implementation. It is better understood
as an interactive process that includes domestic policy ideas and trajectories
interacting with international negotiations and institutions.266
The potential scope of potential domestic activities to respond to climate change

is broad and extends beyond mere energy use to policies regarding research and
development; renewable energy subsidies; regulation of the resources industries
including electricity, natural gas and mining, agriculture and land management
practices; forest management; energy efficiency in the design of buildings and
appliances; and management of the transport and aviation industries.
Furthermore, the creation of a global market in carbon credits, at an international
level, has led to the domestic development of emission abatement schemes
combined with trading markets. Many of these markets have been designed with
the intention of forging future linkages with the international market. However,
the absence of any direction regarding the optimal design of these markets has
resulted in a myriad of models which may not, ultimately, be compatible with the
design of the climate change regime.
264
Jonas Ebbesson, n192, xix.

Ibid, 16. See also Alina Averchenko, Factors of Effectiveness of the International Climate Change
Regime (PhD Thesis, University of Bath, 2004) at 78.
266
Alina Averchenko, n265, 78.
265
171
Addressing climate change requires an effective international regime with the

strength to regulate across global, national and local spheres and influence the
decisions of governments, private investors and individuals alike. To achieve
this, the regime must be empowered with a portfolio of strong incentives and
disincentives, utilising regulatory, liability and market approaches, to promote a
rapid transformation in behavioural choices regarding energy use and energy
efficiency.
A stronger international climate change regime is required with
greater powers to issue directions regarding the domestic policies and emitting
activities of parties to the regime. This may include the imposition of duties on
nation States to promote research and development, energy efficiency and other
policies to modify social behaviour.
D Treatment of Non-Compliance with the Regime

There is a visible absence of repercussions for non-compliance with emission
reduction duties under the climate change regime. In the case of the UNFCCC,
there is only a general obligation to reduce emissions by an undefined amount at
an undefined point in time. There are no stated repercussions in the treaty for
addressing non-compliance with that obligation.
In the case of the Kyoto
Protocol, the emission reduction targets are limited and apply only to a selection
of developed nations. Moreover, the stated enforcement provisions of the Kyoto
Protocol were not properly ratified and are not legally binding on the parties. To
further compound this issue, the parties may withdraw from these agreements, at
any time, without penalty.
The result is an international culture of non-
compliance with little or no repercussions for business as usual emissions. Such

lethargy must be counteracted by the creation of a strong enforcement regime.
The effective implementation of a strong regime with duties to restrict emissions
must also be actively supported by all participating members of the international
community. Substantive non-compliance must be condoned, not ignored, and
those non-compliant parties should be treated accordingly at the negotiating table
to any post-2012 regime.
172
CONCLUSION
Responding to the phenomenon of climate change requires a strong global regime

with embedded flexibility to enable adaptation to emerging scientific and
technological opinion regarding the avoidance of adverse climate change. 267
Climate change is a complex, multi-faceted, global issue that affects a range of
State actors, private firms, expert advisors and private individuals across
domestic jurisdictions and requires new regulatory approaches to engage and
regulate these actors worldwide and across public and private spheres. 268
Accordingly, addressing climate change requires effective regulation across a
range of spheres from the global to the national, Federal, state and local, and is
dependent upon the ability to influence the decisions of governments, private
entities and individuals alike. This unique context requires a regulatory regime
with strong incentives to promote an urgent shift in established behavioural
patterns towards improved energy efficiency and the utilisation of low carbon
energy sources.
The above analysis indicates that the international communitys unconditional

trust in the curative abilities of the carbon market has taken place at the expense
of a well-designed command and control regulatory approach to climate change.
The combined effect of all of the identified dysfunctional features of the climate
change regime is a weak international regime, lacking in regulatory coherence
and strong disciplining force to achieve the significant short-term behavioural
changes required to respond adequately to the threat of climate change.
267
See Axel Michaelowa, 'Flexible Instruments of Climate Policy' in Axel Michaelowa and Michael
Dutschke (eds), Climate Policy and Development: Flexible Instruments and Developing Countries
(2000) Cheltenham, UK, Edward Elgar, 1.
268
Benner, Reinicke and Martin Witte, n113; Patrizia Nanz and Jens Steffek, 'Global Governance,
Participation and the Public Sphere' (2004) 39(2) Government and Opposition 314; Benjamin
Richardson, 'Enlisting Institutional Investors in Environmental Regulation: Some Comparative
Theoretical Perspectives' (2002) 28(2) North Carolina Journal of International Law and Commercial
Regulation 247.
173
It is imperative that the international community acknowledges that the

innovation of using the flexibility mechanisms is merely a global experiment in
new approaches to environmental regulation rather than the panacea for societys
addiction to the use of fossil fuels. Accordingly, the design of a framework for
the climate change regime, post-2012, must learn from the mistakes of its
predecessor.
Post-2012, any regime to respond to climate change must
incorporate a strict and universal emission reduction duty for all nations that is
linked to the scientific consensus regarding the magnitude and timescale of
necessary emission reductions.
The legal mechanisms of that regime must
include a harmonious portfolio of regulatory, liability and market instruments

and be supported by a well resourced regulatory authority with strong powers to
implement and supervise those instruments. The international climate change
regulator must be empowered to direct nations, perhaps through the
establishment of a national counterpart, with respect to their method of
achievement of the emission reduction duties and the design of compatible
domestic carbon markets. Furthermore, given the inevitability that some adverse
climate change will now occur, and the inadequacy of existing international law
principles in addressing such damages, the jurisdiction of this climate change
authority should also extend to the activities of nations in adapting to the impacts
of climate change and to the distribution of responsibility for climate harms
within society.
The potential benefits of the carbon market have captured international attention
and acted as a catalyst for the development of regional and national emission
trading schemes.
Accordingly, it appears inevitable that the flexibility
mechanisms will continue to be harnessed as regulatory tools in the post-2012

regulatory framework.
However, these mechanisms must be reformed and
refined to ensure that they promote the environmental integrity of the regime
rather than bringing it into question. Moreover, to operate effectively, these
market mechanisms must be supported by the compatible and harmonious
treatment of tradeable emission instruments within the legal systems of
participating domestic jurisdictions.
174
Chapter Four - The Australian Legal Response to Climate

Change
INTRODUCTION
The purpose of this chapter is to analyse critically the current role of Australian
law in directly regulating greenhouse gas emissions and mitigating the impacts of
climate change.
The Australian government repeatedly confirmed its
commitment to reducing Australias emissions in accordance with the allocated

target under the Kyoto Protocol.1 Accordingly, in analysing the legal response to
climate change in Australia one would expect to encounter some form of
regulatory duty to restrict emissions, with associated liability provisions, and
some semblance of a functional carbon market system. However, this is not to be
the case. The premise of this chapter is that the regulation of the impacts of
climate change in Australia is characterised by an acute absence of effective
regulatory, liability and market approaches to respond direct ly to the issues of
climate change. Indeed, this chapter concludes that effective Australian laws to
regulate greenhouse gas emissions are conspicuous in their absence. A deliberate
political decision to focus on voluntary policies and initiatives, rather than
enforceable systems of regulations, liabilities and market mechanisms, is
symptomatic of the presence of political resistance to the creation of a legal
response which could undermine economic growth and competitiveness. The
result is a regulatory environment with no coherent legal framework to facilitate
the now urgent and significant reductions in Australias emission levels required
to avoid the adverse impacts of climate change.
Department of the Environment and Heritage, 'Tracking to the Kyoto Target 2006: Australia's
Greenhouse Emissions Trends 1990 to 2008-2012 and 2020' (Australian Greenhouse Office, 2006) at
3.
175
THE REGULATORY CONTEXT IN AUSTRALIA
On a per capita basis, Australia is the third highest emitter of greenhouse gases. 2
Australia contributes 1.43 per cent of the worlds carbon emissions and
comprises 0.32 per cent of the global population. 3 Australias largest and fastest
growing source of emissions comes from energy use and consumption levels are
rising along with Australias rate of economic growth. 4 Emissions from the
energy sector comprised approximately 69 per cent of national emissions in
2004.5 The majority of Australias electricity is fuelled by non-renewable fuels
such as coal and gas with approximately 10 per cent of electricity sourced from
renewable energy including hydro-electric plants. 6 The agriculture sector is
responsible for 16.5 per cent of Australias net emissions and a further 6.3 per
cent of net emissions comes from the land use, land use change and forestry
sector. 7 This sector includes land clearing which, in the 1990s, was a major
source of Australias greenhouse gas emissions. 8 There are now strict controls on
widespread land clearing across Australia. 9
United Nations Development Programme, 'Human Development Report 2007/2008 Fighting

Climate Change: Human Solidarity in a Divided World' (UNDP, 2007), carbon dioxide emissions
and stocks http://hdrstats.undp.org/indicators/237.html at 14 June 2008. C. Hamilton, 'Comparison
Of Emission Sources and Emission Trends Among OECD Countries' (Australia Institute, 1994).
3
Michael R. Raupach et al, 'Global and regional drivers of accelerating CO2 emissions' (2007)
Proceedings of the National Academy of Sciences <http://www.pnas.org/cgi/reprint/0700609104v1>;
CSIRO, 'CO2 emissions increasing faster than expected', CSIRO Media Release 22 May 2007,
http://www.csiro.au/news/GlobalCarbonProject-PNAS.html#1 at 14 June 2008.
4
and Heritage, Canberra' (Australia State of the Environment Committee, 2006) (SoE 2006)
http://www.environment.gov.au/soe/2006/index.html at 14 June 2008 at 13.
5
Ibid, 27. This includes the stationary energy subsector (49.6 per cent of net emissions) and the road
transportation subsector (12.5 per cent of net national emissions).
6
Australian Greenhouse Office, 'Renewable Energy Commercialisation in Australia' (AGO, 2003) at
vii.
7
SoE 2006, n4, 28.
8
Ibid.
9
For example, in Queensland under the Vegetation Management Act 1999 (Qld).
176
Australia has an energy intensive economy and exports two thirds of its primary
energy production with approximately AU$24 million in exports a year,
primarily from the sale of coal. 10 Moreover, Australias population and economy
are both continuing to grow. Without emissions reductions initiatives, and
excluding land use change, Australias emissions have been predicted to grow by
28 per cent from 1990 to 2010 with an increase of 40 per cent in energy sector
emissions. 11
Australia is a party to the United Nations Framework Convention on Climate

Change (UNFCCC). 12 The objective of the UNFCCC is the stabilisation of
greenhouse gas concentrations in the atmosphere at a level that would prevent
dangerous anthropogenic interference with the climate system.13 Australia also
ratified the Kyoto Protocol to the UNFCCC in December 2007 and is now
obliged to achieve its allocated emissions reduction target for the commitment
period 2008 to 2012. 14 Australia was one of only three nations granted an
increase in its greenhouse gas emissions in the first commitment period of the
Kyoto Protocol and was allocated a target of maintaining emissions at 108 per
cent of 1990 levels.15 All Annex-1 parties, including Australia, are also able to
account for national human induced land use change and forestry activities,
since 1990, in calculating their national emissions under the Kyoto Protocol.16
10
Australian Government Energy Task Force, 'Securing Australia's Energy Future' (Department of the
Prime Minister and Cabinet, 2004) at 2; John Wright, 'Towards An Australian Hydrogen Economy'
(2006) 63(6) International Journal of Environmental Studies 837 at 837; R John Samdeman Oam, 'A
Critique of Present Australian Energy Policy' (2006) 63(6) International Journal of Environmental
Studies 719 at 720.
11
Australian Government, 'The National Greenhouse Strategy: Strategic Framework for Advancing
Australia's Greenhouse Response' (Australian Government, 1998) at vii.
12
31 ILM 849 (entered into force on 21 March 1994) (UNFCCC).
13
Ibid, Article 2.
14
signature 16 March 1998 (entered into force on 16 February 2005)(Kyoto Protocol)(together the
Kyoto Protocol and UNFCCC are referred to as the climate change regime). Australia signed the
Kyoto Protocol on 29 April 1998. Following the change of government in 2007, the instrument of
ratification was deposited with the UNFCCC Secretariat on 12 December 2007 and entered into force
on 11 March 2008.
15
The other nations granted an increase were Norway and Iceland.
16
This includes afforestation, reforestation and deforestation activities that have been measured as
verifiable changes in carbon stocks. Kyoto Protocol, n14, Article 3.3.
177
Australia agreed to its emissions reduction target at Kyoto in December 1997. In

June 2001, the United States of America (US) withdrew from the Kyoto Protocol
process and, in 2002, the Australian government announced that it would not
ratify any agreement to restrict greenhouse gas emissions which excluded
developing countries and the US.17
Australias ongoing political position remained that it would not ratify the Kyoto
Protocol unless, and until, it was in the national interest to do so. The then Prime
Minister asserted that, due to Australias special position as an emissions
intensive economy, the Kyoto Protocol would cost jobs and damage Australian
industry. 18 The impacts on the Australian economy from the use of emissions
caps were described by the Australian Greenhouse Office as follows:
compliance with our international greenhouse gas emission commitments will
require a degree of structural adjustment within the economy and, as relatively
emissions-intensive economy... would involve real economic costs for Australia.19
.
the imposition of an emissions cap is likely to reduce opportunities for growth and
increased income.20
Despite the governmental decision to not ratify the Kyoto Protocol, the Federal
government continually reaffirmed its commitment to meet the 108 per cent
target under the Kyoto Protocol on a voluntary basis.21 Following the change in
government, on 11 March 2008, Australia became a party to the Kyoto Protocol
and became bound by the emission reduction targets within that agreement.
17
Planet Ark, Worlds Biggest Coal Exporter Australia Dumps Kyoto (6 June 2002, Australia),
http://www.planetark.org/dailynewsstory.cfm/newsid/16298/story.htm at 15 June 2008.
18
Prime Minister John Howard, Representatives, 5 June 2002, Answers to Questions Without Notice,
3163
19
Australian Greenhouse Office, June 1999, National Emissions Trading, Issuing the Permits,
Discussion Paper No.2, chapter 5 at 45.
20
Ibid, chapter 4 at 39.
21
Department of the Environment and Heritage, n1, 3. SoE 2006, n4, 27.
178
NATIONAL RESPONSES TO CLIMATE CHANGE
Until 2008, the Australian government focused primarily on the use of voluntary
initiatives and policies to address climate change and meet its international
climate change obligations. Accordingly, there is currently no comprehensive
regulation of greenhouse gas emissions in Australia. In recent years, the climate
change debate has shifted to the benefits and risks of establishing an emissions
trading system for Australia.
The effect of this has been the absence of
regulatory drivers in Australia to promote changes in emitting behaviours and

encourage investment in the development and deployment of alternative energy
sources.
Australias climate change policy approach has been based on a no-regrets

approach with the Federal government implementing only those measures which
had other net benefits, or no net costs, besides limiting greenhouse emissions or
conserving or enhancing greenhouse sinks. 22 In response to community concerns
about the prospect of climate change, the Federal government established a
National Greenhouse Advisory Committee (NGAC) in 1989. 23 In December
1992, the Council of Australian Governments (COAG) endorsed the National
Greenhouse Response Strategy which established the framework for Australian
action on greenhouse issues. Five years later, in November 1997, the Prime
Minister announced an AU$180 million package Safeguarding the Future:
Australia's Response to Climate Change, aimed at reducing Australias
greenhouse emissions in line with its commitments under the climate change
regime. 24 This package of measures included the creation of the Australian
22
Rory Sullivan, Rethinking Voluntary Approaches in Environmental Policy (2005) Cheltenham, UK

Northampton, MA, at 104; Rory Sullivan, 'Greenhouse Challenge Plus: a new departure or more of
the same?' (2006) 23(1) Environmental and Planning Law Journal 60 at 61; Australian Greenhouse
Office, The National Greenhouse Strategy (Australian Greenhouse Office, 1998).
23
Australian Government Bureau of Meteorology, 'Climate Activities in Australia 2003' (BOM, 2003)
at 16.
24
Ibid.
179
Greenhouse Office (AGO) to provide a whole of government approach to

greenhouse matters. 25
Following review and refinement of the National Greenhouse Response Strategy,

the National Greenhouse Strategy was released in November 1998.26 The strategy
was intended to act as the primary mechanism through which Australias
international commitments would be met and included abatement strategies for
all of the key sectors that both produce and sequester greenhouse gases.27
The AGO is responsible for the coordination of domestic climate change policy
and the delivery of Commonwealth programs. 28 Those include the imposition of
technical standards for energy generation 29 and voluntary incentive schemes such
as the Greenhouse Gas Abatement Program (GGAP), Renewable Energy
Commercialisation Program (RECP) and Renewable Energy Showcase
Program. 30
GGAP was intended to leverage private sector investment in activities or

technologies through the funding of projects that are likely to result in substantial
emissions reductions or activities to offset greenhouse emissions. The AGO
predicted that GGAP would deliver an abatement of 5 million tonnes of carbon
dioxide equivalent in 2010.31 Projects funded by GCAP included co-generation
25
Ibid.
Australian Government, 'The National Greenhouse Strategy: Strategic Framework for Advancing
Australia's Greenhouse Response' (Australian Government, 1998).
27
Ibid, iii.
28
Ibid, 107.
29
For example, Generator Efficiency Standards (GES) were introduced from 1 July 2000 and were
intended to achieve movement towards best practice in the efficiency of fossil-fuelled electricity
generation, and to deliver reductions in the greenhouse gas intensity of energy supply. See AGO,
Generator Efficiency Standards, http://www.greenhouse.gov.au/ges/index.html at 15 June 2008.
30
viii.
31
Australian Greenhouse Office, Greenhouse Gas Abatement Program (GGAP),
http://www.greenhouse.gov.au/ggap/index.html at 15 June 2008.
26
180
of power from waste, energy efficiency, coal mine gas technologies and
alternative fuel sources. 32
The Renewable Energy Showcase Program was launched in 1998 and offered
funding to renewable energy projects following a competitive tender process.33
This was followed by the launch of the Renewable Energy Commercialisation
Program (RECP) in 1999, a five-year competitive grants program that provided
financial support for strategically important renewable energy technology
initiatives that have strong commercial potential. 34 The Renewable Energy
Industry Program (REIP) was also integrated into the RECP.35
The Australian Government relied heavily on voluntary cooperative partnerships

between industry and government to reduce emissions. From 1995 to 2005, the
Greenhouse Challenge was the centrepiece of the Australian governments
efforts to encourage business to take action on greenhouse gas emissions and
climate change.36 The Greenhouse Challenge Plus programme commenced on 1
July 2005 and was also a cooperative partnership between industry and the
government to reduce emissions, accelerate the uptake of energy efficiency,
integrate greenhouse issues into business decision-making, and provide
consistent reporting of greenhouse gas emissions. 37 Participants were required to
measure and report annually on their greenhouse gas emissions, deliver the
maximum practicable greenhouse gas abatement, continuously improve the
management of greenhouse gas emissions and sinks and work towards the
milestones set out in their agreements. 38 From 1 July 2006, participation in
32
Ibid.
viii.
34
Ibid.
35
Ibid.
36
Rory Sullivan, 'Greenhouse Challenge Plus: a new departure or more of the same?' (2006) 23(1)
Environmental and Planning Law Journal 60 at 60.
37
Australian Greenhouse Office, 'Greenhouse Challenge Plus: Programme Framework 2005' (AGO,
2005) at 1.
38
Ibid, 3.
33
181
Greenhouse Challenge Plus was mandatory for all Australian companies

receiving fuel excise credits of more than AU$3 million in a financial year.39 To
become a member of Greenhouse Challenge Plus, businesses were required to
establish an agreement with the Australian Government to manage and reduce
greenhouse gas emissions. Approved abatement Greenhouse Friendly projects
could be used by Greenhouse Challenge Plus members to offset their emissions.
The Greenhouse Friendly initiative was launched in 2001 and now forms part of
the Australian Government's Greenhouse Challenge Plus program. 40 Greenhouse
Friendly was a voluntary initiative that aimed to provide businesses with the
opportunity to market greenhouse neutral products and services and consumers
with greater purchasing choices. 41 The Greenhouse Friendly program certified
and independently verified voluntary abatement projects in Australia. 42 Approved
abatement projects included energy efficiency initiatives, waste diversion and
recycling, land fill gas capture and flaring, renewable energy generation, and tree
planting and avoided deforestation projects.
43
Projects were required to
demonstrate that the abatement was additional to business as usual practices

and that reductions were permanent and verifiable.44
The Federal government also introduced a number of measures to encourage

energy efficiency for businesses. For example, the Energy Efficiencies
Opportunities Act 2006 (Cth) required corporate groups that used more than 0.5
petajoules of energy in 2005-2006 to assess their energy use, identify and
39
Australian Taxation Office, Fuel Tax Credit and the Greenhouse Challenge Plus Programme
(ATO, 2007); http://www.ato.gov.au/businesses/content.asp?doc=/content/76476.htm at 15 June 2008;
Australian Greenhouse Office, Fuel Tax Credits and Greenhouse Challenge Plus Membership
http://www.greenhouse.gov.au/challenge/members/fueltaxcredits.html at 15 June 2008.
40
Australian Greenhouse Office, 'Greenhouse Friendly Guidelines' (AGO, 2006) at 1.
41
Ibid.
42
Ibid.
43
Australian Greenhouse Office, Abatement Projects
http://www.greenhouse.gov.au/greenhousefriendly/abatement/projects.html at 15 June 2008.
44
182
implement energy efficiency opportunities and report publicly on their

assessments.45
However, despite this expanse of ad hoc voluntary programs, the Federal

government continued to decline to directly regulate or restrict Australias
This political resistance is exemplified by the
following comments by the then Prime Minister in April 2007:

to say that climate change is the overwhelming moral challenge for this generation
of Australians is misguided at best and misleading at worst. It de-legitimises other
challenges over which we do have significant and immediate control, other
challenges with moral dimensions just as real and pressing as those that surround
climate change. It also obscures the need for balance in government decision
making. It feeds ideological demands for knee-jerk policy reactions that would
destroy jobs and the living standards of ordinary Australians.46
In an election year, the Australian community began to question the absence of

action to address the predicted adverse impacts of climate change. By July 2007,
the Prime Minister had adopted a different perspective and acknowledged that:
over time, the scientific evidence that the climate is warming has become quite
compelling and the link between emissions of greenhouse gases from human
activity and higher temperatures is also convincing.47
The Federal government accepted that some response to climate change was
required and introduced a national greenhouse gas emissions reporting system
that was intended to operate in conjunction with the then proposed national
45
Energy Efficiencies Opportunities Act 2006 (Cth) Parts 3, 5, 6, 7.

Australian Broadcasting Corporation, Climate change issue attracting too much attention: PM (23
April 2007, Interview with Prime Minister John Howard, Reporter Michael Brissenden)
http://www.abc.net.au/7.30/content/2007/s1904781.htm at 16 June 2008.
47
Prime Minister John Howard, Address to the Melbourne Press Club (23 July 2007, Melbourne)
http://www.egovmonitor.com/node/13024 at 14 June 2008.
46
183
emissions trading system. 48 The National Greenhouse and Energy Reporting Act
2007 (Cth) requires corporations that emitted above specified threshold levels to
report on their greenhouse gas emissions and energy use through a national
register. 49 The obligation to report commenced on 1 July 2008 with the first
report due in October 2009. The data is intended to be made publicly available
following each reporting period. 50 This Act is largely administrative in nature
and merely requires the submission of reports on levels of emissions. There was
no substantive duty created by this legislation to require, for example, that steps
are to be taken to reduce these reported emissions.
Following the change in Federal government in late 2007, and the subsequent
ratification of the Kyoto Protocol, a significant shift in governmental climate
change policy and regulation was now expected to occur. The current Federal
Government has committed to a target of reducing Australias greenhouse gas
emissions by 60 per cent by 2050. 51 However, this target has not yet been
embedded in legislation and the portfolio of measures for achieving the
reductions has not yet been determined. 52 It appears that significant emphasis
will be placed on a Federal emissions trading scheme as the primary means for
regulating greenhouse gases in Australia.
48
Prime Ministerial Task Group on Emissions Trading, 'Report of the Task Group on Emissions
Trading' (The Department of the Prime Minister and Cabinet, 2007).
49
The thresholds are set out in the National Greenhouse and Energy Reporting Act 2007 (Cth), s13.
50
AGO, National Greenhouse and Energy Reporting Act 2007: Fact Sheet (October 2007)
http://www.greenhouse.gov.au/reporting/publications/pubs/nger-fs.pdf at 15 June 2008.
51
Australian Government, 'Media Release: Government Announces Detailed Timetable on Emissions
Trading' (Senator the Hon Penny Wong, Minister for Climate Change and Water, PW 35/08, 17
March, 2008).
52
Ibid.
184
STATE-BASED RESPONSES TO CLIMATE CHANGE
Under Australias Federal system of government, it is perhaps inevitable that a

piecemeal and variable regulatory approach will be taken across the state
jurisdictions. However, the absence of clear guiding objectives at a national level
has exacerbated this inconsistency in policy approaches to climate change in each
jurisdiction, resulting in a largely fragmented and ineffective regulatory response.
In the absence of Federal legislation to restrict greenhouse gas emissions, some

state governments have adopted emissions reduction targets for their
jurisdictions. In South Australia, the state government has enacted a statute for
the reduction of emissions and promotion of renewable energy. 53
The objects of the Climate Change and Greenhouse Emissions Reduction Act
2007 (SA) are:
(a) to assist in the achievement of ecologically sustainable development in the State
by addressing issues associated with climate change and, in particular
(i) by setting a target (the SA target) to reduce by 31 December 2050 greenhouse
gas emissions within the State by at least 60% to an amount that is equal to or less
than 40% of 1990 levels as part of a national and international response to climate
change; and
(ii) by setting related targets (the renewable electricity targets)
(A) to increase the proportion of renewable electricity generated so that it comprises
at least 20% of electricity generated in the State by 31 December 2014;
(B) to increase the proportion of renewable electricity consumed so that it
comprises at least 20% of electricity consumed in the State by 31 December 2014.
53
These targets were adopted as part of the Government of South Australia Strategic Plan 2007,
http://www.stateplan.sa.gov.au/, at 15 June 2008, Target T3.5.
185
With respect to policy developments, the SA Act states that the Minister should
seek to develop government policies that will assist in:
(i) reducing or limiting climate change or greenhouse gas emissions, or mitigating
the effects of climate change or greenhouse gas emissions; and
(ii) promoting or implementing measures to facilitate adaptation to circumstances
that will inevitably be caused by climate change.54
The Minister is able to set interim targets, sector specific targets and community
wide targets to reduce emissions. 55 However, no interim targets have been
adopted and the language of this Act has been criticised for being largely
hortatory. 56 This may be contrasted with the approach in the United Kingdom
which imposes a statutory duty on the government to achieve a reduction of at
least 60 per cent below 1990 levels by 2050. If the target is not met then this
duty may potentially be enforced through civil enforcement orders against the
State.57
Other Australian states and territories are yet to adopt legislative emission
reduction targets. In Western Australia, the Premier has indicated that the state
government will implement legislation in the future to adopt an emissions
reduction target of 60 per cent below 2000 levels by 2050 in accordance with the
target adopted at the Council of Australia Governments (COAG) in April 2007.58
54
Climate Change and Greenhouse Emissions Reduction Act 2007 (SA), section 14(1)(a).
Climate Change and Greenhouse Emissions Reduction Act 2007 (SA), ss 5(3), 5(5). The Minister
may also set baselines and methods for calculating greenhouse gas emissions ss 5(3),5(4).
56
Rob Fowler, 'Emissions Reduction Targets Legislation' in Tim Bonyhady and Peter Christoff (eds),
Climate Law in Australia (2007) Sydney, The Federation Press, 103 at 115.
57
Climate Change Bill [HL] 2007-2008 (UK) section 1(1). Ibid, 118. The Bill was introduced into the
House of Lords on 14 November 2007 and completed its passage through the House of Lords on 31
March 2008. It received its second reading in the House of Commons on 9 June 2008. It is expected
to receive Royal Assent in 2008.
58
Government of Western Australia, 'Making Decisions for the Future: Climate Change' (May 2007)
at 9.
55
186
EXISTING EMISSIONS TRADING INITIATIVES
For many years, the previous Australian Federal Government remained firm on
its objection to emissions trading in Australia. As stated in the White Paper
Securing Australias Energy Future:
Australia will not impose significant new economy-wide costs, such as emissions
trading, in its greenhouse response at this stage. Such action is premature, in the
absence of effective longer-term global action on climate change, and given
Australia is on track to meet its Kyoto 108 per cent target. Pursuing this path in
advance of an effective global response would harm Australia's competitiveness and
growth with no certain climate change benefits.59
As a result, there are only limited examples of regulatory emissions trading

systems operating in Australia. The key market regimes in Australia were the
Mandatory Renewable Energy Target Scheme (MRETS), 60 New South Wales
(NSW) and Australian Capital Territory (ACT) Greenhouse Gas Abatement
Scheme (GGAS)61 and the Victorian Renewable Energy Target Scheme.62 These
systems were based on baseline and credit models with tradeable certificates,
rather than on cap and trade market systems, and would not be compatible with
the international carbon market.
MRETS placed a legal liability on wholesale purchasers of electricity to

contribute towards the generation of an additional 9,500 gigawatt hours of new
renewable energy by 2010, continuing through to 2020. 63 MRETS required
wholesale purchasers of electricity and large consumers to source a certain
59
Australian Government Energy Task Force, 'Securing Australia's Energy Future' (Department of the
Prime Minister and Cabinet, 2004) at 25.
60
Renewable Energy (Electricity) Act 2000 (Cth).
61
Electricity Supply Act 1995 (NSW).
62
Victorian Renewable Energy Act 2006 (Vic).
63
vii.
187
amount of their electricity from renewable energy sources through the annual
surrender of renewable energy certificates (RECs).
64
Renewable energy
certificates were created by accredited generators for each whole megawatt hour
of electricity generated from eligible renewable sources in excess of the
prescribed baseline. 65 Eligible sources included hydro, biomass, wind, solar and
co-firing of biomass in large coal-fired power stations. 66
Any shortfall in
submitted annual RECS resulted in the imposition of a penalty of AU$40 per

excess megawatt hour.67
Some Australian states also introduced schemes which required electricity

retailers to contribute to a reduction in greenhouse gas emissions. The New
South Wales Greenhouse Gas Abatement Scheme (GGAS) commenced on 1
January 2003 and was described as the most significant jurisdictional
environmental regulation on climate change to date in Australia.68 The GGAS
imposed mandatory greenhouse gas emissions reductions benchmarks on
licensed electricity retailers and certain consumers and required them to
surrender a prescribed quantity of NSW Greenhouse Gas Abatement Certificates
(NGACs), or RECs, each year.69 A mirror scheme was in operation in the ACT. 70
NGACS were created by accredited abatement certificate providers for eligible

projects and represented one tonne of carbon dioxide equivalent of abated
greenhouse gas emissions.71 Eligible projects included low-emission generation
of electricity, demand-side abatement, carbon sequestration in forests and large-
64
Renewable Energy (Electricity) Act 2000 (Cth), ss35,36.

Renewable Energy (Electricity) Act 2000 (Cth), Part 2, Division 4.
66
Iain MacGill, Hugh Outhred and Karel Nolles, 'Some design lessons from market-based greenhouse
gas regulation in the restructured Australian electricity industry' (2006) 34(1) Energy Policy 11 at 16.
67
Carmody, Josh and Willis, Monique, 'Emissions Trading Schemes in Australia' in David Freestone
and Charlotte Streck (eds), Legal Aspects of Implementing the Kyoto Protocol Mechanisms: Making
Kyoto Work (2005) 475 at 479; Ibid, 17.
68
Macgill et al, n66, 18.
69
Electricity Supply Act 1995 (NSW) section 97A.
70
Under the Electricity (Greenhouse Gas Emissions) Act 2004 (ACT).
71
Electricity Supply Act 1995 (NSW), Part 8A and section 97EA.
65
188
user abatement.72 GGAS was criticised for its lack of demonstrated additionality,
or actual reductions in emissions, as numerous NGACs were created for
installations and operational changes implemented prior to the scheme
commencement.73 The NGACs were also intended to be compatible with the
Kyoto Protocol allowances but key differences in the long-term treatment of
carbon sinks would prevent fungibility between these instruments.74
A similar initiative was introduced under the Victorian Renewable Energy Target
Scheme from January 2007. 75 The regime mandated that the consumption of
electricity generated from renewable sources in Victoria must be 10 per cent by
2016. 76 Under the scheme, all electricity retailers and wholesale purchasers of
electricity in Victoria had a legal liability to contribute towards the generation of
additional renewable energy by acquiring Victorian renewable energy certificates
(VRECs). 77 VRECs were able to be created by accredited renewable energy
power stations and small generation unit owners. 78
The Queensland government also introduced, from January 2005, the 13 per cent
Gas Scheme which required electricity retailers to source at least 13 per cent of
their electricity from gas-fired electricity. 79 The Queensland 13 per cent Gas
Scheme (or 18 per cent by 2020) required electricity retailers to surrender gasfired electricity certificates (GECs) to the regulator. 80 GECs were issued by
72
GGAS, Abatement Certificate Providers: Overview,

http://www.greenhousegas.nsw.gov.au/acp/acp_overview.asp at 15 June 2008; Electricity Supply Act
1995 (NSW), Part 8A and Section 97DA.
73
Regina Betz and Iain MacGill, 'Emissions Trading for Australia: Design, Transition and Linking
Options' (Centre for Energy and Environmental Markets, 2005) at 19.
74
Ibid, 28.
75
Essential Services Commission, Victorian Renewable Energy Target Scheme,
http://www.esc.vic.gov.au/public/VRET/ at 15 June 2008.
76
Ibid. Victorian Renewable Energy Act 2006 (Vic) section 66.
77
Victorian Renewable Energy Act 2006 (Vic), Part 4, Division 1.
78
Victorian Renewable Energy Act 2006 (Vic), Part 2, Division 4.
79
Electricity Act 1994 (Qld). .
80
Queensland Government 13% Gas Scheme, http://www.dme.qld.gov.au/Energy/13percentgas.cfm
at 15 June 2008; Macgill et al, n66, 20.
189
accredited eligible gas-fired electricity generators with each GEC representing

one mega watt of eligible gas generation. 81
EMISSIONS TRADING PROPOSALS FOR AUSTRALIA
Emissions trading has gained greater political approval in recent years and a
national emissions trading system for Australia now appears imminent. In 2004,
the National Emissions Trading Taskforce (NETT) initially proposed a national,
state-based, emissions trading system.82 The proposal was supported by all state
and territory governments and Federal support was sought for the implementation
of the program. However, the Federal government opposed the proposal and the
Australian states and territories announced that they would commence the NETT
model, by the end of 2010, if the Federal government failed to implement its own
system.83
In December 2006, the then Prime Minister established a Task Group on

Emissions Trading to consider a proposal for Australia to establish a workable
global emissions trading system in which Australia would participate. The Task
Group issued its report in May 2007 in which it made recommendations for the
implementation of an Australian domestic emissions trading scheme which might
link to other trading schemes in the future. 84 Those recommendations were
adopted by the Prime Minister. Emissions reduction liabilities were to be
81
Ibid.
http://www.cabinet.nsw.gov.au/greenhouse/emissionstrading at 15 June 2008. A discussion paper
outlining the proposed scheme was released in August 2006.
83
Council for the Australian Federation, Communique: 7 February 2007 Sydney at
http://www.emissionstrading.org.au/__data/assets/pdf_file/0016/6343/CAF_communique_9feb07.pdf
at 15 June 2008.
84
Prime Ministerial Task Group on Emissions Trading, 'Report of the Task Group on Emissions
Trading' (The Department of the Prime Minister and Cabinet, 2007) at 9, 85.
82
190
imposed on large scale users of fossil fuels and fossil fuel distributors and the
system was intended to become operational by the end of 2011.
The key features of the emissions trading scheme were to be announced in mid2008 including the long term emissions reduction target for the market. 85
Whatever form this scheme may have ultimately taken, it suffered from a
potentially fatal flaw by being designed prior to the adoption of an appropriate
emissions reduction target for Australia. Accordingly, the design of the scheme
was focused primarily on the avoidance of negative impacts on Australias global
competitiveness rather than on the adoption of strict emission reduction
obligations to avoid the impacts of climate change.
The change of Federal government in November 2007 ceased further

development of the emissions trading scheme. Announcements by the current
government indicate that a Federal emissions trading system is likely to become
operational in Australia in 2010. 86 For this to occur, the trading initiatives
discussed above will, where feasible, need to be transitioned into the new regime
and ultimately decommissioned.87 For now, there is no national regulation of our
greenhouse gas emissions and the formal design of any such market based system
is still being devised.88 From a policy perspective, this is far from ideal and it
does not provide Australian businesses with sufficient information to guide their
short and long term business planning and risk management approaches.
85
Ibid, 144.
Draft emissions trading legislation is expected to be released for comment at the end of 2008.
Australian Government, 'Media Release: Government Announces Detailed Timetable on Emissions
Trading' (Senator the Hon Penny Wong, Minister for Climate Change and Water, PW 35/08, 17
March, 2008). Prime Minister Kevin Rudd has committed to the adoption of a long term target for
Australia of reducing emissions by 60 per cent on 2000 levels by 2050 with interim targets to be
established. Prime Minister Kevin Rudd, Ratifying the Kyoto Protocol (3 December 2007, Media
Statement) http://www.alp.org.au/media/1207/mspm030.php at 15 June 2008. It is unclear the extent
to which this scheme will build upon the design work of the previous Prime Ministerial Task Group
on Emissions Trading.
87
There will significant issues in attempting to merge these trading schemes into a national carbon
trading market with their variances in the creation and treatment of tradeable instruments. See, for
example, State of New South Wales, 'Transitional Arrangements for the NSW Greenhouse Gas
Reduction Scheme' (New South Wales Department of Water and Energy, 2008).
88
The future Australian emission trading system is examined in Chapter Seven.
86
191
The absence of initiatives to restrict Australias rising levels of emissions poses

an even greater challenge in establishing an effective legal response to climate
change. The Intergovernmental Panel on Climate Change (IPCC) recommends
that the international community take action to reduce global atmospheric
concentrations of emissions to around 450 ppm in order to limit increases in
global temperatures to 2-2.4 degrees Celsius above pre-industrial levels which
would require global emission to peak by 2015 and be reduced by 50 per cent ,
below current levels, by 2050. 89
However, given the lack of progress in
Australias emission reduction initiatives, the corresponding Australian target

would have to be in the realms of 90 per cent below 2000 levels by 2050.90
Consequently, the absence of an effective legal response to climate change means

that any future legislative scheme must be capable of mandating the significant,
urgent and deep reductions in greenhouse gas emissions required to address the
threat of climate change. In such a regulatory context, market instruments alone
are unlikely to be adequate to achieve such broad behavioural adjustments and
will need to be complemented by strict duties to reduce emissions as well as a
portfolio of other measures to promote the research and development of low
carbon technologies and mandate the use of alternative energy sources.
89
B.S. Fisher et al, 'Issues related to mitigation in the long term context' in B. Metz et al (eds),
Climate Change 2007: Mitigation. Contribution of Working Group III to the Fourth Assessment
Report of the Inter-governmental Panel on Climate Change (2007) Cambridge, Cambridge University
Press at 173.
90
192
THE REGULATION OF ENERGY SOURCES IN AUSTRALIA
Australia relies heavily on coal for the domestic generation of electricity and this
is a significant source of national greenhouse gas emissions.
Given the
significant reductions in emissions required to avoid the adverse impacts of

climate change, any regime to address climate change in Australia will need to
promote the uptake of low carbon or clean technologies and mandate the use of
renewable energy sources within the Australian community.91 There are a range
of potential renewable energy sources in Australia which are at varying levels of
development and deployment.92 The purpose of the following paragraphs is to
provide a brief overview of the key policy issues in the development of those
alternative energy sources as part of the Australian regulatory response to climate
change.
Large hydro schemes currently produce the largest amount of electricity

generated from renewable energy sources in Australia. 93 However, the popularity
of hydro power has been significantly affected by precipitation changes in
Australia and water shortages which make it difficult to maintain adequate flows
in the Murray, Murrumbidgee and Snowy Rivers. 94 Australia also has an area of
potentially exploitable tidal energy in the Kimberley in Western Australia. 95
However, initial studies indicated that the project would not be economically
viable owing to the remoteness of the region. 96 Australia also has a potential
91
The current Prime Minister has committed to ensuring that at least 20 per cent of Australia's
electricity supply is generated from renewable sources by 2020. This is yet to be legislatively
mandated. Prime Minister Kevin Rudd, Ratifying the Kyoto Protocol (3 December 2007, Media
Statement) http://www.alp.org.au/media/1207/mspm030.php at 15 June 2008.
92
See Mark Diesendorf, Greenhouse Solutions with Sustainable Energy (2007) Sydney, University of
New South Wales Press.
93
David Harries et al, 'Hydro, Tidal and Wave Energy in Australia' (2006) 63(6) International
Journal of Environmental Studies 803 at 803.
94
R John Samdeman Oam, 'A Critique of Present Australian Energy Policy' (2006) 63(6)
International Journal of Environmental Studies 719 at 725.
95
Harries et al, n93, 806.
96
Ibid, 806-808.
193
source of wave energy along the southern coastline and this technology is
currently in the research and development phase. 97
It has been commented that wind power is one of the least expensive and most
environmentally sound of the new renewable sources of electricity and has the
potential to provide at least 20 per cent of Australias electricity within a few
decades.98 The barriers to the development of wind power in Australia include its
reputation as an intermittent rather than reliable source of power; conflict with
competing land uses; and the perceived local environmental and aesthetic
impacts of the wind farms themselves.99
Although Australia possesses the highest average solar radiation resource of any
of the worlds continents the market response has been limited with
approximately five per cent market penetration of solar water heaters. 100
Geothermal energy, although not strictly renewable, is also a potential major
energy source for Australia. 101 The Cooper Basin has the worlds largest known
concentration of hot fractured granite suitable for heat extraction and is reported
to have the capacity to supply all of Australias energy needs for the next 70
years. 102 However, these resources are currently largely unexploited due to the
remoteness of the geothermal resources from major electricity load centres. 103
There has been significant debate in Australia regarding the benefits and risks
associated with nuclear energy including the safety of nuclear reactors and the
97
Ibid, 808-809.
Mark Diesendorf, 'Wind Power in Australia' (2006) 63(6) International Journal of Environmental
Studies 765 at 774.
99
Ibid.
100
Keith Lovegrove and Mike Dennis, 'Solar Thermal Energy Systems in Australia' (2006) 63(6)
International Journal of Environmental Studies 791 at 800-801.
101
David Harries et al, 'Geothermal Energy in Australia' (2006) 63(6) International Journal of
Environmental Studies 815 at 817-820.
102
Samdeman Oam, n94, 725.
103
David Harries et al, n101, 820.
98
194
treatment and disposal of nuclear waste. 104 Those in favour of nuclear power have
commented that it shows considerable promise for the production of large
amounts of reliable, low carbon electricity. 105 The Prime Ministers Nuclear
Energy Taskforce considered these issues and issued its report in December
2006.106 The report concluded that reducing Australias greenhouse gas emissions
requires a full spectrum of initiatives and its goals cannot be met by nuclear
power alone.107 The report estimates that the emissions reductions from nuclear
power could be 8 to 17 per cent of national emissions in 2050. 108 The report also
notes that nuclear power is likely to be between 20 and 50 per cent more costly to
produce than power from a new coal-fired plant at current fossil fuel prices.109 The
Taskforce concluded that for nuclear power and renewable energy sources to
become competitive in Australia, the costs of greenhouse gas emissions must be
an explicit cost of production.110 Potential mechanisms identified to achieve this,
and properly price greenhouse gas emissions, included carbon taxes, permit
trading and emissions charges. 111
It appears that the regulation of greenhouse gases in Australia will require a full
portfolio of policies and measures that incentivise and mandate a range of
renewable energy solutions as well as imposing strict legally enforceable
obligations to reduce annual greenhouse gas emissions. The maturity of these
renewable energy technologies will inevitably influence political deliberations
regarding the stringency of mandates to uptake renewable energy in the near term.
The commercial competitiveness of these alternative energy sources will also
104
For example, see Martin Sevior, 'Considerations for Nuclear Power in Australia' (2006) 63(6)
International Journal of Environmental Studies 859 at 869-871; Jim Falk, Jim Green and Gavin Mudd,
'Australia, Uranium and Nuclear Power' (2006) 63(6) International Journal of Environmental Studies ;
Geoffrey N. Taylor, 'Australia: Host for a Nuclear Waste Storage Site?' (2006) 63(6) International
Journal of Environmental Studies 873.
105
Sevior, n104, 871.
106
Commonwealth of Australia 2006, Uranium Mining, Processing and Nuclear Energy
Opportunities for Australia?, Report to the Prime Minister by the Uranium Mining, Processing and
Nuclear Energy Review Taskforce, December 2006.
107
Ibid, 2.
108
Ibid.
109
Ibid.
110
Ibid.
111
Nuclear Energy Taskforce, n106, 61.
195
play a significant role in their rate of mobilisation and uptake. Therefore, the
development and deployment of these technologies will need to be assisted
through additional subsidies and grants from the government. As commented:
it is clear that there is substantial potential for a range of renewable energy
technologies to play a part in Australias future energy mix. But, even wind power,
the most mature, is still over twice as expensive as Australian coal-fired electricity
generators.112
Consequently, the Australian government must adopt a portfolio approach which

provides adequate regulatory and economic drivers to enhance the commercial
viability of renewable energy technologies and promote the diffusion and uptake
of these alternative energy sources within the community. Such transformations
in traditional energy supply and use will be essential components in achieving the
rapid and large scale reductions in greenhouse gas emissions required within
Australia.
THE RESPONSE OF THE ASIA PACIFIC PARTNERSHIP TO

CLIMATE CHANGE
In addition to its obligations under the UNFCCC and the Kyoto Protocol
Australia also formed a number of other multilateral and plurilateral agreements.
The most significant of these is the Asia-Pacific Partnership on Clean
Development and Climate (AP6), initiated in 2005. Unlike the climate change
regime, this international cooperative agreement is focused on the development
and deployment of improved technologies to address energy security and combat
112
Sevior, n104, 864.
196
climate change rather than the imposition of absolute emission reduction

targets.113
The partnership, known as the AP6, comprises Australia, the United States,
China, India, Canada, Japan and the Republic of Korea.114 AP6 aims to establish
international public-private collaboration to address increased energy needs and
associated challenges, including those related to air pollution, energy security,
and greenhouse gas intensities, in accordance with national circumstances,
through the development, deployment and transfer of cost-effective cleaner
technologies. 115 It intends to achieve this whilst ensuring ongoing economic
growth and development.116
Objectives of the AP6

AP6 devised a Charter, Communiqu and Work Plan at its inaugural meeting in
Sydney in January 2006. Under the Charter, the purpose of the partnership is to
create
voluntary,
cooperation. 117
non-legally
binding,
framework
for
international
AP6 is intended to create an enabling environment for the
exchange of information, implementation of bilateral and multilateral activities

and engagement of the private sector.118
113
Harro van Asselt, 'From UN-ity to Diversity? The UNFCCC, the Asia-Pacific Partnership and the
Future of International Law on Climate Change' (2007) 1 Carbon and Climate Law Review 17 at 1718.
114
Canada joined AP6 in October 2007. Asia-Pacific Partnership on Clean Development and Climate
http://www.asiapacificpartnership.org/ at 15 June 2008.
115
Asia-Pacific Partnership on Clean Development and Climate, 'Charter' (Adopted, Inaugural
Ministerial Meeting, Sydney, 11-13 January 2006, Amended, Second Ministerial Meeting, New Delhi,
14-15 October 2007), http://www.asiapacificpartnership.org/charter.pdf at 15 June 2008. Principles
1.1 and 2.1.
116
Charter, ibid, Annex I Vision Statement of Australia, China, India, Japan, the Republic of Korea,
and the United States of America for a New Asia-Pacific Partnership on Clean Development and
Climate 28 July 2005 at 5.
117
Ibid, Preambles and Principle 2.1.1.
118
Ibid, Principles 2 and 3.
197
It is also intended to:

serve as a framework for supporting agile, constructive, and productive
international cooperation among the Partners to meet our development, energy,
environment, and climate change objectives. 119
The AP6 Policy and Implementation Committee is responsible for the overall
framework, policies, and procedures of the AP6 and will periodically review the
progress of collaboration, and provide direction to the Administrative Support
Group.120 The Administrative Support Group serves as the principal coordinator
of the AP6s communications and activities.121
Under the AP6s agreed Work Plan, 122 eight public-private task forces were
created which focus on power generation and distribution and on key industry
sectors. These task forces were intended to draw on the expertise of private
sectors, research communities and governments to consider the following areas:
cleaner fossil energy;
renewable energy and distributed generation;
power generation and transmission;
steel;
aluminium;
cement;
coal mining; and
buildings and appliances.
119
Ibid, Preambles at 1.
Ibid, Principle 4.2. Any Partner may terminate its membership upon written notice 90 days prior to
the anticipated termination, Charter, Principle 8.1.
121
Ibid, Principle 4.3.
122
Asia-Pacific Partnership on Clean Development and Climate, 'Work Plan' (Inaugural Ministerial
Meeting, Sydney, Australia, 11-12 January 2006) http://www.asiapacificpartnership.org/workplan.pdf
at 24 June 2008.
120
198
Each task force was directed to define the current state of technology in terms of
cost, performance, market share and barriers and to devise action plans for their
sector. 123 The actions plans for each sector were endorsed by the Policy and
Implementation Committee in October 2006. The aim of these task forces was to
improve energy efficiency, promote best practice, and develop new lowemissions solutions.124 In particular, task forces were able to designate flagship
projects and activities, as part of their action plans, that, collectively, exemplified
the vision and objectives of AP6.125 Sector based emission reduction targets were
not set.
In 2006, Australias Prime Minister announced a pledge to invest AU$100

million over five years to support Australias involvement in clean development
projects, capacity building activities and its role in the AP6.126 The Work Plan for
the Cleaner Fossil Energy Task Force, led by the Australian Government,
specifically acknowledges that coal and gas will remain critical fuels for the AP6
but that advanced technologies, including carbon dioxide capture and storage
(CCS), have the potential to reduce greenhouse gas emission levels and other
environmental impacts.
127
The development of post combustion capture
technologies was also specifically included in the action plan for the Cleaner
Fossil Energy Task Force. 128
123
Ibid, 1.
Asia-Pacific Partnership on Clean Development and Climate, Second Ministerial Meeting
Communiqu, (New Delhi, India 15 October 2007)
http://www.asiapacificpartnership.org/DelhiCommunique.pdf at 15 June 2008.
125
Asia-Pacific Partnership on Clean Development and Climate, Flagship Guidelines,
http://www.asiapacificpartnership.org/Flagshipguidelines.pdf at 15 June 2008.
126
Prime Minister of Australia, Asia-Pacific Partnership Sets New Path To Address Climate Change,
Press Release No 1743 (12 January 2006).
127
Cleaner Fossil Energy Task Force, http://www.asiapacificpartnership.org/FossilEnergyTF.htm at
15 June 2008. The development of post combustion capture technologies was part of the action plan
for the Cleaner Fossil Energy Task Force,
128
Asia-Pacific Partnership on Clean Development and Climate, Executive Summary of Task Force
Action Plans
http://www.asiapacificpartnership.org/APP%20Action%20Plans/ExecutiveSummary%20_31%20Oct
%2006_%20_2_.pdf at 15 June 2008.
124
199
CCS or geosequestration has been promoted by government and industry as a

viable solution to help Australia achieve a widespread reduction in greenhouse
gas emissions and a number of demonstration projects are in the design and
implementation stages.129 However, it has been commented that:
without meaningful and mandatory limitations being imposed on [greenhouse gas]
emissions in Australia, it seems unlikely that geosequestration could become
commercially viable in the near future.130
This dependence on the saving graces of CCS to offset emissions from energy
intensive industries, rather than the imposition of strict emission reduction
obligations, is once again symptomatic of the generally dysfunctional approach to
climate change regulation in Australia. This over-emphasis on so-called clean
coal technology to protect Australias competitiveness and growth from stringent
emission reductions fails to appreciate that it is the very phenomenon of climate
change which is the real threat to Australias future economic, environmental and
social well-being.
B AP6 and the International Response to Climate Change

The UNFCCC requires parties to promote the development and diffusion of
technologies, practices and processes which control or reduce greenhouse gas
emissions. 131 Similar obligations are contained within the terms of the Kyoto
Protocol.132 Australias membership of the AP6 does not necessarily offend these
provisions of the international climate change regime. 133 The AP6 Sydney
Communiqu specifically acknowledges that the establishment of the partnership
129
AM Warburton et al, 'Geosequestration Law in Australia' in Tim Bonyhady and Peter Christoff
(eds), Climate Law in Australia (2007) Sydney, The Federation Press, 142 at 142, 159. The legal
issues in implementing these CCS projects in Australia are considered in Chapter Seven.
130
Ibid,160.
131
132
133
Cf. Peter Christoff and Robyn Eckersley, 'Kyoto and the Asia-Pacific Partnership on Clean
Development and Climate' in Tim Bonyhady and Peter Christoff (eds), Climate Law in Australia
(2007) Sydney, The Federation Press, 32 at 37,42.
200
is consistent with efforts under the UNFCCC and would complement, but not
replace, the Kyoto Protocol.134
This is reiterated in the AP6 Charter as follows:

bearing in mind that the purposes of the Partnership are consistent with the
principles of the United Nations Framework Convention on Climate Change and
other relevant international instruments, and are intended to complement but not
replace the Kyoto Protocol.135
It appears unlikely that the AP6 will have any substantive effect on the
international and national response to greenhouse gas emissions and climate
change. The AP6 is not an international treaty; the terms of the agreement are
not binding on its members; and it is not legally enforceable.136 As noted by one
commentator, the degree of precision of commitments under the AP6 is rather
low, which makes it difficult to see how the agreement could have any legal
effects. 137
Accordingly, the AP6 does not possess the normative value to
mandate the domestic imposition of restrictions on national greenhouse gas

emissions. At most, it may complement the international climate change regime
and domestic initiatives by facilitating additional information exchanges and the
diffusion of less emissions-intensive technologies.
However, even this is
dependent upon the effectiveness of the AP6 in obtaining adequate funding from
its members, on a voluntary basis, to enable the implementation of the various
task force work plans.
134
Asia-Pacific Partnership on Clean Development and Climate, Inaugural Ministerial Meeting

Communiqu' (Sydney, Australia, 11-12 January 2006)
http://www.asiapacificpartnership.org/Communique.pdf at 15 June 2008. This was reaffirmed in the
New Delhi Communiqu.
135
Charter, n115, 1.
136
van Asselt, n113, 20.
137
Ibid.
201
THE POTENTIAL IMPACT OF AUSTRALIAN REGULATION ON

NATIONAL EMISSIONS
A number of reports have assessed Australias national levels of greenhouse gas

emissions. The 2006 Australia State of the Environment Report138 noted, with
concern, the increase in net greenhouse gas emissions in Australia. 139 According
to the report, Australias emissions increased by 2.3 per cent to 564.7 million
tonnes of carbon dioxide equivalent from 1990 to 2004.140 The largest source of
those greenhouse gas emissions was attributed to the energy sector and, primarily,
to the stationary energy and transportation sub-sectors.141
Australias greenhouse gas emissions were also assessed in the government

report Tracking to the Kyoto Target 2006: Australias Greenhouse Emissions
Trends 1990 to 2008-2012 and 2020. 142 The previous Federal government
continually reaffirmed its commitment to meeting Australias emissions
reduction target under the Kyoto Protocol. 143 However, this report, released in
late 2006, predicted that business as usual emissions would reach 125 per cent
of 1990 levels by 2010 and 151 percent of 1990 levels by 2020. 144 This would be
in clear breach of Australias duty, under the Kyoto Protocol, to reduce national
emissions to 108 per cent of 1990 levels by 2012.
With the incorporation of the effects of unspecified greenhouse measures this

government report estimated Australias emissions would be 109 per cent of
1990 levels in 2010.145 The exact nature of those greenhouse measures were not
138
SoE 2006, n4.

Ibid, 27.
140
Ibid.
141
Ibid.
142
Department of the Environment and Heritage, n1.
143
Ibid, 3.
144
Ibid, 1,19.
145
Ibid, 16.
139
202
made clear but the report referred to existing government initiatives including the
Greenhouse Gas Abatement Programme, Challenge Plus-Industry Partnerships,
Mandatory Renewable Energy Target and the NSW Greenhouse Gas Abatement
Scheme. 146 The report also referred to examples of government funding of low
emissions technologies and renewable energy. 147 However, even with those
greenhouse measures, the report concluded that emissions would rise to 127 per
cent of 1990 levels by 2020.148
A further report presented by the Australian Bureau of Agriculture and Resource

Economics to AP6, in 2006, concluded that the global diffusion of energy
efficient technologies resulting from AP6 could lead to 23 per cent lower
greenhouse gas emissions by 2050 compared to projected levels. 149
Those
projections were that global greenhouse gas emission levels would almost triple
between 2001 and 2050. 150 Based on this report, and taking into account the
predicted reductions from AP6 initiatives, this would nevertheless result in a
doubling of emissions by 2050 compared to the reductions required under the
Kyoto Protocol. Accordingly, on the basis of these reports, the direct legal
response to climate change in Australia has clearly been ineffective given the
level and rate of emissions reductions now required to not only meet the
conservative targets under the Kyoto Protocol but also to reduce emissions in
order to avoid adverse anthropogenic interference with the climate system.
146
Ibid, 17.
Ibid, 19.
148
Ibid, 1,19.
149
Brian Fisher et al, 'Technological Development and Economic Growth' (ABARE Research Report
06.1, Australian Bureau of Agriculture and Resource Economics, 2006) at 34.
150
Ibid, 14.
147
203
COMPARATIVE DOMESTIC REGULATORY APPROACHES
The lack of restrictions on the emission of greenhouse gases in Australia, over

the last decade, sits in stark contrast to those existing and emerging approaches in
other domestic jurisdictions. Numerous nations, states and regions around the
world have not only embraced the need to actively meet the targets of the Kyoto
Protocol but have gone beyond this to adopt more stringent short and longer term
emission reduction obligations, backed by regulatory regimes, aimed at achieving
the objectives of the UNFCCC. 151 Some noteworthy examples of other domestic
and regional regulatory approaches are detailed in the following paragraphs. All
of these countries have highly developed western economies, democratic systems
of governance, effective law making and enforcement regimes and high standards
of living. Accordingly, all of these countries possess similar features to Australia
and, despite this, have determined to implement initiatives at national or state
levels to reduce emissions and respond to the threat of climate change.
The European Union
The member states of the European Union (EU) elected to fulfil their
commitments under the Kyoto Protocol as an EU Bubble and have a collective
commitment to achieve an eight per cent reduction in greenhouse gas
emissions. 152 The EU commenced an EU-wide emissions trading scheme, from
January 2005, as one of the key policy measures to achieve greenhouse gas
emission reductions and to assist EU member states to meet their target under the
Kyoto Protocol.153 Each member state was obliged to implement the EU scheme
through the passing of national legislation consistent with the directives of the
151
The current Australian Prime Minister has committed to the adoption of a long term target for
Australia of reducing emissions by 60 per cent on 2000 levels by 2050 with interim targets to be
established in late 2008. Prime Minister Kevin Rudd, Ratifying the Kyoto Protocol (3 December
2007, Media Statement) http://www.alp.org.au/media/1207/mspm030.php at 15 June 2008.
152
This is permitted under Article 4.1 of the Kyoto Protocol, n14.
153
European Union (2005) Greenhouse Gas Emission Allowance Trading Scheme at
http://europa.eu/scadplus/leg/en/lvb/l28012.htm at 15 June 2008. EU Directive 2003/87/EC (entry
into force 25.10.2003) published in OJL of the 25.10.2003.
204
EU Parliament. The trading scheme imposes caps on the national carbon dioxide
emissions of all member states which must then be translated into national plans
with allocations for the various domestic sectors.154
The EU has advocated that to achieve the objectives of the climate change
regime, and avoid adverse climate change, surface temperature increases should
be limited to a 2 degrees Celsius increase compared to pre-industrial levels. 155
The EU asserts that this would require that global greenhouse gas emissions are
reduced to at least 50 per cent below 1990 levels by 2050. 156 In March 2007, the
EU resolved to reduce greenhouse gas emissions by at least 20 per cent below
1990 levels by 2020 and challenged the world to follow suit.157 The EU also
adopted targets of a 20 per cent increase in energy efficiency; 20 per cent
increase in the share of renewable energy in the EUs overall energy use; and a
minimum 10 per cent share for biofuels in petrol and diesel by 2020. 158 A
common EU energy plan to implement these targets is currently in the process of
development and consultation with member states.159
154
The operation of this emissions trading scheme is discussed in Chapter Seven.

Commission of European Communities, Proposal for a Decision of the European Parliament and
of the Council on the effort of Member States to reduce their greenhouse gas emissions to meet the
Communitys greenhouse gas emission reduction commitments up to 2020 (the "Effort Sharing"
Decision) (Brussels, 23 January 2008)(COM (2008) 17 final; 2008/0014 (COD)); http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2008:0017:FIN:EN:PDF at 15 June 2008;
Explanatory Memorandum.
156
Ibid.
157
European Council, March 2007. The EU resolved to increase that target to 30 per cent below 1990
levels if the rest of the world adopts similar targets through an international agreement. Commission
of the European Communities, Communication from the Commission to the European Parliament,
the Council, the European Economic and Social Committee and the Committee of the Regions: 20 20
by 2020 Europe's Climate Change Opportunity (Brussels, 23 January 2008) (COM(2008) 30 final),
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2008:0030:FIN:EN:PDF at 15 June
2008.
158
EU Commission, Memo on the Renewable Energy and Climate Change Package (Memo/08/33)
(Brussels, 23 January 2008)
http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/08/33&format=HTML&aged=0&la
nguage=EN&guiLanguage=en at 15 June 2008.
159
The EU Commission adopted a legislative package of proposals to address climate change in the
Climate Action and Renewable Energy Package on 23 January 2008. The package is intended to be
adopted by the EU members by the end of 2008,
http://ec.europa.eu/environment/climat/climate_action.htm at 15 June 2008.
155
205
The United Kingdom
In addition to the EU targets, the United Kingdom (UK) has adopted a long term
target of at least 60 per cent reductions in carbon dioxide emissions, below 1990
levels, by 2050 and 26 to 32 per cent below 1990 levels by 2020. 160 This will be
achieved through the adoption of 5 year carbon budgets.161 The creation of a UK
trading scheme, with wider sectoral coverage than that of the EU scheme, is also
envisaged.162 Uniquely, the Climate Change Act will impose a statutory duty on
the Secretary of State to ensure that the emission reduction targets are met.163
Canada
In April 2007, the government of Canada adopted a short term target of 20 per
cent reductions in emissions, below 2006 levels, by 2050.164 In March 2008, the
government announced the regulatory framework for meeting this target which
included the imposition of obligations on all covered industrial sectors to reduce
their emissions intensity from 2006 levels by 18 per cent by 2010, with 2 per cent
continuous improvement every year after that. 165 Industries may elect to reduce
emissions or obtain sufficient credits via a number of flexible compliance
mechanisms.166 Proposed greenhouse gas regulations are to be published in late
2008 and will come into force on 1 January 2010. 167 The Alberta government of
160
The Committee on Climate Change, to be established under Part 2 of the Bill, will consider
whether this long term target should be 80 per cent below 1990 levels. Climate Change Bill [HL]
2007-2008 (UK). The Bill was introduced into the House of Lords on 14 November 2007 and
completed its passage through the House of Lords on 31 March 2008. It received its second reading in
the House of Commons on 9 June 2008. It is expected to receive Royal Assent in 2008. DEFRA, UK
Legislation: taking the Climate Change Bill forward-progress (18 February 2008)
http://www.defra.gov.uk/Environment/climatechange/uk/legislation/index.htm at 15 June 2008.
161
Climate Change Bill [HL] 2007-2008 (UK), section 4.
162
Climate Change Bill [HL] 2007-2008 (UK), Part 3.
163
Climate Change Bill [HL] 2007-2008 (UK), section 1(1). DEFRA, UK Legislation: taking the
Climate Change Bill forward-progress (18 February 2008)
164
Government of Canada, Turning the Corner: Regulatory Framework for Industrial Greenhouse
Gas Emissions (Minister of Environment, March 2008) at iii-iv.
165
Ibid.
166
Ibid. These compliance mechanisms include obtaining credits from: domestic offsets; the CDM of
the Kyoto Protocol; the early action program; and payments into a technology fund.
167
Environment Canada, Government Delivers Details of Greenhouse Gas Regulatory Framework
(Ottawa, 10 March 2008), http://www.ec.gc.ca/default.asp?lang=En&n=714D9AAE1&news=B2B42466-B768-424C-9A5B-6D59C2AE1C36 at 15 June 2008.
206
Canada has independently adopted a target of equal to or less than 50 per cent of
1990 levels, relative to Gross Domestic Product, by 31 December 2020.168
The United States of America
Despite the decision of the Federal US government to not ratify the Kyoto
Protocol, a number of states and regions in the US have also adopted measures to
reduce their greenhouse gas emissions. 169 For example, the US state of New
Jersey has adopted a short term target of 1990 levels by 2020 and a long term
target of 80 per cent below 2006 levels by 2050. 170 Connecticut has adopted a
short term target of 1990 levels by 2010, a mid term target of 10 per cent below
1990 by 2020 and a long term target of 75 to 85 per cent below 2001 levels.171
California has also adopted ambitious targets of reducing greenhouse gas
emissions to 2000 levels by 2010; to 1990 levels by 2020; and to 80 per cent
below 1990 levels by 2050.172 To assist in meeting these targets, the California
State Air Resources Board is required to adopt regulations, on or before 1
January 2010, that achieve the maximum technologically feasible and costeffective greenhouse gas emission reductions from sources or categories of
sources.173
168
Alberta Government, Climate Change and Emissions Management Act 2003, section 3(1). Net
emissions intensity limits are imposed on large facilities under Part 2 of the Climate Change and
Emissions Management Act: Specified Gas Emitters Regulation (Alberta Regulation 139/2007).
169
For a summary see Pew Center on Global Climate Change A Look at Emissions Targets
http://www.pewclimate.org/what_s_being_done/targets/ at 16 June 2008.
170
Executive Order No. 54, State of New Jersey Office of the Governor, Press Release: Governor
Corzine Calls for Sweeping Reduction of Greenhouse Gas Emissions in New Jersey (New Jersey, 13
February 2007) http://newjersey.gov/governor/news/news/approved/20070213a.html at 16 June 2008.
171
Connecticut Climate Change Action Plan 2005; Connecticut Climate Change Act 2004
(Connecticut Public Act No. 04-252).
172
Governors Executive Order S-3-05 (1 June 2005); the target of 1990 levels by 2020 is given
statutory status by the California Global Warming Solutions Act 2006 (AB 32).
173
California Global Warming Solutions Act 2006 (AB 32), Part 4.
207
New Zealand
Finally it should be noted that New Zealand (NZ) is also a ratified party to the
Kyoto Protocol and has actively implemented programs aimed at meeting its
target and reducing its greenhouse gas emissions to 1990 levels over the period
2008-2012.174 Meeting this target poses particular challenges for NZ given that,
in 1990, almost 80 per cent of total electricity generation in NZ came from
renewable energy sources including hydro, geothermal and wind. 175 Furthermore,
a significant amount of NZ national emissions come from the agriculture industry
including methane from ruminant animals (30 per cent of national emissions) and
nitrous oxide emissions (18 per cent of national emissions). 176 The technical
solutions for methane, in particular, are quite problematic. 177
Accordingly,
although the adopted target is not as ambitious as that of the EU or the UK, for
example, the efforts of the NZ government appear quite respectable when
compared to the disappointing Australian response to its less onerous target.178
CONCLUDING COMMENTS
The climate change regime is dependent on domestic legislation, policies and

other emissions reduction initiatives to achieve global reductions in greenhouse
gas emissions in order to avoid the adverse impacts of climate change. However,
the climate change regime does not impose direct obligations on nation parties to
implement such initiatives, instead providing parties with a broad discretion as to
174
These include engagement in the market mechanisms of the Kyoto Protocol, implementation of the
Climate Change Response Act 2002 (NZ), designing an emissions trading scheme, establishment of
energy efficiency and sustainability strategies and the creation of the Sustainable Land Management
and Climate Change Plan of Action. New Zealand Ministry for the Environment, Major Climate
Change Policies and Strategies http://www.mfe.govt.nz/issues/climate/policies-initiatives/policiesstrategies.html at 15 June 2008.
175
New Zealand Government, 'New Zealand's Climate Change Solutions: an overview' (2007) at 5.
176
Ibid, 8.
177
Ibid.
178
That is, reductions in national emissions to 108 per cent of reported 1990 levels.
208
the choice and manner of implementation of domestic reduction initiatives.

Where this results in a complete absence of direct regulatory initiatives to reduce
emissions, as in the case of Australia, this deliberate exercise of discretion has the
effect of undermining the international regime in achieving its global
environmental objectives.
The purpose of this chapter was to analyse critically the direct regulatory
approaches to greenhouse gas emissions and climate change in Australia. The
brevity of this chapter is due entirely to the complete absence of direct domestic
regulation aimed at minimising emissions or responding to climate change. This
is despite Australias clear international duties to do so. The approach of the
Federal government has been based, primarily, on ad hoc voluntary schemes
which have provided little incentive for the Australian community to alter its
emitting behaviour or for industry to make significant investments in less energy
intensive technologies or alternative energy sources.
Indeed, the current
Australian legal approach presents as a prime example of an inadequate, legally

dysfunctional, and ultimately ineffective, response to the challenges of climate
change. As a result, the design of any future legal regime to reduce emissions
rapidly will have to contend with this lack of progress within the Australian
community. In such circumstances, the use of market incentives alone will not
be sufficient to achieve the substantial, and abrupt, emission reductions now
required not only to comply with Australias international obligations but also to
avoid the adverse impacts of climate change. A portfolio of legal responses is
required including direct regulation with strict duties to reduce emissions; market
mechanisms to promote private engagement; and other measures to promote the
development and deployment of new technologies and use of alternative energy
sources. All of these measures will be critical in order to establish an effective
regime to achieve such a radical transformation in the Australian psyche.
209
In the meantime, the absence of comprehensive regulation in Australia to address

climate change makes it necessary to review the surrogate legal mechanisms that
might operate to require, indirectly, reductions in greenhouse gas emissions and
respond to the impacts of climate change. The following two complementary
chapters consider the operation of existing Australian environmental and
planning regimes and the common law of torts respectively. The former chapter
presents a critical analysis of the current and potential role of environmental and
planning regulation, in Australia, in imposing obligations to minimise emissions
and adapt to the impacts of climate change. The latter chapter presents a critical
examination of the role of the Australian common law of torts as a mechanism to
distribute responsibility for the harmful effects of greenhouse gas emissions
resulting from the impacts of climate change.
210
Chapter Five - The Role of Environmental Regulation, in

Australia, in Responding to the Impacts of Climate Change
INTRODUCTION
The regulation of humankinds impacts on the environment is based upon a
sophisticated collection of guiding environmental principles and strict legal rules
that are formulated across international, national, regional and local levels. The
overarching purpose of environmental regulation is to resolve tensions between a
kaleidoscope of conflicting short term economic priorities, social interests and
the long term requirements for a sustainable environment. The phenomenon of
climate change is an environmental problem for which strong regulation is
required to address conflicting short term economic imperat ives and long term
social impacts and environmental degradation. This tension is exacerbated by the
prevailing misunderstanding and doubt regarding the science of climate change
and the causal impacts of greenhouse gas emissions. At an international level,
climate change is regulated through a relatively weak international regulatory
regime with limited emission reduction obligations and weak enforcement
mechanisms. Nations are provided with a vast discretion as to the manner of
domestic regulation of greenhouse gas emissions. In the case of Australia, that
discretion has been exercised to facilitate business as usual and discourage the
restriction of emissions from Australias major industries.
The analysis of the Xstrata case contained in this chapter was published in Nicola Durrant, 'The
Xstrata Coal Mine Challenge: Objections, Judicial Determinations and Natural Justice' (2007) Issue
60 Queensland Environmental Practice Reporter 125. The analysis of adaptation to climate change
and leasing/sale of land contracts contained in this chapter was included in a conference paper entitled
'Addressing Climate Liabilities in Common Transactional Documents' presented at the National
Environmental Law Association The Law of Climate Change Conference, Freemantle Western
Australia, 27-28 March 2008.
211
In the absence of specific national regulation of greenhouse gas emissions in

Australia, the regulation of emissions as air pollution likely to cause
environmental harm will fall to be regulated under existing Australian
environmental protection and environmental impact assessment regimes. Even if
Federal legislation is implemented in the future to restrict the rate of greenhouse
gas emissions, these environmental and planning regimes will continue to play a
critical role in regulating the physical impacts of climate change. Consequently,
the purpose of this chapter is to critically assess the current scope of Australian
environmental law and its ability to regulate emissions and minimise the harmful
impacts of climate change. This chapter presents an analysis of the law in theory
and case studies of the law in practice. This chapter concludes that the current
operation of these environmental regimes is suboptimal and characterised by a
serious dichotomy between the law as written and its practical interpretation and
application by Australian determining authorities.
Given the urgency and
significance of the threat of climate change there is very limited jurisprudence in

this area.
Moreover, the majority of judicial considerations display a
fundamental misconception regarding the proper role of the principles of

ecologically sustainable development (ESD) in the application of the law; a
serious misunderstanding as to the nature of climate change; and lingering doubt
regarding the accuracy of the scientific predictions of the impacts of climate
change.
ADDRESSING CLIMATE CHANGE AND THE PROMOTION OF

SUSTAINABLE DEVELOPMENT: INTERNATIONAL PRINCIPLES
Society has long acknowledged the inherent tension between continued economic
growth, development and the degradation of the Earths natural resources. The
report of the World Conference on Environment and Development Our Common
212
Future crystallised a new aspirational goal for society called sustainable

development.2 Sustainable development was defined as the ability of humanity
to ensure that development meets the needs of the present without compromising
the ability of future generations to meet their own needs. 3
Sustainable development is comprised of three independent pillars of

sustainability, namely, environmental, economic and social sustainability.
Actions to address sustainability are clearly interconnected with the global goal
of avoiding adverse climate change. The overriding objective of the United
Nations Framework Convention on Climate Change (UNFCCC) is to achieve the
stabilization of greenhouse gas concentrations in the atmosphere at a level that
would prevent dangerous anthropogenic interference with the climate system.5
The adverse effects of climate change are described as follows:

changes in the physical environment or biota resulting from climate change which
have significant deleterious effects on the composition, resilience or productivity of
natural and managed ecosystems or on the operation of socio-economic systems or
on human health and welfare.6
Accordingly, climate change has been described as the archetypal environmental

issue with its supranational impacts that disrupt sea levels, ocean currents and
the constituent gases of the atmosphere and impacts that are spatially and
temporally removed from the point of emissions. 7
G. Bruntland, (ed) 'Report of the World Commission on Environment and Development: Our
Common Future (The Bruntland Report)' (Oxford University Press, 1987).
3
Ibid, 43.
4
Jennifer A. Elliott, An Introduction to Sustainable Development (3 ed, 2006) London, New York,
Routledge at 11.
5
31 ILM 849 (entered into force on 21 March 1994)(UNFCCC), Article 2.
6
UNFCCC, n5, Definitions.
7
Jennifer Elliott, n4, 72-73, 77.
213
The UNFCCC states that the Parties have a right to, and should, promote
sustainable development.8 The Kyoto Protocol to the UNFCCC also requires
parties to promote sustainable development in the achievement of their emissions
reduction obligations (or targets).9
Avoiding adverse climate change requires the effective regulation of a range of

uncertain ecological effects from a broad scope of human activities at global,
regional and local levels. 10 In particular, to promote sustainable resource, there is
a need to assess and manage, within an effective legal framework, the political,
social, cultural and economic dimensions of human uses of the Earths resources:
poverty eradication, changing consumption and production patterns, and protecting
and managing the natural resource base for economic and social development are
overarching objectives of, and essential requirements for, sustainable
development.11
Climate change is an obvious example of an environmental problem that has the

potential to affect adversely both current and future generations. The UNFCCC
states that the parties to the convention are determined to protect the climate
system for present and future generations 12 and that:
the Parties should protect the climate system for the benefit of present and future
generations of humankind, on the basis of equity and in accordance with their
common but differentiated responsibilities and respective capabilities.13

signature 16 March 1998 (entered into force on 16 February 2005)(Kyoto Protocol), Article 2(1).
10
Joyeeta Gupta, 'Glocalization: The Precautionary Principle and Public Participation with special
reference to the UN Framework Convention on Climate Change' in David Freestone and Ellen Hey
(eds), The Precautionary Principle and International Law (1996) The Netherlands, Kluwer Law
International, 231 at 231.
11
World Summit on Sustainable Development, 'Johannesburg Declaration on Sustainable
Development' (2002) at [11].
12
13
Ibid, Principle 1.
9
214
Acknowledgement and protection of the rights and interests of future generations

is a key component in the promotion of sustainable development. 14
The
Stockholm Declaration first expressed this principle of inter-generational equity

as:
man.bears a solemn responsibility to protect and improve the environment for
present and future generation. 15 The natural resources of the earthmust be
safeguarded for the benefit of present and future generations.16
The nature of the rights of future generations is a controversial issue. It has been
described by one commentator as:
the right to those natural resources which are necessary to guarantee basic economic,
social and cultural rights over an indefinite period of timeand the conservation of
the conditions, including conservation of biological diversity, which are necessary
to ensure their attainment.17
Entrenched in the principles of sustainable development and inter-generational

equity is the obligation to adopt a precautionary approach to risks in
environmental management and decision-making processes. Therefore, the
precautionary principle is concerned with the identification and management of
risks of environmental and social harm through a process of institutionalised
caution.18 This principle was first expressed in the Rio Declaration which states
that:
in order to protect the environment, the precautionary approach shall be widely
applied by States according to their capabilities. Where there are threats of serious
or irreversible damage, lack of full scientific certainty should not be used as a
14
Alexandre Kiss, 'The Rights and Interests of Future Generations and the Precautionary Principle' in
David Freestone and Ellen Hey (eds), The Precautionary Principle and International Law (1996) The
Netherlands, Kluwer Law International, 19 at 23.
15
United Nations Conference on the Human Environment, 'Declaration of the United Nations
Conference on the Human Environment' (1972), Principle 1.
16
Ibid, Principle 2.
17
Alexandre Kiss, n14, 24.
18
C.J Barrow, Environmental Management for Sustainable Development (2 ed, 2006) New York,
Routledge at 33.
215
reason
for postponing cost-effective measures to prevent
environmental
19
degradation.
The precautionary principle was also adopted in the UNFCCC and is described in
the following terms:
the Parties should take precautionary measures to anticipate, prevent or minimize
the causes of climate change and mitigate its adverse effects. Where there are
threats of serious or irreversible damage, lack of full scientific certainty should not
be used as a reason for postponing such measures, taking into account that policies
and measures to deal with climate change should be cost-effective so as to ensure
global benefits at the lowest possible cost.20
The effect of the precautionary principle is, inter alia, to lower the threshold at
which decision-makers must acknowledge that a reasonable risk to the
environment exists.21 It also requires an element of mitigation of the risk of harm
and has been described as the most developed form of the general [r]ule
imposing an obligation to prevent harm to the environment. 22
ENVIRONMENTAL PROTECTION AND AVOIDANCE OF HARM:

NATIONAL PRINCIPLES IN AUSTRALIA
The Australian Federal system of government has resulted in separate

environment protection regimes being created by the Commonwealth and the
various states. Little reference is made to the environment in the Australian
19
UNCED, 'United Nations Conference on Environment and Development: The Rio Declaration'
((1992) 31 ILM 874), Principle 15.
20
UNFCCC, n5, Principle 3.
21
Nicolas De Sadeleer, Environmental Principles: From Political Slogans to Legal Rules (2002) New
York, Oxford University Press at 160.
22
Alexandre Kiss, n14, 27.
216
Constitution and the regulation of environmental matters resides primarily with

the states and territories. 23 However, the Commonwealth government has relied
on a range of heads of power in the Constitution, including the corporations
power, the trade and commerce power and the external affairs power, to enact
Commonwealth environmental laws.24 The end result is a nation with a range of
differing legislation, policies and approaches to environmental protection across
the federal, state and territory jurisdictions.
There are a number of instruments that have been adopted and endorsed by the
Commonwealth, states and territories, which provide guiding principles for the
protection of the environment and promotion of environmental sustainability in
Australia.
Firstly, the National Strategy for Ecologically Sustainable Development (NSESD)

was endorsed by the Council of Australian Governments in December 1992. The
policy defines ecologically sustainable development (ESD) as development
which aims to meet the needs of Australians today, while conserving our
ecosystems for the benefit of future generations. 25 And, using, conserving and
enhancing the community's resources so that ecological processes, on which life
depends, are maintained, and the total quality of life, now and in the future, can
be increased. 26
23
Other than section 100 Commonwealth of Australian Constitution Act which states that the
Commonwealth shall not, by any law or regulation of trade or commerce, abridge the right of a State
or of the residents therein to the reasonable use of the waters of rivers for conservation or irrigation.
24
Commonwealth of Australian Constitution Act ss 51(xx), 51(i), 51 (xxix). Stewart Smith, 'New
Commonwealth and State Government Environment Relationships: Briefing Paper No 18/99' (1999)
at 3-4.
25
Ecologically Sustainable Development Steering Committee, 'National Strategy for Ecologically
Sustainable Development' (Australian Government, 1992), Part 1.
26
Ibid.
217
The guiding principles of the NSESD include an acknowledgement of the need to

consider the global dimension of environmental impacts of actions and policies27
and the adoption of the precautionary principle in the following terms:
where there are threats of serious or irreversible en vironmental damage, lack of full
scientific certainty should not be used as a reason for postponing measures to
prevent environmental degradation.28
Further, NSESD states that cost-effective and flexible policy instruments should
be adopted, such as improved valuation, pricing and incentive mechanisms.29
The Intergovernmental Agreement on the Environment 1992 (IGAE) addresses

the responsibilities of the various levels of government in Australia in regulating
environmental concerns. IGAE endorses the incorporation of the precautionary
principle into decision making and states that:
in the application of the precautionary principle, public and private decisions should be
guided by:
careful evaluation to avoid, wherever practicable, serious or irreversible damage

to the environment; and
an assessment of the risk-weighted consequences of various options.30
The IGAE also commits to ensuring that environmental issues associated with a
proposed project are taken into consideration and that there is a proper
examination of matters which significantly affect the environment.31 Accordingly,
these guiding instruments are unequivocal in their support for the implementation
and incorporation of the principles of ESD, including the principle of inter-
27
Ibid, Part 1, Principle 3.

29
30
Australian Government, 'Intergovernmental Agreement on the Environment' (1992), 3.5.1.
31
Ibid, 3.4.
28
218
generational equity and the precautionary principle, into the decision-making

process. The following sections will analyse the extent to which these principles
are being implemented in relation to significant greenhouse gas emissions and
climate change.
DOMESTIC
REGULATION
UNDER
THE
CLIMATE
CHANGE
REGIME: DUTIES AND DISCRETION
The UNFCCC and Kyoto Protocol are both international agreements, reached
through international consensus, that are aimed at reducing anthropogenic
greenhouse gas emissions to avoid or reduce the adverse effects of climate
change. 32
Climate change is an international environmental concern and it
requires cooperative global efforts to minimise its adverse effects. Although

global, the problem is not homogeneous. The regime is based on an
understanding of the differing social, economic and environmental circumstances
of each country including differences in their contributions to the global warming
problem. Accordingly, the climate change regime adopts a principle of common
but differentiated responsibilities, in line with equitable principles, and imposes
customised emissions reduction obligations on each party. It recognises that
policies and measures to protect the climate system against climate change
should be appropriate for the specific conditions of each nation and does not
dictate the specific method of attainment of those emissions reductions.33
Parties are able to choose which greenhouse gases, from a collection of six gases,
will be the focus of their mitigation activities. Parties may also manage domestic
land use management practices and carbon sinks to control net national
32
33

Ibid, Article 3(4).
219
emissions.34 This provides parties with ample discretion regarding the nature and
extent of domestic behavioural modification whilst acknowledging the inherent
sovereignty of nation States. This flexibility ethos is replicated in the Kyoto
Protocol which also creates flexible implementation mechanisms that may be
utilised, at will, by the parties to the Protocol.35 Consequently, the UNFCCC and
Kyoto Protocol outline, in broad terms, the types of policies that should be
considered at a national level to implement the duty to reduce domestic
greenhouse gas emissions. However, for the most part, the international regime
leaves the method of implementation to the discretion of the parties.
This is a common approach for international environmental agreements whereby:

the agreement on protective measures is international, but the implementation with
regard to each polluter is generally left to each state. As indicated by the phrase
think globally, act locally, the assumption is that the objectives of international
agreements shall be realized by the sum of all the state parties national
undertakings. It is therefore a prerequisite that the measures of each state are
compatible with the international accord.36
Accordingly, a criticism levelled at international law is equally pertinent to the

climate change regime:
hardly any guidance is provided as to the design and proportion of legal,
administrative or other measures for pollution control; no criteria are given on what
constitutes a compatible control system (emphasis added).37
34
All Annex-1 parties are able to account for national human induced land use change and forestry
activities, since 1990, in calculating their national emissions under the Kyoto Protocol. This is
limited to afforestation, reforestation and deforestation activities that have been measured as
verifiable changes in carbon stocks. Kyoto Protocol, n9, Article 3.3.
35
These flexible mechanisms include the Clean Development Mechanism, Joint Implementation and
international emissions trading.
36
Kluwer Law International at xix.
37
Ibid, 113.
220
There are a number of provisions in the UNFCCC and Kyoto Protocol which
generally require the implementation of policies and programmes to address
climate change at a national level. First and foremost, each party must develop a
national inventory of its anthropogenic greenhouse gas emissions and removals
by sinks and must submit these to the UNFCCC Secretariat.38 Parties are also
required to formulate and regularly update national and, where appropriate,
regional programmes containing measures to mitigate climate change concerning,
inter alia, the energy, transport, industry, agriculture, forestry and waste sectors.39
In particular, developed Annex-1 countries 40 , including Australia, must adopt
national policies and take corresponding measures on the mitigation of climate
change, by limiting their anthropogenic emissions of greenhouse gases and
protecting and enhancing their greenhouse gas sinks and reservoirs.41 They must
also identify and periodically review policies and practices which encourage
activities that lead to greater levels of anthropogenic emissions of greenhouse
gases.42
All parties to the UNFCCC must also promote sustainable management, and
promote and cooperate in the conservation and enhancement, as appropriate, of
sinks and reservoirs of all greenhouse gases. 43 Critically, as a party to the
UNFCCC, Australia has agreed to take climate change considerations into
account in relevant social, economic and environmental policies and actions, and
to employ appropriate methods, including impact assessments, formulated and
determined nationally, with a view to minimising the adverse effects of measures
undertaken to mitigate or adapt to climate change. 44
38
UNFCCC, n5, Article 4(1)(a); Kyoto Protocol, n9,Article 5(1).

UNFCCC, n5, Article 4(1)(b).
40
That is, those developed nations listed in Annex 1 to the Kyoto Protocol, n9.
41
UNFCCC, n5, Article 4(2)(a); Kyoto Protocol, n9, Articles 2(1);10.
42
UNFCCC, n5, Article 4(2)(e).
43
Ibid, Article 4(1)(d).
44
Ibid, Article 4(1)(f).
39
221
GREENHOUSE GASES, CLIMATE CHANGE AND HARM: THE

SCIENTIFIC FINDINGS
In the context of the legal response to the consequences of climate change, the
fundamental role of science has been described as to provide credible
evidence that particular proposed or ongoing human activities cross some
threshold of harm, triggering precautionary action. 45 However, once a risk of
likely environmental harm has been identified, complete scientific certainty is not
required prior to a decision to restrict such actions. 46
A detailed summary of the existing scientific evidence regarding the causes and
impacts of climate change is presented in Chapter Two. For completeness, the
key findings in respect of greenhouse gases, climate change and environmental
harm are summarised below:
In relation to the link between the activities of humans and increased

atmospheric concentrations of greenhouse gases the Intergovernmental Panel
on Climate Change (IPCC) states that:
global atmospheric concentrations of carbon dioxide, methane and nitrous
oxide have increased markedly as a result of human activities since 1750
and now far exceed pre-industrial values determined from ice cores
spanning many thousands of years. The global increases in carbon dioxide
concentration are due primarily to fossil fuel use and land use change,
while those of methane and nitrous oxide are primarily due to agriculture.47
45
Mary O'Brien, 'Science in the Service of Good: The Precautionary Principle and Positive Goals' in
Joel A. Tickner (ed), Precaution, Environmental Science, and Preventive Public Policy (2003)
Washington, Island Press, 279 at 279.
46
David Freestone and Ellen Hey, 'Origins and Development of the Precautionary Principle' in David
Freestone and Ellen Hey (eds), The Precautionary Principle and International Law (1996) The
47
Climate Change' (IPCC Secretariat Geneva, 2007) at 2.
222
In relation to the emission of greenhouse gases and increases in global

temperatures, the IPCC concludes that:
most of the observed increase in globally average temperatures since the
mid-20th century is very likely due to the observed increase in
anthropogenic greenhouse gas concentrations.48
In relation to the resulting impacts of climate change, the IPCC concludes

that:
warming of the climate system is unequivocal, as is now evident from
observations of increases in global average air and ocean temperatures,
widespread melting of snow and ice, and rising global mean sea level.49
REGIMES TO PROTECT THE ENVIRONMENT: THE THEORETICAL

REGULATION OF EMISSIONS
Chapter Four concluded that there is currently no national regulatory scheme in

Australia that regulates, holistically, greenhouse gas emissions from domestic
sources.50 The absence of a clear regulatory framework at a Federal level raises
questions regarding the suitability and flexibility of existing principles of
environmental protection to reduce our greenhouse gas emissions. There have
been many calls for specific Australian legislation, to restrict national greenhouse
gas emissions. However, strictly speaking, there is not a need for new legislation
48
Ibid, 8. Very likely, in this context, refers to above 99 per cent scientific certainty.
Ibid, 4.
50
There are Federal government proposals to implement a national emissions trading system in
conjunction with a greenhouse gas emissions reporting system with trade commencing in 2010. The
trading scheme will impose liabilities on certain sectors to reduce their greenhouse gas emissions.
This trading mechanism is intended to operate in conjunction with the mosaic of existing and
emerging environmental regimes at both Federal and State levels. Australian Government, 'Media
Release: Government Announces Detailed Timetable on Emissions Trading' (Senator the Hon Penny
Wong, Minister for Climate Change and Water, PW 35/08, 17 March, 2008).
49
223
in order to achieve this. Under the current wording of environmental protection

legislation, in Australia, it is open to the environmental regulatory authorities to
regulate emissions and to prosecute for failure to take steps to minimise our
emissions. In addition, the approval of new industrial projects with large scale
greenhouse gas emissions, such as coal mines and coal fired power plants, will be
assessed under existing environmental protection and planning legislation at state,
territory and Commonwealth levels (as applicable).
The decisions of regulators under environmental protection and planning

legislation in Australia will play a crucial role in influencing the outcomes
regarding greenhouse gas emissions and climatic changes. Regulation of major
projects in Australia is guided by the precepts of sustainability, inter-generational
equity and precaution. Environmental protection legislation in Australia seeks to
maintain the long-term quality of the local environment through the regulation of
pollution and environmental harm. The principles of ESD have been adopted
into many Australian national and state environmental policies and statutes. 51
References to the precautionary principle range from the express to the oblique
including direct obligations to take into account, general obligations to have
regard to and statutory objectives of acting in accordance with a precautionary
approach.52 Accordingly, the majority of environmental protection statutes have
adopted the principles of environmental sustainability and the precautionary
principle in some form. 53
In South Australia (SA), where a specific greenhouse emission reduction target

has been adopted54 , the object of the Environmental Protection Act 1993 (SA
51
Jacqueline Peel, The Precautionary Principle in Practice: Environmental Decision-Making and

Scientific Uncertainty (2005) Sydney, The Federation Press at 19.
52
Ibid, 20.
53
For a detailed discussion of the environmental protection legislation in each Australian jurisdiction
see Douglas E Fisher, 'The Statutory Relevance of Greenhouse Gas Emissions in Environmental
Regulation' (2007) 24(3) Environmental and Planning Law Journal 210.
54
As discussed in Chapter Four.
224
EPA) is to promote the principles of ecologically sustainable development

including:
(A) sustaining the potential of natural and physical resources to meet the reasonably
foreseeable needs of future generations;
(B) safeguarding the life-supporting capacity of air, water, land and ecosystems;
and
(C) avoiding, remedying or mitigating any adverse effects of activities on the
environment.55
The SA EPA states that proper weight should be given to both long and short
term economic, environmental, social and equity considerations in deciding all
matters relating to environmental protection and that a precautionary approach
should be taken to the assessment of the risk of environmental harm. 56 Finally,
the objects refer to the incorporation of both the precautionary and polluter pays
principles into the exercise of decision-making functions.57
The SA EPA imposes a general environmental duty requiring persons not to

undertake activity that might pollute the environment unless all reasonable and
practical measures have been taken to minimise any environmental harm. 58 A
pollutant includes any solid, liquid or gas and would include the emission of
greenhouse gases to the atmosphere. 59 The SA Act prohibits the undertaking of a
prescribed activity of environmental significance except as authorised under a
licence.60 This includes development activities.61
55
Environmental Protection Act 1993 (SA), section 10(1)(a)(i).

Environmental Protection Act 1993 (SA), section 10(1)(a)(ii).
57
Environmental Protection Act 1993 (SA), section 10(1)(b)(iv)-(vi).
58
Environmental Protection Act 1993 (SA), section 25(2).
59
Environmental Protection Act 1993 (SA), section 3(1).
60
Environmental Protection Act 1993 (SA), section 36. Schedule 1. The Act does not apply to
authorised activities under the Mining Act 1971 (SA), Environmental Protection Act 1993 (SA),
section 7(4).
61
Environmental Protection Act 1993 (SA), section 57.
56
225
As in the majority of Australian state and territory jurisdictions, it is an offence to

cause
serious
environmental
harm,
material
environmental
harm and
environmental nuisance. 62 Environmental harm is defined to mean any harm

(including risk of harm or future harm) to the environment of whatever degree or
duration while environment includes the land, air, water, organisms and
ecosystems and includes the amenity values of an area.63 The Act applies to the
coastal waters of the state and the air above and land beneath those waters. In
addition, the Act has extra-territorial application and if a person causes
environmental harm within the state they will be liable as if the conduct were
engaged in within the state.64
It is useful to compare the approach to environmental protection in SA with other

state jurisdictions that have not adopted a legislative greenhouse gas emissions
reduction target.
The objectives of the Queensland Environmental Protection Act 1994 (QLD EPA)
are to protect Queenslands environment while allowing for ESD.65 There is a
general duty to avoid environmental harm and it is an offence to cause unlawful
environmental harm, that is causing serious or material environmental harm or
environmental nuisance. 66
Environmental Harm is defined under the QLD EPA as:

any adverse effect, or potential adverse effect (whether temporary or permanent and
of whatever magnitude, duration or frequency) on an environmental value, and
includes environmental nuisance.67
62
Environmental Protection Act 1993 (SA), ss 79,80,82.

Environmental Protection Act 1993 (SA), ss3(1), 5(1).
64
Environmental Protection Act 1993 (SA), section 9.
65
Environmental Protection Act 1994 (Qld), section 3.
66
Environmental Protection Act 1994 (Qld), ss 436, 437, 438, 440.
67
Environmental Protection Act 1994 (Qld), section 14(1).
63
226
Environmental value is defined as a quality or physical characteristic of the

environment that is conducive to ecological health or public amenity or safety.68
The environment is itself defined under the Act to include all ecosystems, all
natural and physical resources, and the qualities and characteristics of locations,
places and areas. 69
The QLD EPA specifies that environmental harm may be caused whether the
harm is a direct or indirect result of the activity; or whether the harm results
from the activity alone or from the combined effects of the activity and other
activities or factors. 70 The language and scope of these principles is clearly
sufficiently wide to encompass the emission of greenhouse gases to the
atmosphere and the resulting impacts on both the environment and
environmental values.
Finally, it should be noted that there is also a prohibition against the release of a
prescribed contaminant into the environment.71 Although not yet a prescribed
contaminant, as gases, greenhouse gases would be treated as contaminants and
could be prescribed in the future.
Similarly, in New South Wales (NSW), harm to the environment includes the
direct or indirect alteration of the environment and includes any act or emission
that results in pollution. 72 Any air impurity, which includes gases, fulfils the
definitions of air pollution and harm. 73 There is a general duty to notify of
pollution incidents that threaten material environmental harm. 74 In addition,
possible pollution is required to be taken into account by the regulator in the
68

70
Environmental Protection Act 1994 (Qld), section 14(2).
71
72
Protection of the Environment Operations Act 1997 (NSW), Dictionary.
73
74
Protection of the Environment Operations Act 1997 (NSW), section 148.
69
227
licensing of activities.75 Liability may be incurred where air pollution is caused

from a plant provided that the pollution is due to a failure to maintain the plant in
an efficient condition, or operate the plant in a proper and efficient manner.76
It is also an offence to wilfully or negligently dispose of waste in a manner that is

likely to harm the environment. 77 Waste refers to any substance whether solid,
liquid or gaseous that is emitted into the environment in such volume,
constituency or manner as to cause an alteration in the environment. 78 Some
jurisdictions, such as Western Australia, also prohibit the discharge of
hydrocarbons into the environment.79 Methane is a natural greenhouse gas and a
hydrocarbon and could be prohibited under these provisions. 80
In New Zealand, it is also an offence to discharge contaminants into the

environment unless authorised under a regional plan or resource consent. 81
However, in that jurisdiction, the definition of contaminants has been interpreted
and applied by the regulators to extend to the discharge of greenhouse gases:
Contaminant includes any substance (including gases, odorous compounds, liquids, solids,
and micro-organisms) or energy (excluding noise) or heat, that either by itself or in
combination with the same, similar, or other substances, energy, or heat
(a) When discharged into water, changes or is likely to change the physical, chemical, or
biological condition of water; or
(b) When discharged onto or into land or into air, changes or is likely to change the
physical, chemical, or biological condition of the land or air onto or into which it is
discharged.82
75

77
Protection of the Environment Operations Act 1997 (NSW), section 115. This is a tier 1 offence.
78
79
Environmental Protection (Unauthorised Discharges) Regulations 2004 (WA).
80
Environmental Protection (Unauthorised Discharges) Regulations 2004 (WA) section 3. The
discharge of a scheduled material from a commercial activity is prohibited in Western Australia.
Schedule 1 lists petrol diesel or other hydrocarbon.
81
Resource Management Act 1991 No. 69 (NZ), ss15, 15B.
82
Resource Management Act 1991 No. 69 (NZ), section 2(1).
76
228
Consequently, environmental harm from cumulative greenhouse gas emissions

does currently fall within the scope of Australian legislation to protect the
environment from contamination. Moreover, the discharge of emissions into the
atmosphere is able to be regulated in Australia without the need for any new
legislation or amendments to the current statutes. This raises the question: why
are the greenhouse gas emissions from these projects not regulated under existing
environmental protection laws? This disinclination to apply the principles of
environmental protection to avert the impacts of climate change appears to be the
result of political and economic influences on the regulator.
The previous
Federal governments resistance to the ratification of the Kyoto Protocol, and the
adoption of strict targets for the reduction of emissions, also appear to have
played a key role in this disinclination.
The imposition of an express statutory duty on Australian regulators to

specifically require them to take into account, and address, the causal impacts
from relevant greenhouse gas emissions may be necessary to address this culture
of administrative oversight. In New Zealand, for example, there are positive
obligations imposed on the environmental regulator to have particular regard to;
the ethic of stewardship, the efficient use of resources, the efficiency of the end
use of energy, the effects of climate change and the benefits to be derived from
the use of renewable energy. 83 Moreover in the United Kingdom, a statutory duty
is imposed on the Secretary of State to ensure that the net UK carbon account for
the year 2050 is at least 60 per cent below 1990 levels. 84
83
Resource Management Act 1991 (NZ), section 7. New Zealand is a party to the UNFCCC and the
Kyoto Protocol.
84
Climate Change Bill [HL] 2007-2008 (UK), section 1(1). The Bill was introduced into the House of
Lords on 14 November 2007 and completed its passage through the House of Lords on 31 March
2008. It received its second reading in the House of Commons on 9 June 2008. It is expected to
receive Royal Assent in 2008. DEFRA, UK Legislation: taking the Climate Change Bill forwardprogress (18 February 2008)
229
In the United States of America (US), a collection of states and cities brought a
suit against the EPA for its failure to regulate carbon dioxide emissions under the
US Clean Air Act. The Clean Air Act requires the EPA to set emission standards
for:
any air pollutant from any class of motor vehicles.. which..cause, or contribute to,
air pollution which may reasonably be anticipated to endanger public health or
welfare.85
Air pollutant is defined under the Clean Air Act to include:

any air pollution agent or combination of such agents, including any physical,
chemical, biological...substance or matter which is emitted into or otherwise enters
the ambient air.86
After referring to the above provisions, the US Supreme Court found that
greenhouse gas emissions did fall within this definition and commented:
the Clean Air Acts sweeping definition of air pollutant includes any air pollution
agent. On its face, the definition embraces all airborne compounds of whatever
stripe, and underscores that intent through the repeated use of the word any.
Carbon dioxide, methane, nitrous oxide, and hydrofluorocarbons are without a
doubt physical [and] chemical . . . substance[s] which [are] emitted into . . . the
ambient air. The statute is unambiguous.(emphasis added)87
It may only be a matter of time before similar judicial actions are attempted
against environmental regulators in Australia and, in the right judicial setting, a
similar legal interpretation might be applied. However, there will be greater
difficulties in demonstrating that such specific statutory duties to address
85
Clean Air Act (CAA) 42 USC s/s 7401 et seq. (1970), section 202(a)(1) (42 U.S.C. 7521).
CAA, ibid, section 7602(g).
87
Massachusetts v Environmental Protection Agency 549 US (2007) (Supreme Court of the United
States, decided 2 April 2007) at 26.
86
230
emissions exist, and are required to be exercised, owing to the less prescriptive
wording generally found within existing Australian environmental legislation.
REQUIREMENTS TO ASSESS THE ENVIRONMENTAL IMPACTS OF

GREENHOUSE GAS EMISSIONS
A The Proper Role of EIA Process in Assessing Emissions
In all Australian state, territory and federal jurisdictions, environmental
assessment is a key feature of strategic environmental planning and management
and a key means of achieving ESD.88 Environment Impact Assessment (EIA) has
been described as a systematic process for the examination and evaluation of the
environmental effects of proposed activities that are considered likely to
significantly affect the environment.89
The environmental assessment process is a means of ensuring that environmental

considerations are given equal consideration in the assessment of social,
economic and environmental impacts of proposed activities. 90
The role of
environmental assessment has been described as enabling:

an assessment of whether there are threats of damage;
an evaluation of the conclusiveness or certainty of the scientific

evidence;
informed decisions to be made to avoid or mitigate, whenever

practical, serious or irreversible damage; and
88
Gerry Bates, Environmental Law in Australia (6 ed, 2006) Chatswood, Lexis Nexis Butterworths at
313.
89
Ibid.
90
Ibid, 316.
231
shifting the burden of proof to persons potentially responsible for

environmental harm. 91
A proper EIS will address the cumulative environmental impacts resulting from
the proposed project. 92 A proper EIS will consider the potential impacts from the
likely greenhouse gas emissions of the proposed activity. The EIA must do more
than simply play lip service to the fact that some emissions will result or that
there is some remote possibility of climate change occurring.
In order to
properly fulfil its function, the EIA must assess the long-term, cumulative
impacts on the environment from the greenhouse gas emissions of the proposed
activity.93
The decision-maker must question whether there is sufficient information to

make a proper assessment of the direct and indirect consequences of an action.94
Therefore, the EIA should ensure that:
there is sufficient information before the [decision-maker] to enable his
consideration of all relevant matters so that if there is serious or irreversible
environmental damage from climate change/global warming and there is scientific
uncertainty about the impact he can determine if there are measures he should
consider to prevent environmental degradation in relation to this project.95
The fact that there may be a lack of scientific certainty regarding the future
impacts of climate change cannot be used as an excuse for not properly
considering such impacts as part of the assessment process:96
91
Bentley v BGP Properties Pty Ltd (2006) 145 LGERA 234, Justice Preston at [68].
BT Goldsmith Planning Services Pty Ltd v Blacktown City Council [2005] NSWLEC 210 at [90].
93
Gray v Minister for Planning and Others (2006) 152 LGERA 258 at 297.
94
Minister for Environment and Heritage v Queensland Conservation Council [2004] FCAFC 190.
95
Gray v Minister for Planning and Others (2006) 152 LGERA 258 at 296. For a discussion of the
depth of that consideration see David Farrier, 'The Limits of Judicial Review: Anvil Hill in the Land
and Environment Court' in Tim Bonyhady and Peter Christoff (eds), Climate Law in Australia (2007)
Sydney, The Federation Press, 189 at 196.
96
Gray v Minister for Planning and Others (2006) 152 LGERA 258 at 297.
92
232
scientific uncertainty is not the same as low probabilityeven when timing and
magnitude of an event or effect is uncertain, there may be a strong scientific basis
for concern about the impact.97
Consequently, an EIA should assess the likely impacts from the emission of
greenhouse including the likelihood of localised environment harm from changes
in the global climate as a result of the increase in cumulative global emissions.
The fact that significant emissions will result from the project will not necessarily
lead to rejection of the proposal. The likely significant environmental impacts
from those emissions must be balanced against all other economic, social and
environmental factors.
B Duties to Assess Impacts in State Planning Regimes

Major industrial projects have the potential to involve significant environmental
effects and will be required to comply with some form of environmental impact
assessment (EIA) process in most jurisdictions.
The Environmental Impact
Statement (EIS) should assist the decision maker in their consideration of: the
likely environmental impacts of the project; whether to approve the project; and
whether conditions should be attached to that approval. 98 Consequently, the EIA
process has the potential to play a critical role in enabling authorities to evaluate
and balance the risks of climate change impacts from emissions and the
implications of possible conditions to mitigate or offset those emissions.
The following paragraphs provide an overview of the requirements to evaluate

the significant environmental impacts of projects under Australian planning laws.
This analysis highlights the variance in the function and scope of the planning
schemes across each of the state and territory jurisdictions. Despite this, the
97

98
Jacqueline Peel, n51, 142.
233
language and breadth of all of these schemes appears sufficient to encompass

regulation of the likely adverse environmental effects of greenhouse gas
emissions and climate change. As noted by one commentator:
while the planning legislation in each State makes no specific reference to
greenhouse gas emissions, there would seem little doubt that in each State the
planning function acknowledges environmental values, enables the consideration of
environmental impacts and, in most cases, requires environmental impacts to be
considered.99
In SA, where a statutory emissions reduction target has been adopted, the
Development Act 1993 requires development to be assessed against the
provisions of the appropriate development plan and building rules.
100
Development plans must seek to promote the provisions of the SA Planning

Strategy and should facilitate protection of the environment, ecologically
sustainable development and the management, conservation and use of natural
and other resources. 101 The SA Planning Strategy refers to the SA target of
reducing emissions by 60 per cent by 2050 and states that:
all developments to support targeted population and economic growth must be
sustainable, promoting improved resource management practices (including water
and waste) and reducing reliance on non-renewable resources.102
Accordingly, the controlling provisions of development plans must promote the

reduction of greenhouse gas emissions and the protection of the environment. In
relation to major projects, the Minister may declare a development or project to
be of major environmental, social or economic importance. 103 The Development
Assessment Commission will direct the type of environmental assessment to be
99
Douglas E Fisher, n53, 215.

Development Act 1993 (SA), section 33(1).
101
Development Act 1993 (SA), ss 3,23(3).
102
Government of South Australia, 'Planning Strategy for Metropolitan Adelaide' (August 2006) at 17.
103
Development Act 1993 (SA), section 46.
100
234
undertaken for these projects. 104 Specific SA development plans also make
reference to greenhouse gases. For example, the City of Adelaide Development
Plan contains principles of development control that require all new residential
and office developments and extensions/refurbishments to be designed to
minimise energy consumption and limit greenhouse gas emissions.
105
Development must also comply with the regulations which may be made in
relation to building sustainability, energy efficiency requirements and reductions
of greenhouse gases.106
The objective of the Western Australia (WA) Planning and Development Act
2005 is to promote the sustainable use and development of land in the state.107 In
the preparation of a State Planning Policy the Commission must have regard to,
inter alia, conservation of natural or cultural resources for social, economic,
environmental, ecological and scientific purposes and amenity, design and
environment.108 The EPA may request an environmental review of a proposed
scheme and has the power to issue instructions to the Commissioner regarding
the required process of that review. 109 Significant proposals for development may
also be referred to the EPA for assessment. 110 A significant proposal is defined as
a proposal likely, if implemented, to have a significant effect on the
environment.111 It is a matter for the EPA to determine the form, content, timing
and procedure of any such environmental review. 112
104
Development Act 1993 (SA), Part 4, Division 2.

Government of South Australia, 'Adelaide (City) Development Plan under the Development Act
1993' (Consolidated August 2007), Principles 111-113.
106
These regulations are yet to be made. Development Act 1993 (SA), section 108 and Schedule 1, Cl.
17A.
107
Planning and Development Act 2005 (WA) section 3(1)(c).
108
Planning and Development Act 2005 (WA) section 27(b)(e).
109
Environmental Protection Act 1986 (WA) section 48C(1)(a), Planning and Development Act 2005
(WA) section 39.
110
Environmental Protection Act 1986 (WA), Part IV.
111
Environmental Protection Act 1986 (WA), section 37B.
112
Environmental Protection Act 1986 (WA), section 40.
105
235
In NSW, where consent is required for development, the consent authority must
have regard to the likely impacts of that development, including environmental
impacts on both the natural and built environments, and social and economic
impacts in the locality.113 Development is defined to include, inter alia, the use
of land and the carrying out of work. 114 In considering whether there will be
significant effects on threatened species, populations or ecological communities
the consent authority must turn its mind to a range of factors including impacts to
critical habitat and disruption of life cycle of species.115 Where development is to
be carried out by a public authority, the determining authority has a duty to
examine and take into account to the fullest extent possible all matters affecting
or likely to affect the environment by reason of that activity. 116 Accordingly,
these provisions clearly require the authority to consider the potential impacts
from the use of the land and the carrying out of works, including the emission of
greenhouse gases, and the resulting effects on the environment. A formal EIA
must be carried out if the development is designated or the activity is likely to
significantly affect the environment.117 If it is likely to significantly affect an
endangered species or ecological community, a Species Impact Statement (SIS)
is also required. 118
Ministerial approval is required for projects that are deemed to be major

development projects under either a State Environmental Planning Policy (SEPP)
or by order of the Minister. 119 These projects may also be declared critical
infrastructure projects if, in the opinion of the Minister, the project is essential
for the state for economic, environmental or social reason. 120 This declaration
restricts the application of state planning instruments and third party appeals. 121
113
Environmental Planning and Assessment Act 1979 (NSW), ss79C (1)(b),111.

Environmental Planning and Assessment Act 1979 (NSW), section 4.
115
Environmental Planning and Assessment Act 1979 (NSW), section 5A.
116
Environmental Planning and Assessment Act 1979 (NSW), section 111.
117
Environmental Planning and Assessment Act 1979 (NSW), ss 112(1), 78A(8)(a); Environmental
Planning and Assessment Regulation 2000 (NSW), Schedule 3.
118
Environmental Planning and Assessment Act 1979 (NSW), ss78(8)(b), 112 (1B).
119
Environmental Planning and Assessment Act 1979 (NSW), ss75B, 75D.
120
Environmental Planning and Assessment Act 1979 (NSW), section 75C.
121
Environmental Planning and Assessment Act 1979 (NSW), section 75T.
114
236
In Victoria, local planning authorities are required to consider significant

environmental effects. 122 This may require the preparation of an Environmental
Effects Statement (EES). 123
The Ministerial Guidelines for Assessment of
Environmental Effects under the Environmental Effects Act comments that

projects with potential greenhouse gas emissions exceeding 200,000 tonnes of
carbon dioxide equivalent per annum might lead to impacts of regional or state
significance and could warrant referral to the Minister to determine whether an
EEA is required. 124 The Minister must, as part of the determination process,
consider whether the project is capable of having a significant effect on the
environment including the likelihood of adverse effects and the associated
uncertainty of available predictions as well as the availability of other assessment
processes.125
Finally, in Queensland, entities exercising functions under the Integrated

Planning Act 1997 are required to have regard to the purposes of the Act and to
advance its purposes in the performance of their functions. 126 Those purposes
include taking into account environmental effects, avoiding or lessening the
adverse effects of development and ensuring sustainable or prudent use of natural
resources.127
In particular, they must ensure that decision making processes:

(ii) take account of short and long-term environmental effects of development at
local, regional, State and wider levels; and
(iii) apply the precautionary principle; and
122
Planning and Environment Act 1987 (Vic), section 60.

Environmental Effects Act 1978 (Vic), section 8.
124
Department of Sustainability and Environment, Ministerial Guidelines for Assessment of
Environmental Effects Under The Environmental Effects Act 1978 (7 ed, 2006) Melbourne, Victorian
Government at 7.
125
Ibid, 10.
126
Integrated Planning Act 1997 (Qld), section 1.2.2.
127
Integrated Planning Act 1997 (Qld), section 1.2.3.
123
237
(iv) seek to provide for equity between present and future generations.128
For development prescribed by the regulations, the EIA process must be

complied with.129
The above analysis highlights the variety of regulatory approaches to

environmental assessment and environmental protection adopted across the states
and territories. On a proper application of the subject-matter, scope and purpose
of these planning regimes, it would be expected that the significant long term
effects on the environment and the community from adverse climate change
would be balanced against the short term economic and social interests of the
approval of the project. The proper outcome of this evaluation would be the
imposition of reasonable conditions of approval requiring the mitigation or offset
of some or all of the future emissions of the project. Ideally, this would be the
case. Certainly, this would be in accordance with the objectives of these regimes.
However, this is not the norm in practice.
Furthermore, when the decision of the determining authority is subject to judicial

challenge the outcome is often unsuccessful. These schemes vary in their level
of particularity of the matters to be taken into consideration in the EIA process.
Consequently, where this process is not complied with by the determining
authority the judiciary must undertake an awkward process of interpretation to
conclude that the promotion of the stated objectives of the regime includes a
consideration of the principles of ESD and, specifically, requires a quantitative
assessment of the greenhouse gas emissions of the project.130 This leads to the
128
Integrated Planning Act 1997 (Qld), section 1.2.3(a).

Integrated Planning Act 1997 (Qld), Part 8.
130
For example Drake Brockman v Minister For Planning [2007] NSWLEC 490 (Jagot J) at [118][119] where the applicant failed to establish that the Minister for Planning was specifically bound to
quantitatively assess the greenhouse gas emissions from a project in considering the principles of
ESD. In NSW, reference to the public interest, in a section where there is no specific reference to
ESD, has been taken to embrace the concepts of ESD in the context of the subject matter scope, and
purpose of the Environmental Planning and Assessment Act 1979 (NSW): Walker v Minister for
Planning [2007] NSWLEC 741; (2007) LGERA 124 at [154]; BGP Properties v Lake Macquarie
City Council (2004) 138 LGERA 237 at 257; Telstra Corporation Ltd v Hornsby Shire Council (2006)
129
238
conclusion that the EIA process, in practice, would be significantly improved by

the inclusion of a specific legislative provision requiring the assessment, and
mitigation, of greenhouse gas emissions as part of the approval process.
EVALUATING EMISSIONS AND ENVIRONMENTAL EFFECTS: THE

LAW IN PRACTICE
Litigation under environmental and planning statutes is increasingly being used

as a tool for drawing attention to the ramifications of unrestricted greenhouse gas
emissions. This is especially so in Australia where a number of cases have been
brought challenging the failures of statutory agencies, in determining resource
use applications, to consider properly the global impacts from emissions of
proposed projects. Such challenges require that the Australian Courts interpret a
concoction of broad and specific legal principles and statutory provisions
including: the concept of ESD; the precautionary principle; evidence of any harm
to the environment from emissions; and other relevant aspects to determine how
emissions should be addressed by the determining authority. The result has been
a line of judicial determinations spanning the full spectrum from: complete
acceptance of the evidence of climate change and the need to assess the impacts
of emissions; to overwhelming doubt regarding the IPCC reports and any causal
link between emissions and discernable environmental harm. Accordingly, the
following case studies evaluate those determinations of the Australian Courts in
which the practical interpretation and application of the law to the issue of
climate change is central to judicial considerations. The case studies below
include judicial consideration of the causative link between greenhouse gas
emissions and climate change; the operation of the principles of ESD in respect
67 NSWLR 256; 146 LGERA 10 at [123]; Carstens v Pittwater Council (1999) 111 LGERA 1 at 25;
Gray v Minister for Planning (2006) 152 LGERA 258 at [42]-[44].
239
of the predicted impacts of climate change; and the economic implications of

placing restrictions on industrial emissions.
A The Treatment of Causation in Environmental Case Law

The key challenge for determining authorities is the taxing issue of causation.
That is the establishment of a sufficient causal link between greenhouse gas
emissions from a proposed project; climate change; and resulting adverse impacts
on environmental values in Australia.
The Courts have distinguished between causal links and mere speculation of
adverse impacts. As commented in the Nathan Dams case:
a causal relationship between an action and a presumptive impact was capable of
almost infinite extension Fitzgerald v Penn (1954) 91 CLR 268 at 277....infinite
extension of the requisite causal link should be avoided by excluding possible
impacts that were merely speculative.131
As early as 1994, the Courts seemed ready to accept a demonstrated causal link
between greenhouse gas emissions and potential environmental harm:
the evidence establishes that the project will emit CO2, which is a greenhouse gas,
and will contribute to the enhanced greenhouse effect, a matter of national and
international concern.132
However, the range of decisions since then presents a series of inconsistent

judicial deliberations regarding the causal link between climate change and the
emissions from Australian projects.
131
Minister for the Environment and Heritage v Queensland Conservation Council Inc (2004) 134
LGERA 272; [2004] FCAFC (Nathan Dams Case) at [45].
132
Greenpeace Australia Ltd v Redbank Power Company Pty Ltd and Singleton Council (1994) 86
LGERA 143 at 153.
240
For example, in 2004, the Victorian Civil and Administrative Tribunal (VCAT)
considered a planning scheme amendment that facilitated mining coal fields to
supply coal to the adjacent electricity generation facility (the Hazelwood case).
The terms of reference for the established panel of inquiry included a direction
that the panel was not to refer to greenhouse gas emissions from the electricity
generation facility as these issues were to be addressed through a separate
process. 133 The EES under the Environmental Effects Act 1978 (Vic) and the
Planning and Environment Act 1987 (Vic) did not address the production of
greenhouse gases from the burning of the coal. 134 Public submissions were made
in relation to the emission of greenhouse gases and the panel was legally required
to consider all submissions but had been specifically prohibited from doing so.135
The failure to consider the emissions of the plant was appealed. VCAT held that
these were relevant submissions and were required to be considered by the panel
even if they related to an indirect effect of the amendment.136 VCAT considered
the potential impacts from the energy generated as a result of the planning
scheme amendment and described the test as follows:
whether the effect may flow from the approval of the amendment; and if so,
whether, having regard to the probability of the effect and the consequences of the
effect (if it occurs), the effect is significant in the context of the amendment.137
In applying this test, VCAT remarked:

many would accept that, in present circumstances, the use of energy that results in
the generation of some greenhouse gases is in the present interests of Victorians;
but at what cost to the future interest of Victorians? Further the generation of
greenhouse gases from a brown coal power station clearly has the potential to give
rise to significant environmental effects. Hence I think it follows that a planning
133
Charles Berger, 'Hazelwood: A new lease on life for a greenhouse dinosaur' in Tim Bonyhady and
Peter Christoff (eds), Climate Law in Australia (2007) Sydney, The Federation Press, 161 at 165. The
panel was established under the Environmental Effects Act 1978 (Vic), section 9.
134
Australian Conservation Foundation v Latrobe City Council (2004) 140 LGERA 100 at 101.
135
Peter Christoff (eds), Climate Law in Australia (2007) Sydney, The Federation Press, 161 at 165.
136
Australian Conservation Foundation v Latrobe City Council (2004) 140 LGERA 100 Justice
Morris (The Hazelwood Case) at 109, 110.
137
Ibid, 109.
241
scheme could contain a provision directed at reducing the emission of greenhouse

gases from a coal burning power station not only to maintain an ecological
process, but to balance present and future interests. 138
And observed the following:

put another way, the approval of [the amendment] will make it more probable that
the Hazelwood Power Station will continue to operate beyond 2009; which, in turn,
may make it more likely that the atmosphere will receive greater greenhouse gas
emissions than would otherwise be the case; which may be an environmental effect
of significance.139
This case has been described as a landmark decision owing to the fact that:
for the first time, an Australian adjudicative body had accepted a clear chain of
causation from a proposed activity (coal mining) through to foreseeable
downstream consequences (greenhouse gas emissions from combustion of the coal)
to the contribution to climate change caused by those emissions.140
However, it should be noted that the science linking anthropogenic greenhouse

gas emissions with climate change was not in dispute in this appeal. 141 In contrast,
in the 2006 decision of WPSQ Proserpine/Whitsunday Branch Inc v Minister for
the Environment and Heritage (the Bowen Basin Case), the Court has been
described as being:
far more sceptical of arguments concerning a causal link between coal mining
activities and damage to ecosystems through climate change than his judicial
colleagues in the Hazelwood and Anvil Hill cases.142
138
Australian Conservation Foundation v Latrobe City Council (2004) 140 LGERA 100 at 109.
Ibid, 110.
140
Although in the end..the legal victory did not significantly alter the governments approach,
Peter Christoff (eds), Climate Law in Australia (2007) Sydney, The Federation Press, 161 at 170.
141
Ibid, 168.
142
Warming' (2007) 24 Environmental and Planning Law Journal 90 at 102.
139
242
The Court criticised the lack of a demonstrated causal link as follows:

I have proceeded upon the basis that greenhouse gas emissions consequent upon the
burning of coal mined in one of these projects might arguably cause an impact upon
a protected matter, which impact could be said to be an impact of the proposed
action... However I am far from satisfied that the burning of coal at some
unidentified place in the world, the production of greenhouse gases from such
combustion, its contribution towards global warming and the impact of global
warming upon a protected matter, can be so described. The applicants concern is
the possibility that at some unspecified future time, protected matters in Australia
will be adversely and significantly affected by climate change of unidentified
magnitude, such climate change having been caused by levels of greenhouse gases
(derived from all sources) in the atmosphere. There has been no .. attempt to
identify the extent (if any) to which emissions from such mining, transportation and
burning might aggravate the greenhouse gas problem. 143 (emphasis added)
A similar argument was submitted before the Court in the US decision of

Massachusetts v Environmental Protection Agency. In that case, the submission
that any such reductions would be globally insignificant was rejected in the
following terms:
EPA maintains that its decision not to regulate greenhouse gas emissions
from..motor vehicles contributes so insignificantly to petitioners injuriesEPA
does not believe that any realistic possibility exists that the relief petitioners seek
would mitigate global climate change and remedy their injuries. This is especially
so because predicted increases in greenhouse gas emissions from developing
nations, particularly China and India, are likely to offset any marginal domestic
decrease.144
But EPA overstates its case...Agencies, like legislatures, do not generally resolve
massive problems in one fell regulatory swoopAnd reducing domestic
automobile emissions is hardly a tentative step.145
143
Wildlife Preservation Society of Queensland (WPSQ) Proserpine/Whitsunday Branch Inc v

Minister for the Environment and Heritage (the Bowen Basin Case)(2006) 232 ALR 510, Justice
Dowsett at [72].
144
Massachusetts v Environmental Protection Agency 549 US (2007) (Supreme Court of the United
States, decided 2 April 2007) at 20-21.
145
Ibid, 21.
243
While it may be true that regulating motor-vehicle emissions will not be itself
reverse global warming, it by no means follows that we lack jurisdiction to decide
whether EPA has a duty to take steps to slow or reduce itA reduction in domestic
emissions would slow the pace of global emissions increases, no matter what
happens elsewhere.146
In the decision of Gray v The Minister for Planning, the Court declared invalid
decisions under the NSW Environmental Planning and Assessment Act by
Director-General in relation to a proposal to build a large coal mine known as the
Anvil Hill Project.147 The project was predicted to mine up to 10.5 million tonnes
of coal per annum. 148 The Director Generals requirements for the content of the
environmental assessment of the project included that the proponent address
[a]ir quality including a detailed greenhouse gas assessment.
149
The
assessment addressed only the direct emissions from the project (scope 1
emissions) and indirect emissions from the use of electricity (scope 2
emissions).150 Emissions from third party burning of the coal were not assessed
(scope 3 emissions).151 The environmental assessment was deemed adequate by
the Director-General and placed on public exhibition. A judicial challenge was
then commenced.
The Court held that the Director-General was legally bound to consider the
impacts of greenhouse gas emissions of the downstream burning of coal by third
parties in the environmental assessment of new coal mines (scope 3 emissions).
The Court based that finding on the need to take into account the fundamental
146
Ibid, 22-23.
Gray v Minister for Planning and Others [2006] NSWLEC 720; (2006) 152 LGERA 258, Justice
Pain.
148
Ibid, 266.
149
Ibid, 270.
150
Ibid, 271-272.
151
Ibid.
147
244
principles of ESD, the precautionary principle and the principle of

intergenerational equity as part of the EIA process. 152
In relation to the test of causation and significance, the Court observed:

Climate change/global warming is widely recognised as a significant environmental
impact to which there are many contributors worldwide but the extent of the change
is not yet certain and is a matter of dispute. The fact there are many contributors
globally does not mean the contribution from a single large source such as the Anvil
Hill Project in the context of NSW should be ignored in the environmental
assessment process. The coal intended to be mined is clearly a potential major
single contributor to GHG emissions deriving from NSW given the large size of the
proposed mine. That the impact from burning the coal will be experienced globally
as well as in NSW, but in a way that is currently not able to be accurately measured,
does not suggest that the link to causation of an environmental impact is
insufficient.153
........
I consider there is a sufficiently proximate link between the mining of a very
substantial reserve of thermal coal in NSW, the only purpose of which is for use as
fuel in power stations, and the emission of GHG which contribute to climate
change/global warming, which is impacting now and likely to continue to do so on
the Australian and consequently NSW environment, to require assessment of that
GHG contribution of the coal when burnt in an environmental assessment under Pt
3A.154
In addition, the Court found that the potential for future regulation of emissions
was no reason to exclude those emissions from the scope of an environmental
assessment:
it is not appropriate to limit the scope of the environmental assessment on the basis
that GHG emissions may or may not be subject to regulation in the future whether
152
Ibid, 293-297. Such requirements were based on the need to take into account the public interest
under section 79C of the Environmental Planning and Assessment Act 1979 (NSW).
153
Ibid, 287.
154
Ibid, 288.
245
in NSW or overseas. The fact that it may be difficult to quantify an impact with
precision does not mean that it should not be done.155
B The Absence of Climate Change Regulation As a Determining Factor

The assessment and approval of proposed major projects in Australia requires the
evaluation of a number of competing factors including:
conclusions regarding causal links and the potential for

environmental harm from the greenhouse gas emissions of a
project;
residual doubt regarding the scientific findings of the IPCC and

the levels of scientific uncertainty in those findings;
the absence of legislation to regulate specifically greenhouse gas

emissions and climate change;
opinions as to the appropriate role of the judiciary and whether

regulation of emissions is something more properly determined by
the Australian legislature;
the potential local economic and social benefits from the approval
of the projects; and
the potential local economic and social impacts from the refusal of
the project or from the imposition of conditions requiring the
reduction or offset of some or all of the emissions of the project.
155
Ibid, 297.
246
The absence of legislation to address climate change appears to be a significant

factor in these determinations. As noted by one commentator:
it is important to point out, however, that some of the equivocation about
environmental impact is attributable not to gaps in scientific research but to
uncertainties about the extent of the social commitment to reducing greenhouse gas
emissions over time.156
The fact that a project will result in an amount of greenhouse gas emissions is but
one planning and environment factor to be balanced in the decision-making
process.157 As commented in the Redbank Power Case:
the application of the precautionary principle dictates that a cautious approach
should be adopted in evaluating the various relevant factors in determining whether
or not to grant consent; it does not require that the greenhouse issue should
outweigh all other issues.158
In the Redbank Power Case, the Court had accepted that there was a causal link
between the project, emissions and climatic impacts yet commented that:
whether [power stations] should be prohibited is, of course, a matter for government
policy and it is not for the Court to impose such a prohibition. It is for State and
national governments to take into account the competing economic and
environmental issues raised by the greenhouse effect and to set policy in light of
those issues.159
Likewise, the Court observed in the Bowen Basin Case that:

the applicants case is really based upon the assertion that greenhouse gas emission
is bad, and that the Australian government should do whatever it can to stop it
156
David Farrier, n95, 194.

Greenpeace Australia Ltd v Redbank Power Company Pty Ltd and Singleton Council (1994) 86
LGERA 143.
158
Ibid, 154.
159
Ibid, 153.
157
247
including, one assumes, banning new coal mines in Australia. This case is far
removed from the factual situation in Minister for Environment and Heritage v
Queensland Conservation Council Inc (2004) 139 FCR 24.160
C The Xstrata Coal Mine: A Case Study

The flaws of the current Australian environmental legal system, in failing to
regulate emissions, do not stem from an absence of legislation or statutory
authority. The power to regulate is there for the taking. Instead it appears to
stem from the prevailing conflict between the short term economic priorities to
protect the economy, jobs and economic growth and the long term threats of
climate change from continuing emissions from major industries. The result is a
governmental approach which attempts to provide the illusion of regulation
without any substantive restrictions on the emissions from major projects. This
is well illustrated in the series of litigation regarding the Xstrata coal mine,
discussed in some detail below.
In 2005, Xstrata Coal Queensland Pty Ltd (Xstrata) applied for the extension of
its mining lease and an associated amendment to the environmental authorisation
for the mine under the Mineral Resources Act 1989 (Qld) (MRA) and the
Environmental Protection Act 1994 (Qld) (EPA) for the mining project at Suttor
Creek in Queensland. Those applications were objected to by the Queensland
Conservation Council (QCC).
The Nature of the Objection to the Mining Expansion
Objections to the application by Xstrata were heard in the Land and

Resources Tribunal in early 2007. The QCC sought the imposition of
conditions including, inter alia, that 100 per cent of the greenhouse gas
160

Minister for the Environment and Heritage (2006) 232 ALR 510 at [72].
248
emissions from the mining, transport and use of the coal be avoided, offset or
reduced. 161 QCC later sought to amend that condition to 100 per cent of
emissions from the mining project and 10 per cent of emissions from the
transport and use of the coal. 162
This imposition of conditions was based on evidence including the reports of

the IPCC and UK Stern Review163 that:
greenhouse gas emissions (principally as a consequence of energy use) is
contributing to global warming and climate change which itself is imposing
significant economic, social, and environmental costs on Australia and the rest
of the world.164
QCC submitted to the Tribunal that the mine would still be economically
viable if it paid for offsets for 10 per cent of its greenhouse gas emissions.
This was described by QCC as follows:
this makes the cost of offsetting the whole of the mine's direct emissions and
10 per cent of its indirect emissions $55-$144 million..well within the margin
of economic viability of the mine and still allowing Xstrata a profit of about $1
billion for a mine costing about $2.2 billion to operate.165
However, this amendment was refused by the Tribunal on the basis that it
would substantially change the case that Xstrata had to meet and QCC was
not permitted to make submissions outside of its particularised objections. 166
161
Queensland Conservation Council Inc v Xstrata Coal Queensland P/L & Ors [2007] QCA 338,
Justice McMurdo (President) at [5].
162
Ibid, [6].
163
Treasury 2006).
164
Re Xstrata Coal Queensland Pty Ltd & Ors [2007] QLRT 33 at [11].
165
Toby Hutcheon, 'Racing to the Aid of King Coal', The Courier Mail (Brisbane), 16 October 2007,
Perspectives http://www.news.com.au/couriermail/story/0,23739,22596694-27197,00.html at 15 June
2008.
166
Queensland Conservation Council Inc v Xstrata Coal Queensland P/L & Ors [2007] QCA 338 at
[7].
249
II The Nature of the Evidence Before the Tribunal

The Tribunal was entitled to inform itself of anything it considered
appropriate but it was also specifically required to observe natural justice. 167
In his decision, the President relied heavily on a journal that came to his
attention titled The Stern Review: A Dual Critique. By letter dated 5
February 2007, the Tribunal wrote to the parties as follows:
since the President reserved his decision in this matter last Thursday, he
has become aware of two documents which may be relevant to his
decision. They are:
The Stern Review: A Dual Critique, Vol 7 No 4, World Economics
Journal, October-December 2006, pages 165-232.
Climate Change 2007: The Physical Science Basis (Summary for Policymakers),
Intergovernmental Panel on Climate Change Working Group 1 Fourth Assessment
Report, Paris, February, 2007, pages 1-21.
The parties each filed their submissions in response to the documents

referred to by the Tribunal. QCC contended that the Tribunal should not
have regard to the documents referred to in the letter as they were
contrary to the uncontested evidence at the hearing 168 and noted, by letter
dated 14 February 2007, that:
3.the submissions of Xstrata and the EPA raise matters which go
beyond the evidence and that were not put to any of the expert
witnesses called at the hearing.
4.QCC does not know how the Tribunal proposes to make use of
the two documents or the submissions of Xstrata and the EPA;
however, QCC raises the requirements in sub-s49(1) of the Land
and Resources Tribunal Act 1999 that the Tribunal must observe
the rules of natural justice and must act as quickly, and with as
167
Land and Resources Tribunal Act 1999 (Qld), ss 49(1); 49(2)(b); Mineral Resources Act 1989
(Qld) section 268(2).
168
Submissions filed by QCC 9 February 2007.
250
little formality and technicality, as is consistent with a fair and

proper consideration of the issues before it. 169
III The Decision of the Land and Resources Tribunal

The Tribunal reached its decision the following day on 15 February 2007. In
rejecting the application of QCC, the President concluded that:
having regard to all of the evidence before me, I am not satisfied that:
the proposed coal mine would:
cause any adverse environmental impact which could

not be managed by the draft environmental authority;
prejudice the public right and interest;
any good reason has been shown to refuse the subject

applications; and
ESD principles operate to require the applications to be
conditioned as advocated by the objectors.170
In relation to the issue of causation and environmental harm from greenhouse

gas emissions, the President commented:
QCC submitted that I should have regard to ESD principles to mitigate the
serious environmental degradation caused by global warming. The difficulty
with that submission is that..it is based upon an assumption concerning the cause
and effect of global warming. In the present case, I am not satisfied that that
assumption (relevantly, a demonstrated causal link between this mines GHG
emissions and any discernable harmlet alone any serious environmental
degradationcaused by global warming and climate change) has been shown
by QCC to be valid.Indeed even if this mines GHG emissions were
eliminated completely, QCC failed to show that that would have the slightest
effect on global warming or climate change.171
169
QCC, by letter dated 14 February 2007. Queensland Conservation Council Inc v Xstrata Coal
Queensland P/L & Ors [2007] QCA 338 at [10], [12].
170
Re Xstrata Coal Queensland Pty Ltd & Ors [2007] QLRT 33 at [22].
171
Ibid, [21].
251
In reaching his decision, the President critiqued the findings of the IPCC
regarding global warming and the global risks of climate change and made the
following surprising comment:
with all respect, a temperature increase of only 0.45C over 55 years seems a
surprisingly low figure upon which to base the IPCCs concerns about its inducing
many serious changes in the global climate system during the 21st Century.172
In relation to the sought condition to offset, avoid or reduce emissions, the

President noted that:
apart from having no demonstrated impact on global warming or climate
changeany such condition would have.. the real potential to drive wealth
and jobs overseas and to cause serious adverse economic and social
impacts upon the State of Queensland. Absent universally applied policies
for GHG reduction, requiring this mine (and no others) to limit or reduce
its GHG emissions would be arbitrary and unfair. That cannot be what our
law requires.173
The Tribunal thereby made orders recommending to the Minister for Mines
and Energy that the application for additional surface area, and the related
environmental authority, be granted without any of the conditions sought by
QCC. QCC appealed against those orders.
IV The Findings of the Court of Appeal

The Queensland Court of Appeal found that all of QCCs experts had given
opinions accepting that global warming and climate change were both real
and caused by anthropogenic emissions of greenhouse gases and Xstratas
experts had also unequivocally accepted in their evidence that anthropogenic
greenhouse gas emissions contributed to global warming and that emissions
from the mine would also contribute to it:174
172
Ibid, [18].
Ibid, [23].
174
Queensland Conservation Council Inc v Xstrata Coal Queensland P/L & Ors [2007] QCA 338 at
[37]-[38].
173
252
the competing expert evidence presented by Xstrata on the one hand and
QCC on the other at the hearing did not put in issue that global warming
and climate change were real and were caused by emissions of greenhouse
gases linked to human activity, especially the burning of fossil fuels.175
The President of the Queensland Court of Appeal commented:

the fact that climate change is occurring and that anthropogenic
greenhouse gas emissions have contributed to it, was undoubtedly common
ground between the parties at the hearing. What was in issue was the
extent to which the proposed mine would contribute to global warming and
whether, in the applicable factual and statutory matrix, the Tribunal should
impose conditions on the recommended granting of Xstrata's applications
in response to the mine's potential contribution to global warming.176
The Court of Appeal noted that the Tribunals decision that it was not
satisfied of any demonstrated causal link between Xstrata's greenhouse gas
emissions and any discernible harm appeared to have been significantly
influenced by the Carter-Byatt critique of the Stern Review, a critique which
was raised in neither Xstrata's nor the EPA's case and was contrary to their
positions taken at the hearing. 177 The Court of Appeal held that, in the
circumstances, this amounted to a denial of natural justice to QCC:178
merely informing the parties that the Tribunal had become aware of
documents which may be relevant to its decision did not satisfy the
Tribunal's obligation to afford the parties procedural fairness by giving
them a real opportunity to present information or argument on a matter not
already obvious but in fact regarded as important by the decision-maker.179
175
Ibid, [36].
Ibid, [41].
177
Ibid, [44].
178
Ibid, [47].
179
Ibid, [46].
176
253
The obligation to protect the right to natural justice was espoused by the
Court of Appeal as follows:
the statutory scheme under which the Tribunal operated in this case
demonstrated a clear legislative intention to have applications heard and
determined expeditiously but according to principles of natural justice. It is
regrettable that this has not resulted in the present case which must now be
re-heard. QCC is, however, entitled to have its objections heard and
determined according to law. 180
The Court of Appeal further held that QCC should be allowed to amend the
condition sought requiring that 100 per cent of emissions be avoided,
reduced or offset to a requirement of only 10 per cent as:
the proposed amendment to the particulars involved a question of degree
and amount; if anything it narrowed rather than widened, but certainly did
not alter, the issue for determination between the parties.181
The orders of the Land and Resources Tribunal were set aside and the matter
remitted to the Land Court for determination according to law.182
V The Governmental Response: Validating Legislation

In response to this judicial determination that the plaintiffs had been denied
natural justice, the Queensland government stepped in to propose legislation
to validate the development. Such a process would remove any requirement
for due process to be observed.
180
Ibid, [56].
Ibid, [51].
182
Following the transfer of jurisdiction from the Land and Resources Tribunal to the Queensland
Land Court, section 91 Land Court Act 2000 (Qld) and section 87 Land and Resources Tribunal Act
1999(Qld) as amended by the Land Court and Other Legislation Amendment Act 2007 (Qld).
181
254
The second reading speech of the validating bill indicates the governments
concerns that the decisions of the Governor in Council and the Minister for
Environment, to issue the mining lease and the environmental authority,
could be declared invalid:
this means that the future of the new mining operations...and the future of
everyone employed there is literally hanging by a thread. This thread could
be cut at any moment if someone successfully took this matter to court.183
The purpose of the Mining and Other Legislation Amendment Bill 2007 (Qld)
(MOLA) was to validate the grant of the mining lease under the MRA and
the environmental authority under the EPA in order to remove any
uncertainty about the validity of those grants and to secure the future of the
mining operations. 184 This was implemented through the insertion of the
following new provisions:
Section 418AA (2) Mineral Resources Act 1989:
The application made under section 275 to include additional surface area No. 2
in the mining lease is taken to have been validly granted on 29 March 2007.
Section 579A (2) Environmental Protection Act 1994:
The Ministers decision made on 8 March 2007 to grant the application is taken
to have been validly made under chapter 5.185
The MRA and the EPA require a number of factors to be taken into account,
in the making of decisions whether to grant the mining lease and an
environmental authority, including any adverse environmental impacts,
principles of ESD and the public interest. Yet, in enacting this validating
legislation, the Parliament was not bound to consider any such factors. The
183
Minister for Mines and Energy, Second Reading Speech: Mining and Other Legislation
Amendment Bill (16 October 2007) at 3591.
184
Explanatory Notes, Mining and Other Legislation Amendment Bill 2007 (Qld).
185
Mining and Other Legislation Amendment Act 2007 (Qld).
255
Parliaments decision to pass the validating legislation does not appear to

have been based on concerns regarding environmental protection or concerns
regarding the future economic and social costs of climate change. Indeed, it
appears to have been based primarily on short-term economic considerations
regarding the commercial viability of the mining project and the need to
remove any threats to the jobs of those affected.
The announcement of the governments decision to propose such legislation

contained the following comments:
we will protect the mines 190 jobs and the investment in the mine.The
coal industry is central to the Queensland economy and we will not allow a
technicality to threaten its development and jobs.186
It also noted that a national emissions trading scheme was the appropriate
way to manage emissions rather than an ad hoc approach which singles out
particular companies.
187
These comments may well be justified in
themselves. However, there was no reference to the absence of a right to

participate, to comment, or to be heard. This is especially significant since
such rights were part of the statutory decision-making processes that had
been bypassed by the enactment of the validating legislation.
Interestingly, the explanatory note to the MOLA under the heading

Consistency with Fundamental Legislative Principles acknowledges that:
the validating legislation arguably does not have sufficient regard to the
rights of individuals, in that it denies the QCC and its members the
opportunity to be heard further on greenhouse gas issues arising out of the
mining operations.188
186
Premier Anna Bligh and Minister for Mines and Energy Joint Statement: Government to Legislate
to Ensure Coal Mines Future (12 October 2007)
http://statements.cabinet.qld.gov.au/MMS/StatementDisplaySingle.aspx?id=54462 at 15 June 2008.
187
Ibid.
188
Explanatory Notes, Mining and Other Legislation Amendment Bill 2007 (Qld), Consistency with
Fundamental Legislative Principles.
256
It is mere speculation to consider whether the Land Court would have made
the same recommendation as the Land and Resources Tribunal. The
development may or may not have been approved. Either way, the Land
Court would have been aware of the Court of Appeals direction to ensure
natural justice which is one of the essential elements of the rule of law.
D The Role of Judicial Appeal in Regulating Climate Change

The outcomes of the above judicial appeals are illustrative of the inherent
complexities and inconsistencies between the treatments of greenhouse gas
emissions from projects across the various Australian jurisdictions.
Judicial
appeals are a costly, cumbersome and uncertain tool for regulating emissions in
Australia particularly given the lack of consistency across state environmental
and planning regimes. Moreover, in the controversial area of climate change, the
outcome is highly dependent upon the opinion of the presiding judge regarding
the existence of climate change and the economic implications of regulating
emissions. Accordingly:
litigation for an environmental cause is a strategy with inherent drawbacks and
difficulties include its expense, the need to identify appropriate test cases, and
persuading judges of the validity of climate friendly interpretations of
environmental legislation that will often be deeply unpopular with government and
industry.189
The outcomes of these administrative and judicial determinations demonstrate the

dichotomy of the law in theory and the law in practice. These consent authorities
appear reluctant to embrace and apply the principles of ESD, inter-generational
equity and precaution in practice. The decisions of these consent authorities
appear to represent a misunderstanding as to the true scope of the legislation and
the full environmental implications of greenhouse gas emissions and climate
change. These regulatory errors are often compounded in judicial appeals where
189
257
the Court supports the status quo and fails to require the proper application of the
law in light of the evidence of the likely harmful impacts of emissions.
The uncertainty of the application of existing laws to greenhouse gas emissions

has created additional risks and compliance costs for those major industries that
are the targets of these actions. Moreover, the lack of clarity and unpredictability
in the application of the law to emissions, and the risk of retrospective findings of
unlawfulness by the common law, deters future business planning to introduce
technological changes and other modifications to reduce levels of emissions. An
effective legal response to the impacts of climate change requires a settled
regulatory path to guide behavioural changes rather than the retrospective
evaluation of actions. However, this is not the traditional role of the common
law and it cannot, and should not, be used as a planning instrument.
Consequently, an effective regulatory approach to climate change requires a

coherent set of legal principles to guide behaviours. There are difficulties in
achieving a consistent approach to climate change regulation through the
disparate state based schemes with their vastly different approaches to
environmental management. Given Australias international duty to reduce its
emissions, it is preferable that the regulation of our national emissions should
take place in accordance with a considered, consistent and harmonised national
approach to environmental regulation. Ultimately, this leads to the conclusion
that it is more properly the realm of the Federal government to regulate
consistently the environmental, economic and social risks from significant
The potential role of the Federal government in
regulating these environmental impacts is considered below.
An effective regulatory approach requires not only a coherent set of legal

principles but also the considered and appropriate interpretation of those rules by
relevant authorities and the judiciary. This may require additional education of
258
relevant decision-makers to enable them to make fully informed decisions

regarding the environmental implications of greenhouse gas emissions and to
ensure that the principles of ESD are fully embedded within that decision making
process. It may also require the creation of specific statutory duties requiring
authorities to not only undertake a full and proper consideration of the potential
impacts of greenhouse gas emissions but also to impose conditions of approval
which require proponents to take all reasonable steps to minimise those
emissions and mitigate the predicted impacts.
POTENTIAL COMMONWEALTH REGULATION OF GREENHOUSE

GAS EMISSIONS
The Federal Environment Protection and Biodiversity Conservation Act 1999

(Cth) (EPBC Act) has the potential to play a significant role in the regulation of
greenhouse gas emissions in Australia.
The EPBC Act does not currently
specifically regulate greenhouse gas emissions and climate change. However,

under its current scope and language, the legislation does extend to projects with
significant emissions and could apply to all major industrial projects in Australia.
Indeed, given the inconsistencies and uncertainties in the assessment and
treatment of emissions at a state level, it is preferable that the regulatory regime
for these projects is established in an open and transparent manner at a national
level with supervised implementation through the existing state-based regulatory
authorities.
A The Theoretical Scope and Operation of the EPBC Act

The objects of the EPBC Act are clear in referring to the protection of the
environment, the promotion of the principles of ESD and the implementation of
Australias international obligations:
259
(a)
to provide for the protection of the environment, especially those aspects of

the environment that are matters of national environmental significance; and
(b)
to promote ecologically sustainable development through the conservation

and ecologically sustainable use of natural resources; and
(c)
to promote the conservation of biodiversity; and
(ca)
to provide for the protection and conservation of heritage; and
....
(e)
to assist in the co-operative implementation of Australias international

environmental responsibilities.190
In order to achieve its objects, the EPBC Act:

adopts an efficient and timely Commonwealth environmental assessment and
approval process that will ensure activities that are likely to have significant impacts
on the environment are properly assessed. 191
The EPBC Act goes beyond a mere referral to the principles of ESD and instead
specifies the components of the principle in the following terms:
(a)
decision-making processes should effectively integrate both long-term and

Short-term economic, environmental, social and equitable considerations;
(b)
if there are threats of serious or irreversible environmental damage, lack of

full scientific certainty should not be used as a reason for postponing
measures to prevent environmental degradation;
(c)
the principle of inter-generational equity-that the present generation

should ensure that the health, diversity and productivity of the environment
is maintained or enhanced for the benefit of future generations;
(d)
the conservation of biological diversity and ecological integrity should be a

fundamental consideration in decision-making.192
190
Environment Protection and Biodiversity Conservation Act 1999 (Cth) (hereafter the EPBC Act),
section 3(1).
191
EPBC Act, section 3(2).
192
EPBC Act, section 3A.
260
Accordingly, the text of the EPBC Act is clear in stating that it is intended to
conserve and protect the Australian environment and that lack of full scientific
certainty should not be used as a reason for not taking steps to prevent
environmental degradation in Australia. Actions which have or are likely to have
a significant impact on matters of national environmental significance are
controlled actions including actions that may have significant impact on:
declared world heritage properties;
declared Ramsar wetlands;
listed threatened species or endangered communities; and
listed migratory species. 193
Declared world heritage properties include Kakadu National Park in the Northern
Territory and the Great Barrier Reef in Queensland both of which are on the
World Heritage List. Declared Ramsar wetlands are sites recognised under the
international Ramsar Convention as being of international significance. 194
The Australian Courts have determined that, in considering the impacts of these
activities, there is an obligation to consider not only the direct impacts from the
construction of the project but also the indirect impacts flowing from the project
where they are sufficiently close to the action to allow it to be said, without
straining the language, that they are, or would be, the consequences of the action
on the protected matter.195 The test of significance to be applied to these impacts
is whether the impact is important, notable or of consequence having regard to
its context or intensity.196
193
Also actions in Commonwealth marine areas and on Commonwealth land that may have a
significant impact on the environment. EPBC Act, section 24.
194
Convention on Wetlands of International Importance especially as Waterfowl Habitat (the Ramsar
Convention) (adopted 2 February 1971, Ramsar, Iran)(entry into force 1975). Australia has 63 such
declared Ramsar wetlands, Australian Government, Protecting Australias Ramsar Wetlands (2002,
Canberra) http://www.environment.gov.au/epbc/publications/ramsar.html viewed 15 June 2008.
195
Minister for the Environment and Heritage v Queensland Conservation Council Inc (2004) 134
LGERA 272; [2004] FCAFC 190 (Nathan Dams Case) at [53].
196
Booth v Bosworth (2001) 114 FCR 39 at 64, Justice Branson.
261
The term impact is defined under the EPBC Act as:

(a) the event or circumstance is a direct consequence of the action; or
(b) for an event or circumstance that is an indirect consequence of the actionthe
action is a substantial cause of that event or circumstance.197
The legislation sets out an array of criteria to be met in order for indirect
secondary actions to meet the definition of impact including the reasonable
contemplation of the parties and the foreseeability of the outcome.198
The carrying out of a controlled action, without an approval, is prohibited.

Proponents of activities that are likely to affect a matter of national significance
are obliged to refer the action to the Minister for determination.199 If deemed to be
a controlled action, these projects can potentially be governed by both state and
federal environmental assessment processes. 200 It is a matter for the Minister to
determine whether an activity is a controlled action. 201 The EPBC Acts specifies
that the Minister must consider all adverse impacts from the proposed action and
must not consider any beneficial impacts.202
If the Minister determines that the action is a controlled action then an

assessment must be carried out under the EPBC Act. The Minister may choose
from a range of assessment mechanisms including a public environment report,
environmental impact statement, or public inquiry. 203
197
EPBC Act, section 527E(1).

199
EPBC Act, section 63.
200
Unless exempted by an assessment bilateral agreement between the state and Federal Government.
201
202
203
198
262
In deciding whether or not to approve the taking of an action, and what

conditions to attach to an approval, the Minister must consider matters related to
the environment and relevant economic and social matters.204 The Minister must
also take into account the principles of ESD.205 The Act specifically states that
the Minister must not act inconsistently with Australias international obligations
regarding world heritage, ramsar wetlands and threatened and migratory
species.206
If the Minister determines that an approval is appropriate then it may be issued

with any conditions that are necessary or convenient for protecting, or mitigating
damage to, a matter protected by Part 3. 207 These conditions could include
monitoring plans, insurance and deposits. 208 In deciding whether to attach a
condition of approval, the Minister must consider the desirability of ensuring that
the condition represents a cost-effective means of achieving the object of the
condition.209
It should be noted that the Governor General is empowered to make specific

regulations to give effect to Australias obligations under the UNFCCC but this
discretionary power has not been exercised. 210
B The Practical Application of the EPBC Act to Climate Change

The Australian Great Barrier Reef World Heritage Property and Wet Tropics
World Heritage Area are both sensitive and vulnerable to the impacts of
greenhouse gas emissions and climate change. As noted by one commentator:
204

206
EPBC Act, ss137-140.
207
EPBC Act, section 134.
208
209
EPBC Act, section 134(4)(b).
210
EPBC Act, section 520(3)(k).
205
263
Climate Change is accepted as a major threat to coral reefs worldwide including the
[Great Barrier Reef]. It is expected to affect coral reefs mainly through changes of
three variables: increases in sea surface temperature causing coral bleaching;
decreases in calcification rates, slowing coral growth due to changing seawater
chemistry; and increases in sea level. 211
According to the IPCC, there is a very high risk that a significant loss of
biodiversity will occur by 2020 in ecologically rich sites, including the Great
Barrier Reef, Queensland Wet Tropics and Kakadu National Park, as a result of
climate change. 212 The IPCC has identified a clear link between temperature
increases and greenhouse gas emissions.
213
It has also concluded that
anthropogenic warming has had a discernable influence on many physical and

biological systems.214
In light of the above, it would seem both likely and reasonable that major projects
with significant emissions would, as a minimum, be referred to the Minister and
assessed as controlled actions under Part 8 of the EPBC Act. However, this has
not occurred and the Australian government has resisted the view that these
emissions are likely to harm environmental values in Australia. For example, the
Bowen Basin case highlighted the Commonwealth Governments reluctance to
assess the climate change impacts of large new coal mines and the need for
reform of the EPBC Act.215 The case related to two referrals under the EPBC Act
for the development of new coal mines (the Isaac Plains Project and the Sonoma
Project). Both referrals submitted that the mines did not impact on matters on
national environmental significance and were not controlled actions under the
211
Chris McGrath, 'Setting Climate Change Targets to Protect the Great Barrier Reef' (2007) 24
212
IPCC, 'Climate Change 2007: Impacts, Adaptation and Vulnerability: Summary for Policy Makers,
Contribution of Working Group II to the Fourth Assessment Report of the Intergovernmental Panel
on Climate Change' (IPCC Secretariat, 2007) at 13.
213
IPCC Working Group I, n47, 8.
214
IPCC, Working Group II, n212, 9.
215
Kirsty Ruddock, 'The Bowen Basin Coal Mines Case: Climate Law in the Federal Court' in Tim
Bonyhady and Peter Christoff (eds), Climate Law in Australia (2007) Sydney, The Federation Press,
173 at 173.
264
EPBC Act.216 The Isaac Plains Project was expected to involve the mining of an
estimated 10 million tonnes of coal over the nine year life of the project.217 The
Sonoma Project was expected to produce 30 million tonnes of product coal over
the fifteen year life of the mine.218
The Ministers delegates decided that these mines would not have significant
impacts on matters of national environmental significance. An officer in the
department considered the Isaac Plains proposal and commented that the nature
of induced climate change from the referred coal mining operation, and impacts
on the world heritage values, are speculative.219 In reaching a decision that the
proposed Isaac Plains Project was not a controlled action, the delegate added:
I regard the likelihood of significant impacts on [national environmental
significance] arising from the marginal addition of greenhouse gases to be
extremely small, in addition to speculative.220
In relation to the Sonoma Project, the same departmental officer commented:

the quantum contribution to induced climate change directly attributable to the
referred action is minute and not likely to be measurable against the context of
existing and reasonably foreseen contributors. 221
The delegate determined that the proposed Sonoma Project was not a controlled
action and noted that any indirect impacts on World Heritage Areas were
speculative.222
216
Ibid, 174.
218
Kirsty Ruddock, n213, 174.
219
220
Ibid, [18].
221
Ibid, [29].
222
Ibid, [30].
217
265
The Court rejected the submissions of the applicants that the delegate had failed
to consider properly the greenhouse gases generated in the extraction,
transportation and burning of coal and that the cumulative nature of greenhouse
gas emissions should be taken into account.223 In relation to the causal evidence
before it, the Court remarked:
I am far from satisfied that the burning of coal at some unidentified place in the
world, the production of greenhouse gases from such combustion, its contribution
towards global warming and the impact of global warming upon a protected matter,
can be so described. there has been no suggestion that the mining, transportation
or burning of coal from either proposed mine would directly affect any such
protected matter, nor was there any attempt to identify the extent (if any) to which
emissions from such mining, transportation and burning might aggravate the
greenhouse gas problem.224
The Court also rejected the applicants submission that the principles of ESD
should be incorporated as part of the evaluation process and observed:
it is not clear that this principle can be applied to the decision-making process
prescribed by s75. In any event it has not been established that either project will
cause serious or irreversible environmental damage. 225
This regulatory trend continued when, in February 2007, the Minister determined
that the proposed Anvil Hill coal mine was not a controlled action under the
EPBC Act. The project involved an open cut coal mine and ancillary facilities
estimated to mine up to 10.5 million tonnes of coal per annum for domestic and
export markets. 226 The delegates reasons for decision were stated as follows:
I found that, while it is clear that, at a global level, there is a relationship between
the amount of carbon dioxide in the atmosphere and warming of the atmosphere, the
climate system is complex and the processes linking specific additional greenhouse
223
Ibid, [55],[56].
Ibid, [72].
225
Ibid, [54].
226
Anvil Hill Project Watch Association Inc v Minister for Environment and Water Resources [2007]
FCA 1480 (20 September 2007, Justice Stone) at [17].
224
266
gas emissions to potential impacts on matters protected under Part 3 of the EPBC
Act are uncertain and conjectural...in light of the relatively small contribution of the
proposed action to the amount and concentration of greenhouse gases in the
atmosphere, I found that a possible link between... gases..from the proposed action
and a measurable or identifiable increase in global atmospheric temperature...is not
likely to be identifiable.227
The decision was challenged in the Federal Court of Australia. Submissions for
the applicant placed heavy reliance on the overriding objectives of the EPBC Act.
Judge Stone cited with approval the decision of the Court in the Bowen Basin
Case in the following terms:
his Honour noted that the decision-maker in that matter had accepted the possibility
that the coal might be burn, thereby producing additional greenhouse gases which
might cause climate change and said that The point at which he disagreed with the
applicant was as to the likelihood of any adverse impact upon a protected matter
and the extent thereof. In my view that is precisely the position here.
.....the relatively small contribution of the proposed emissions to total global
emissions could not be seen as having a significant impact. That is a conclusion that
was open to her on the findings she had made.228
Consequently, despite the strong language of the EPBC Act, in its practical
application the EPBC Act suffers from the same flaws as its state counterparts
and, once again, illustrates the dichotomy between the law in theory and its
practical application to the risks of unfettered greenhouse gas emissions. Despite
the judicial contemplations outlined above, it seems clear that Australian projects
with significant levels of greenhouse gas emissions would be likely to have a
significant impact on matters of national environmental significance under Part
3 of the EPBC Act. Under the current definition of impact, the greenhouse gas
emissions must be considered to be a substantial cause of the climate change
227
Quoted in David Farrier, n95, 203.

Anvil Hill Project Watch Association Inc v Minister for Environment and Water Resources [2007]
FCA 1480 at [36], [40].
228
267
event. 229 This poses some difficulty for both determining authorities and the
judiciary as some level of scientific uncertainty remains regarding that causal link
between emissions and resulting harm. 230
However, the Act embraces the
principles of ESD, inter-generational equity and precaution.
It is those key
principles which should influence the decision-maker to assess appropriately the

social and environmental impacts of unfettered emissions and impose conditions
to minimise those emissions in order to avoid adverse impacts on matters of
national significance. The presence of some scientific uncertainty should not be
used to justify the failure to restrict Australias greenhouse gas emissions and
address the risks of climate change.
Since the inception of the EPBC Act there have been numerous proposals to
include a specific trigger for climate change impacts within the regime. 231 Most
recently, the current Prime Minister has indicated an intention to reform the
EPBC Act to require an assessment of the climate change impacts of all new
major projects in Australia as part of the environmental assessment process.232
However, the effectiveness of any climate trigger will be wholly dependent on
the quality of determinations of the Minister in considering the environmental
impacts and imposing stringent conditions requiring the reduction or offset of the
emissions of these projects.
Such conditions would need to be imposed in
parallel with, not in place of, the regulation of emissions under any national
emissions trading scheme. In the absence of these restrictions, the trigger is
likely to be nothing more than legislative decoration. 233 Effectively addressing
greenhouse gas emissions in Australia requires not merely formative reforms but
also critical changes to the substantive effects of the law in practice.
229

Issues in establishing a causative link are discussed in Chapter Six.
231
For a summary of these proposals see Andrew Macintosh, 'The Greenhouse Trigger: Where did it
go and what of its future?' in Tim Bonyhady and Peter Christoff (eds), Climate Law in Australia
(2007) Sydney, The Federation Press, 46.
232
Australian Labour Party, 'ALP National Platform and Constitution 2007' (44th ALP National
Conference, 2007), Chapter 9, Principle 24.
233
Andrew Macintosh, n231, 60.
230
268
AUSTRALIAS LEVEL OF COMPLIANCE WITH THE CLIMATE

CHANGE REGIME
Through the creation of domestic policies aimed at addressing climate change

Australia is, prima facie, in compliance with its obligations to do so under the
climate change regime. In addition to the large number of policies and programs
in existence which refer to addressing climate change, the language and scope of
the existing environmental and planning regimes is clearly sufficient to apply to
this emergent environmental threat.
However, it is clear that Australias regulatory approach is not in accordance with

the spirit and the text of the international environmental accords and does not
comply substantively with Australias international duties. Principles of ESD,
inter-generational equity and precaution, under existing environmental protection
regimes, have not been applied to emitting activities to protect the Australian
environment from likely degradation and harm.
The economic, social and
environmental risks of climate change, resulting from cumulative levels of

emissions, are not being considered fully and balanced as part of the EIA process.
As a consequence, the potential harms from climate change are often omitted or
undervalued in determinations regarding the approval of large scale emitting
activities. The end result of this unfortunate regulatory approach is the continual
approval of major projects with no obligation to mitigate or offset anticipated
levels of greenhouse gas emissions. Accordingly, it is apparent that Australia is
not furthering the objectives of the climate change regime by taking action to
stabilise emissions at a level that would avoid anthropogenic interference with
the climate system.
269
THE ROLE OF LAW IN FACILITATING ADAPTATION TO CLIMATE

CHANGE
Thus far, this Chapter has considered the role of environmental regulation in
minimising greenhouse gases to avoid the harmful environmental and social
impacts of climate change. However, some adverse impacts of climate change
are now inevitable. The historic levels of greenhouse gas emissions, coupled
with the inertia of the climate system, means that any emission reductions that
are achieved may now be too late to prevent the occurrence of all adverse
climatic changes.234
As noted by the IPCC:
past emissions are estimated to involve some unavoidable warming (about a further
0.6C by the end of the century relative to 1980-1999) even if atmospheric
greenhouse gas concentrations remain at 2000 levels..There are some impacts for
which adaptation is the only available and appropriate response.235
What this means, in real, practical terms, is that some level of adaptive behaviour
is necessary for modern society even if we are successful in meeting the most
challenging of the IPCC stabilisation scenarios.236 The legal community is only
just beginning to consider the full suite of appropriate measures that will be
required to adapt to those predicted impacts. The role of law in facilitating this
adaptation is multi-faceted and includes both anticipatory and reactive functions
such as urban planning and development consent functions, access to insurance,
disaster relief and compensation programs to respond, and promote resilience, to
the impacts of climate change. As a minimum, this will include accommodations
within planning regimes and conditions of consent to deter maladaptive
234
at xi. Mohan Munasinghe and Rob Swart, Primer on Climate Change and Sustainable Development:
Facts, Policy Analysis, and Applications (2005) Cambridge, Cambridge University Press at 172.
235
IPCC, 'Climate Change 2007: The Synthesis Report: Summary for Policy Makers, Fourth
Assessment Report of the Intergovernmental Panel on Climate Change' (IPCC Secretariat, 2007) at 18.
236
Ibid, 20.
270
behaviours in coastal communities and to promote adaptive behaviours, including

the development of renewable energy sources. These regulatory functions are
considered in the following paragraphs. Consumer preferences will also have a
significant influence on the sustainability of designs of homes and commercial
buildings.
These so-called green buildings are often regulated through
voluntary schemes and contractual provisions contained in common transactional

documents such as leases and land contracts. The role of these legal mechanisms,
in responding to the impacts of climate change, is also considered below.
A The Duty to Adapt to Climate Change

The UNFCCC requires not only the mitigation of emissions but also cooperation
between nations and preparation for adaptation to the impacts of climate change
including coastal zone management; water resources; agriculture; and for the
protection and rehabilitation of areas affected by drought, desertification and
floods.237
Once again, the climate change regime is silent on the particular principles that
should operate to facilitate such adaptation. Adaptation has been described as
the adjustment in human and natural systems in response to climate change
stresses and their effects, which moderates damage, and helps to exploit
opportunities for benefit. 238
The IPCC has provided some initial guidance to nation parties on the types of
adaptive strategies that need to be implemented across the globe. 239 However,
there is vast uncertainty as to how much, and what adaptation is needed to
237
UNFCCC, n5, Article 4(1)(e). The Kyoto Protocol, n9, contains similar obligations and establishes
an adaptation fund for vulnerable developing countries using the share of proceeds from the Clean
Development Mechanism (CDM).
238
Mohan Munasinghe and Rob Swart, Primer on Climate Change and Sustainable Development:
239
IPCC, Working Group II, n212.
271
minimise the adverse impacts of climate change. Mitigation and adaptation are
interconnected. The nature and scale of adaptation will need to be continually reevaluated and adjusted in light of the success of global initiatives to mitigate
greenhouse gas emissions, or otherwise, and changes in the scientific predictions.
Moreover effective adaptation measures are highly dependent on specific,
geographical and climate risk factors as well as regional institutional, political
and financial constraints: 240
the array of potential adaptive responses available to human societies is very large,
ranging from purely technological (e.g.,sea defences), through behavioural (e.g.,
altered food and recreational choices), to managerial (e.g., altered farm practices)
and to policy (e.g., planning regulations).241
The IPCC predicts that the specific climatic impacts experienced within Australia
will include:
intensified water security problems as a result of reduced precipitation

and increased evaporation;
significant loss of biodiversity in some ecologically rich sites including

the Great Barrier Reef and Queensland Wet Tropics;
increased risks from sea level rise and increases in the severity and
frequency of storms and coastal flooding due to ongoing coastal
development and population growth; and
decline in production from agriculture and forestry due to increased

drought and fire. 242
240
Ibid, 19.
Ibid.
242
IPCC, 'Climate Change 2007' , n212, 13. IPCC, 'Climate Change 2007: Impacts, Adaptation and
Vulnerability, Contribution of Working Group II to the Fourth Assessment Report of the
Intergovernmental Panel on Climate Change' (IPCC Secretariat, 2007) at 509.
241
272
In relation to the particular adaptive capacities of Australia, the IPCC concludes

that:
the region has well-developed economies, extensive scientific and technical
capabilities, disaster mitigation strategies, and biosecurity measures. However, there
are likely to be considerable cost and institutional constraints to the implementation
of
adaptation
options........Indigenous
communities
have
low
adaptive
capacity...Water security and coastal communities are the most vulnerable

sectors....Natural systems have limited adaptive capacity... Projected rates of
climate change are very likely to exceed rates of evolutionary adaptation in many
species. Habitat loss and fragmentation are very likely to limit species migration in
response to shifting climatic zones.243
It can be said with some certainty that adapting to the impacts of climate change
goes hand in hand with improved levels of environmental sustainability. The
IPCC has concluded that the promotion of sustainable development could reduce
vulnerability to climate change by enhancing adaptive capacity and increasing
resilience.244 Accordingly, there is an emerging parallel role for the Australian
legal system in promoting sustainability and guiding adaptation to the likely
future effects of climate change. This requires an interventionist approach, on
the part of global, regional and local authorities, to promote adaptation and
address the regulatory issues associated with the increased incidences of floods,
storms, loss of food production, unreliability of energy supplies, rising sea levels
and failing infrastructure.
B Adaptation and Coastal Development

One of the aims of the Australian COAG National Climate Change Adaptation
Framework is to revise all planning systems, including codes, standards and
guides, to increase resilience to climate change and reduce vulnerability to
243
IPCC, 'Climate Change 2007: Impacts, Adaptation and Vulnerability, Contribution of Working
Group II to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change' (IPCC
Secretariat, 2007) at 509.
244
Ibid, 20.
273
climate change hazards.245 Sound planning management for coastal inundation is

vital in Australia where more than 80 per cent of the population lives within 50
kilometres of the rising seas. 246 According to the IPCC, sea-level rise and human
development are together contributing to losses of coastal wetlands and
mangroves and increasing damage from coastal flooding. 247 Moreover, rising sea
levels in conjunction with storm surges provide a real threat of floods and
inundation for Australian coastal communities. Adaptation to sea level rises is
addressed, to varying extents, in many state climate change plans and strategies
but; there is considerable disparity in the extent to which climate impacts have
figured in public planning and decision-making throughout Australia.248
The adaptation strategy for Byron Bay in the State of NSW is illustrative of the
tension that can result where private landowners are prohibited from taking
actions to adapt to rising sea-levels and protect their properties.
In making
determinations regarding consent to develop on coastal land, the local authority is

required to take into account, inter alia, the NSW Coastal Policy 1997, the
Coastline Management Manual, and the North Coast Design Guidelines.249 The
NSW Coastal Policy 1997 includes the goal of considering the potential effects of
climate change in the planning and management of coastal development.250 Under
State Environmental Planning Policy No 71 Coastal Protection, the local
authority must consider the likely impact of coastal processes and coastal hazards
on development and any likely impacts of development on coastal processes
when preparing a draft local environmental plan (LEP) and when determining a
245
COAG, National Climate Change Adaptation Framework (COAG, 13 April 2007) at 26,
www.coag.gov.au/meetings/130407/docs/national_climate_change_adaption_framework.pdf at 15
June 2008
246
CSIRO, 'Climate Change and Australia's Coastal Communities' (CSIRO, 2002).
247
IPCC, Working Group II, n212, 9.
248
Jan McDonald, 'The Adaptation Imperative: Managing the Legal Risks of Climate Change
Impacts' in Tim Bonyhady and Peter Christoff (eds), Climate Law in Australia (2007) Sydney, The
Federation Press, 124 at 128. See, for example, SA Coastal Erosion, Flooding and Sea Level Rise
Standards and Protection Policy www.environment.sa.gov.au at 15 June 2008 and the South-east
Queensland Regional Coastal Management Plan 2006 (Qld).
249
North Coast Regional Environmental Plan 1988 (NSW), cl. 32B(2).
250
NSW Government, NSW Coastal Policy 1997: a sustainable future for the New South Wales
Coast (NSW, 1997), NSW Coastal Policy 1997 Goals 2.1, 2.2.
274
development application to carry out development on coastal land.251 In addition,

any draft LEP that applies to land adjoining or adjacent to a coastal foreshore
area should:
(a) restrict development so as to minimise long term risk to life and property and its impact
on the coastal processes, and
(d) prohibit development landward from the back beach erosion scarp that is at immediate
risk from coastal processes, other than development involved with stabilisation works.252
Coastal zone management plans may be prepared by local authorities for their
respective coastal zones. 253
These plans must address the protection and
preservation of beach environments and beach amenity, and the emergency

actions that may be carried out during periods of beach erosion including works
for the protection of property affected or likely to be affected by beach erosion,
where beach erosion occurs through storm activity or an extreme or irregular
event.254 Where a coastal zone management plan has been prepared, it is an
offence to carry out work for the purpose, or that has the effect, of preventing or
remediating beach erosion, or for protecting property likely to be affected by
beach erosion, except in accordance with the plan. 255 A coastal management plan
is still to be adopted by Byron Shire Council. 256
Under the Byron Local Environmental Plan 1988, the objectives of land zoned
coastal land include the prevention of development which would adversely
affect, or be adversely affected by, coastal processes. 257 The objectives of the
251
State Environmental Planning Policy No 71 Coastal Protection, cl 7, cl 8(j). The LEP must also
give effect to the provisions of the NSW Coastal Policy 1997; Direction of the Minister for Planning
under the Environmental Planning & Assessment Act 1979 (NSW), section 117.
252
North Coast Regional Environmental Plan 1988 (NSW), cl 32.
253
Coastal Protection Act 1979 (NSW) section 55B. Local authorities in coastal zones may be
directed by the Minister for Planning to make a coastal zone management plan.
254
Coastal Protection Act 1979 (NSW) section 55C.
255
Coastal Protection Act 1979 (NSW) section 55K.
256
According to Byron Shire Council, a plan will be developed in 2008,
http://www.byron.nsw.gov.au/Environment/Coastal/ManagementPlan.aspx at 15 June 2008.
257
Byron Local Environmental Plan 1988 (NSW) at 30, Zone No. 7(f1)(Coastal Land Zone).
275
Byron Development Control Plan 2002 include the aim of ensuring that the
impact of coastal processes on potential development is minimised by limiting
development and ensuring any development is only temporary. 258 Where new
development is located between the beach escarpment and the immediate impact
line (as identified in the Coastline Management Study), no building may be
located within 20 metres of the escarpment and any works must be of modular
construction and able to be removed within 12 hours.259 For any development
within the immediate impact line and the 50 year erosion line, consent is granted
subject to the proviso that the development consent must cease, and the
development must be relocatable by road vehicle, if the erosion escarpment
comes within 50 metres of the development.260
It is also a condition of consent that a restriction is placed on the title to the

property in the following terms:
the subject land and any improvements erected thereon must not be used for the
purpose of (land use) in the event that the erosion escarpment, as defined by the
Works and Services Director of the Council of the Shire of Byron from time to
time, comes to within 50 metres of any buildings or any part thereof at any time
erected on the said land. 261
A similar restriction is placed on development located within the 50 year and 100
year erosion lines. In that case, the owner has the option of demolition, rather
than relocation, of the property. 262 However, Byron Shire Council has also
repeatedly refused applications for consent to carry out erosion protection works
in the area.263 As a result this informal policy of planned retreat unquestionably
258
Byron Development Control Plan 2002 (NSW), Part J2.1.

260
261
Under section 88E of the Conveyancing Act 1919 (NSW); Byron Development Control Plan 2002
(NSW), Part J2.2.
262
263
McDonald, n248, 131-133 and Parkes v Byron Shire Council [2003] NSWLEC 104 (unreported)
(Justice Lloyd, Land and Environment Court, 5 May 2003); Parkes v Byron Shire Council [2004]
NSWLEC 92 (unreported) (Commissioner Tuor, Land and Environment Court, 15 June 2004); John
259
276
shifts the adaptation burden onto the landowner, but confers no right to undertake
private adaptation measures. 264
Despite the notifications on title at the time of purchase, community tensions

have arisen as a result of the combinations of: the policy of planned retreat;
prohibitions on private coastal protection works; and the significant property
values of these coastal properties. The residents of Belongil Beach in Byron Bay
have called for a reconsideration of this strategy and have threatened to sue
Byron Shire Council for its failure to comply with the NSW Coastal Protection
Act and to protect residents from coastal erosion from rising sea levels. 265
However, as noted by one commentator, only rarely would local or state
authorities be found to owe a positive duty to actively protect their property from
coastal erosion. 266
A similar challenge was made to local authorities in Auckland, New Zealand

(NZ), where coastal homes were classified as being at risk of coastal inundation
following a local report on global-warming sea level rises. 267 According to
reports, the value of the properties dropped 30 per cent, following the
classification, and the landowners sought to have the classification removed from
the Land Information Memorandum issued by the local council. 268
Van Haandel v Byron Shire Council [2006] NSWLEC 394 (unreported) (Commissioner Brown, Land
and Environment Court, 20-21 June 2006).
264
McDonald, n248, 133.
265
See, for example, Heath Gilmore, 'Waterfront Owners Threat to Sue Over Rising Sea Levels', The
Sun-Herald (Sydney), 20 May 2007, 7.
266
climate change impacts' (2007) 24(6) Environmental and Planning Law Journal 405 at 413.
267
J Bengtsson, R Hargreaves and I.C. Page, 'Assessment of the Need to Adapt Buildings in New
Zealand to the Impacts of Climate Change' (Study Report No 179 (2007), BRANZ, 2007) at 87;
Beston, Anne, Seaside Houses Falsely Tagged as Flood Risks The New Zealand Herald, 14 October
2006.
268
Ibid.
277
In NSW, the approval of a retirement development located on a flood constrained

coastal plain was held to be void on the basis that the Minister for Planning had
failed to consider, as part of his considerations of the public interest and ESD,
whether the impacts of the proposed property would be compounded by changed
weather patterns as a result of climate change and whether this would lead to an
increased risk of flooding:
climate change flood risk is, prima facie, a risk that is potentially relevant to a flood
constrained, coastal plain development such as the subject project. In my opinion,
having regard to the subject matter, scope and purpose of the EPA Act and the
gravity of the well-known potential consequences of climate change, in
circumstances where neither the Director-Generals report nor any other document
before the Minister appeared to have considered whether climate change flood risk
was relevant to this flood constrained coastal plain project, the Minister was under
an implied obligation to consider whether it was relevant and, if so, to take it into
consideration when deciding whether to approve the concept plan. The Minister did
not discharge that function.269
In Queensland, there is at least one example of a Court upholding the decision of

a local authority to relocate development to avoid the risks of inundation. In 2007,
a landowner appealed a condition of approval issued by Redland Shire Council
that, in effect, moved the proposed building from an area at risk of flooding to a
different part of the same coastal property. The proposed location of the house
was in an area subject to once in 100 year inundation whereas the condition of
approval identified an area with a higher elevation. 270 Under established town
planning principles, the Court should not consider whether a better site exists
elsewhere for proposed development, only whether the proposed application is
appropriate.271 The Queensland Court of Appeal held that the condition imposed
269
Walker v Minister for Planning [2007] NSWLEC 741; (2007) LGERA 124 at [161], [166]. An
appeal has been lodged by the Minister against this decision. The appeal hearing will take place later
this year.
270
Charles & Howard Pty Ltd v Redland Shire Council [2007] QCA 200 at [3].
271
Scurr v Brisbane City Council (No 6) (1975) QPLR 162 at 165-166; Comkey Pty Ltd v Caboolture
Shire Council (2006) QPELR 399 at [47], Bennett & Anor v Livingstone Shire Council & Ors (1985)
QPLR 214 at 216, The Aborigines and Islanders Alcohol Relief Service Limited v Mareeba Shire
Council & Ors (1985) QPLR 292 at 295-296, Queensland Adult Deaf and Dumb Society
(Incorporated) v Brisbane City Council (1972) 26 LGRA 380 at 386, Castro v Douglas Shire Council
278
by the Council was a valid condition taking into account local planning policies
regarding sea level rises which had the objective of protecting residential housing
from floodwaters by excluding such development from lands inundated by the
Average Recurrence Interval of one in 100 year flood. 272
These examples highlight the legal uncertainty surrounding the authority of local
councils to demand adjustments to the manner of use of private property in order
to protect the community from those risks. Decisions by local councils to act or
not act, where the local authority has exercised sufficient control over the threat,
may result in legal challenges and potential findings of liability for the losses
suffered by private landowners. 273 Consequently, the role of local authorities may
need to be strengthened through specific statutory powers enabling those
authorities to demand amendments to the design, location, use of building
materials and level of sustainability of proposed development in order to promote
adaptation and minimise the risks posed by the impacts of climate change.
Greater community education and awareness must also be achieved to assist
landowners in understanding the reasons behind such regulation and the full
implications of the future risks of climate change to their properties.
C Adaptation and Renewable Energy Projects

Addressing the risks of climate change will require a portfolio of legal responses
including the establishment of strict obligations to reduce emissions and the
facilitation of renewable energy sources.
This will require a shift in the
traditional regulatory approach to the assessment of new projects and will require
the balancing of conflicting short term social and environmental impacts with the
(1992) QPLR 146 at 158, Luke v Maroochy Shire Council & Watpac Developments Pty Ltd (2003)
QPELR 447 at [50], Charles & Howard Pty Ltd v Redland Shire Council [2007] QCA 200 at [21].
272
Charles & Howard Pty Ltd v Redland Shire Council [2007] QCA 200 at [10], [25]-[29].
273
McDonald, n 266, 413. Although greater exemptions are emerging for local authorities through
the various tortious law reforms (discussed in Chapter Six).
279
long term potential to reduce significantly Australias greenhouse gas emissions.

This is not currently the norm in the consideration of renewable energy projects
in Australia.274
One example of the adoption of a balanced assessment can be found in the 2007
Taralga Case involving a proposed windfarm in New South Wales.
The
proposal was objected to by local landowners and the local community on the
basis of visual and noise impacts. The Court acknowledged that the windfarm
would interrupt the natural cohesion of the local landscape. 275 However, the Court
considered this is light of the public interest in the promotion of renewable
energy. The Court accepted the conclusions of the IPCC reports regarding the
link between fossil fuel use and climate change, noted the likely impacts on the
Australian Great Barrier Reef, water resources and agriculture and observed that
the difficulty facing governments globally is how to deal with the implications
of climate change whilst continuing to meet the demands of a growing
population.276
The Court referred to the central role of the principles of ESD and the concept of
intergenerational equity regarding the development of new energy resources and
remarked:
addressing the implications of climate change involves a complex intersection of
political, economic and social considerations. It is widely recognised that the state
of the global environment is in rapid decline, requiring an urgent response if the
274
For a discussion of other approaches to the approval of wind farms, in particular, see James Prest,
'The Bald Hills Wind Farm Debacle' in Tim Bonyhady and Peter Christoff (eds), Climate Law in
Australia (2007) Sydney, The Federation Press, 230 and the discussion of cases preceding Taralga in
Judith Jones, 'Global or Local Interests? The Significance of the Taralga Wind Farm Case' in Tim
Bonyhady and Peter Christoff (eds), Climate Law in Australia (2007) Sydney, The Federation Press,
262.
275
Taralga Landscape Guardians Inc v Minister for Planning and Res Southern Cross Pty Ltd [2007]
NSWLEC 59 at [116].
276
Ibid, [68]-[72].
280
current quality of life enjoyed by most Australians is to continue and future

generations are to have access to the resources of the present.277
This judgment has been described as emphasising the need for environmental
laws to be interpreted at a local level in order to respond to the global challenge
of climate change.278 The Court noted that the attainment of inter-generational
equity in the production of energy requires two things. The first is that the
mining and use of energy is sustainable. The second is to increasingly substitute
energy sources that result in less greenhouse gas emissions thereby reducing the
cumulative and long term effects caused by climate change.279
The Court concluded that renewable energy sources are an important method of
reducing emissions and noted that wind energy involves almost zero emissions
once constructed. 280 In this context, the Court came to the conclusion that the
overall public benefits outweighed the private objections:
there is a significant public interest..in adoption of alternative,
more
environmentally friendly, energy generation sources.the broader public interest

must outweigh this impact [on the local landowners].281
In NZ, the Resource Management Act seeks to facilitate the approval of

renewable energy projects by requiring that, in considering an application for a
resource consent, the consent authority must not have regard to the effects of
such a discharge on climate change except to the extent that the use and
development of renewable energy enables a reduction in the discharge into air of
greenhouse gases, either in absolute terms; or relative to the use and development
277
Ibid, [67], [73].

Kirsty Ruddock, n215, 182.
279
Taralga Landscape Guardians Inc v Minister for Planning and Res Southern Cross Pty Ltd [2007]
NSWLEC 59 at [74].
280
Ibid, [75],[79].
281
Ibid, [146]-[147].
278
281
of non-renewable energy. 282 Accordingly, under the provisions of the NZ Act,

resource consent is more likely to be granted for a renewable energy project,
which will enable reductions in the discharge of greenhouse gases into the air,
than a fossil fuel based project.283
D Adaptation to Climate Change and Common Legal Transactions

I
Climate Change and Sustainable Building Design
The most common of legal transactions involve property as the central asset.
The implications of climate change on existing and future buildings are
significant. The lifespan of new buildings today can be 40 to 60 years which
means that the buildings that we are currently designing and constructing will
be significantly affected by the impacts of climate change.284 According to a
study commissioned by the Australian Greenhouse Office (AGO), the main
impacts of climate change with implications for Australian buildings are:
increased energy consumption due to higher temperatures;
health effects of over-heating;
increased risk of damage from more intense tropical cyclones, storms

and stronger winds and from increased cracking of drier soils and
ground movement impacting on foundations and pipe work;
increased damage from flooding; and
increased bushfire risk. 285
282
Resource Management Act 1991 No. 69 (NZ), section 104E.

Greenpeace New Zealand v Northland Regional Council [2007] New Zealand Resource
Management Appeals 87 at 99 [50] and 100 [55]; (Williams J, High Court, Auckland).
284
Australian Greenhouse Office, 'An Assessment of the Need to Adapt Buildings to the Unavoidable
Consequences of Climate Change' (Report to the Australian Greenhouse Office, Department of the
Environment and Water Resources, BRANZ, 2007) at 3.
285
Ibid.
283
282
The Australian Building Code incorporates energy efficiency provisions that

require new building works, residential and commercial, to meet specified
energy efficiency performance standards based on the Australian climate
zone in which the building will be located.286 These mandatory requirements
specify criteria relating to the building fabric, external glazing, heat
resistance, air movement and efficiency of lighting and equipment depending
upon whether the building is housing, multi-residential or commercial. 287
These provisions have been adopted through many of the state planning
schemes but this is not uniform. 288 For example, new development in SA
must comply with either the Building Code of Australia or the South
Australian Housing Code. The latter code requires all new homes to achieve
a 5 star energy efficiency rating compatible with the relevant climate zone of
the site. 289 More specific sustainable design principles are required to be
followed for new developments in the City of Adelaide Development Plan in
order to minimise energy consumption and limit greenhouse gases.290 These
include:
passive solar consideration in the design, planning and placement

of buildings;
286
Building Code of Australia 2006, Volume One Energy Efficiency Provisions, Section J. The
Building Code 2003 applied energy efficiency standards to housing. In BCA 2006, these now apply to
building classes 2-9. See also D E Fisher, 'Formulation of Building Standards for Energy
Conservation in Buildings' (2006) 18 Environmental Law and Management 282 at 290-291.
287
Australian Building Codes Board, Energy Efficiency Provisions for Housing (27 August 2007)
http://www.abcb.gov.au/go/whatweredoing/workprogram/projectsae/energy/eeprovisionshousing at
17 June 2008; Australian Building Codes Board ,Energy Energy Provisions for Multi-Residential
and Commercial Buildings (27 August 2007),
http://www.abcb.gov.au/go/whatweredoing/workprogram/projectsae/energy/eecommercial at 17 June
2008.
288
Energy efficiency requirements are imposed in many of the States and Territories but there is not
yet a unified national approach; see Building Code of Australia 2006, Volume One Energy Efficiency
Provisions, Section J. The Building Code 2003 applied energy efficiency standards to housing. BCA
2006 applies energy efficiency standards to building classes 2-9. For a brief overview of the different
jurisdictional approaches see http://www.houseenergyrating.com/ at 15 June 2008. The National
Framework for Energy Efficiency is intended to achieve a nationally consistent legislated regime,
http://www.nfee.gov.au/buildings.jsp?xcid=121 at 15 June 2008.
289
2002 South Australian Housing Code, Appendix H; see Planning SA SA Housing Code
Amendment 14 (May 2007) - Appendix H,
http://www.planning.sa.gov.au/download.cfm?DownloadFile=E5B9F999-F203-0D46AD26A708FBF4E684 at 15 June 2008.
290
These principles apply to all new residential and office developments and
extensions/refurbishments. Government of South Australia, 'Adelaide (City) Development Plan under
the Development Act 1993' (Consolidated August 2007), Principle 113.
283
designing for the life-cycle of the development to allow for future

adaptation;
considering low levels of embodied energy in the selection and

use of materials;
developing energy efficiency solutions including passive designs

using natural light, solar control, air movement and thermal mass;
and
using low carbon and renewable energy sources. 291
Other states, such as NSW, have implemented their own separate regimes for
energy efficiency in building design.292
There are also some embryonic examples of the need to adapt to climate
change being taken into consideration in judicial deliberations. For example,
the case of Jackson Teece v Waverley Council involved a residential flat
building proposal which had a number of deficiencies including inadequate
parking and poor solar access. 293 While the proposal as a whole was refused,
Roseth SC made the following interesting observation in respect of the
inadequate parking:
given the current concern with climate change and the increasing emphasis on the
use of public transports, I would be reluctant to refuse an application because it is
deficient in parking, so long as the deficiency does not cause other people
inconvenience.294
291
Ibid.
For example, the SEPP (Building Sustainability Index: BASIX) 2004 (NSW) requires all new
homes in New South Wales to use up to 40 per cent less potable water and produce up to 40 per cent
fewer greenhouse gas emissions than the average home. There are also some State-based initiatives
designed to promote energy efficiency in the corporate sector including the Clean Energy Act 2008
(Qld) (passed 14 May 2008) which requires businesses which use 10 terajoules or more of energy
each year to undertake an energy audit and devise an energy savings plan (Parts 5- 6 Clean Energy
Act 2008 (Qld)).
293
Jackson Teece v Waverley Council [2007] NSWLEC 69, Senior Commissioner Roseth, at [28],[29].
294
Ibid, [28].
292
284
It is likely that the legal framework for the design, construction and operation
of buildings will continue to strengthen as the effects of climate change
become more apparent. Ultimately, it is likely that each planning scheme
will provide, and enforce, detailed requirements regarding site choice,
building design, material selection and operational efficiency of all buildings
in response to the risks posed by climate change.
Given the increased
complexities of retrofitting existing buildings, it is increasingly important

that buildings are designed with this future regulatory environment in mind.
It is also imperative that a consistent national approach to these issues is
developed in order to provide strong incentives to the building industry to
continue to innovate and enhance the sustainability of the design,
construction and operation of these buildings.
II Adaptation to Climate Change and Green Leasing

The impacts of climate change have resulted in a green building evolution
in the move towards more environmentally sustainable building design and
operations. The green building evolution includes some mandatory resource
efficiency standards contained in certain local planning schemes as well as a
raft of voluntary measures such as the Green Star Scheme and the National
Australian Built Environment Rating Scheme that seek to impose a
sustainability standard on the design and operation of commercial buildings
in Australia. 295 Recent years have also seen the emergence of green leases
for buildings through which landlords and tenants cooperate to achieve
certain performance standards.
The Green Building Council of Australia defines a Green Star building as a

property that incorporates design, construction and operational practices that
significantly reduce or eliminate the negative impact of development on the
295
Green Building Council of Australia, Green Star http://www.gbca.org.au/green-star/ at 15 June

2008; National Australian Built Environment Rating Scheme (formerly Australian Building
Greenhouse Rating).
285
environment and occupants. The aim is to achieve buildings that are

optimally energy, water and resource efficient. To be a Green Star building,
the building must have achieved a Green Star rating of four or more stars
under the Green Building Council of Australias rating system.296 The Green
Star rating evaluates separately the environmental impacts that are a direct
consequence of a projects site selection brief, design, construction and
maintenance under a number of categories.
Those categories of
environmental assessment are:

management;
energy efficiency;
water efficiency;
indoor environment quality (IEQ);
transport;
material selection;
land use ecology;
emissions; and
innovation.297
A recent review of Green Star certified buildings found that these buildings
generally achieve:
a. a reduction in energy use of up to 85 per cent against equivalent
conventional buildings;
b. a reduction in potable water consumption of over 60 per cent against
conventional buildings;
c. average carbon dioxide reduction equivalent to removing 130 cars off the
road permanently; and
d. an average of 69 per cent of construction waste being diverted from
landfill. 298
296
Richard Bowman and John Mills, 'Valuing Green: How Green Buildings Affect Property
Valuations and Getting the Valuation Method Right' (Green Building Council of Australia, 2008) at 9.
297
Green Building Council of Australia The Inside Guide to Green Star
http://www.gbcaus.org/docs/GBCA_The%20Inside%20Guide%20to%20Green%20Star.pdf at 15
June 2008.
298
Richard Bowman and John Mills, n296, 10.
286
The positive financial implications of a green building include lower building

operating costs, ease of sale and rental of the building, enhanced tenant retention
and improved occupancy rates. 299 Other benefits extend to improvements in
tenant productivity, general wellbeing and occupational health and safety.300 This
is predicted to result in green buildings attracting a premium in the rental market
as well as being future proofed against the risk of higher energy costs and
tightening regulations on building sustainability performance.
301
The
implications of a green building in a lease setting are significant. To achieve

optimal environmental performance, building owners and tenants must cooperate
fully to achieve certain benchmarks for energy use, water use and waste
management (disposal and recycling) with ongoing information keeping and
reporting between the parties. 302 This is in direct contrast to the traditional, arms
length, commercial relationship between a landlord and tenant.303 Accordingly,
green leases will need to incorporate expressly the specific rights and
obligations of the landlord and tenant, mutual environmental performance
benchmarks, and evolved cooperative mechanisms for addressing noncompliance and issues in disputes.
The National Australian Built Environment Rating Scheme (Nabers) is another

voluntary scheme intended to assist Australian building owners, managers and
tenants to promote and market their greenhouse performance and encourages best
practice in the design, operation and maintenance of commercial buildings to
minimise greenhouse emissions.304 It is administered nationally by the Nabers
Office. The energy rating (from 1-5) can apply to the base building, entire
299
Ibid, 5.
Ibid 6.
301
Ibid.
302
Tim Power, 'Lease Arrangements for Green Commercial Buildings' (2007) Freehills: Update
http://www.freehills.com.au/publications/publications_2243.asp at 15 June 2008.
303
Sharon Christensen and William Duncan, 'Green Leases - A New Era in Landlord and Tenant Cooperation?' (2007) 15 Australian Property Law Journal 54 at 58.
304
Formerly known as the Australian Building Greenhouse Rating Scheme (ABGR). National
Australian Built Environment Rating Scheme, Nabers Energy Commitment Agreement [new
buildings and refurbishments], 1. National Australian Built Environment Rating Scheme, Nabers
Energy Commitment Agreement [new or refurbished tenancies and fitouts], 1
http://www.nabers.com.au/office.aspx at 15 June 2008.
300
287
building or individual tenancies according to their actual performance using 12

months of energy data.305
Building owners and tenants are required to enter into contractual agreements
with the Nabers Office prior to the use of the energy rating. The contracting
party must be the proprietor or head lessee of the premises.
The so-called
commitment agreement allows the proponent to nominate the star level that the
project will perform at, once the building is fully operational.
Three stars
represent current best market practice and commitment agreements are intended
to nominate star levels of 4, 4.5 or 5. Once the commitment agreement has been
signed, building owners and tenants are able to promote the greenhouse
performance of the building or tenancy. The prior approval of the Nabers Office
is required where the party wishes to sell, transfer or otherwise dispose of
ownership of the premises and relevant rights and obligations under the
agreement must be assigned to the third party. 306
According to the AGO, buildings that include sustainable measures, including
strong passive solar design principles and efficient water usage systems, are
likely to be more resilient to the impacts of climate change.
307
The
Commonwealth Energy Efficiency in Government Operations Policy requires

energy efficiency obligations to be included in all documentation for all premises
owned or leased by the Commonwealth.308 Contracts, leases and other relevant
documentation for new buildings, major refurbishments and new leases over
2,000 square metres must specify minimum energy performance standards of 4.5
stars under the ABGR.309
305
Ibid.
If the third party purchaser does not wish to be bound by a commitment agreement then the owner
or tenant, as the case may be, is entitled to immediately terminate the agreement. National Australian
Built Environment Rating Scheme, Nabers Energy Commitment Agreement [new buildings and
refurbishments], 5. National Australian Built Environment Rating Scheme, Nabers Energy
Commitment Agreement [new or refurbished tenancies and fitouts], 5.
307
Australian Greenhouse Office, n284, 4.
308
Australian Greenhouse Office, 'Energy Efficiency in Government Operations Policy'
(Commonwealth of Australia, 2006).
309
Ibid 1. This does not apply to tenancy areas of less 2,000m2 and leases of under 2 years where only
requirements for energy efficient lighting and separate metering apply. Exceptions can be granted for
an ABGR rating of less than 4.5 in special circumstances eg heritage listed buildings. Department of
306
288
The AGO has developed a Green Lease Schedule to be used in all leases for
Commonwealth buildings and lettings, that makes provision for a range of
ongoing energy efficiency performance obligations. 310 The schedule requirements
vary according to the size and nature of the particular lease. 311 However, the
standard provisions in the green lease schedule generally relate to:
the achievement and maintenance of the 4.5 ABGR energy rating (this
can be adjusted down in limited circumstances);
separate metering of all tenancies and central services (including

electricity, gas, hot and cold water);
agreement to an Energy Management Plan which assesses strategies for

maintaining the ABGR rating, managing energy intensity and achieving
energy intensity improvements;
establishment of a Building Management Committee, for larger tenancies,

to operate as a communication, consultation and record keeping vehicle;
and
dispute resolution and remedial clauses which adopt a cooperative

approach to rectifying non-compliance and invoke the use of an
appropriately specialised expert to resolve issues under the green lease
schedule.312
It is envisaged that the uptake of green leases and sustainable buildings

designs will increase, and may even become a mandatory requirement, as the
impacts of climate change on the Australian environment become more
pronounced.
the Environment and Water Resources and Australian Greenhouse Office, 'Energy Efficiency in
Government Operations Policy: Green Lease Schedule (GLS)' (Commonwealth of Australia, 2007).
310
Australian Greenhouse Office, Green Lease Schedule
http://www.environment.gov.au/settlements/government/eego/index.html at 15 June 2008.
311
Department of the Environment and Water Resources and Australian Greenhouse Office, 'Energy
Efficiency in Government Operations Policy: Green Lease Schedules Guidance Notes'
(Commonwealth of Australia, 2007) at 12.
312
Ibid, 9-10.
289
III Adaptation to Climate Change and Contracts for the Sale of Land
When advising in relation to the sale of land, Australian legal practitioners
should be increasingly aware of the potential physical, economic and
environmental implications of adverse climate change and the effect that may
have on the value of their clients assets. The potential future risks from
climate change include sea level rises, flooding and the risk of future
inundation of properties with resulting deterioration in property values and
loss of assets. There is also the risk of failure of buildings from increased
temperatures, droughts and incidences of severe weather events. Purchasers
should also be made aware of the financial implications of future regulatory
regimes which may require the mandatory installation of energy efficient and
water saving devices and may restrict the ability of landowners to fully
exploit the opportunities associated with their assets.
Property assessments should take into account the risk of climate change
impacting on the asset and, in particular, the risks of flooding and inundation
on the present and future value of the property. Whether the building is
environmentally sustainable will also impact on the existing and future
market value of the property.
Unsustainable buildings may result in
accelerated value depreciation of the asset and may require major capital
works to meet future regulatory changes including the imposition of more
stringent economic and environmental performance standards.
313
Such
developments could require the insulation of all buildings, the use of

appliances with 4 or 5 star efficiency ratings, the installation of solar hot
water systems, greywater recycling systems and so on.
These could
potentially be mandatory for all new homes as well as requiring retrofits in

existing homes.
313
Richard Bowman and John Mills, n296, 5-6.
290
Land contracts may increasingly require warranties from the vendor

regarding the energy efficiency and water efficiency of the property. In the
Australian Capital Territory, it is now mandatory for vendors to disclose the
current level of energy performance of a dwelling prior to sale.
All
advertisements for the sale of premises must contain a statement of the

energy efficiency rating (EER) of the habitable part of the premises. 314
Failure to include such a statement is a strict liability offence. 315 A person
will also commit a strict liability offence if the EER is false or misleading in
a material particular. 316 The vendor must supply the prospective buyer with a
copy of the EER before entering into a contract for the sale of the premises
and the buyer must certify in writing that the EER has been received.317 If this
does not occur then the seller is liable to pay the buyer an amount equal to
0.5 per cent of the purchase price of the premises. 318
In this era of drought and water restrictions, the presence of water tanks has
also become a significant factor in the marketing of properties.
The
performance of the property in meeting water restrictions is also increasingly

relevant. In Queensland, for example, excessive water users are required to
enter into water efficiency management plans with the local water authority
through which the owner undertakes to install water efficient taps, toilets,
showers and appliances within a set period of time. 319
Repeated non-
compliance will result in fines, outdoor watering bans and the installation of
flow restrictors on the propertys water supply. 320 These restrictors are
installed to the water meter at the property and will reduce significantly the
314
Civil Law (Sale of Residential Property) Act 2003 (ACT), section 22(1).
316
Civil Law (Sale of Residential Property) Act 2003 (ACT), ss 22(3)-22(5).
317
Civil Law (Sale of Residential Property) Act 2003 (ACT), ss 23(1)-22(2).
318
319
For non-residential users, this is implemented through Part 5, Division 3 of the Water Act 2000
(Qld) (ss 360ZCA-360ZCK).
320
Queensland Water Commission, Residential Excessive Water User Compliance Program: Level
6, http://www.qwc.qld.gov.au/myfiles/uploads/level%206/fact%20sheets/L6FS_ExcessiveUse.pdf
at 15 June 2008.
315
291
water flow rate.321 The water commissioner has advised that restrictors will
be initially installed for a 30 day period but will be reinstalled for serial
offenders. 322 Accordingly, the past performance of the property, and its
ability to meet water targets through normal day-to-day operations, is
becoming an important aspect for consideration in the purchase of a
property. 323
Where carbon credits have been sold from carbon stored in the vegetation on
the property then the purchaser must also consider the rights and
responsibilities associated with that stored carbon including the contractual
assignment of legal obligations to preserve the carbon stocks on the land for a
lengthy period of time.
CONCLUSION
Environmental law is driven by the imperative of managing risk, and climate

change is no exception to this rule.324 As noted by one commentator [c]limate
law...is..the very core of environmental law, for no environmental problem is as
pervasive or as long-term in its impact. 325
In the absence of specific regulation aimed at restricting Australias national

emissions, the current systems to regulate pollution and environmental harm are
321
Ibid. Broad powers to restrict (and prohibit) water supply where the commission considers it
necessary are provided under Part 6 of the Water Act 2000 (Qld). These restrictions can extend to
water taken from a rainwater tank that is connected to a service providers reticulated supply (section
360ZD(3)).
322
Queensland Water Commission, n320.
323
The generation and sale of carbon credits from vegetation on land is discussed further in Chapter
Seven .
324
Nicolas De Sadeleer, n21, 3.
325
Environmental Law' (2004) [2004](1) Environmental Liability 19 at 19.
292
readily equipped to step into this void and regulate greenhouse gas emissions and
their environmental repercussions. In theory, the objectives and scope of these
existing environmental legal systems comfortably extend to the regulation of
climate change and the restriction of emissions. Indeed, the Federal EPBC Act is
particularly well suited to addressing major projects with significant levels of
emissions and the potential to impact on matters of national significance.
However, in practice, the interpretation and application of these laws merely
pays lip service to the objectives of environmental protection. As noted by one
commentator:
the law as set down in legislation does not always reflect what happens in practice.
The availability of legal rights and powers often does not reflect the reality of
natural resources management.natural resources management is more likely to be
constrained by political influences, which include social, cultural and economic
considerations, than by absence of legal power.326
The lack of political will to restrict emissions has prevented determining

authorities from giving the impacts of emissions and climate change the full
consideration required under the principles ESD. As a result of this derogatory
treatment, the principles of ESD are demoted to a secondary consideration rather
than being treated as they should be, that is, as a primary imperative which
should underpin all decision-making in Australia. Moreover, erroneous findings
as to the causes of climate change, and the consequences of additional
anthropogenic emissions, undermine the proper functioning of these legal
systems. The result is the suboptimal operation of a protective regime with very
little substantive effect on the emissions of Australian industries. Consequently,
a major paradigm shift is required to regulate greenhouse gas emissions, and the
risks of climate change, in Australia effectively. The science of climate change
must be accepted at all governmental levels and greater education provided to
determining authorities regarding the causal links between emissions and climate
326
Gerry Bates, 'Legal Perspectives' in Stephen Dovers and Su Wild River (eds), Managing
Australia's Environment (2003) Sydney, The Federation Press, 255 at 255.
293
change. Furthermore, the principles of ESD, inter-generational equity; and

precaution must be embraced and given their full status in all environmental and
planning determinations across Australia.
The existing legal system is also clearly not primed to facilitate adaptation to the
impacts of climate change. The current legal approach is ad hoc, inconsistent
across the state and territory jurisdictions, and lacking in any clear parameters for
implementation. Adaptation requires that sustainability becomes the norm in all
aspects of building design, location and operation; and in resource choices and
resource use. Accordingly, an effective regulatory approach requires traditional
property laws, planning regimes, land contracts and leasing provisions, across
Australia, to be reformed to accommodate this new overarching priority of
promotion of the principles of ESD.
Effectively responding to the causes and impacts of climate change is a

challenging task and requires a regulatory authority with ample information,
expertise, funding and other resources at its disposal. Given these resourcing
challenges, and the need for national consistency in the regulation of Australian
industries, it appears preferable that such regulation is directed at a
Commonwealth level with consistent implementation through the various statebased regulatory authorities. Such an approach will achieve greater harmony in
the regulatory approach to the emissions from major projects whilst utilising the
existing resources of the state authorities. In the event that a national emissions
trading system is established for Australia, these regulatory approaches have the
potential to play a significant complementary role towards achieving Australias
emission reduction and adaptation objectives.
294
Chapter Six - The Potential Role of the Common Law of Torts

in Addressing Climate Change Harm in Australia
INTRODUCTION
Humans play a pivotal role in contributing to climate change through the burning
of fossil fuels, the use of products that emit greenhouse gases and land-use
changes such as urbanisation, deforestation and agricultural practices. Changes
to our climate system are predicted to result in rising sea levels, rising
temperature and higher incidences of severe storms. 2 Climate-related harm could
include loss of homes, livestock and other property, damage to public
infrastructure and to coastal settlements, impaired agricultural yields, loss of
livelihoods and population displacement. 3 The human health impacts could
involve thermal stress and heat-related deaths and illnesses, proliferation and
geographical shifts of infectious diseases, impaired nutrition and other adverse
mental and physical health risks. 4
Despite this growing evidence, many authorities and industries in Australia

appear reluctant to undertake immediate action to reduce greenhouse gas
emissions. 5 Accordingly, some climate-related harm is now inevitable. This
Sections of this chapter were published in Nicola Durrant, 'Tortious Liability for Greenhouse Gas
Emissions? Climate Change, Causation and Public Policy Considerations' (2007) Volume 7, Issue 2
QUT Law and Justice Journal 403 and Nicola Durrant, 'Professional Liability for Climate-Affected
Advice' (2007) Issue 60 Queensland Environmental Practice Reporter 114.
2
Climate Change' (IPCC Secretariat Geneva, 2007); IPCC, 'Climate Change 2001: Synthesis Report to
the Third Assessment Report of the Intergovernmental Panel on Climate Change' (Cambridge
University Press, 2001)).
3
Ibid.
4
IPCC, 'Climate Change 2001', n2, 9.
5
Some States are beginning to implement State-based reduction targets but these do not yet amount to
a prohibition on greenhouse gas emissions. For example, the Climate Change and Greenhouse Gas
Emissions Reduction Act 2007 (SA).
295
leads to the question. On whom should the risk fall for climate harm? Is it
industry, government or the private individual? 6
The purpose of this chapter is to assess the potential legal issues in establishing
liability for large-scale emitters of greenhouse gases, in Australia, for resulting
harms caused from changes to the climate system. This paper focuses on the
likely role of the common law of torts in addressing resulting harms from climate
change. It does so primarily through an analysis of the potential scope of liability
in hypothetical negligence and nuisance suits against coal mining projects and
coal-fired power plants. This chapter identifies a range of significant obstacles in
successfully bringing claims in negligence for climate change harm.
These
include issues in foreseeability, causation and the operation of public policy

principles. This chapter concludes that the prospects of success of such tortious
actions are remote. Consequently, the distribution of risk from climate change,
and associated allocation of liability, would be more appropriately addressed
through consistent, national legislation rather than through the ad hoc adaptation
of the common law.
CLIMATE CHANGE AND THE LAW OF TORTS
Climate change is a global phenomenon and has resulted in international

agreements to reduce global greenhouse gas emissions and minimise climate
harms. A majority of the international community agreed to an international
framework for reducing emissions through the United Nations Framework
Or in the words of Myles Allen; what might happen if it all goes horribly wrong? Myles Allen,
'The Spectre of Liability: Part 1-Attribution' in Kenny Tang (ed), The Finance of Climate Change: A
Guide for Governments, Corporations and Investors (2005) London, Risk Books, 367 at 367.
296
Convention on Climate Change (UNFCCC) and the Kyoto Protocol. 7 The

overriding objective of the UNFCCC, of which Australia is a party, is to achieve
the stabilization of greenhouse gas concentrations in the atmosphere at a level
that would prevent dangerous anthropogenic interference with the climate
system.8
Australia is also a party to the Kyoto Protocol. The current Federal Australian
government deposited the instrument of ratification of the Kyoto Protocol with
the UNFCCC Secretariat in late 2007. Australia became bound to comply with
its obligations under the Kyoto Protocol in March 2008. 9 This includes an
obligation to reduce greenhouse gas emissions to 108 per cent of 1990 levels in
during 2008 and 2012.10
Both the UNFCCC and the Kyoto Protocol are silent on the allocation of
responsibility for damage caused as a result of anthropogenic greenhouse gas
emissions. This means that, at an international level, reparation of harm must be
addressed through existing international law principles including the principle of
State responsibility for transboundary harm. 11 At a national level, and in the
absence of specific legislation regulating emissions and climate harm, the
allocation of liability for losses must fall to be addressed by the common law.
31 ILM 849 (entered into force on 21 March 1994)(UNFCCC); Kyoto Protocol to the United Nations
Framework Convention on Climate Change, opened for signature 16 March 1998 (entered into force
on 16 February 2005) (Kyoto Protocol)(together the climate change regime).
8
9
That is 90 days from the receipt of the Instrument of Ratification by the United Nations.
10
Kyoto Protocol, n7, Article 3 and Annex A.
11
See Roda Verheyen, Climate Change Damage and International Law: Prevention Duties and State
Publishers.
297
The common law is a dynamic area of law that is able to adapt to the changing
needs of society.12 The principal goal of tort law has been described in many
formats. One theoretical approach refers to tort law as corrective justice, another
as maximising social welfare and a third as the distribution or allocation of the
costs of risk-bearing. 13 From these three, the appropriate basis for liability for
environment related torts appears to be based on considerations of sharing the
risk of the broad social costs of climate change. 14 Accordingly, in the emerging
area of climate losses, the Court must develop and adapt legal principles to
identify wrongdoers, recognise the wrong done, allocate blame and distribute
losses. However, it is debatable whether the common law of torts is able to adapt
sufficiently to apply to the modern, global, environmental, problem of climate
change which cuts across the public and private arenas. 15
THE HYPOTHETICAL CLIMATE SUIT: ACTIONS IN NEGLIGENCE
Tortious actions in negligence are most likely to be brought against large users of
fossil fuels, suppliers of fossil fuels and the creators of products that utilise fossil
fuels. 16 Actions may also be brought against governments in their capacity as
public authorities and where they own or control public works and infrastructure
such as electricity utilities.
This chapter focuses, in particular, on the
hypothetical scenario involving the long-term operation of a coal mine, coal-fired

electricity plant or other large-scale industrial emitter of greenhouse gases in
Australia.
Such entities could be either publicly or privately owned.
12
Karen Morrow, 'Nuisance and Environmental Protection' in John Lowry and Rod Edmunds (eds),
Environmental Protection and the Common Law (2000) Oxford, Oregon, Hart Publishing, 139 at 139.
Perre v Apand Pty Ltd (1999) 198 CLR 180 at [92] per McHugh J.
13
Glanville Williams and B.A. Hepple, Foundations of the Law of Tort (2 ed, 1984) London,
Butterworths at 197-198, 201.
14
Karen Morrow, n12, 157.
15
Ibid.
16
Joseph Smith and David Shearman, Climate Change Litigation: Analysing the Law, Scientific
Evidence and Impacts on the Environment, Health and Property (2006) Adelaide, Presidian Legal
Publications at 17.
298
Accordingly, it is against this factual background that the following tortious

principles are considered:
the existence of a duty of care owed by the defendant to the plaintiff;
a breach by the defendant of the standard of care; and
damage to the plaintiff caused by the defendants breach of the duty.
DUTY OF CARE AND THE EMISSION OF GREENHOUSE GASES

A Duty of Care and Physical Harm
The type of harm suffered has implications for the finding that a duty of care is
owed.
Potential climate related harm, following greenhouse gas emissions,
includes physical property damage from heat, wind, floods and sea level rises.
Where greenhouse gas emissions have caused property damage, personal injury
and consequential loss then it is necessary to determine whether the relationship
between the parties falls within one of the recognised relationships giving rise to
a duty of care. 17
The foundation for the establishment of a duty of care is found in the so-called
neighbour principle as espoused in Donoghue v Stevenson: 18
you must take reasonable care to avoid acts or omissions which you can reasonably
foresee would be likely to injure your neighbour. Who then, in law is my
neighbour? The answer seems to be persons who are so closely and directly
affected by my act that I ought reasonably to have them in contemplation as being
so affected when I am directing my mind to the acts or omissions which are called
into question.
17
18
Spartan Steel & Alloys Ltd v Martin & Co [1973] 1 QB 27.

Donoghue v Stevenson [1932] AC 562 at 580 per Lord Atkin.
299
The establishment of a neighbour relationship between the emitter and the

plaintiff requires a number of elements including that the plaintiff be so closely
and directly affected that the emitter ought reasonably to have them in
contemplation as being so affected. Proximity was explained by Deane J in the
following manner:
[proximity] involves the notion of nearness or closeness and embraces physical
proximity (in the sense of space and time) between the person or property of the
plaintiff and the person or property of the defendant, circumstantial proximity such
as an overriding relationship of employer and employee or of a professional man
and his client and causal proximity in the sense of the closeness or directness of the
relationship between the particular act or cause of action and the injury sustained.19
The application of this principle to an industrial plant and local residents affected
by emissions appears quite valid. However, the impacts of climate change go
beyond the local community and extend to the regional, national and the global.
As the nexus between the emitter and the plaintiff expands, the likelihood of the
Court finding a duty of care becomes more and more uncertain.
B Duty of Care and Pure Economic Loss

Where harms relating to climate change involve only a risk of physical damage,
or property devaluation, then no physical harm will be involved and this will be
pure economic loss.
This could occur in circumstances of negligent
misrepresentation of the risks of property flooding, negligent performance of

services in omitting to address climate risks, defective goods and property
damage.
19
Jaensch v Coffey (1984) 155 CLR 549 at 584.
300
Where the harm caused by the emitting industry results in pure economic loss
then recovery will be permitted only in limited circumstances. 20 As noted:
in my opinion it is still right to say that as a general rule damages are not
recoverable for economic loss which is not consequential upon injury to the
plaintiff's person or property. The fact that the loss was foreseeable is not enough to
make it recoverable. However, there are exceptional cases in which the defendant
has knowledge or means of knowledge that the plaintiff individually, and not
merely as a member of an unascertained class, will be likely to suffer economic loss
as a consequence of his negligence, and owes the plaintiff a duty to take care not to
cause him such damage by his negligent act.21
In such circumstances, this will require the establishment of a novel duty of care
by the Court.
The Court now applies an incremental approach to the
establishment of a novel duty of care, that is, the law should develop novel
categories of negligence incrementally and by analogy with the established
categories. 22 This multi-factorial approach looks to a range of legal and policy
principles including the defendants control of the circumstances giving rise to
the harm and the vulnerability of the plaintiff in terms of their inability to protect
themselves from that harm. 23
The concept of vulnerability was described in Woolcock Street Investments v

CDG Property Ltd as follows:
vulnerability, in this context, is not to be understood as meaning only that the
plaintiff was likely to suffer damage if reasonable care was not taken. Rather,
vulnerability is to be understood as a reference to the plaintiffs inability to
protect itself from the consequences of a defendants want of reasonable care, either
20

Caltex Oil (Aust) Pty Ltd v The Dredge Willemstad (1976) 136 CLR 529 at 555.
22
Sutherland Shire Council v Heyman (1985) 157 CLR 424 at 481 per Justice Brennan.
23
Sullivan v Moody (2001) 207 CLR 562; 183 ALR 404 at [48]-[49]; Rogers v Whitaker (1992) 175
CLR 479; Bryan v Maloney (1995) 182 CLR 609; Hill v Van Erp (1997) 188 CLR 159; 142 ALR 687,
Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515; Esanda Finance
Corporation v Peat Marwick Hungerfords (1997) 188 CLR 241. See also Jane Stapleton, The
Golden Thread at the Heart of Tort Law: Protection of the Vulnerable, (2003) 24
Australian Bar Review 41.
21
301
entirely or at least in a way which would cast the consequences of loss on the
defendant.24
With respect to greenhouse gas emissions, the emitter has control of the nature
and amount of greenhouse gases produced and emitted by its industrial activities.
The avoidance of harm from climate change is outside the control of the plaintiff
and, as individuals, they are unable to prevent the occurrence of climate change.25
Moreover, as severe weather events, coastal erosion, landslides and floods
increase in vulnerable areas the insurance sector is increasingly denying coverage
for these climate change related risks. 26
However, in considering whether to establish a novel duty, the Court will also
take into account public policy principles.
Public policy issues present a
significant obstacle for any tortious action based on harm from climate change.
Climate change is a global phenomenon and occurs as a result of natural
processes as well as historic and continuing anthropogenic emissions. The
establishment of a duty of care for harm caused by climate change as a result of
the contribution of the particular emissions of the defendant could be regarded as
the imposition of an unreasonable social burden. The Court may determine that
holding these individual emitters responsible for the cumulative global and
historic emissions of our industrialised society is an unreasonable shift of
responsibility and has the potential to result in the imposition of indeterminate
liability on emitters.27 As part of its considerations, the Court will balance the
interests of the community with concerns that the identification of a duty of care
could result in a flood of claims before the Courts alleging breach. As the harms
24
Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515 at [23] per Chief Justice
Gleeson, Justices Gummow, Hayne and Heydon.
25
Ibid.
26
Andrew Dlugolecki and Mojdeh Keykhah, 'Climate Change and the Insurance Sector: Its Role in
Adaptation and Mitigation' in Kathryn Begg, Frans Van Der Woerd and David L. Levy (eds), The
Business of Climate Change: Corporate Responses to Kyoto (2005) Sheffield, Greenleaf Publishing,
147; RF&C Investments, 'In the Front Line: The Insurance Industry's Response to Climate Change'
(Reo Research, 2007) at 8; Evan Mills, 'From Risk to Opportunity: 2007 Insurer Responses to
Climate Change' (CERES, 2007).
27
Cole v South Tweed Heads Rugby League Football Club Ltd (2004) 207 ALR 52.
302
from climate change become more and more apparent in Australia, concerns
about the flood of claims will become all the more legitimate in the eyes of the
law.
C Duty of Care and Public Authorities

Public authorities are likely to experience increased claims in negligence against
them as a result of their direct action, or failure to take action, in addressing the
risks of climate change. This could include claims in respect of:
the choice of protective standards in planning schemes (for example, the minimum
height above sea-level for new development); the determination of individual
development applications, including conditions for flood or bushfire protection and
erosion control; and the choice of protective strategies such as the construction of
levees, seawalls, and stormwater systems. 28
Successful claims against authorities regarding the development of planning

schemes would be unusual given that such determinations are generally
considered by the Court to be political in nature.29 However, claims regarding
individual determinations of development applications may have greater
prospects of success where council is exercising considerable control over the
fate of the site in circumstances where it must be taken to have knowledge of the
current predictions of climate impacts, at least compared with a trusting and
vulnerable purchaser. 30 Whether a duty is found to be owed by the authority will
depend upon the stringency of the wording of the empowering legislation and
whether it is characterised as being owed to individuals or the public at large.
28
climate change impacts' (2007) 24(6) Environmental and Planning Law Journal 405 at 412. Claims in
negligence might also be bought against public authorities in circumstances where they own or
control the facilities responsible for large scale greenhouse gas emissions.
29
See, for example, Ryan v Great Lakes Council; New South Wales v Ryan (2002) 77 ALJR 183 at
186. Ibid.
30
McDonald, n28, 412.
303
Moreover, statutory tort law reforms in Australia have limited the scope of
potential liabilities of public authorities and provided additional defences to
tortious claims. For example, the following principles will apply in determining
whether a duty of care exists in relation to a public authority:
(a) the functions required to be exercised by the authority are limited by the
financial and other resources that are reasonably available to the authority for the
purpose of exercising the functions;
(b) the general allocation of financial or other resources by the authority is not open
to challenge;
(c) the functions required to be exercised by the authority are to be decided by
reference to the broad range of its activities (and not merely by reference to the
matter to which the proceeding relates);
(d) the authority may rely on evidence of its compliance with its general procedures
and any applicable standards for the exercise of its functions as evidence of the
proper exercise of its functions in the matter to which the proceeding relates.31
Accordingly, public authorities are able to rely on evidence of limited financial

and other resources in defending findings of a duty, or breach of that duty, by the
Court. The onerous financial burden of responding to the risks of climate change
will heavily influence the Courts consideration of reasonableness when
determining whether a duty of care exists in relation to climate change. 32
31
Section 35 of the Civil Liability Act 2003 (Qld). Similar provisions have been enacted in s 42 of the
Civil Liability Act 2002 (NSW), s38 of the Civil Liability Act 2002 (Tas), s110 of the Civil Law
(Wrongs) Act 2002 (ACT) and s5W of the Civil Liability Act 2002 (WA). Section 83 of the Wrongs
Act 1958 (Vic) is similar but excludes (b). Richard Douglas, Gerard Mullins and Simon Grant, The
Annotated Civil Liability Act 2003 (QLD) (2004) Chatswood, LexisNexis Butterworths at 35.5.
32
See also Elizabeth Carroll, Wednesbury Unreasonableness as a Limit on the Civil Liability of
Public Authorities (2007) 15 Tort Law Review 77.
304
CAUSATION AND LIABILITY IN CLIMATE SUITS

A The Standard of Care and Emissions of Greenhouse Gases
Once a duty of care has been found to have been owed, the Court must consider
what is the relevant standard of care and if it has been breached. The standard of
care is determined, as a question of law, through the application of an objective
standard of the reasonable person. 33 This was described by Mason J in Wyong
Shire Council v Shirt as follows:
in deciding whether there has been a breach of the duty of care the tribunal of fact
must first ask itself whether a reasonable man in the defendant's position would
have foreseen that his conduct involved a risk of injury to the plaintiff or to a class
of persons including the plaintiff. If the answer be in the affirmative, it is then for
the tribunal of fact to determine what a reasonable man would do by way of
response to the risk. The perception of the reasonable man's response calls for a
consideration of the magnitude of the risk and the degree of the probability of its
occurrence, along with the expense, difficulty and inconvenience of taking
alleviating action and any other conflicting responsibilities which the defendant
may have. It is only when these matters are balanced out that the tribunal of fact can
confidently assert what is the standard of response to be ascribed to the reasonable
man placed in the defendant's position.34 (emphasis added)
Accordingly, in setting the appropriate standard of care the Court will determine
the magnitude of the risk of climate change, the probability of that risk actually
occurring and the relative expense of requiring the defendant to take steps to
alleviate that risk.
B Calculus of Breach of Duty and Climate Harm

The relevance of the ability to take precautions against a risk of harm is now
articulated in the various statutory tort law reforms in the following manner:
33
34
Glasgow Corporation v Muir [1943] AC 448 at 454.

Wyong Shire Council v Shirt (1980) 146 CLR 40 at 47-48 per Justice Mason.
305
(1) A person does not breach a duty to take precautions against a risk of harm
unless
(a) the risk was foreseeable (that is, it is a risk of which the person knew or ought
reasonably to have known); and
(b) the risk was not insignificant; and
(c) in the circumstances, a reasonable person in the position of the person would
have taken the precautions.35
Foreseeability of the risk has been described by the Court as:

a risk of injury which is remote in the sense that it is extremely unlikely to occur
may nevertheless constitute a foreseeable risk. A risk which is not far-fetched or
fanciful is real and therefore foreseeable. 36
Under the tort law reforms, this common law test of foreseeability has been
altered to apply to risks that are not insignificant. 37 This was discussed in
Drinkwater v Howarth38 as:
a risk which is much more than far-fetched or fanciful may not differ materially
from a risk which is not insignificantif the plaintiff was clearly at risk, then it
cannot be said that the risk was insignificant. It was a clear risk.39
So the question to be asked is whether the risk of climate change was not
insignificant at the time of the emission of the greenhouse gases? The UNFCCC,
35
Section 9 of the Civil Liability Act 2003 (Qld). Similar provisions to s 9 have been enacted in s43
Civil Law (Wrongs) Act 2002 (ACT), s5B Civil Liability Act 2002 (NSW), s32 Civil Liability Act
2002 (SA), s11 Civil Liability Act 2002 (Tas), s48 Wrongs Act 1958 (Vic), s5B Civil Liability Act
2002 (WA). Richard Douglas, Gerard Mullins and Simon Grant, The Annotated Civil Liability Act
2003 (QLD) (2004) Chatswood, LexisNexis Butterworths at 9.7.
36
Wyong Shire Council v Shirt (1980) 146 CLR 40 at 48 per Justice Mason.
37
Compare with section 48(3)(a) of the Wrongs Act 1958 (Vic) which states that this term includes,
but is not limited to, acts that are far-fetched or fanciful.
38
Drinkwater v Howarth [2006] NSWCA 222.
39
Ibid, at [16] and [19].
306
of which Australia is a party, was adopted in 1992. 40 The preamble to the

UNFCCC clearly state that the parties to the UNFCCC are concerned about the
impact of increased atmospheric emissions on global warming and climate
change:
concerned that human activities have been substantially increasing the atmospheric
concentrations of greenhouse gases, that these increases enhance the natural
greenhouse effect, and that this will result on average in an additional warming of
the Earths surface and atmosphere and may adversely affect natural ecosystems
and humankind.41
On the basis of this international agreement, it could be legitimately argued that

the risk of injury from climate change resulting from human emissions of
greenhouse gases was a real, foreseeable risk and not insignificant risk as of
1992. In contrast, it was not until 2007 that the Australian Federal government
officially acknowledged that the science linking greenhouse gas emissions and
global warming was convincing:
over time, the scientific evidence that the climate is warming has become quite
compelling and the link between emissions of greenhouse gases from human
activity and higher temperatures is also convincing.42
In any event, the publication of the Fourth Assessment Report on Climate

Change of the Intergovernmental Panel on Climate Change (IPCC Report), in
February 2007, made it abundantly clear that climate change was occurring, that
the effects of climate change were of an adverse or harmful nature and that
greenhouse gas emissions were contributors to that occurrence.43
40
UNFCCC, n7. This was signed by Australia on 4 June 1992 and ratified on 30 December 1992.
UNFCCC,n7, Preamble.
42
Prime Minister John Howard, Address to the Melbourne Press Club (23 July 2007, Melbourne)
http://www.egovmonitor.com/node/13024 at 14 June 2008.
43
IPCC, 'Climate Change 2007', n2.
41
307
In relation to climate warming, the IPCC Report concludes that

warming of the climate system is unequivocal, as is now evident from observations
of increases in global average air and ocean temperatures, widespread melting of
snow and ice, and rising global mean sea level.44
The IPCC Report identifies a clear link between temperature increases and
greenhouse gas emissions and concludes that most of the observed increase in
globally average temperatures since the mid-20 th century is very likely due to the
observed increase in anthropogenic greenhouse gas concentrations.45
The assessment concludes that continued emissions at or above current rates will,
very likely, cause further warming and induce larger changes in the climate
system than those observed during the 20th century. 46 Accordingly, at the time of
release of this report with its increased scientific certainty, knowledge of the
probability of harm from unabated greenhouse gas emissions could be concluded
to have entered the public arena.
An analogy may be drawn with medical negligence cases where knowledge of

the risk of harm has developed over time. In H v Royal Alexandra Hospital for
Children, 47 there was no general knowledge of the risk of contracting HIV via
blood transfusions until the first documented case in 1983. Justice BadgeryParker found that, upon publication of the reported case, the hospital ought to
have been aware of the risk:
the first Australian case of AIDS was published in April 1983. I have no difficulty
in concluding that reasonably informed physicians, scientists and blood transfusion
44
Ibid, 4.
Ibid, 8. Very likely, in this quote, refers to a scientific certainty of above 90 per cent.
46
Ibid, 10.
47
H v Royal Alexandra Hospital for Children (1990) Aust Torts Reports 81-000.
45
308
services in this country ought to have been well aware by at latest April 1983 that
there was a real risk.48
A similar argument could be run in relation to the release of the IPCC report in
February 2007.
The IPCC Report addresses climate change impacts
predominantly at a global level. It could be argued that the specific harm

experienced by the plaintiff was not itself reasonably foreseeable because those
localised impacts were not predicted by the IPCC. However, this argument
becomes weaker as Australian studies on likely climatic impacts, at a regional
level, become publicly available.49
Additionally, the argument could be raised by defendants that, because of the

global, cumulative relationship between greenhouse gas emissions and climate
change, the harm would have occurred regardless of the care taken by the
defendant.
The IPCC Report concludes that past and future emissions will
continue to contribute to warming and sea level rises for more than a millennium
to come due to the large timescales required to remove the gases from the
atmosphere.50 Carbon dioxide, for example, will stay in the atmosphere for up to
one hundred years. 51
In determining whether there has been a breach of duty, the Court will undertake
an assessment of, amongst other matters, the reasonableness of the precautions
undertaken by the defendant. The matters to be considered are articulated in the
statutory tort law reforms as follows:
48
Ibid, at 67,529.
For example, CSIRO and Australia Bureau of Meteorology, 'Climate Change in Australia:Technical
Report 2007' (Commonwealth Scientific and Industrial Research Organisation, 2007); RSJ (Bob)
Beeton et al, 'Australia State of the Environment 2006: Independent Report to the Australian
Government Minister for the Environment and Heritage, Department of the Environment and
Heritage, Canberra' (Australia State of the Environment Committee, 2006),
50
IPCC Climate Change 2007, n2, 13.
51
The other greenhouse gases have both longer and shorter life spans.
49
309
in deciding whether a reasonable person would have taken precautions against a risk
of harm, the court is to consider the following (among other relevant things)
(a) the probability that the harm would occur if care were not taken;
(b) the likely seriousness of the harm;
(c) the burden of taking precautions to avoid the risk of harm;
(d) the social utility of the activity that creates the risk of harm.52
The level of probability of the harm occurring will vary according to the nature
of the plaintiff and the point in time of the assessment. The probability and likely
seriousness of the risk of harm will be assessed at the time of injury to the
plaintiff. 53 In terms of the seriousness of the harm, the Court will take into
account the gravity of the harm in terms of the global impacts from greenhouse
gas emissions and predicted changes to the climate system.
In terms of the burden of taking practical precautions with respect to the nature of
the risk, this is described as:
(a) the burden of taking precautions to avoid a risk of harm includes the burden of
taking precautions to avoid similar risks of harm for which the person may be
responsible; and
(b) the fact that a risk of harm could have been avoided by doing something in a
different way does not of itself give rise to or affect liability for the way in which
the thing was done.54
52
For example, section 9(2) of the Civil Liability Act 2003 (Qld).
Roe v Minister of Health [1954] 2 QB 66.
54
Section 10 of the Civil Liability Act 2003 (Qld). Similar provisions have been enacted in s44 Civil
Law (Wrongs) Act 2002 (ACT), s5C Civil Liability Act 2002 (NSW), ss 11 and 12 Civil Liability Act
2002 (Tas), s49 Wrongs Act 1958 (Vic), s5B(2) Civil Liability Act 2002 (WA). Richard Douglas,
Gerard Mullins and Simon Grant, The Annotated Civil Liability Act 2003 (QLD) (2004) Chatswood,
LexisNexis Butterworths at 10.3.
53
310
The Court will assess the reasonableness of the acts taken by the defendant. In
Graham Barclay Oysters Pty Ltd v Ryan, 55 the distributor of oysters was sued in
negligence after the plaintiff contracted hepatitis from oysters which had been
grown in contaminated water. Justice McHugh considered the reasonableness of
the acts of the defendant and commented:
no doubt the magnitude of the risk, if it eventuated, was high. But so are the
magnitudes of many risks that reasonable people run because the alternative is too
costly or too inconvenient. The magnitude of the risk of being involved in a motor
car accident is very high, and the risk could be minimised, if not eliminated, by no
car ever travelling at more than 10 km per hour. But few would contend that
travelling at 10 km per hour was the only reasonable response to the risk of a motor
car accident.56
A similar analysis could be applied in relation to the magnitude of risk of climate

change and the reasonableness of requiring industries to avoid all (or most)
greenhouse gas emissions. A balance needs to be identified between the risk and
the reasonable steps that could be taken to minimise emissions. This could
include use of clean coal technologies or carbon capture and storage (CCS), the
generation or purchase of offset credits through emission reduction projects or
modification to plants to utilise alternative fuel sources.57
The Court will look to the expense, difficulty and convenience of the taking of
those practical precautions in the context of the gravity of the harm. 58 The fact
that the defendant does not possess the resources to implement the reasonable
precautions is not itself a sufficient defence.59 The Court could take into account
the ability of the defendant to pass the costs of these initiatives on to consumers
55
Graham Barclay Oysters Pty Ltd v Ryan (2002) 211 CLR 540 at [111].
Ibid.
57
Discussed in Nicola Durrant, Emissions Trading, Offsets and Other Mitigation Options for the
Australian Coal Industry(2007) 24(5) Environmental Planning and Law Journal 361.
58
Caledonian Collieries Ltd v Speirs (1957) 97 CLR 202; Romeo v Conservation Commission (NT)
(1998) 192 CLR 431; Wyong Shire Council v Shirt (1980) 146 CLR 40.
59
PQ v Australian Red Cross Society [1992] 1 VR 19; Apex Holiday Centre (Inc) v Lynn [2005]
WASCA 58.
56
311
and the ultimate cost implications for the community.
The Court will also
consider the social utility of the activity giving rise to the harm. 60 In a modern
context, it would be possible to raise the argument that there is an essential
community need for continued energy supply in order for our society to function.
In considering whether there has been a breach of duty, the Court will take into
account any relevant statutory or customary standards. Whether there is statutory
authorisation for the harmful act will also be a relevant factor. For example, if
legislation prescribed the amount of greenhouse gas emissions that could
lawfully be emitted into the atmosphere then this would be factored into the
consideration of the reasonableness of the conduct. It is possible that the future
Federal emissions trading system would encompass such an authorisation.
Current
environmental
protection
legislation
in
Australia
regulates
environmental harm and pollution in such terms that could reasonably be

applied to restrict greenhouse gas emissions. However, environmental protection
authorities are not currently enforcing those provisions in relation to greenhouse
gases and, as a general rule, those authorisations do not prohibit or restrict
greenhouse gas emissions. 61
Customary standards will also be a relevant consideration for the Court.

Industries worldwide have lawfully emitted unabated greenhouse gases since the
time of the industrial revolution. Customarily, there have been no limits or
restrictions on those emissions from industrial activities. However, this is but
one factor for the Court to take into consideration and will not necessarily operate
to prevent a finding of breach of duty.
60
This has traditionally been applied in cases involving the police, ambulance and other social
services in terms of the community good. For example, Daborn v Bath Tramways Motor Co Ltd
[1946] 2 All ER 333; Watt v Hertfordshire County Council [1954] 2 All ER 368.
61
As discussed in Chapter Five.
312
BREACH OF DUTY AND DAMAGE IN CLIMATE SUITS

In deciding whether a breach of duty caused the particular damage the Court will
consider:
whether the breach of duty was a necessary condition of the

occurrence of the harm (factual causation); and
whether it is appropriate for the scope of the liability of the person in

breach to extend to the harm (scope of liability). 62
A Establishing Factual Causation in Climate Suits

Attribution of responsibility under the law of torts is based on causation as a
limiting force. 63 To be liable in negligence there must be a causal connection
between the defendants breach of duty and the harm suffered by the plaintiff.64
However, climate change represents a unique challenge for the establishment of
causation and it is unlike any other form of environmental pollution or toxic
tort.65
I
Causation and the Climate System
The IPCC was established in 1988 to assess existing scientific information in

order to understand the scientific basis of risk of human-induced climate
change and its potential impacts.66 The Earths climate system is described by
the IPCC as follows:
62
For example, section 9 Civil Liability Act 2003 (Qld).

Robert G Lee, 'From the Individual to the Environmental: Tort Law in Turbulence' in John Lowry
and Rod Edmunds (eds), Environmental Protection and the Common Law (2000) Oxford, Oregon,
Hart Publishing, 77 at 78.
64
For example, section 11(1)(a) Civil Liability Act 2003 (Qld).
65
Emissions from the exhausts of cars and deterioration in local air quality have a clear temporal and
spatial link. There are analogies to be drawn between causation issues in climate litigation and those
already experienced in tobacco and toxic tort suits. However, the evidentiary links in climate litigation
are significantly more complex. Robert G Lee, 'From the Individual to the Environmental: Tort Law
in Turbulence' in John Lowry and Rod Edmunds (eds), Environmental Protection and the Common
Law (2000) Oxford, Oregon, Hart Publishing, 77 at 81.
66
IPCC, About IPCC: Mandate; http://www.ipcc.ch/about/index.htm at 14 June 2008.
63
313
an interactive system consisting of five major components: the atmosphere,

the hydrosphere, the cryosphere, the land surface and the biosphere, forced
or influenced by various external forcing mechanisms, the most important
of which is the Sun the direct effect of human activities on the climate
system is [also] considered an external forcing.Many physical, chemical
and biological interaction processes occur among the various components
of the climate system on a wide range of space and time scales, making the
system extremely complex.67
The Courts have traditionally applied the common sense and experience test
encompassing the but for test. 68 That is, whether the plaintiffs damage
would have occurred but for the defendants act or omissions in
combination with value judgments of the Court and the infusion of policy
considerations. 69
This civil standard of proof requires the plaintiff to
demonstrate, on the balance of probabilities, that the defendants acts or

omissions caused the damage suffered. 70 There must be a more probable
inference in favour of what is alleged not just a possibility.71 The action will
fail if non-negligent causes of the harm are equally probable on the facts.72 In
the case of Barnett v Chelsea,73 the plaintiff alleged negligence in the hospital
care of her husband after he had consumed arsenic tea. The plaintiff failed to
establish a causal link between the breach of the duty of care and her
husbands death as the Court found that her husband would have died
regardless of the care he received. 74
67
IPCC, 'Climate Change 2001', n2, 1.1.2.

This is reflected in ss 11(1)(b) and 11(4) of the Civil Liability Act 2003 (Qld).
69
March v E & M H Stramare Pty Ltd (1991) 171 CLR 506 at 516 per Chief Justice Mason.
70
Barnett v Chelsea and Kensington Hospital Management Committee [1969] 1 QB 428.
71
Justice Gibbs in TNT Management Pty Ltd v Brooks (1979) 23 ALR 345 at 349; Seltsam Pty Ltd v
McGuiness (2000) 49 NSWLR 262 per Justice Spigelman at 75; St George Club Ltd v Hines (1961)
35 ALJR 106 at 107.
72
Chisholm v State Transport Authority (1987) 46 SASR 148; Tubemakers of Australia Ltd v
Fernandez (1976) 50 ALJR 720 at 724 per Justice Mason.
73
Barnett v Chelsea and Kensington Hospital Management Committee [1969] 1 QB 428.
74
Ibid.
68
314
However, a simple cause and effect approach is problematic in the case of

harm from climate change, as expressed by the IPCC:
many processes and interactions in the climate system are non-linear. That
means that there is no simple proportional relation between cause and
effect. A complex, non-linear system may display what is technically
called chaotic behaviour. This means that the behaviour of the system is
critically dependent on very small changes of the initial conditions. This
does not imply, however, that the behaviour of non-linear chaotic systems
is entirely unpredictable.75
Accordingly, it is inevitable that some level of scientific uncertainty will

prevail. 76 As noted by one commentator:
even if predictions about future temperature increase could be made with
acceptable levels of certainty, predicting the consequences of specific
temperature increase on ecological systems requires confrontation with
many additional issues that are plagued by scientific uncertainty. The
science of ecology is much too soft to predict ecosystem-wide responses to
stress with certainty. 77
The IPCC is regarded as an example of the emergence of post-normal

science, that is, a scientific approach with relaxed scientific thresholds which
embodies the precautionary principle and utilises an extended peer
community. 78 Accordingly, this adoption of a post-normal approach to
scientific assessment has repercussions for the ability of plaintiffs to establish
a persuasive causative link on the scientific evidence available. There is, of
course, no strict requirement to meet the scientific standard of proof in the
establishment of judicial causation.79 In the determination of causation, the
75
IPCC, 'Climate Change 2001' n2, 1.2.2.

Jacqueline Peel, The Precautionary Principle in Practice: Environmental Decision-Making and
Scientific Uncertainty (2005) Sydney, The Federation Press at 36.
77
78
Jerry Ravetz, 'The Post-Normal Science of Precaution' (2004) 36 Futures 347; Tuomo Saloranta,
'Post-Normal Science and the Global Climate Change Issue' (2001) 50 Climatic Change 395; Silvio
Funtowicz and Jerome Ravetz, 'Science for the Post-Normal Age' (1993) 25 Futures 739.
79
Although probabilistic evidence has been adopted in some medical cases; see Richard Goldberg,
Causation and Risk in the Law of Torts: Scientific Evidence and Medicinal Product Liability (1999)
Oregon, Hart Publishing.
76
315
Court will adopt a common sense approach. 80 Nevertheless, it is difficult to

identify, on the balance of probabilities, that the greenhouse gas emissions of
the defendant caused the harm suffered in the presence of such scientific
doubt. As concluded by one commentator:
for the vast majority of damaging weather events, we will never be able to
prove beyond reasonable doubt that but for human influence on climate,
that event would never have occurred.81
Climate change is a global phenomenon and is the result of historic emissions

from human society. Current greenhouse gas emissions will contribute to the
overall cumulative atmospheric concentrations.
Therefore, it will be
problematic to prove that a particular defendant (or selection of identified

defendants) was responsible for the historic emissions which caused the
climate system to change and the resulting local environmental impacts
within Australia, which in turn caused the particular harm suffered by the
plaintiff.82 Moreover, the spatial and temporal scales between the release of
emissions, the resulting climate changes and the resulting harm or loss are
inherently unpredictable. As explained by the IPCC:
when variations in the external forcing occur, the response time of the
various components of the climate system is very different. With regard to
the atmosphere, the response time of the troposphere is relatively short,
from days to weeks, whereas the stratosphere comes into equilibrium on a
time-scale of typically a few months. Due to their large heat capacity, the
oceans have a much longer response time, typically decades but up to
centuries or millennia. Therefore the system may respond to variations
in external forcing on a wide range of space- and time-scales.83
80
Laferriere v Lawson (1991) 78 DLR (4th) 609; [1991] 1 SCR 541 at [159]; Halverson v Dobler
[2006] NSWSC 1307 at [176] per McClellan CJ.
81
Myles Allen, 'The Spectre of Liability: Part 2-Implications' in Kenny Tang (ed), The Finance of
Climate Change: A Guide for Governments, Corporations and Investors (2005) London, Risk Books,
381 at 381.
82
See Eduardo Penalver, 'Acts of God or Toxic Torts? Applying Tort Principles to the Problem of
Climate Change' (1998) 38(Fall) Natural Resources Journal 563 at 579-582.
83
IPCC, 'Climate Change 2001', n2, 1.2.2.
316
There is a complex series of processes, responses and feedbacks that occur in

the climate system following the cumulative radiative forcing of the
greenhouse gases as depicted in Figure Four. In addition, some natural
climate variability will continue to occur.
There will be difficulty in
distinguishing between natural climate variability and human induced

climatic changes.
Moreover, the argument may persist that due to the
cumulative global nature of emissions the harm would have occurred

regardless of the contributions of the defendant.84
Figure 4: UNEP/GRID-Arendal, Climate Change: Processes, Characteristics and Threats,

(2005) UNEP/GRID-Arendal Maps and Graphics Library, at
http://maps.grida.no/go/graphic/climate_change_processes_characteristics_and_threats at 16
June 2008.
84
Provided that a causative link is otherwise established, defendants may still be held individually
liable in negligence or nuisance notwithstanding that the contribution alone would be insufficient to
amount to unreasonable interference Bonnici v Ku-Ring-Gai Municipal Council [2001] NSWSC 1124;
(2001) 121 LGERA 1 per Sperling J at [196]; Blair v Deakin (1887) 52 JP 327.
317
II Increase in the Risk of Harm from Climate Change

In certain cases involving negligence and harm to health, the Court has
moved away from the strict application of civil proof. In an attempt to bridge
the evidentiary gap from lack of knowledge the Court has instead applied the
test of whether, on the balance of probabilities, the defendants negligence
materially contributed to the risk of the damage occurring. 85
One of the primary decisions in this area is McGhee v National Coal Board.86
In that case, an employee was exposed to abrasive brick dust, no washing
facilities were provided, and he developed dermatitis. The Court held that
the employer was liable in negligence where his breach of duty had caused,
or materially contributed to, the injury suffered notwithstanding that there
were other factors which had contributed to the injury:
first, it is a sound principle that where a person has, by breach of a duty of
care, created a risk, and injury occurs within the area of that risk, the loss
should be borne by him unless he shows that it had some other cause.
Secondly,one may ask, why should a man who is able to show that his
employer should have taken certain precautions and who in fact sustains
exactly that injuryhave to assume the burden of proving more: namely,
that it was the addition to the risk, caused by the breach of duty, which
caused or materially contributed to the injury? In many casesthis is
impossible to prove, just because honest medical opinion cannot segregate
the causes of an illness between compound causes. And if one asks which
of the partiesshould suffer from this inherent evidential difficulty, the
answer as a matter of policy or justice should be that it is the creator of the
risk whomust be taken to have foreseen the possibility of damage, who
should bear its consequences.87
85
McGhee v National Coal Board [1972] 3 All ER 1008; [1973] 1 WLR 1; Bonnington Castings Ltd
v Wardlaw [1956] AC 613, Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32.
86
McGhee v National Coal Board [1972] 3 All ER 1008; [1973] 1 WLR 1.
87
McGhee v National Coal Board [1972] 3 All ER 1008 at 1012; [1973] 1 WLR 1 at 6 per Lord
Wilberforce cf. Wilsher v Essex Health Authority [1988] AC 1074.
318
Similarly, in the United Kingdom case of Fairchild v Glenhaven Funeral

Services Ltd, 88 the House of Lords permitted the evidentiary gap to be
overcome for an employee who suffered mesothelioma. Mesothelioma and
anthropogenic climate change can be characterised in similar terms as they
are triggered by cumulative impacts. Mesothelioma has been described by
one expert as:
cumulative in that the longer the exposure and the heavier the exposure the
greater the dose of asbestos which enters the lung and therefore the greater
the chance of fibres getting into the periphery of the lung where they
would generate mesothelioma.89
Under the state of medical knowledge at the time, onset of the disease could
not be attributed exclusively to one of several successive employers, all
equally careless. The Court in Fairchild v Glenhaven Funeral Services Ltd
held that, in certain special circumstances, the Court could depart from the
usual 'but for' test of causal connection and treat a lesser degree of causal
connection as sufficient, namely that the defendant's breach of duty had
materially contributed to causing the claimant's disease by materially
increasing the risk of the disease being contracted.90 It might be possible for
plaintiffs to bring sufficient evidence to demonstrate that the large-scale
fossil fuel user materially increased the risk of climatic impacts, with
resulting harm, by their greenhouse gas contributions. However, the
Australian Courts are yet to embrace the United Kingdom approach to
exceptional cases.
88
Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32.

Evidence of Dr Joseph in Scott (DDT 48/90) quoted in Wallaby Grip (BAE) Pty Ltd (in liq) v
Macleay Area Health Service (1998) 17 NSWCCR 355 (CA).
90
Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32. This test will not apply where there
are any number of noxious agents which may equally probably have caused the harm or damage;
Wilsher v Essex Area Health Authority [1988] AC 1074; Fairchild v Glenhaven Funeral Services Ltd
[2003] 1 AC 32 at [22] per Lord Bingham.
89
319
In special cases in Australia it must be shown, as a minimum, that on the

balance of probabilities the defendant materially contributed to the injury
suffered.91 The distinction between increase in risk and material contribution
was discussed in Seltsam Pty Ltd v McGuiness: 92
the issue in the present case is whether an increased risk did cause or
materially contribute to the injury actually sufferedThere is a tension
between the suggestion that any increased risk is sufficient to constitute a
material contribution, and the clear line of authority that a mere
possibility is not sufficient to establish causation for legal purposesThe
reconciliation between the two kinds of reference is to be found in the fact
that the actual risk had materialised. The possibility or risk that X
might cause Y had in fact eventuated, not in the sense that X happed and Y
also happed, but that it was undisputed that Y had happened because of
X.93 (emphasis added).
Assuming that the traditional standard of proof would apply to climate torts
in Australia, the establishment of a causative link between the harm suffered
and the identifiable increased risk by the defendant will be highly
problematic. It is possible that some of these difficulties in establishing
causation may be lessened where the plaintiff is the government:
when states bring tort claims, the plaintiffs have almost infinite lifespans
and cover large amounts of territory, allowing for an aggregation of effects
over both space and timeThe aggregation of harms makes it easier to
rule out confounding factorsaggregation allows plaintiffs to better
establish that some present harms from climate change exist in the broader
geographic and temporal range.94
91
Orica Limited and Anor v CGU Insurance Limited [2003] NSWCA 331 at [90] per Spigelman CJ;
Bendix Mintex Pty Ltd v Barnes (1997) 42 NSWLR 307 at 312320 per Mason P; Wallaby Grip (BAE)
Pty Ltd (in liq) v Macleay Area Health Service (1998) 17 NSWCCR 355 (CA).
92
Seltsam Pty Ltd v McGuiness (2000) 49 NSWLR 262.
93
Ibid at 280 per Chief Justice Spigelman.
94
David A. Grossman, 'Warming Up to a Not-So-Radical Idea: Tort-Based Climate Change
Litigation' (2003) 28 Colombia Journal of Environmental Law 1 at 24-25.
320
Plaintiffs may also benefit from the use of class actions where there are a
number of actions with common issues of law or fact.95 Although the joining
of such actions would not lessen the burden of establishing causation, they
could assist through the pooling of resources towards obtaining necessary
scientific and factual evidence regarding the defendants contribution to the
harm suffered. Nevertheless, the probability of success of tortious actions for
climate harm would be enhanced if Australian Courts were persuaded that
climate change is an exceptional circumstance meriting the relaxation of the
strict but for test and the adoption of the United Kingdom approach. For
this to occur, the Court must be persuaded that there are good public policy
reasons for the extension of liability under a less stringent causative
approach.96 In the absence of such judicial developments, the difficulties in
establishing causation appear, at this point in time, insurmountable.
III Relevance of Environmental Principles

It will be interesting to observe the judicial treatment of these unique claims
in negligence as they emerge in Australia and, in particular, the potential role
that established environmental law principles could play in traditional
deliberations of causation. This includes the application of the concept of
ecologically sustainable development (ESD) and the embedded principle of
inter-generational equity and precautionary principle. 97
95
See Damien Grave and Ken Adams, Class Actions in Australia (2005) Sydney, Lawbook Co and
John Taberner, Class Actions and Climate Change (6 September 2007) Freehills,
www.freehills.com.au/publications/publications_6950.asp at 14 June 2008.
96
Section 11(2) Civil Liability Act 2003 (Qld). Similar provisions have been enacted in s45 Civil Law
(Wrongs) Act 2002 (ACT), s5D Civil Liability Act 2002 (NSW), s13 Civil Liability Act (Tas), s51
Wrongs Act 1958 (Vic), s5C Civil Liability Act 2002 (WA), s34(2) Wrongs Act 1936 (SA).
97
Ecologically Sustainable Development Steering Committee, 'National Strategy for Ecologically
Sustainable Development' (Australian Government, 1992), Part 1; Australian Government,
'Intergovernmental Agreement on the Environment' (1992).
321
ESD is described as, development which aims to meet the needs of

Australians today, while conserving our ecosystems for the benefit of future
generations. 98 And:
using, conserving and enhancing the community's resources so that ecological
processes, on which life depends, are maintained, and the total quality of life,
now and in the future, can be increased.99
Moreover, the precautionary principle asserts that a lack of scientific

certainty should not be used as a reason for not taking action to protect the
environment. 100 This principle is designed to alleviate the acknowledged
difficulties of obtaining full scientific certainty. The effect of this statutory
principle is, inter alia, to lower the threshold at which decision-makers must
acknowledge that a reasonable risk to the environment exists. 101 Accordingly,
the precautionary principle has the potential to play a significant role in the
adaptation of common law principles to these emergent environmental harms.
The interaction of the precautionary principle with the common law standard
of proof could operate to lower the threshold at which a risk of harm from
greenhouse gas emissions becomes probable. 102 However, until such time as
the Court considers this issue, the interaction of these principles is largely
conjecture. Moreover, even as the threshold for establishing a causative link
decreases, the risk of the Court imposing indeterminate liability increases.103
This policy issue may operate to persuade the Court that it is not appropriate
to impose indeterminate private liability for these forms of global public
harm.
98
Ibid.
Ibid.
100
David Freestone and Ellen Hey, 'Origins and Development of the Precautionary Principle' in David
Freestone and Ellen Hey (eds), The Precautionary Principle and International Law (1996) The
101
Nicolas De Sadeleer, Environmental Principles: From Political Slogans to Legal Rules (2002)
New York, Oxford University Press at 160.
102
103
Perre v Apand Pty Ltd (1999) 198 CLR 180 at 221 (McHugh J ).
99
322
B Scope of Liability in Negligence

As part of its deliberations, the Court must also consider whether it is
appropriate for the scope of the liability of the person in breach to extend to the
harm caused.104 This will include a consideration of intervening causes and public
policy issues.
Intervening Causes and Climate Change Harm
The Court must consider whether other causes have intervened to break the
chain of causation.
As commented, man must guard against normal
phenomenon of nature not against unusual ones.105 Defendants may raise the
argument that climate change, and the resulting impacts, are out of the
ordinary and that all ordinary precautions have been taken against
foreseeable harm.
Alternatively, it could be submitted that more recent greenhouse gas

emissions from other entities, following the emissions of the defendant, acted
as novus actus interveniens. 106
In the context of significant emissions
worldwide it might be argued that those other greenhouse gas emissions were
intervening events, breaking the chain of causation and that those emitters
were in fact the last wrongdoers. 107 The success of such arguments would
depend upon the prevailing judicial attitudes to the establishment of
causation.
104
Section 11(1)(b) Civil Liability Act 2003 (Qld).

Blyth v Birmingham Waterworks (1856) 11 Exch; John Fleming, The Law of Torts (9 ed, 1998)
North Ryde, LBC Information Series at 249.
106
Scott v Shepherd (1773) 2 W Bl 892.
107
Home Office v Dorset Yacht Company Ltd [1970] AC 1004.
105
323
II Policy Considerations in Climate Suits

This chapter has identified a number of potential policy issues that could
operate to persuade the Court to not identify a duty of care. These policy
considerations will also play an important role in the Courts decision as to
whether the scope of liability for breach of that duty is appropriate.108 These
include considerations of the fairness of imposing the burden of liability
relative to the fault of the defendant as well as:
the spectre of indeterminate liability; 109
floodgates concerns;110
public/private issues: who can better avoid the loss and who should
bear the risk for the public harm of climate change?
the availability (or lack of) alternative remedies under common law
and statute; and
the deliberate decision of the legislature not to regulate or prohibit

emissions and the appropriate roles of the Court and Parliament
respectively. 111
The combination of all of these policy considerations will weigh heavily in

the Courts determination of whether it is appropriate to impose liability on
the defendant. Overall, it is highly probable that the Court would conclude
that it is not appropriate to impose liability for the emission of greenhouse
gases and the resulting climate harm.
108
Considered in Anns v London Borough of Merton [1978] AC 728.

For example, Caltex Oil (Australia) Pty Ltd v The Dredge Willemstad (1976) 136 CLR 529 at
555.
110
For example, Chester v Council of the Municipality of Waverley (1939) 62 CLR 1.
111
Brodie v Singleton Shire Council (2001) 206 CLR 512.
109
324
THE HYPOTHETICAL CLIMATE SUIT: PROFESSIONAL LIABILITY

FOR CLIMATE-AFFECTED ADVICE
As noted, evidence regarding the potential physical, economic and social impacts
of climate change is growing. Recent reports from the IPCC emphasise the
potential threats from climate change to our modern society. 112
Moreover,
regional reports are now emerging which predict the specific impacts on
Australian societies from adverse climatic changes. 113
Given this increased
concern regarding the potential damage brought about by climate change,

professional advisors should take into account these climate change impacts in
the provision of information or advice to their clients.
Such climate-related
advice could include:

architectural advice and engineering reports; 114
surveys and valuations of properties; 115
investment advice;
advice/information provided by public authorities; and
the provision of commercial legal advice. 116
There is a general legal obligation to exercise reasonable skill and the care in the
provision of professional advice. 117 This may arise as a term of a contract; it may
arise as a statutory duty; it may arise as a liability in tort. Consequently, advisors
should be taking into account the risks of increased temperatures, droughts and
112
IPCC, 'Climate Change 2001'; 'Climate Change 2007', n2.

For example, CSIRO and Australia Bureau of Meteorology, 'Climate Change in
Australia:Technical Report 2007' (Commonwealth Scientific and Industrial Research Organisation,
2007).
114
Voli v Inglewood Shire Council (1963) 110 CLR 74 at [84]-[85].
115
Smith v Eric S Bush [1990] 1 AC 831.
116
Capebay Holdings Pty Ltd v Sands [2002] WASC 287 (4 December 2002) at [87].
117
John L. Powell and Roger Stewart (eds), Jackson and Powell on Professional Liability (6 ed, 2007)
London, Sweet and Maxwell at [2-005].
113
325
incidences of severe weather events and the risk of failure of buildings from
defective building design and construction. They should also be considering the
financial implications of future regulatory regimes which restrict the use of
carbon emitting technologies. A failure to take these risks into consideration may
give rise to legal liabilities for the provision of negligent information or advice. 118
A Professional Advisors, Climate Change and Negligence

It is a well-established principle that, in the provision of advice to their client,
professionals must exercise reasonable skill and care. 119 Breach of such a duty of
care, by a professional advisor, may give rise to liabilities in the tort of
negligence. The standard of care of a professional advisor was described in
Andrew Master Hones Ltd v Cruikshank & Fairweather:
the degree of knowledge and care to be expected is thus seen to be that degree
possessed by a notional duly qualified person practising that profession. The test is
therefore, if I may put it that way, an objective test referable to the notional member
of the profession and not a subjective test referable to the particular professional
man employed. 120
Accordingly, the professional must meet the objective standard of reasonable

competence. 121 However, the existence of a duty of care does not mean that
professionals will be held liable for all losses which their clients experience. As
Lord Denning MR commented:
the law does not usually imply a warranty that he will achieve the desired result, but
only a term that he will use reasonable care and skill. The surgeon does not warrant
that he will cure the patient. Nor does the solicitor warrant that he will win the
case.122
118
MLC v Evatt [1971] AC 793

Astley v Austrust Ltd (1999) 197 CLR 1; Gutteridge, Haskins & Davey Pty Ltd [1993] 1 VR 27.
120
Andrew Master Hones Ltd v Cruikshank & Fairweather [1980] R.P.C. 16 at 18 per Justice Graham.
121
Midland Bank Trust Co Ltd v Hett, Stubbs and Kemp [1979] Ch 384 at 402 per Justice Oliver.
122
Greaves & Co (Contractors) Ltd v Baynham Meikle & Partners [1975] 1 WLR 1095 at 1100D per
Lord Denning MR.
119
326
At common law, evidence of general practice within the professional field will be
a relevant consideration by the Court in its determinations of the standard of care
owed by the profession. 123
Where harms relating to climate change involve only a risk of physical damage,
or property devaluation, then no physical harm will be involved and this will be
pure economic loss. This could occur in circumstances of negligent
misrepresentation of the risks of property flooding, negligent performance of
services in omitting to address climate risks, defective goods, and property
damage. As discussed above, where the harm caused by the emitting industry
results in pure economic loss then recovery will be permitted only in limited
circumstances. 124 The multi-factorial approach of the Court will assess a range of
legal and policy principles including the defendants control of the circumstances
giving rise to the harm and the vulnerability of the plaintiff in terms of their
inability to protect themselves from that harm. 125
B Architects, Engineers, Developers and Climate Change

Liabilities may accrue to architects, engineers and builders in the provision of
advice regarding the suitability of design, location and construction of buildings.
Like all other professionals, they must exercise reasonable care and skill in the
course of carrying out work. 126 This includes taking into account the appropriate
design and location of new buildings that will still be in use as the effects of
climate change intensify. There may also be an implied term in their contracts
123
Edward Wong Finance Co Ltd v Johnson Strokes and Master [1984] AC 296; Heydon v NRMA
Ltd (2000) 51 NSWLR 1. Christian Witting, Liability for Negligent Misstatements (2004) New York,
Oxford University Press at 13.10.
124
125
Sullivan v Moody (2001) 207 CLR 562; 183 ALR 404 at [48]-[49]; Rogers v Whitaker (1992) 175
CLR 479; Bryan v Maloney (1995) 182 CLR 609; Hill v Van Erp (1997) 188 CLR 159; 142 ALR 687,
Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515; Esanda Finance
Corporation v Peat Marwick Hungerfords (1997) 188 CLR 241. See also Jane Stapleton, The
Golden Thread at the Heart of Tort Law: Protection of the Vulnerable, (2003) 24 Australian Bar
Review 41.
126
Voli v Inglewood Shire Council (1963) 110 CLR 74 at 84.
327
with clients that the product, such as the designed building, is fit for its intended
purpose.127
The implications of climate change on existing and future buildings are

significant. The lifespan of most new buildings today is approximately 40 to 60
years which means that the buildings that we are currently designing and
constructing will be significantly affected by the impacts of climate change.128
According to a study commissioned by the Australian Greenhouse Office (AGO),
the main impacts of climate change with implications for Australian buildings are:
increased energy consumption due to higher temperatures;
health effects of over-heating;
increased risk of damage from more intense tropical cyclones, storms and
stronger winds and from increased cracking of drier soils and ground
movement impacting on foundations and pipe work;
increased damage from flooding; and
increased bushfire risk. 129
Accordingly, the risks posed by climate change require architects, engineers and
developers to give greater consideration to the location, design and construction
of buildings and to take into account these likely impacts and the risks that they
pose to the constructed asset. The location of the building should take into
127
Doug Rea Enterprises Pty Ltd v Hymix Australia Pty Ltd (1988) 4 BCL 67; s71 Trade Practices
Act 1974 (Cth), Pt 4 Domestic Building Contracts Act 2000 (Qld), Pt 2C Home Building Act 1989
(NSW), Pt VA Building Act 1972 (ACT), s8 Domestic Building Contracts Act 1995 (Vic), s32
Building Work Contractors Act 1995 (SA).
128
Australian Greenhouse Office, 'An Assessment of the Need to Adapt Buildings to the Unavoidable
Consequences of Climate Change' (Report to the Australian Greenhouse Office, Department of the
Environment and Water Resources, BRANZ, 2007) at 3.
129
Ibid.
328
account the risk of inundation and vulnerability to severe storms.130 The selection
of building materials should take into account the possibility of heat stress and
thermal movement. Buildings should also be designed with additional wind
loading as a possibility from severe weather events. 131 Foundations should be
deeper to counteract increases in local erosion and soil instability from thermal
movement. Stormwater and drainage system designs should take into account
the possibility of rising sea levels and water tables. Finally, these buildings
should be designed for the future carbon constrained environment using energy
efficient design and components. 132
C Surveyors, Valuers and Climate Advice

Surveyors and valuers may be engaged to inspect, value and provide advice to
prospective purchasers in relation to buildings and properties. Surveyors are
required to exercise reasonable care and skill in the inspection of a building and
should take into account all of the factors identified above.
The most common symptoms of climate change in buildings are likely to be

structural defects caused by the climatic impacts of drought and erosion including
subsidence, cracking and undermining of foundations. In terms of structural
damage, the buyer will be concerned with both current and future structural
damage to the property.
130
J Bengtsson, R Hargreaves and I.C. Page, 'Assessment of the Need to Adapt Buildings in New
Zealand to the Impacts of Climate Change' (Study Report No 179 (2007), BRANZ, 2007).
131
Australian Greenhouse Office, n128, 4.
132
Energy efficiency requirements are imposed in many of the States and Territories but there is not
yet a unified national approach; see Building Code of Australia 2006, Volume One Energy Efficiency
Provisions, Section J. The Building Code 2003 applied energy efficiency standards to housing. BCA
2006 applies energy efficiency standards to building classes 2-9. For a brief overview of the different
jurisdictional approaches see http://www.houseenergyrating.com/ at 15 June 2008. The National
Framework for Energy Efficiency is intended to achieve a nationally consistent legislated regime,
http://www.nfee.gov.au/buildings.jsp?xcid=121 at 15 June 2008.
329
As noted in Matto v Rodney Broom Associates:133

[a] buyer, unless he says otherwise, is not concerned only with structural damage
likely to occur while he is, in the immediate future, living in the house but also with
structural damage which is likely to occur at a more remote data of which the
impact upon him will result..[including] his ability to sell the house.134
Accordingly, it is arguable that current surveys being undertaken by professional

surveyors should take into account the defects that are likely to be caused by
climate change in the foreseeable future. In the provision of valuation reports,
valuers should also take into account the above factors and, in particular, the risks
of flooding and inundation on the present and future value of the property. The
standard applied by the Court is that the report must represent the true value of
the property based on a competent valuation of the premises. A valuer may be
liable in negligence where that valuation does not represent the true value and
contains a material and negligent error. 135 Valuers may be also be potentially
liable for misleading and deceptive conduct under section 52 of the Trade
Practices Act 1974 (Cth) and under the Fair Trading Act of each respective state
and territory. 136
In the case of MGICA (1992) Ltd v Kenny & Good Pty Ltd137 a mortgage insurer
sued in negligence and for misleading conduct for the overvaluation of a
property. The Court held that the valuation was so far removed from the true
value as to be misleading, since:
the supply of [the] valuation report ..conveyed representations, not only that the
opinions expressed in them were held, but also (a) that the opinions were based on
133
Matto v Rodney Broom Associates [1994] 2 E.G.L.R. 163.

Ibid at 168 per Lord Justice Ralph Gibson.
135
Merivale Moore Plc v Strutt & Parker [1999] Lloyds Rep. P.N 734 at 744; Bolam v Friern
Hospital Management Committee [1957] 1 W.L.R. 582.
136
Section 38(1) Fair Trading Act 1989 (Qld), s42(1) Fair Trading Act 1987 (NSW), s12(1) Fair
Trading Act 1992 (ACT), s56(1) Fair Trading Act 1987 (SA), s14(1) Fair Trading Act 1990 (Tas),
s9(1) Fair Trading Act 1999 (Vic), s10(1) Fair Trading Act 1987 (WA), s42(1) Consumer Affairs and
Trading Act(NT).
137
MGICA (1992) Ltd v Kenny & Good Pty Ltd (1996) 140 ALR 313.
134
330
reasonable grounds; (b) that they were the product of the exercise of due care and
skill; and (c) that they were, after making due allowance for their nature as opinions
as to the market value of real estate as at a particular time, safe to be relied upon
and not outside the range of latitude properly to be allowed to them.138
Accordingly, both surveyors and valuers are, prima facie, obliged to take into
account the likely impacts of climate change in the provision of their professional
information or advice.
D Public Authorities as Advisors

It is common conveyancing practice to request information from the local council
regarding the attributes of the property to be purchased including the flooding
risks of the property. Accordingly, local councils play a pivotal role in the
provision of advice regarding the status of properties. Local councils may have a
duty to exercise reasonable care in the provision of such advice. At common
law, the provision of advice by a local council has the potential to give rise to
liabilities for resulting losses provided that:
such losses were reasonably foreseeable to the council at the time of

the provision of the advice; and
it was reasonable for the plaintiff to act in reliance of that advice. 139
Where, for example, the property is a low-lying coastal property which will be at
risk of inundation from rising sea-levels, then Councils should exercise caution in
advising whether the property is at risk of flooding.
138
Ibid, 356-357 per Justice Lindgren.

Shaddock v Parramatta City Council (1981) 150 CLR 225; Pisano v Fairfield City Council [1991]
Aust. Torts R. 69; Burke v Forbes Shire Council (1987) 63 LGRA 1.
139
331
The scope of potential local Council liability has been narrowed significantly by
statutory exemptions and limitations as part of the statutory tort law reforms. In
the establishment of a duty of care and in its considerations of whether that duty
has been breached, the Court will take into account the limited resources of the
Council, in the context of the wider range of responsibilities of the Council.140
Moreover, the statutory tort law reforms provide that an act or omission of the
authority does not constitute a wrongful act or omission unless it was so
unreasonable that no public authority could properly consider it to be a
reasonable exercise of its functions:
(1)
This section applies to a proceeding that is based on an alleged wrongful exercise of

or failure to exercise a function of a public or other authority.
(2)
For the purposes of the proceeding, an act or omission of the authority does not
constitute a wrongful exercise or failure unless the act or omission was in the
circumstances so unreasonable that no public or other authority having the functions
of the authority in question could properly consider the act or omission to be a
reasonable exercise of its functions.141
Consequently, the Courts will apply the objective test of the reasonable council
and will consider whether such a reasonable council in the same position would
take the same course of action. Accordingly, the circumstances in which a local
council may be held liable in negligence have been significantly curtailed by the
enactment of these tort law reforms. Nevertheless, there may be circumstances in
which a local council is held liable for the provision of negligent advice where
the information regarding the flooding risks is reasonably available to the
140
Section 35 Civil Liability Act 2003 (Qld), s42 of the Civil Liability Act 2002 (NSW), s38 of the
Civil Liability Act 2002 (Tas), s110 of the Civil Law (Wrongs) Act 2002 (ACT) and s5W of the Civil
Liability Act 2002 (WA). Section 83 of the Wrongs Act 1958 (Vic) is similar but excludes (b). Richard
Douglas, Gerard Mullins and Simon Grant, The Annotated Civil Liability Act 2003 (QLD) (2004)
Chatswood, LexisNexis Butterworths at 35.5.
141
Section 35 Civil Liability Act 2003 (Qld). Similar provisions have been adopted in ss 43 and 44 of
the Civil Liability Act 2002 (NSW) and s111 of the Civil Law (Wrongs) Act 2002 (ACT). Section 84
of the Wrongs Act 1958 (Vic) is similar but with additional exemptions. Richard Douglas, Gerard
Mullins and Simon Grant, The Annotated Civil Liability Act 2003 (QLD) (2004) Chatswood,
LexisNexis Butterworths at 36.6.
332
Council and the advice is not provided in good faith following reasonable
inquiries.142
E Legal Advisors and Climate Advice

In addition to the obligation to exercise due skill and care, the duties of legal
advisors towards their clients also include a fiduciary obligation.143 This fiduciary
duty has been described as a paradigm of the general duty to act with care
imposed by law on those who take it upon themselves to act for or advise
others. 144 Lawyers have a duty to protect their clients from any real and
foreseeable risks by giving appropriate advice and, if necessary, initiating an
action to guard against such risks. 145
Therefore, in terms of the future risks of climate change, legal professionals have
a duty to warn their clients about the inherent risks of a transaction. 146 This
includes advising clients in relation to the likely physical impacts on acquired
assets and on the regulatory developments that may restrict the ability of the
client to fully exploit the opportunities associated with the property.
Obligations to consider the impacts of climate change are not restricted to

advisors in the environmental arena but extend to advice furnished in the
property law, construction, banking and finance, government and corporations
law arenas to name but a few. All lawyers should be aware of the potential
142
Mid Density Developments Pty Ltd v Rockdale Municipal Council (1993) 44 FCR 290. See also
the statutory exemption from liability for advice furnished in good faith e.g. s733, Local Government
Act 1993 (NSW).
143
Stephen Walmsley, Alister Abadee and Ben Zipser, Professional Liability in Australia (2002)
Pyrmont, Lawbook Co at 82-83. Maguire v Makaronis (1997) 188 CLR 449.
144
Henderson v Merrett Syndicates Ltd [1995] 2 A.C. 145 at 205F per Lord Browne-Wilkinson.
145
Montague Mining Pty Ltd v Gore [1998] FCA 1334.
146
Capebay Holdings Pty Ltd v Sands [2002] WASC 287 (4 December 2002) at [92] per Justice
Pullin; C W Dixey & Sons Ltd v Parsons (1964) 192 EG 197; Stephen Walmsley, Alister Abadee and
Ben Zipser, Professional Liability in Australia (2002) Pyrmont, Lawbook Co at 317.
333
physical, economic and environmental implications of adverse climate change

and the effect that may have on the current provision of strategic legal advice.147
F Duties of Directors and Avoiding Climate Risks

For completeness, it should also be noted that company directors may also be in
breach of their fiduciary duties as a result of their failure to take into account the
likely impacts of climate change or to take reasonable steps to minimise the
financial risks and liabilities of the company regarding climatic changes.148
Company directors have a duty to manage the business of the company in the
best interests of the company. 149 There is a duty imposed on directors of
companies to take reasonable care and exercise diligence in the performance of
their office.150 In the making of business decisions, directors must also reasonably
inform themselves about the relevant subject-matter.151 Accordingly, there is an
obligation that directors keep themselves informed as to the likely impacts of
climate change on the company and the steps that can be taken to minimise risks
to the company.152 The duties of a director include an obligation to take steps to
avoid significant liabilities from future regulatory greenhouse regimes such as
cap and trade initiatives and other carbon constraints.
It also extends to
minimising the risks of climate-related liabilities including averting potential

tortious actions for unabated greenhouse gas emissions. Shareholders may also
seek a resolution at the annual general meeting that requires the company to
147
This emphasises the importance of proper scoping of professional work with clients in order to
expressly specify the extent to which potential climate change impacts predicted by the IPCC will be
taken into account in such professional advice.
148
Rosemary Lyster, 'Chasing Down the Climate Change Footprint: Forces Converge' (2007) 24(4)
149
Section 181 Corporations Act 2001 (Cth) requires Directors to exercise their powers and discharge
their duties in good faith and in the best interests if the company.
150
Section 180 Corporations Act 2001 (Cth) requires Directors to exercise due care and diligence in
the discharge of their duties.
151
Section 180(2) Corporations Act 2001 (Cth). See also Daniels (formerly practising as Deloitte
Haskins and Sells) v Anderson (1995) 37 NSWLR 438.
152
In the United Kingdom, directors must also have regard to the impact of the companys operations
on the community and the environment, section 173(d) Company Law Reform Act 2006 (UK).
334
disclose its annual greenhouse gas emissions and to take action to reduce its
carbon footprint. 153 Failure of a company to respond properly, or to action such
resolutions, could also lead to additional actions and liabilities of the company
and its directors.154
POTENTIAL DEFENCES TO CLIMATE SUITS IN NEGLIGENCE
In defence of a tortious action, it could be argued that the plaintiffs own

negligence or fault contributed to the injury or loss suffered where that damage
was a reasonably foreseeable consequence of the plaintiffs fault. 155 The question
to be asked is whether the plaintiffs conduct increased the risk of harm? 156 If
found to have been contributory negligent, the Court will apportion liability and
will reduce the award of damages based on the principle of what is just and
equitable given the plaintiffs degree of fault or share in responsibility for the
damage.157 This could potentially result in a 100 per cent reduction in damages. 158
Accordingly, in climate suits, it could be argued that the loss or harm of the
plaintiff was caused partly by the fault of the plaintiff.
As noted by one
commentator, we are all potentially responsible under tort law for our continued
153
Christina Ross, Evan Mills and Sean Hecht, 'Limiting Liability in the Greenhouse: Insurance RiskManagement Strategies in the Context of Global Climate Change' (2007) 26A Stanford
Environmental Law Journal 251 at 264. For a discussion of disclosure obligations in the US, see
Jeffrey A. Smith and Matthew Morreale, 'The Fiduciary Duties of Officers and Directors' in Michael
B. Gerrard (ed), Global Climate Change and U.S. Law (2007) Chicago, American Bar Association,
497.
154
Rosemary Lyster, ,n148, 315.
155
Joslyn v Berryman (2002) 214 CLR 552.
156
Azzopardi v State Transport Authority (Rail Division) (1982) 30 SASR 434.
157
Joslyn v Berryman (2002) 214 CLR 552; Davies v Swan Motor Company (Swansea) Limited [1949]
2 KB 291 at 326 per Lord Denning; Stapley v Gypsum Mines Ltd [1953] AC 663 at 682.
158
Section 24 Civil Liability Act 2003 (Qld), Similar provisions have been enacted in s47 Civil Law
(Wrongs) Act 2002 (ACT), s5S Civil Liability Act 2002 (NSW), s4(1) Civil Liability Act 2002 (Tas),
s63 Wrongs Act 1958 (Vic).
335
emissions of greenhouse gases.159 This could be based on the plaintiffs own acts
of emitting, or causing to be emitted, greenhouse gases through their
consumption of goods and services thereby adding to the cumulative risk of
adverse climate change. However, this submission is less persuasive where the
plaintiff can show that they have taken steps to minimise or offset their own
emissions.160
An alternative defence could be raised of volenti non fit injuria where the
plaintiff can be shown to have freely accepted the risk of injury from climate
change, through their consumption of goods and services, with the full
knowledge of the risk that the emission of greenhouse gases would result in
climate change and harm. 161 The evidence must support an inference that the
plaintiff consented to the risk of injury, by the defendant, and to the lack of
reasonable care which would create that risk of harm. 162 This argument could be
weakened where it can be demonstrated that there was no free choice in using
those goods and services as there were no reasonably available, low-emission,
alternatives at the time.163
Finally, time limitations in the bringing of an action could pose significant

difficulties for plaintiffs. 164 In any action, the plaintiff must identify the point in
time at which the cause of action accrued. This is problematic in the climate
scenario where it is impossible to identify the historical point in time at which the
emission of greenhouse gases gave rise to the current harm suffered. Given
scientific uncertainty as to the timescale between the emission of greenhouse
159
David A. Grossman, n94, 25.

It is envisaged that proportionate responsibility for emissions will be uneven with greater fault
falling to the industrial source of emissions rather than the emissions of the individual plaintiff.
161
Smith v Baker and Sons [1891] AC 325.
162
Woodridge v Sumner [1963] 2 QB 43 at 69.
163
David A. Grossman, n 91, 51. As to the requirement to be able to choose freely see Bowater v
Rowley Regis Corporation [1944] KB 476 at 479 per Lord Justice Scott.
164
As a general rule, a limitation period of three years applies to personal injuries and a period of 6
years to property damage. Sections 11,10(1) Limitation of Actions Act 1974 (Qld), ss 16B(2), 11(1)
Limitation Act 1985 (ACT), ss 18A, 50C, 14(1)(b) Limitation Act 1969 (NSW), ss 36, 35 Limitation
of Actions Act 1936 (SA), ss 5(1), 4(1)(a), Limitation Act 1974 (Tas), ss 5(1AA), 5(1)(a) Limitations
of Actions Act 1958 (Vic), ss 13(1),12 Limitation Act 1935 (WA).
160
336
gases and resulting forcing effect in the climate system, it will be a challenge to
identify the point in time at which the action accrued.
THE HYPOTHETICAL CLIMATE SUIT: ACTIONS IN PUBLIC AND

PRIVATE NUISANCE
In addition to actions in negligence, affected persons may also consider bringing

an action in nuisance for interference with their rights of use and enjoyment of
their land. The types of activities that might give rise to successful claims in
nuisance are not closed and extend to a myriad of unlawful interferences
including flooding, noxious smells, dust, vibration, fire and noise.165 Accordingly,
nuisance could apply to a range of climate change impacts where the effects are
aggravated by the acts of the defendant such as the spread of flooding and fire.
The most likely causes of action in nuisance relate to flooding and the actions of
the local authority regarding the construction and maintenance of sea walls and
other coastal protection devices and actions taken to address rising sea levels and
the risks of storm surges. Nuisance actions against private actors could also be
envisaged as property owners take steps to protect themselves from flooding,
storm damage and bushfires and, in doing so, inadvertently interfere with
neighbouring properties.
Nuisance actions against large-scale emitters could also be considered. The main
challenge in developing such actions relates to the delayed effect between the
release of the emissions and the sufferance of the interference. Greenhouse gas
165
Sedleigh-Denfield v OCallaghan [1940] AC 880; Lord Mayor, Aldermen and Citizens of the City
of Manchester v Farnworth [1930] AC 171; Pwllbach Colliery Co Ltd v Woodman [1915] AC 634;
Hargrave v Goldman (1963) 110 CLR 40; Sturges v Bridgman (1879) 11 Ch D 852.
337
emissions accrue in the atmosphere for significant timescales before the effects of
climate change become apparent.
The difficulty will present itself when a
plaintiff seeks to bring a nuisance action for interference suffered today that is
allegedly caused by the historic greenhouse gas emissions of the defendant(s).
In addition, the defendant company allegedly responsible for the harmful

emissions may no longer be operational. In the case of emissions of greenhouse
gases from a long standing, historic, large-scale emitter such as a coal mine then
the nuisance may be characterised as a continuing one.166 Where the interference
is characterised as a continuing nuisance then the action may be commenced at
any time during the nuisance and damages may be sought for the historic harm. 167
However, if the emission of greenhouse gases is instead characterised as an
isolated instance of interference then the action must be commenced within six
years from the interference. 168 Regardless of time limitations, in both cases,
establishing a causative link between the current interference and the historic
emissions will be exceedingly difficult.
A Elements of Nuisance
Acts or omissions may amount to both public and private nuisances. Nuisance
was described in Hargrave v Goldman as the unreasonable interference with a
persons use or enjoyment of land, or some right over, or in connection with it.169
Accordingly, a successful cause of action in nuisance must establish that:
the plaintiff has title to sue in respect of the nuisance;170
the defendant has interfered with a recognised right;171 and
166
Midwood & Co Ltd v Manchester Corporation [1905] 2 KB 597.

Earl of Harrington v Derby Corporation [1905] 1 Ch 205.
168
Section 10(1) Limitation of Actions Act 1974 (Qld), s11(1) Limitation Act 1985 (ACT), s14(1)(b)
Limitation Act 1969 (NSW), s35 Limitation of Actions Act 1936 (SA), s4(1)(a), Limitation Act 1974
(Tas), s5(1)(a) Limitations of Actions Act 1958 (Vic), s38(1)(c) Limitation Act 1935 (WA). The
limitation period is three years in the Northern Territor y under s11 (1)(b) Limitation Act 1981 (NT).
169
Hargrave v Goldman (1963) 110 CLR 40 at 49 per Justice Windeyer.
170
Oldham v Lawson (No 1) [1976] VR 654.
167
338
the interference was both substantial and unreasonable. 172
B Potential Climate Actions in Private Nuisance

Actions in private nuisance could include claims by property owners affected by
flooding, sea level rises and other climatic impacts as a result of greenhouse gas
emissions. Actions could also potentially be brought by farmers experiencing
loss of production from climatic impacts on crops and soil productivity. 173
In order to bring an action in private nuisance, the plaintiff must have a legally
recognised interest in the land or rights to occupy or exclusively possess the
land.174 Occupation, by itself, is not sufficient to give rise to a right to sue and the
plaintiff must have exclusive possession.175 Accordingly, claims in nuisance may
be brought by land owners, mortgagors, tenants and licensees.
A successful nuisance action must relate the impacts of climate change to some
physical or substantial and unreasonable interference with the use and enjoyment
of the specific property. 176 Given this, most cases of climate related nuisance
claims will be based on actual damage to property. 177 The interference must be so
substantial as to cause harm or material damage to the land or substantial
interference with the comfort and convenience of the occupier of the land. 178
Where the otherwise insubstantial acts of one or more defendants together
171
Sedleigh-Denfield v OCallaghan [1940] AC 880 at 903.

Kine v Jolly [1905] 1 Ch 480; Sedleigh-Denfield v OCallaghan [1940] AC 880.
173
Joseph Smith and David Shearman, n16, 82.
174
Malone v Laskey [1907] 2 KB 141.
175
Oldham v Lawson (No 1) [1976] VR 654; Stockwell v Victoria [2001] VSC 497 (17 December
2001) (Justice Gillard).
176
Robinson v Kilvert (1889) 41 Ch D 88 at 94; 61 LT 60.
177
Land includes protected rights attached to the land such as an easement and profit prendre.
Cunard v Antifyre Ltd [1933] 1 KB 551; Phipps v Pears [1965] 1 QB 76; [1964] 2 All ER 35.
178
Munro v Southern Dairies [1955] VLR 332.
172
339
amounts to unreasonable interference, then they may all be held individually

liable for the resulting aggregate nuisance. 179
As noted, the disturbance of rights must be connected with the land and
recognised by law. In the case of Phipps v Pears, it was held that there was no
recognised easement in law to protect a property from the adverse effects of the
weather. As commented by the Court:
every man is entitled to pull down his house if he likes. If it exposes your house to
the weather, that is your misfortune. It is no wrong on his part. Likewise every man
is entitled to cut down his trees if he likes, even if it leaves you without shelter from
the wind or shade from the sun.180
The Courts have recognised interference based on noise, 181 smell,182 and vibration183
impacts on the property but it seems unlikely that temperature would be
considered an actionable interference. A claim relating to the detrimental effects
of increased air temperature was considered in the case of Robinson v Kilvert.184
In that case there was a claim in nuisance by the occupier of premises where
paper was manufactured. The defendant had installed heating equipment that led
to increased air temperatures which had detrimental effects on the paper. The
Court found that this was not sufficiently noxious to amount to a nuisance and
that the harm was caused due to the particular sensitivity of the plaintiffs choice
of manufacturing process. 185
179
Bonnici v Ku-Ring-Gai Municipal Council [2001] NSWSC 1124; (2001) 121 LGERA 1 at [196];
Blair v Deakin (1887) 121 LGERA 1.
180
Phipps v Pears [1965] 1 QB 76; [1964] 2 All ER 35 at 38 per Lord Denning MR.
181
Vincent v Peacock [1973] 1 NSWLR 466.
182
Bamford v Turnley (1862) 3 B&S 62.
183
Sturges v Bridgman (1879) 11 Ch D 852.
184
Robinson v Kilvert (1889) 41 Ch D 88.
185
Ibid.
340
C Potential Climate Actions in Public Nuisance

Actions may also be bought under the common law principles of public nuisance
for interference caused to the public at large. 186 Potential actions in public
nuisance would be likely to include actions against public authorities regarding
flooding and coastal erosion in public areas and actions against large-scale
greenhouse gas emitters by those industries economically affected by climate
change such as the tourism, skiing and fishing industries.
At common law, a public nuisance is described as an act or omission which

materially affects the reasonable comfort and convenience of the life of a class of
the public.187 Under the criminal law, common nuisance is described as follows:
a person must not unlawfully do an act or make an omission in relation to property
under the persons control that:
(a) causes danger to the publics lives, health or safety; or
(b) causes danger to the publics property or comfort, and physical injury to anyone;
or
(c) obstructs the public in the exercise or enjoyment of a right common to all its
members, and causes physical injury to anyone. 188
The Attorney-General, as the public representative, would normally commence

any necessary action in nuisance on behalf of the public. 189 The interference
complained of must be substantial and unreasonable and it must interfere with a
recognised public right. 190 Public rights include public access to highways,
186
In some Australian jurisdictions public nuisance may also attract criminal sanctions, see for
example, section 300 Criminal Code 1995 (Qld) and the various State environmental protection
legislation.
187
Wallace v Powell [2000] NSWSC 406; (2000) 10 BPR 18,481 per Chief Justice Hodgson at [32];
A-G v PYA Quarries Ltd [1957] 2 QB 169 at 184 per Lord Justice Romer.
188
Criminal Code 1995 (Qld) s300. Maximum penalty, three years imprisonment.
189
For example, Attorney-General; Ex rel Pratt v Brisbane City Council [1988] 1 Qd R 346; (1987)
63 LGRA 294.
190
Ball v Consolidated Rutile Ltd [1991] 1 Qd R 524; Deepcliffe Pty Ltd v The Council of the City of
the Gold Coast [2001] QCA 342 (31 August 2001).
341
footpaths and waterways as well as pollution of public waters.191 Public rights are
not necessarily related to land and public nuisances:
may be established in the case of exposing in public a person with an infectious
disease, selling food unfit for human consumption, obstructing a highway, or
allowing a house near a highway to be ruinous. 192
In certain circumstances an individual may also bring an action in public

nuisance where it can be shown that, as a result of the defendants interference
with a public right, the individual has suffered particular, or special, damage over
and above that suffered by the public at large. 193 Special damage extends from
economic loss, to delay and inconvenience, suffered as a result of the
interference. 194 The difficulty in bringing successful actions in public nuisance, as
an individual, stems from the requirement that the plaintiff must prove that their
injury and inconvenience is more substantial than the general public. This can be
an onerous test to meet. In the past, commercial fishermen have been denied
relief for pollution of waters on the basis that their fishing rights are no different
to those of the general public. 195
D Unreasonable Interference and Private Nuisance

If the obstacle of standing is successfully overcome then it must be shown that
the interference is both substantial and unreasonable. Not all interference will
attract liability in nuisance. The Court will seek to achieve a balance between the
competing rights of enjoyment of the occupier of land and the rights of use and
enjoyment of his or her neighbour.196
191
Walsh v Ervin (1952) VLR 361; Tate & Lyle Industries Pty Ltd v Greater London Council [1983]
2 AC 509; Railtrack plc v Mayor & Burgesses of London Borough of Wandsworth [2001] EWCA Civ
1236; The Wagon Mound (No 2) [1967] 1 AC 617.
192
Kent v Minister for Works (1973) 2 ACTR 1; 21 FLR 177 at 204 per Justice Smithers.
193
Walsh v Ervin (1952) VLR 361 at 371 per Justice Scholl.
194
Ibid.
195
Ball v Consolidated Rutile [1991] 1 Qd R 524. In that case, the pecuniary loss was held to not be
sufficient for standing.
196
342
As commented by the Court:

a balance has to be maintained between the right of the occupier to do what he likes
with his own and the right of his neighbour not to be interfered with. It is
impossible to give any precise or universal formula, but it may broadly be said that
a useful test is perhaps what is reasonable according to the ordinary usages of
mankind living in society, or, more correctly, in a particular society. The forms
which nuisance may take are protean.197
..
for the purpose of ascertaining whether as here the plaintiff can establish a private
nuisance I think that nuisance is sufficiently defined as a wrongful interference with
another's enjoyment of his land or premises by the use of land or premises either
occupied or in some cases owned by oneself. The occupier or owner is not an
insurer; there must be something more than the mere harm done to the neighbour's
property to make the party responsible. Deliberate act or negligence is not an
essential ingredient but some degree of personal responsibility is required, which is
connoted in my definition by the word use.198
Whether an interference with the use and enjoyment of land is substantial will be
determined by the Court in accordance with reasonable standards for the use and
enjoyment of the land in question. 199 This will be assessed in light of the
character, duration and time of the interference and the effect of the interference
of the plaintiff:
what are reasonable standards must be determined by common sense, taking into
account relevant factors, including what the Court considers to be the ideas of
reasonable people, the general nature of the neighbourhood and the nature of the
location at which the alleged nuisance has taken place, and the character, duration
and time of occurrence of any noise emitted, and the effect of the noise.200
197
Sedleigh-Denfield v OCallaghan [1940] AC 880 at 896.

Ibid, 8967.
199
Oldham v Lawson (No 1) [1976] VR 654 at 655 per Justice Harris.
200
Ibid.
198
343
In the case of climate-related nuisance claims, the Court will be obliged to

undertake a challenging deliberation process that distinguishes between the
unlawful acts of the defendant and the natural interference of the modern climate
system.
It may be argued that the interfering harm is caused, not by the
defendant, but instead by natural events. However, there is judicial precedent for
defendants to be held liable in nuisance where a hazard occurs on their land, be it
caused by a natural event or man-made, where the defendant had knowledge of
the hazard and took no steps to prevent interference to the plaintiff.
201
Accordingly, an element of reasonable foreseeability will operate in determining

whether the defendant knew or ought to have known of the occurrence of the
nuisance.202
Private owners and public authorities may be liable for interference caused by the
construction of protective works that cause damage or flooding to adjoining land.
Nuisance claims relating to flooding and drainage are reasonably common
although the legal outcome is not always clear.
In Sedleigh-Denfield v
O'Callaghan, the defendant was held liable in nuisance for the negligent
construction of an artificial work which resulted in flood waters flowing on to the
plaintiff's land.203 In contrast, in the case of Elston v Dore the defendant filled an
artificial drain which operated to remove floodwater from the plaintiffs land.204
This was held to not constitute a nuisance as it did not cause the land to be
damaged, invaded or interfered with. The damage suffered was held to be due to
the natural deficiency of the appellants land. 205
201
Leakey v National Trust [1980] QB 485; Delaware Mansions Ltd v Westminster City Council
[2001] 4 All ER 737. Cf Goldman v Hargrave [1967] 1 AC 645 where the defendant failed to
extinguish a fire in a tree on the property caused by lightning.
202
The Wagon Mound (No 2) [1967] 1 AC 617; Delaware Mansions Ltd v Westminster City Council
[2001] 4 All ER 737
203
Sedleigh-Denfield v OCallaghan [1940] AC 880.
204
205
Ibid.
344
In proving that unlawful interference has occurred in the climate suit, the
principle of give and take, live and let live will be applied by the Courts.206 Not
all interference will constitute a nuisance and the utility of the defendants
activities will be balanced against the general public interest. The onus of proof
resides with the defendant to show the reasonableness of their acts in light of the
interference. The defendant is under an obligation to do what is reasonable in all
of the circumstances taking into account the nature of the activities, the
characteristics of the actual defendant and, where relevant, the availability of
financial resources for the defendant to address the risk. 207
If there are reasonably practical alternatives, which would not involve excessive
expenditure, and would prevent the interference then the use may be considered
unreasonable.208 For example, the ability to utilise alternative fuel sources, CCS
technology or to take steps to offset the greenhouse gas emissions of an industrial
plant may be considered by the Court. It may be argued that these technologies
are not yet fully mobilised for commercial use and involve significant start-up
costs.209 Nevertheless, pilot programs to trial these technologies are possible and
the associated costs will be considered in the context of the general economic
position of the defendant. In the case of large-scale emitters, with significant
annual profits, the Court may well consider the development and use of
alternative technologies to be reasonable given all of the circumstances.
In defending a cause of action in nuisance, public authorities may be able to rely

on the statutory authorisation of the activities giving rise to the interference and
proof that the harm done is an inevitable consequence of the exercise of that
statutory authorisation. 210 The Court must determine that the empowering statute,
206
Bamford v Turnley (1862) 3 B&S 62 at 32-33 per Bramwell B.

Leakey v National Trust [1980] QB 485 Lord Justice Megaw at 526; Ruthning v Ferguson (1930)
45 CLR 604.
208
McMahon v Catanzaro [1961] QWN 22; Painter v Reed [1930] SASR 295 at 304 per Justice
Richards.
209
The availability of renewable energy sources in Australia is discussed in Chapter Four.
210
Bonnici v Ku-Ring-Gai Municipal Council [2001] NSWSC 1124; (2001) 121 LGERA.
207
345
for example the relevant Local Government Act, specifically authorises the
specific activities that gave rise to the nuisance. 211 The burden of proof will fall
on the public authority to show that it was the intention of the statute to permit
the harm suffered; namely, interference with private rights to the use and
enjoyment of land.212 Where the harm may have been avoidable but the cost of
avoiding harm arising from the only practicable means of exercising that
authority was prohibitive then the authority will not be held liable for the harm. 213
The judicial process of statutory interpretation of the empowering provisions has

been described as follows:
(1) When a public body, or individual, erects or uses structures, purporting
to act under statutory authority, and thereby creates a nuisance, or
otherwise injures a member of the public, the first question for
determination is whether the damage complained of is the result of an act
authorised or directed by the statute, upon its true construction. (2) If the
act causing the damage is so authorised, the defendant is not liable unless
he is guilty of negligence in the design or execution of the work. (3)
Negligence in such circumstances must be based some active operation or
on defect in design on the part of the defendant, and not upon mere
inactivity or nonfeasance.214
Consequently, although public authorities may find themselves increasingly the

subject of claims in negligence and nuisance for climate change related harm, the
ambit of liability in Australia is relatively narrow compared to private defendants
and is becoming increasingly so as the exemptions and immunities of public
authorities continue to expand.
211
Metropolitan Asylum District v Hill (1881) 6 App Cas 193; Allen v Gulf Oil Refining Ltd [1981]
AC 1001.
212
Cohen v City of Perth (2000) 112 LGERA 234; Kempsey Shire Council v Lawrence (1996) Aust
Torts Reports 81-375.
213
Bonnici v Ku-Ring-Gai Municipal Council [2001] NSWSC 1124; (2001) 121 LGERA 1 per
Sperling J at [191].
214
Madell v Metropolitan Water Sewerage and Drainage Board (1936) 36 SR 68 at 72-73 per Justice
Davidson as quoted with approval in Symons Nominees Pty Ltd v Road & Traffic Authority New
South Wales (1991) Aust Torts Reports 81-081 by Justice Brownie.
346
E Examples of Climate Change Nuisance Actions in the United States

There have been numerous attempts in the United States of America (US) to
bring actions in public nuisance to prevent greenhouse gas emissions and to
minimise the occurrence of global warming. 215 In the case of State of Connecticut
et al v American Electric Power Company et al,216 a group of States217 brought an
action against the five largest emitters of carbon dioxide in the US in public
nuisance. The plaintiffs alleged that:
global warming will cause irreparable harm to the property in New York State and
New York City and that it threatens the health, safety and well being of New Yorks
citizens, residents and environment.218
Evidence was provided of existing temperature increases and predicted climatic

changes and the plaintiffs sought an order:
(i) holding each of the Defendants jointly and severally liable for contributing to an
ongoing public nuisance, global warming and (ii) enjoining each of the Defendants
to abate its contribution to the nuisance by capping its emissions of carbon dioxide
and then reducing those emissions by a specified percentage each year for at least a
decade.219
The Court held that these were non-justiciable political questions to be addressed
by the political branches and commented that:
the scope and magnitude of the relief Plaintiffs seek reveals the transcendently
legislative nature of this litigation. Plaintiffs ask this Court to cap carbon dioxide
emissions and mandate annual reductions of an as-yet-unspecified percentage
Because resolution of the issues presented here requires identification and
balancing of economic, environmental, foreign policy and national security interests
215
For a review of these cases see Lee A. DeHihns III, 'Climate and the Court' (2008) 25(1) The
Environmental Forum 22.
216
State of Connecticut et al v American Electric Power Company et al 406 F. Supp. 2d 265; 2005
U.S. Dist. LEXIS 19964; 35 ELR 20186 (United States District Court For the Southern District of
New York,15 September 2005). For a detailed discussion of this case see Dawn T. Mistretta and
Stanley B. Green, 'Global Warming Litigation: Cooling Down or Heating Up in the Private Sector?'
(2006) Winter 2006 Toxic Torts and Environmental Law 1.
217
The action was brought by the States of Connecticut, New York, California, Iowa, New Jersey,
Rhode Island, Vermont, Wisconsin and the City of New York.
218
State of Connecticut et al v American Electric Power Company et al 406 F. Supp. 2d 265 at 268
and 270.
219
Ibid, 268.
347
an initial policy determination of a kind clearly for non-judicial discretion is

required.220
These issue of political non-justiciabiity is a significant obstacle in climate

suits in the US. More recently, an action was commenced by the State of
California against six leading car manufacturers seeking damages for creating
and contributing to the public nuisance of global warming. 221 In September
2007, the District Court determined that it lacked jurisdiction to hear the
matter as the case involved public policy, foreign policy, and political issues:
the adjudication of Plaintiffs claim would require the Court to balance the
competing interests of reducing global warming emissions and the interests
of advancing and preserving economic and industrial development. AEP,
406 F. Supp. 2d at 272. The balancing of those competing interests is the
type of initial policy determination to be made by the political branches,
and not this Court.222
Another action in public nuisance was brought by an individual in the case of

Korsinksky v United States EPA.223 The action was commenced against the
US EPA and a number of other environmental departments for their emission
of greenhouse gases and their failure to implement practical, feasible and
economically viable options for eliminate [sic] carbon dioxide emissions.224
The plaintiff sought standing on the grounds that he was more vulnerable to
disease-causing environmental pollution because he was suffering from
sinuses-related diseases and had developed a mental sickness upon
learning of the danger of pollution. 225 The Court held that such allegations
fall more within the realm of the hypothetical and the conjectural rather than
220
Ibid, 272 and 274.

People of the State of California v General Motors Corporation et al 2007 (Case No. C06-05755
MJJ, 2007, United States District Court for the Northern District of California) at 1.
222
Ibid, 11-12.
223
Korsinksky v United States EPA 2005 U.S. Dist. LEXIS 21778 (United States District Court For
the Southern District of New York, 28 September 2005).
224
Ibid, [2]
225
Ibid, [6]-[7].
221
348
the actual or imminent and therefore are insufficient for the purposes of
standing.226 This finding was upheld on appeal where the Court commented
moreover, Korsinsky has failed to sufficiently allege that his injury is likely
to be redressed by any relief the district court could grant.227
ADEQUACY OF REMEDIES IN NEGLIGENCE AND NUISANCE
In considering the effectiveness of the common law of tort in addressing climate

harm, it is necessary to consider, briefly, the adequacy of the remedies that may
be awarded in a successful climate suit.
If a successful action in negligence is established then the Court may allocate

common law damages. The principle for the award of such a remedy is that the
plaintiff must be put in the position that it would have been in had the climate
tort not been committed.228 If a successful action is brought in nuisance then the
potential remedies for the interference would include abatement, injunctive relief
or common law damages. 229 Where the claim is in private nuisance, damages
may include the diminution in land value from the interference.230
226
Ibid, [8].
Korsinksky v United States EPA, 192 Fed. Appx. 71 (United States Court of Appeals for the
Second Circuit, 10 August 2006) at 72.
228
In terms of damages for negligence advice, the Court will consider how much detriment the
plaintiff has suffered as a result of the failure to provide the correct advice; Commonwealth v Amann
Aviation Pty Ltd (1991) 174 CLR 64 and Gates v City Mutual Life Assurance Society Ltd (1986) 160
CLR 1.
229
Moss v Christchurch Rural District Council [1925] 2 KB 750; the award of an injunction is
discretionary and will depend upon the nature of the nuisance, the public interest and other factors.
The award of an injunction will be more likely where the nuisance is of a continuing nature. Miller v
Jackson [1977] QB 966.
230
Hunter v Canary Wharf Ltd & London Docklands Development Corporation [1997] UKHL 14;
[1997] AC 655; Premier Building and Consulting Pty Ltd v Spotless Group Ltd [2007] VSC 377.
227
349
The effectiveness of these remedies in addressing the loss and damage from the
impacts of climate change is debatable. Such actions are valuable in their ability
to draw attention to the current deficiencies of the Australian regulatory
environment in addressing climate related harm. However, regardless of the
remedy of the Court, climate change will continue to occur and harm will
continue to ensue. Even if an injunction is awarded, this will only mitigate some
of the global emissions and will not halt climate change entirely. In terms of the
award of damages, it is questionable whether the quantum awarded could (or
should) ever fully compensate the plaintiff for the losses resulting from the
unlimited scope of impacts of global climate change.
Give this, tortious
principles can only achieve so much in the regulation of emissions and

mitigation of climate change. The law of tort also appears to be of limited
assistance in acting as a distributive mechanism for climate change harm. This
places increased reliance on the conventional distributive mechanism of
insurance in addressing the risks of climate change.
THE ROLE OF INSURANCE IN ADDRESSING CLIMATE HARM
The object of insurance has traditionally been to protect each individual against
an uncertain loss by pooling risks across a diverse group of individuals who pay
an annual premium towards the pools overall predicted losses in return for
compensation for claimable events.231
231
Gary S. Guzy, 'Insurance and Climate Change' in Michael B. Gerrard (ed), Global Climate Change
and U.S. Law (2007) Chicago, American Bar Association, 541 at 542.
350
The social benefits of insurance have been described as follows:

if priced correctly, insurance not only provides a social safety net but induces
individuals and businesses to take more intelligent risks, while lessening the burden on
government to intervene in the event of severe financial hardship.232
Whether a particular risk of loss is insurable is dependant upon the loss meeting
the following conditions for insurability:
randomness of the loss (unpredictability of events occurring);
assessability of the frequency and severity of claimable events

(quantifiable);
mutuality of interest (risk community); and
economic feasibilityaffordability of the payments for claimable events

(premium).233
The increasing frequency and intensity of climate change impacts will result in a
higher demand for insurers to transfer the risk of loss from climate change events.
The insurance industry can, in theory, provide coverage against a wide range of
climate and weather related impacts as well as coverage for climate related losses
through director and officer cover and health and life insurance cover. However,
the increasing levels of risk of loss associated with those climate change events
will directly influence the availability, price and conditions to be imposed on any
climate change insurance. 234
232
REO, 'In the Front Line: The Insurance Industry's Response to Climate Change' (F&C Investments,
2007) at 4.
233
Christopher Walker and Brian Thomas, 'Protecting Your Carbon Asset: Risk and Insurance in the
Greenhouse Gas Markets' in Kenny Tang (ed), The Finance of Climate Change: A Guide for
Governments, Corporations and Investors (2005) London, Risk Books, 293 at 298.
234
Gary Guzy, n231, 546.
351
Climate change has been described as having the potential to bankrupt the global
insurance industry.
235
Of particular concern is the increasing level of
unpredictability, and increasing frequency and severity, of the impacts of climate

change. This prevents not only the ability to anticipate losses but also the ability
to accurately price the risks of climate change. 236 Moreover, the effects of
natural disasters are compounded by the demographic and socio-economic trends
across the world. 237 Hand in hand with the increased frequency and intensity of
tropical cyclones and severe storms is an increased risk of flooding from rivers
and tributaries breaking their banks, flash flooding events and inundation from
storm-surges and tsunamis. Australian society has expressed a preference for
coastal and canal developments resulting in high intensity residential
development, with increasing property values, within metres of high tide levels.
This proximity to the water makes adaptation to storms, flooding and inundation
extremely difficult. The result of this will be increased premiums, additional
conditions on cover and, in some areas, a complete absence of availability of
cover. 238
The Insurance Council of Australia predicted that approximately 170,000

Australian homes are located in such high risk areas that insurers may determine
not to accept the risk.239 This issue is not confined to Australia. Over a million
new homes to be built in flood prone areas in the United Kingdom are stated as
being at risk of becoming unsaleable, uninsurable and uninhabitable.240 As a
result, the British insurance industry is threatening to refuse flood coverage
unless more flooding defences are established by the British government.
235
Sverker C. Jagers, Matthew Paterson and Johannes Stripple, 'Privatizing Governance, Practicing
Triage: Securitization of Insurance Risks and the Politics of Global Warming' in David L. Levy and
Peter Newell (eds), The Business of Global Environmental Governance (2005) Cambridge, MIT Press,
249 at 254.
236
Ibid; REO, n232,15.
237
Gary S. Guzy, n231, 547. Evan Mills, Richard J Jnr Roth and Eugene Lecomte, 'Availability and
Affordability of Insurance Under Climate Change: A Growing Challenge for the U.S.' (CERES, 2005)
at 2.
238
Karl Sullivan, Issues: Residential Flood Insurance (Insurance Council of Australia),
http://www.insurancecouncil.com.au/Residential-Flood-Insurance/default.aspx at 15 June 2008.
239
Ibid.
240
Jennifer Hill, New Houses in Flood Areas Uninsurable (15 February 2008, Planet Ark)
http://www.planetark.com/avantgo/dailynewsstory.cfm?newsid=46972 at 15 June 2008.
352
So what is the role for insurers amidst all of these potential climate change losses?
It is clear that the insurance sector has the potential to play a significant role in
dealing with the future affects of adverse climate change. The industry has been
aware of the enormous financial implications of climate change for some time
now. Whether the insurance industry is prepared to respond to consumer demand
and insure these growing climate risks will depend on the extent to which it is
prepared to evolve to embrace these new liabilities and to utilise innovative tools
such as weather derivatives, catastrophe bonds and micro-insurance to manage
that risk. 241 In the absence of strong regulation, the insurance industry is in a
position to exercise considerable influence on public policy to reduce greenhouse
gas emissions, promote adaptation (including use of improved building design
and building materials) and discourage inappropriate land use in vulnerable
areas.242 Insurers may also choose to incentivise good practice to reduce global
emissions by facilitating investment in renewable energy and emission reduction
programs and offering preferential premium rates to sustainable buildings, hybrid
cars and energy efficient businesses. 243
As severe weather events, coastal erosion, landslides and floods increase in

vulnerable areas the result may be that insurers deny coverage for those
liabilities. If coverage is denied in high risk areas then the local government may
be forced into the position of surrogate insurer in providing disaster relief and
assisting in the rebuilding of damaged homes and businesses. The question of
who should source the funds for such measures is highly debatable. In the
absence of such relief then, ultimately, it will be the individuals themselves who
must absorb the full costs of climate change. Their only recourse may then be to
241
Andrew Dlugolecki and Mojdeh Keykhah, 'Climate Change and the Insurance Sector: Its Role in
Adaptation and Mitigation' in Kathryn Begg, Frans Van Der Woerd and David L. Levy (eds), The
Business of Climate Change: Corporate Responses to Kyoto (2005) Sheffield, Greenleaf Publishing,
147 at 158, 160; Sverker C. Jagers, Matthew Paterson and Johannes Stripple, n235, 259-260.
242
Evan Mills, 'From Risk to Opportunity: 2007 Insurer Responses to Climate Change' (CERES, 2007)
at 35. See also Evan Mills, 'From Risk to Opportunity: How Insurers Can Proactively And Profitably
Manage Climate Change' (CERES, 2006).
243
Mills 2007, ibid, 2-3.
353
attempt to seek recompense from potentially negligent entities, such as planning

authorities, architects, engineers and builders, who caused the building to be
approved and constructed in a position of such vulnerability. Given the unlikely
success of such climate suits, it seems preferably for the insurance industry to
continue to provide insurance cover for climate risks but to incorporate the
increased risk of losses into the price of premiums and to include additional
conditions on coverage that require, for example, the installation of property
protection measures against the risks of flood.
PROSPECTS OF SUCCESS OF CLIMATE ACTIONS
The purpose of this chapter was to consider the role of the common law
principles of negligence and nuisance in addressing climate related harms from
large-scale emitters in Australia. At this embryonic stage of climate change torts,
both in Australian and overseas jurisdictions, it is largely a theoretical exercise in
assessing the likely probabilities of success of tortious actions. So much will be
dependent upon the character of the defendant, the nature of the harm suffered
and the specificity of the scientific evidence available. Critically, it will also
depend upon the judicial philosophy of the residing Court in terms of their
commitment to developing the common law to remedy these new emerging
climate injustices.
This chapter has identified a number of significant obstacles to the successful

instigation of tortious actions for climate related harm including: foreseeability,
causation and public policy considerations. Without doubt, the establishment of
causation remains the primary obstacle to any successful action, in negligence or
nuisance, against any private or public defendant.
354
The level of scientific
uncertainty is significant and the challenges of meeting the legal test of causation
enormous.
The likelihood of the Court indulging such tenuous claims of a causative link
between the emissions and harm suffered is doubtful. Moreover, the judiciary
may well consider that it is not its proper role to establish such wide private
liability for harm that is caused through the global, public, phenomenon of
climate change.
Concerns about the imposition of indeterminate liability,
floodgates concerns, and the proper role of the legislature in laying down the
law may well operate to prevent a finding of any liability in negligence.244 As
noted in the decision of Cambridge Water:
as a general rule it is more appropriate for strict liability in respect of operations of
high risks to be imposed by Parliament, than by the courts. If such liability is
imposed by statute, the relevant activities can be identified, and those concerned can
know where they stand. Furthermore, statute can where appropriate lay down
precise criteria establishing the incidence and scope of such liability. 245
Despite these issues, climate change suits are likely to become more frequent in
the Australian setting. In the first instance, defendants are likely to be public
authorities rather than private persons due to their temporal longevity and the
perception that these authorities have greater financial resources at their disposal.
However, it is these very public entities that are provided with increased legal
protections, under the statutory reforms to the Australian tort laws, making
findings of liability against them all the more remote.
244
James Goudkamp, The Spurious Relationship Between Moral Blameworthiness And Liability for
Negligence (2004) Melbourne University Law Review 11.
245
Cambridge Water Co. Ltd v Eastern Counties Leather plc [1994] 2 AC 264 per Lord Goff of
Chieveley at [76].
355
The application of nuisance principles to adaptation activities that aggravate the

effects of climate change appears to fall within the traditional realms of nuisance,
particularly in those circumstances involving the increased risks of flooding and
bushfire. In the case of flooding, a reasonably clear causal link can be envisaged
between the failure to maintain build or maintain sea walls, and other protective
works, and the resulting flooding of private land. However, nuisance claims
against current large scale emitters of greenhouse gases will be much more
problematic.
Continued, unabated, greenhouse gas emissions do pose a serious
threat to the well being of the general community. However, the inertia present
in the climate system prevents liability being attributed to those current emitters
of greenhouse gases. Greenhouse gases will remain in the atmosphere for long
time-scales and current emissions will increase the existing concentrations of
gases. 246 Although the continuation of emissions will contribute to global
warming, strictly speaking, the interference suffered now cannot be causally
related to current emissions but is the result of those past emissions. 247 Therefore,
true responsibility for such harm resides with our historic large-scale industrial
emitters.
THE FUTURE OF TORT-BASED CLIMATE LITIGATION
In an ideal world, the common law of tort would not be used as a primary tool for
achieving mitigation of, and adaptation to, the impacts of climate change. As a
regulatory tool, tortious actions for climate harm are expensive and unruly and
the outcomes are indeterminate. As noted by one commentator:
246
at xi.
247
In the United Kingdom, where there are multiple contributors that together create the nuisance,
each of the contributors is liable for the cumulative effects of their polluting actions. Pride of Derby
and Derbyshire Angling Association Ltd v British Celanese [1953] Ch 149.
356
the ad hoc nature of court proceedings, the expense involved in bringing them, and
the uncertainty as to their results means that, in the long-term, litigation alone is
unlikely to be an optimal approach for bringing about effective action to address
climate change.248
Given the prevailing uncertainties and weaknesses in tortious actions for climate
change, the common law is not the most appropriate tool for achieving necessary
behavioural changes to reduce emissions and avoid climate harms. In addressing
climate change, the proper role of the common law should be to act as a
complementary measure against a background of strong regulatory action.
However, it is highly questionable whether the common law can adapt
sufficiently to address the current black hole in the regulatory web.
249
International and domestic regulatory frameworks for the reduction of

greenhouse gas emissions are emerging around the world in an ad hoc fashion.
There is now a Federal government proposal in Australia to implement a scheme
for the reduction of greenhouse gas emissions. However, such a scheme would
not commence until 2010 and reductions in emissions would not be
instantaneous. Moreover, all of these emerging regulatory schemes fail to make
provision for the distribution of the liabilities and losses of climate change harm
leaving such matters to be determined by the ad hocery of the common law.
It is submitted that the issue of liability, within Australia, would be better

addressed through a nationally consistent, clear regulatory framework to allocate
liability, fairly and equitably, for the risk of climate change harm. The creation
of clear statutory principles could provide large-scale emitters with some level of
certainty regarding their future climate risks and legal liabilities. Potentially,
some form of compensation fund could also be established through the allocation
of a proportion of the royalties or taxes paid to the governments by these
248
Warming' (2007) 24 Environmental and Planning Law Journal 90 at 103.
249
John Murphy, 'Noxious Emissions and Common Law Liability: Tort in the Shadow of Regulation'
in John Lowry and Rod Edmunds (eds), Environmental Protection and the Common Law (2000)
Oxford, Oregon, Hart Publishing, 51 at 75.
357
industries. Such legislation should adopt an appropriate test for causation which
incorporates the precautionary principle and accommodates the prevailing
scientific uncertainty to enable legitimate claims to be brought. Such regulation
requires the balancing of a range of conflicting economic, social and
environmental priorities of our society, both now and in the future.
250
Accordingly, it is submitted that such a process more properly resides in the

democratic domain of the legislature.
250
358
Chapter Seven The Role of Law in a Multi-National Global

Carbon Market: Rights, Duties and Legal Innovation
INTRODUCTION
The raison d'etre of the international climate change regime is to achieve
significant reductions in the Earths atmospheric concentrations of greenhouse
gas emissions sufficient to avoid adverse anthropogenic interference with the
climate system. Achieving such large-scale, short-term, reductions in emissions
requires radical and abrupt changes in societys choice of energy sources,
efficiency of energy use and overall level of environmental sustainability. The
policy tool selected for the climate change regime, to facilitate these behavioural
adjustments, is the innovative regulatory mechanism of the tradeable emission
instrument within a capped international carbon market. 2 Through the artificial
construct of the emission instrument, the regime establishes a duty to reduce
emissions in conjunction with a trading mechanism.
This is intended to
incentivise emission reductions and enable those reductions to be carried out at

the geographic location at which it is most cost-effective to do so. In order to
achieve the necessary global emission reductions, in the most cost-effective
manner, a strong legal duty to reduce emissions must be embedded within an
optimally efficient trading system.
For that optimality to occur, the carbon
market must be designed and implemented with a harmonious fusion of

economic and legal functions.
This chapter expands upon a short analysis of the legal frameworks published in Nicola Durrant,
Emissions Trading, Offsets and Other Mitigation Options for the Australian Coal Industry, (2007)
Volume 24, Issue 5 Environmental Planning and Law Journal 361.
2
signature 16 March 1998 (entered into force on 16 February 2005); United Nations Framework
Convention on Climate Change, opened for signature on 4 June 1992, 31 ILM 849 (entered into force
on 21 March 1994) (together the Climate Change Regime). The term carbon market is used in this
thesis to refer to those markets trading in carbon emission instruments as well as those trading in
greenhouse gas emission instruments more generally.
359
However, the arbitrary imposition of an international carbon market, and

tradeable emission instrument, onto existing domestic legal systems creates
serious challenges in the mutual creation and recognition of these artificial
constructs. Moreover, weaknesses in the regulatory design of the climate change
regime may well operate to prevent the emergence of a compatible global carbon
market. The lack of strong regulatory drivers at the international level, with
respect to the design and implementation of domestic regimes, combined with the
complexity and immaturity of the international climate market, has resulted in the
creation of an assortment of domestic carbon markets and climate change
programs with incongruent legal characteristics.
The purpose of this chapter is to consider the necessary legal features of an

effective carbon market to facilitate the cost-effective reduction of greenhouse
gas emissions. It does so through an analysis of the key legal features of the
emerging international, regional and domestic carbon market mechanisms. In
particular, this chapter addresses the following critical components of an effective
legal framework to facilitate carbon trading:
a strict duty to reduce emissions within a specified period of time;
the creation of tradeable emission instruments, within a trading system, to

incentivise reductions to meet the emission reduction obligation;
a regulated program to enable the creation, transfer and surrender of

credits from projects that reduce or abate emissions (known as offsets);
and
a legal regime to regulate, and permit net reductions in emissions from,

the capture, transport and storage of greenhouse gases (carbon capture
and storage or CCS).
360
THE STATUS OF THE ATMOSPHERE UNDER INTERNATIONAL

LAW
The Earths atmosphere is an undifferentiated gaseous mass which constantly

circulates around the planet including through national air space.
atmosphere is composed of several distinct layers.
The
The first layer, the
troposphere, extends upwards from the surface of the Earth for 15 kilometres and
accounts for 85 per cent of all atmospheric gases. 4 This is followed by the
stratosphere, which extends from 15 kilometres to 50 kilometres above the
Earths surface, and the layers of the mesosphere and the thermosphere. 5
The legal status of the atmosphere is not clearly defined in international law. 6
Global commons, such as the high seas, have traditionally fallen within the
doctrine of res communis and are beyond the jurisdiction of any one nation but
may be used by all.7 In comparison, the fish within the seas are treated as res
nullius and do not belong to anyone until such time as they are appropriated.
However, the atmosphere is unique. It is partly located within the air space of the
territories of nation States and, under customary law, those States have complete
and exclusive sovereignty over that space. 8 Accordingly, those parts of the
atmosphere within the air space are technically capable of sovereign ownership.
However, in practical terms, the biological characteristics make it impossible to
impound and take exclusive possession of the atmospheric gases.9 As a result,
although the States have not relinquished all claims to the atmosphere it has been
Marvin S. Soroos, 'Garrett Hardin and tragedies of global commons' in Peter Dauvergne (ed),
Handbook of Global Environmental Politics (2005) Cheltenham, Edward Elgar, 35 at 40.
4
Ibid, 8.
5
Ibid.
6
Ibid, 33.
7
Ibid, 7.
8
Chicago Convention of International Civil Aviation 1944, Article 1, (entered into force 1947) cited
in D.J Harris, Cases and Materials on International Law (5 ed, 1998) London, Sweet and Maxwell at
239. The boundary between air space and outer space is unsettled but a better view appears to be that
air space is linked to atmosphere and present where there are traces of air to be found (see Bin Cheng,
Studies in International Space Law (1997) Oxford, Clarendon Press at 32).
9
Marvin S. Soroos, 'Preserving the Atmosphere as a Global Commons' (1998) 40(2) Environment 6 at
34.
361
customarily treated as though it is beyond national jurisdiction.10 This lack of

clarity regarding ownership and access rights remains unresolved in those
international instruments which regulate emissions to the atmosphere including
the terms of the climate change regime.
The atmosphere could be described as common property. Common property is

conventionally regarded as:
amorphous, diffuse, ephemeral and unspecified in comparison with private
property, and this view, when it is successful in the political and legal process, plays
a role in the enclosure of the commons.11
However, in many respects, the greenhouse gas sink mechanism of the global
atmosphere does not fit neatly within the concepts of an open access resource
domain. As commented:
atmospheric absorptive capacity is not a resource in the same sense as are, for
example, ocean fisheries. There is no resource flow to any appropriator; fish are
taken by fishermen, but pollution diffuses throughout the available airspace.12
Whether the atmosphere possesses the characteristics of an open access resource

is debatable.
As a result of the creation of the climate change regime, the
atmosphere is no longer a true open-access regime. The United Nations (UN)

has created a body which regulates rights of access to the sink mechanisms of the
atmosphere by those parties to the regime. In this respect, the atmosphere has
been provided with common property status, as a common concern, which is
10
Marvin S. Soroos, n3, 35 at 40 and Marvin S. Soroos, 'The Evolution of Global Commons' in HoWon Jeong (ed), Global Environmental Policies: Institutions and Procedures (2001) Hampshire,
Palgrave Publishers, 39 at 50.
11
McCay and Acheson, The Question of the Commons (1987) at 22 quoted in Michael Goldman,
'Inventing the Commons: Theories and Practices of the Commons' Professional' in Michael Goldman
(ed), Privatizing Nature: political struggles for the global commons (1998) London, Pluto Press, 20 at
25.
12
Susan J. Buck, The Global Commons: an introduction (1998) Washington, Island Press at 126.
362
managed by the parties to the climate change regime (through the COP/MOP).
However, for those developed countries and conscientious objectors such as the
United States of America (US), who remain outside of the regime, the
atmosphere retains its pre-existing legal character. 13
It could be argued that the atmosphere was, even prior to the Kyoto Protocol, no
longer an open access resource. The creation of international regulatory bodies,
through the UN, and the imposition of rules and regulations regarding use
intervened in the unfettered use and abuse of the commons.
The Montreal
Protocol addresses the emission of ozone depleting substances to the atmosphere,

the Convention on Long-Range Transport of Air Pollutants14 addresses pollution
to the atmosphere and the UNFCCC began the process of restricting the use of
the sink capacities of the atmosphere in such a way as to cause adverse climate
change impacts. It should also be noted that customary laws regarding State
responsibility and transboundary harm apply in relation to excessive greenhouse
gas emissions to the atmosphere. In particular, the atmosphere is subject to the
international no-harm principle which prohibits a State from causing harm to
the environment of other States or in areas not subject to national jurisdiction.15
It would flow from this principle that a State is under an obligation not to cause
harm to the global environment and its resources, from its activities, including
exceeding the carrying capacity of the Earths atmospheric sink mechanisms.16
Exploitation of the atmospheres sink capacities, and the corresponding impacts

of climate change, will affect all of the Earths common pool resources and
resource domains. As a result, the climate change regime is aimed at establishing
a protective regulatory policy, with quasi-property rights incentives, to overcome
13
Bruce Yandle, 'Grasping for the Heavens: 3-D Property Rights and the Global Commons' (1999 2000) 10 Duke Environmental Law & Policy Forum 13 at 39.
14
Convention on Long-Range Transport of Air Pollutants (1979) (entered into force 16 March 1983).
15
Stockholm Declaration of 1942 and, in particular, Decision of the Trail Smelter Arbitral Tribunal
1941, American Journal of International Law 35; 684. This is discussed in Chapter Three.
16
There are, substantial evidentiary difficulties associated with establishing a link, on the balance of
probabilities, between activities or actions of nations and the resulting adverse climatic impacts.
Causation issues are discussed in Chapter Six.
363
these externalities and minimise such exploitation.
Accordingly, the climate
change regime could be considered more akin to a global environmental

governance regime addressing environmental concerns rather than the strict
privatisation of a commons.
The global nature of the climatic system renders a collaborative global effort both
appropriate and necessary. As the Kyoto Protocol acknowledges, climate change
and its adverse effects are a common concern of humankind and, as such, it
creates a duty to cooperate in a common response. This duty could be regarded
as a public trust obligation towards achieving the sustainability of the atmosphere
in which the institutional bodies of the climate change regime act as stewards of
the commons. 17 Regardless of its ultimate characterisation, this acknowledgment
requires synergy between global efforts to address climate change and
consistency in the recognition and treatment of tradeable emission instruments
under the international climate market.
The phrase common concern of humankind is a lesser version of the phrase

common heritage of mankind which is used to refer to, for example, the
resource of Earths outer space. The common heritage of humankind embodies a
firmer acknowledgement of the collective duties of humanity and rights of
ownership in and collective control of the specific resource. Common heritage
refers to neither private property nor public or collective property but universal
property, without a subject, or without any subject but the fiction of a unified
humanity.18 The effect of this, according to one commentator, is not to:
mark the end of the appropriation of things or the elimination of existing forms of
property, but rather expresses restrictive limitations on exclusive rights and shows
17
For a discussion of public trusts see Peter H Sand, 'Sovereignty Bounded: Public Trusteeship for
Common Pool Resources' (2004) 4(1) Global Environmental Politics 47 at 57 who submits that
global trusteeship is conceivable, feasible and tolerable.
18
Balibar, E Masses, Classes, Ideas: Studies on Politics and Philosophy Before and After Marx (1994)
(trans J Swenson) at 220-221 quoted in Aykut Coban, 'Caught Between State-Sovereign Rights and
Property Rights: regulating biodiversity' (2004) 11(4) Review of International Political Economy 736
at 751.
364
the intrinsic limits of the total possession of things, since its very existence is
predicated on participation of all proprietors and on the reciprocal control of the
collective activity of humanity on nature (emphasis added).19
COMMODIFICATION OF THE ATMOSPHERIC COMMONS: RIGHTS

TO EMIT AND THE CLIMATE CHANGE REGIME
A Legal Innovation in Protecting the Atmospheric Commons
The atmosphere is part of the global commons. It is an open-access resource
domain with a finite capacity to absorb carbon dioxide and other pollutants
without adverse environmental impacts. 20
The resulting stable and benign
climate from this ecological function is beneficial for all humankind and could be
characterised as a global public good.21 Unfortunately, as part of the commons,
the atmosphere also suffers from unrestricted global exploitation. As Hardin
described in the now infamous work, The Tragedy of the Commons, the natural
self-interest behaviour of individuals to maximise his or her own personal gain,
in this case resulting in the undertaking of activities which emit excessive
greenhouse gases into the atmosphere at the expense of the climate system. As a
result:
each man is locked into a system that compels him [or her] to increase his [or her]
herd without limit in a world that is limited. Ruin is the destination toward which
all men rush, each pursuing his own best interest in a society that believes in the
freedom of the commons.22
19
Aykut Coban, n18, 751.

Marvin S. Soroos, n3, 38.
21
Ibid, 45.
22
Garrett Hardin, 'The Tragedy of the Commons' (1968) Science 162at 1244 cited in Michael
Goldman, 'Inventing the Commons: Theories and Practices of the Commons' Professional' in Michael
Goldman (ed), Privatizing Nature: political struggles for the global commons (1998) London, Pluto
Press, 20 at 24.
20
365
In economic terms, the emission of greenhouse gases, and the resulting adverse
impacts of climate change, are a classic example of market failure. 23 In such
cases, the market has failed to register the economic value of the carrying
capacity of the atmosphere in accommodating emissions and the exploitation of
that resource is treated as an externality to the market.24 These circumstances led
the Stern Review on the Economics of Climate Change to conclude that climate
change...is the greatest and widest-ranging market failure ever seen.25
Market instruments are often associated with the cost-effective achievement of

environmental goals and objectives.
26
They can play a crucial role in
internalising the real environmental cost of activities into the pricing of goods
and services thus acting as a rationing device. 27
A related environmental
principle is that of the Polluter Pays principle by which the polluter, or end user,
is held financially responsible for the costs of their activities:
the polluter should bear the expense of carrying out...pollution prevention and
control measuresto ensure that the environment is in an acceptable state. In other
words the costs of these measures should be reflected in the cost of goods and
services which cause pollution in production and/or consumption.28
This purpose of this principle is to internalise externalities to integrate the true

environmental and social costs of modern activities into the price of goods and
23
William D Nordhaus, 'To Slow or Not to Slow: the Economics of the Greenhouse Effect' (1991)
101(July 1991) The Economic Journal 920 at 923; Neil Adger and Samual Frankhauser, 'Economic
analysis of the greenhouse effect: optimal abatement level and strategies for mitigation' (1993) 3(1-3)
International Journal of Environment and Politics 104 at 104.
24
25
Treasury 2006), at i,http://www.hmtreasury.gov.uk/independent_reviews/stern_review_economics_climate_change/sternreview_index.cf
m at 14 June 2008.
26
European Environment Agency, 'Using the Market for Cost-Effective Environmental Policy:
Market-based Instruments in Europe' (No1/2006, EEA, 2006).
27
Ibid, 5; Daniel J Dudek and John Palmisano, 'Emissions Trading: why is this thoroughbred
hobbled?' (1988) 13(2) Colombia Journal of Environmental Law 217 at 222.
28
OECD, 'Recommendation on the Implementation of the Polluter-Pays Principle' (C(74)223, 1974),
I(2).
366
services. 29 This, in turn, is intended to encourage the market to react to the new
price signal for these goods and services and to modify its behaviour to achieve
outcomes that are more economically efficient.30 The emission reduction duties
imposed under the climate change regime are compatible with this principle as
obligations to reduce emissions apply only to those emissions for which the party
is directly responsible. Accordingly, under the climate change regime, nations
are not held responsible for their indirect emissions occurring within other
jurisdictions.
There are a range of policy tools available for use in the regulation of
environmental problems including direct regulation, taxes and charges,
environmental subsidies, voluntary agreements and permit trading systems.31 A
properly designed economic instrument allows a State or entity to use their
knowledge of their own activities to achieve environmental objectives at the
lowest cost. 32 When coupled with a fully functioning and properly designed
trading system, these policy tools can create efficiency gains with the reallocation
of the cost of abatement of emissions to its most cost-efficient point:
properly designed emissions trading markets can capitalize on the common interests
if nations, emissions sources, and the public to provide incentives to meet and
exceed environmental and economic performance goals.33
29
Nicolas De Sadeleer, Environmental Principles: From Political Slogans to Legal Rules (2002) New
York, Oxford University Press at 21. C.J Barrow, Environmental Management for Sustainable
Development (2 ed, 2006) New York, Routledge at 32.
30
Ibid, 21.
31
Nick Johnstone, 'Efficient and Effective Use of Tradable Permits in Combination with Other Policy
Instruments' (Paper presented at the OECD Global Forum on Sustainable Development: Emissions
Trading 17-18 March 2003 Paris, Greenhouse Gas Emissions Trading and Project Based Mechanisms,
Paris, 2003) at 119.
32
Tom Tietenberg, 'Economic Instruments for Environmental Regulation' (1990) 6(1) Oxford Review
of Economic Policy 17 at 22.
33
Annie Petsonk, Daniel J Dudek and Jospeh Goffman, 'Market Mechanisms and Global Climate
Change: An Analysis of Policy Instruments' (Paper presented at the Trans-Atlantic Dialogues on
Market Mechanisms: Bonn 23 October 1998 and Paris, 27 October 1998, 1998) at 5.
367
In this way, market rights are used to commodify environmental harms and to
bring them within the rationale of the market system 34:
production is interaction of man and nature; if this process is to be organized
through a self-regulating mechanism of barter and exchange, then man and nature
must be brought into its orbit; they must be subject to supply and demand, that is, be
dealt with as commodities, as goods produced for sale.35
Consequently, by modifying the price signals experienced by each individual, the

aim is for the best private choice to coincide with the best social choice. 36
Accordingly, it has been stated that a properly designed emissions trading
program can: increase environmental effectiveness; reduce compliance costs;
create financial rewards for environmental performance; tap existing expertise;
and create incentives for new technologies, processes and environmental
management.37
It was as early as the 19th century that John Stuart Mill predicted the possible
development of a market in air owing to its emergence as a scarce resource:
air, for example, though the most absolute of necessaries, bears no price in the
market because it can be obtained gratuitously: to accumulate a stock of it would
yield no profit or advantage to any one.....If it became customary to sojourn long in
places where the air does not naturally penetrate, as in diving-bells sunk in the sea,
a supply of air artificially furnished would, like water conveyed into houses, bear a
price: and if from any revolution in nature the atmosphere became too scanty for
the consumption, or could be monopolized, air might acquire a very high
marketable value (emphasis added)38
34

Karl Polanyi, The Great Transformation (1957) Boston, Beacon Press at 130.
36
Tom Tietenberg, n32, 17; Daniel J Dudek and John Palmisano, n27, 222.
37
Annie Petsonk, Daniel J Dudek and Jospeh Goffman, n33, 5.
38
John S Mill, Principles of Political Economy (1848) at 4, quoted in Yandle, n13, 17.
35
368
The use of market based mechanisms has been heralded as the political saviour
of the climate change regime. Presented as a means of achieving greenhouse gas
emissions reductions at least cost, the market mechanism is regarded as an
innovative policy tool. Under the climate change regime, countries with high
domestic marginal abatement costs are able to purchase credits from those
countries with low emissions abatement costs thereby allowing reductions to take
place in the most cost-efficient geographic location.39 As a result, the cost of
meeting the emission reduction target is significantly lower with international
emissions trading compared to obligations to meet all reductions domestically.40
The use of tradeable emission instruments also creates a financial incentive for
innovation and compliance by nations and businesses with potential economic
returns from the sale of excess permits. 41 Accordingly, the incorporation of
tradeable emission instruments, in the current climate change regime, is designed
to:
convert the open access regime currently governing international use of the
atmosphere into a well-managed commons regime, with an articulated property
rights structure which assures sustainable management practices. 42
However, the use of market instruments as a policy tool is no silver bullet. The
regulatory outcomes of the market will be limited by the choice of emission
reduction target to drive the emissions trading scheme.
Consequently, an
inadequate cap on emissions will undermine the environmental effectiveness of

the market model. Proper monitoring of emissions, and enforcement of noncompliance, will also be paramount. 43 Ultimately, the international climate
39
Mohan Munasinghe and Rob Swart, Primer on Climate Change and Sustainable Development:
40
Erik Haites and Malik Amin Aslam, 'The Kyoto Mechanisms and Global Climate Change:
Coordination Issues and Domestic Policies' (Pew Center on Global Climate Change, 2000) at 1.
41
David M. Driesen, 'Economic Instruments for Sustainable Development' in Benjamin Richardson
and Stephen Wood (eds), Environmental Law for Sustainability: A Reader (2006) Oxford
Portland, Hart Publishing, 277 at 302-303.
42
Patricia A. Monahan, Letting the market control the greenhouse effect: the promise and the pitfalls
of a global emissions trading system (Master of Science (Land Resources) Thesis, University of
Wisconsin, 1992) at 14.
43
Any penalty for non-compliance must be significantly higher than the market price of the permit.
Erik Haites and Malik Amin Aslam, n40,13, 15.
369
market will be lacking in environmental integrity if, collectively, the climate

change regime fails to achieve its global objective of stabilising emissions at a
level that prevents adverse anthropogenic climate change.
As noted by one
commentator:
the carbon market is a means rather than an end and the success of the market and
its various segments will be judged by how effectively it assists us in lowering
[greenhouse gas] emissions, decarbonising our economies and in achieving truly
sustainable development.44
It should also be remembered that the carbon trading market is an artificial

construct which exists purely as a result of the prevailing political will of the
nation States and will remain in existence only for as long as the government
collective deems it appropriate. The temporary nature of the carbon market
introduces a significant element of risk and uncertainty for participants investing
in the scheme. Accordingly, to ensure the optimal operation of the international
market, it will be necessary to instil confidence in the enduring nature of the
tradeable emission instruments, their ongoing inherent value, and the longevity of
the trading system.
B Rights to Emit and Assigned Amount Units

At the beginning of the first commitment period, each Annex-1 party to the
Kyoto Protocol was issued with a number of Assigned Amount Units (AAUs)
equal to the percentage, inscribed for the party in Annex B, of its aggregate
anthropogenic carbon dioxide equivalent emissions of the greenhouse gases in
the base year, multiplied by five. 45 The assigned amounts, listed in Annex B of
the Kyoto Protocol, were agreed upon by each party during negotiations on the
44
David Freestone and Charlotte Streck, 'Introduction: The Challenges of Implementing the Kyoto
Mechanisms' (2007) 2(Special Issues: The Kyoto Protocol and Carbon Finance) Environmental
Liability 47 at 55.
45
UNFCCC, Decision 13/CMP.1: Modalities for the Accounting of Assigned Amounts under Article
7, paragraph 4, of the Kyoto Protocol: Annex: Modalities for the accounting of assigned amounts
under Article 7, paragraph 4, of the Kyoto Protocol(FCCC/KP/CMP/2005/8/Add.2) Section I (B) at
[5].
370
text of the Kyoto Protocol. Each AAU is equal to one metric tonne of carbon
dioxide equivalent calculated using global warming potentials.
AAUs do not create rights in relation to the greenhouse gases themselves,

instead, they provide a bundle of rights in relation to the emission of those gases.
AAUs determine the amount that a party is entitled to emit during the
commitment period but do not provide a right or guarantee that a State will be
permitted to emit a level of emissions in the future. Indeed, the parties have
specifically stated that the Kyoto Protocol has not created or bestowed any right,
title or entitlements to emissions of any kind on parties included in Annex-1.46
AAUs do not expire at the end of the first commitment period and may be banked
for use in any future commitment periods should they eventuate.47
However, the AAUs of a party are not secure and can be varied through any
international agreement reached by the parties in relation to future, post-2012,
commitment periods. According, these AAUs are:
unitized and divisible embodiments of promises accepted by sovereign States in the
context of a multilateral agreement which for that reason can be revoked, revised
and altered through further negotiation. 48
AAUs have been described as quasi property rights comprising of a mixture of a

sovereign right to act and a public property right of government entities.49 These
46
UNFCCC, Decision 2/ CMP 1 Principles, nature and scope of the mechanisms pursuant to Articles
6, 12 and 17 of the Kyoto Protocol, (FCCC/KP/CMP/2005/8/Add 1).
47
UNFCCC, Decision 3/CMP.1: Modalities and Procedures for a Clean Development Mechanism as
Defined in Article 12 of the Kyoto Protocol. Annex: Modalities and Procedures for a Clean
Development Mechanism, (FCCC/KP/CMP/2005/8/Add 1) section F [33].
48
Jacob Werksman (1996) Greenhouse Gas Emissions Trading and the WTO Review of European
Community International Environmental Law 8 (3) 251 quoted in Farhana Yamin, 'The Use of Joint
Implementation to Increase Compliance with the Climate Change Convention' in James Cameron,
Jacob Werksman and Peter Roderick (eds), Improving Compliance with International Environmental
Law (1996) London, Earthscan Publications, 229 at 16.
371
hybrid rights are the cornerstone of the tradeable rights regime under the Kyoto
Protocol yet their exact legal nature was not explained within the treaty or the
decisions of the parties to the climate change regime. The bundles of rights to
emit to the atmosphere is akin to the sovereign rights of nations but these rights
have been fettered and restricted through the consensus adoption of the climate
change regime.
Through that diplomatic compromise, the parties have
recognised the finite nature of the atmospheres sink capacity and created
conditional regulatory rights of access to those atmospheric sinks.50
However, the restriction of those sovereign rights applies only to those parties
who have conceded to such a fetter. Non-parties, such as the US, continue to
hold their customary sovereign rights to access the atmosphere. As such, there
are no specific limits imposed on their right to emit into the atmospheric sink.
However, above a certain emission threshold, their actions would be in breach of
their undertakings as parties to the UNFCCC which requires parties to stabilise
emissions in the atmosphere at a level that would prevent dangerous
anthropogenic interference with the climate system. 51 Accordingly, where the
proportionate emitting behaviour of the US contributes to a level of emissions
which are scientifically shown to lead to dangerous anthropogenic interference
then it would be in breach of its international duties under the terms of that treaty.
In addition, the US, along with the parties to the climate change regime, will
continue to be subject to the existing principles of customary law including the
principle of State liability for transboundary harm. States are not restricted in
their sovereign right to the use of natural resources within their territory provided
that such activities do not cause harm to the territory of another State. This
49
Matthieu Wemaere and Charlotte Streck, 'Legal Ownership and Nature of Kyoto Units and EU
Allowances' in David Freestone and Charlotte Streck (eds), Legal Aspects of Implementing the Kyoto
Protocol Mechanisms: Making Kyoto Work (2005) Oxford, Oxford University Press, 35 at 42.
50
Charlotte Streck, 'The Governance of the Clean Development Mechanism: the case for strength and
stability' (2007) 2 (Special Issue: The Kyoto Protocol and Carbon Finance) Environmental Liability
91 at 92.
51
372
principle requires States not to cause damage to the environment of other States
or areas beyond the limits of their national jurisdiction and to compensate for any
such damage which does occur.52
C CDM Projects and Certified Emission Reduction Units

The Kyoto Protocol enables parties to earn Certified Emissions Reduction Units
(CERs) by transferring technologies and undertaking emission reduction projects
in non-Annex 1 nations (CDM).53 The aim of this tool is thus, prima facie, to
assist Annex-1 parties to reach their targets whilst at the same time assisting
developing nations to achieve sustainable development. As with AAUs, each
CER represents one metric tonne of carbon dioxide equivalent, calculated using
global warming potentials. These units are issued under the Kyoto Protocol as a
result of the implementation and verification of CDM projects aimed at real,
measurable and long-term benefits related to the mitigation of climate change. 54
CERs are able to be transferred to State parties and authorised private entities.
They are additional credits, able to be added to the number of AAUs in a
national account, thereby allowing a State to increase its permitted level of
greenhouse gas emissions for the commitment period.
The CDM became
operational prior to the first commitment period by permitting the use of

emission reductions obtained between 2000 and 2008 to be used to meet the
targets.55 This is subject to the vaguely worded proviso that the use of the market
mechanisms must be supplemental to domestic emission reduction activities
which must constitute a significant element of their efforts to meet the emission
reduction target.56
52
The issues of transboundary harm and other State liabilities for climate damage are considered in
Chapter Three.
53
54
Kyoto Protocol, n2, Article 12(5)(b).
55
56
UNFCCC, Decision 2/ CMP 1 Principles, nature and scope of the mechanisms pursuant to Articles
6, 12 and 17 of the Kyoto Protocol, (FCCC/KP/CMP/2005/8/Add 1) at [1]. The EU has determined
373
The CDM has acted as a catalyst for cooperation and collaboration between
public and private actors towards the development and diffusion of emission
reduction technologies.
However, there are complex approval processes,
significant transaction costs and high levels of uncertainty and risk associated
with investment in CDM projects.
To be registered and approved for
implementation, the project documentation must first demonstrate, to the

satisfaction of the independent verifier and the Executive Board to the CDM, that
the project will result in reductions in emissions which are additional to any that
would otherwise occur in the absence of the project. 57 Projects implemented
under the CDM are also subject to approval locally in the country where the
emission reduction projects are to be implemented.58 In addition, the host party
must provide written confirmation that the project assists it in achieving
sustainable development.59
The CDM has been criticised for its failure to ensure that all CDM projects
achieve the dual objectives of additional emission reductions and the promotion
of sustainable development. 60 In many cases, only the former is occurring and
even then the scale of emission reductions is small in the context of global
emission trends.61 However, the additionality of emission reductions:
is difficult to verify, since it counterfactual. Most stakeholders agree that many
CDM projects are not additional in practice and would also have been implemented
in the absence of the CDM.62
that 50 per cent of its emission reductions must be achieved internally. David Freestone and Charlotte
Streck, n44, 49.
57
Kyoto Protocol, n2, Article 12(5)(c).
58
UNFCCC, Decision 3/CMP.1 n 47, section F [29].
59
Ibid, section G [40] (a).
60
Karen Holm Olsen, 'The Clean Development Mechanism's Contribution to Sustainable
Development: A Review of the Literature' (2007) 84 Climatic Change 59 at 89.
61
Ibid. Ernestine Meijer and Jacob Werksman, 'CDM - Concepts, Requirements and Project Cycle'
(2007) 2(Special Issue: The Kyoto Protocol and Carbon Finance) Environmental Liability 81 at 81.
62
Martin Cames et al, 'Climate Change: Long-Term Prospects of CDM and JI' (Research Report 204
41 192, Federal Environmental Agency (Umweltbundesamt), 2007) at 134.
374
CERs are only granted following the independent verification of the actual
emissions reductions from the completed project and the approval of the
Executive Board. These CER instruments come into existence only through the
achievement of a certain level of emissions abatement. 63 Accordingly, issued
CERs are creatures of a combination of factors including:
the text of the Kyoto Protocol and decisions of the COP/MOP relating to
the category of emission reduction project implemented;
the relevant modalities and procedures of the Executive Board to the

CDM; and
the terms of any contractual agreement(s) between the transacting parties.
The precise legal nature of the CER will depend upon the application,
interpretation and interaction of all these instruments. Where certain aspects of
the CDM are not addressed within those legal documents then it must be
addressed by the applicable domestic laws. Consequently, only practice will
reveal whether this hybrid of public, private, domestic and international law
provides a sufficient legal foundation for a market on which the planets future
depends.64
Participants to a CDM project will involve the developing host country, Annex-1
developed nation, project developers, project investors and land owners. The
legal rights of each of those participants in the abatement project are somewhat
unclear. As a general principle, the right to ownership of the emission instrument
will vest with the entity responsible for the implementation of the emission
reduction activities. However, in the context of carbon sequestration projects,
63
Martijn Wilder, Monique Willis and Mina Guli, 'Carbon Contracts, Structuring Transactions:
Practical Experiences' in David Freestone and Charlotte Streck (eds), Legal Aspects of Implementing
the Kyoto Protocol Mechanisms: Making Kyoto Work (2005) Oxford, Oxford University Press, 295 at
301.
64
Ernestine Meijer and Jacob Werksman, n61, 89.
375
ownership of the land, the tree and the sequestered rights may rest with different
entities.65 Legal ownership will also differ if the stored carbon is treated as a
natural resource within the domestic jurisdiction. In such a case, ownership in
the natural resource may be considered to reside in the government.66 In addition,
due to the international implications of the abatement of emissions, national
governments may claim sovereign entitlements to the instruments. Consequently,
it is essential that all participants reach clear agreement on the method of
allocation of the CERs produced by the project, and the legal entitlements and
obligations of each party to the transaction.
Temporary and Long-Term Instruments for Forestry
There are varying types of CERs which may be issued depending upon the
category of CDM project implemented by the parties. Whilst the majority of
projects will result in the same output, that is, CERs, misgivings as to the
permanence of emissions reductions from certain types of Land Use, LandUse Change, and Forestry (LULUCF) projects resulted in the creation of
additional restricted credits. These misgivings are based on the potential for
carbon leakage from reduction projects involving land management practices
or, more significantly, carbon sequestration in forests. Trees and vegetation
extract carbon dioxide from the atmosphere through their processes of
photosynthesis.
However, the absorption and storage of carbon in these
projects are perceived as non-permanent. Natural disturbances such as fires

or pests or human disturbances such as changes in management practices or
harvest will result in the release of the accumulated carbon stock into the
atmosphere. As a result, the parties agreed under the Kyoto Protocol that net
emissions reductions or removals by sinks resulting from LULUCF activities
would result in the creation of removal units (RMUs) for the first
65
Martijn Wilder, Monique Willis and Katherine Lake, 'Commodifying Carbon' in Kenny Tang (ed),
The Finance of Climate Change: A Guide for Governments, Corporations and Investors (2005)
London, Risk Books, 51 at 60. The specific rights associated with biological sequestration are
discussed later in this Chapter.
66
Martijn Wilder, Monique Willis and Mina Guli, n63, 301.
376
commitment period of the Kyoto Protocol. These are temporary credits not
able to be banked following the end of the first commitment period in 2012.
Certain LULUCF activities, namely afforestation and deforestation, may also

be implemented as CDM projects. To address the non-permanence criticisms
of these sink projects the parties agreed to the creation of specific temporary
crediting for these CDM projects, namely, temporary CERs (tCERs) and
long-term CERs (lCERs).
A tCER is a CER issued for afforestation or
deforestation activities which expires at the end of the commitment period

following the one during which it was issued. 67 A lCER expires at the end of
the crediting period of the afforestation or reforestation activity for which it
was issued. 68 Project participants may elect which of these credits will be
issued for the emission reductions from the sink projects. The crediting
period can be for a maximum of 20 years, renewed twice, or a maximum of
30 years. At the time of each renewal, it must be demonstrated that the
original project baseline is still valid or has been updated taking into account
new data. 69 In addition, the quantity of removals of emissions must be
verified, prior to certification, every five years for the duration of the
crediting period.70 In the event that the amount of sequestered carbon in the
project has reduced, the tCERs and lCERs must be replaced with credits from
the same activity or AAUs will be deducted from the participants account.71
67
UNFCCC, Decision 5/CMP 1 Modalities and Procedures for Afforestation and Deforestation
Project Activities under the Clean Development Mechanism in the First Commitment Period of the
Kyoto Protocol Annex, Definitions.
68
Ibid.
69
UNFCCC, Decision 19/CMP 9, n67, Annex, G [23].
70
Ibid, Annex, I [32][33].
71
Benoit Bosquet, 'Specific Features of Land Use, Land-Use Change, and Forestry Transactions' in
Mechanisms: Making Kyoto Work (2005) Oxford, Oxford University Press, 281 at 288; Sebastian
Scholz and Ian Noble, 'Generation of Sequestration Credits under the CDM' in David Freestone and
Charlotte Streck (eds), Legal Aspects of Implementing the Kyoto Protocol Mechanisms: Making
Kyoto Work (2005) Oxford, Oxford University Press, 265 at 270.
377
The implementation of a registered monitoring plan is a condition of

verification, certification and issuance of any tCERs and ICERs.72 The issue
of tCERs and lCERs are conditional upon the project developer complying
with a number of requirements aimed at ensuring the integrity of the sink
removals.
tCERs and lCERs may be used towards meeting a partys
emission reduction target for the commitment period in which they are
issued. A party may only use tCERs and lCERs for a maximum of one per
cent of the partys base year emissions for each year of the commitment
period. In addition, at the end of the crediting period tCERs and lCERs must
be replaced with other allowances under the climate change regime or with
new tCERs/lCERs.73
Different approaches to the treatment of carbon sequestration credits have

been adopted around the world. The core difference has been the permanence
of the credit issued for the sequestration and the time period in which the
sequestration project must be monitored and managed. This differentiation
causes significant difficulties in terms of the fungibility of tradeable
instruments across market systems. It also raises criticisms regarding the
environmental integrity and sustainable outcomes of the climate change
regime.
On one view, these sequestration projects are no more than a
temporary measure which defer the inevitable emission of carbon to the

atmosphere. Alternatively, these measures are a short-term solution which
may ease the burden of achieving the necessary emission cuts by the middle
of the 21st century. If it is envisaged that we will soon shift to a low carbon
economy in which technological innovations will reduce the emitting
behaviour of society then, in such circumstances, the future escape of
emissions from these temporary stores would have a less severe atmospheric
impact than in current circumstances.
72
UNFCCC, Decision 5/CMP 1, n67, Annex, H [29].

Ibid, Annex K, [44] [48]. UNFCCC, Decision 16/CMP.1: Land-Use Land-Use Change and
Forestry Annex: Definitions, modalities, rules and guidelines relating to land use, land- change and
forestry activities under the Kyoto Protocol (FCCC/KP/CMP/2005/8/Add.3), section D.
73
378
D JI Projects and Emission Reduction Units

Emission Reduction Units (ERUs) are created following the implementation and
verification of Joint Implementation (JI) projects in Annex-1 party jurisdictions.
Under the Kyoto Protocol, investors in Annex-1 parties with emission limits are
able to assist other Annex-1 parties to implement projects in their jurisdiction
aimed at reducing anthropogenic emissions by sources or enhancing
anthropogenic removals by sinks of greenhouse gases in any sector of the
economy. 74 A JI project must have the approval of all parties involved and it
must again be demonstrated that the emissions reductions achieved by the project
are additional to any that would have occurred in the absence of the project.75
The method of creation of these rights depends upon whether the host nation
meets the pre-requisites to follow the simplified approval process. If these prerequisites are met, then the host country will itself verify and grant the
appropriate number of ERUs to the Annex-1 party. If this is not the case, then
the Joint Implementation Supervisory Board will perform this function following
verification by an accredited independent entity (AIE). 76 Unlike CERs issued
under the CDM, the credits resulting from these JI projects are not additional
credits. The host party must cancel the requisite number of AAUs or RMUs in
its holding account and issue the same number of ERUs to the nominated party.77
Accordingly, these rights can be regarded as a hybrid of the AAU and CER
instruments. JI projects are likely to only be approved within those jurisdictions
which possess AAUs in excess to those required to meet their emission reduction
duties under the Kyoto Protocol. This is unlikely to be the case in Australia.
74
Kyoto Protocol, n2, Article 6.1.

Ibid.
76
UNFCCC, 'Decision 9/CMP.1: Guidelines for the Implementation of Article 6 of the Kyoto
Protocol. Annex: Guidelines for the Implementation of Article 6 of the Kyoto Protocol',
77
Kyoto Protocol, n2, Article 6.1(b).
75
379
EFFECTIVENESS OF THE EMERGING GLOBAL CARBON MARKET
In considering the role of law in facilitating the global carbon market, it is

necessary to identify the key principles by which the effectiveness of the legal
framework can be assessed.
It is necessary to identify and balance the
requirements for effectiveness across a range of disciplines with potentially

conflicting
requirements,
namely,
legal,
economic
and
environmental
requirements. A holistic analysis of these requirements is necessary in order to

achieve an overall appreciation of the principles for the effective design and
operation of a legal regime that utilises innovative market mechanisms to reduce
greenhouse gas emissions and address climate change. In addition, the climate
change regime must be assessed as a whole and the effectiveness of the carbon
market as an innovative regulatory tool must be viewed as a part of both the
international and domestic regulatory spheres.
The principles of effectiveness, designed to achieve a holistic balance between

the potentially conflicting principles of the various disciplines, can be described
as follows:
the economic requirements for the optimal performance of a market

including market efficiency and cost-effectiveness;78
78
Market efficiency, in this context, has been considered in the following papers: Michael I. Jeffery
and Warwick R. Baird, 'Using Market-Based Incentives to Curtail Greenhouse Gas Emissions:
Factors to Consider in the Design of the Clean Development Mechanism, Joint Implementation and
Emissions Trading' (2001) 6(2) Asia Pacific Journal of Environmental Law 117; Organisation for
Economic Co-operation and Development, 'Global Warming: Economic Dimensions and Policy
Responses' (Organisation for Economic Co-operation and Development, 1995); John Palmisano,
Establishing a Market in Emissions Credits: a Business Perspective, IEA environment briefing; no. 2;
(1996) London, The Institute of Economic Affairs; Richard Sandor, 'Implementation Issues: Market
Architecture and the Tradeable Instrument (in search of the trees)' in United Nations Conference on
carbon emission entitlements (1992) New York, United Nations, 151; Tom Tietenberg,
'Implementation Issues for Global Tradeable Carbon Entitlements' in Ekko Van Ierland (ed),
International Environmental Economics:Theories, Models and Applications to Climate Change,
International Trade and Acidification (1994) Amsterdam, Elsevier, 119; Nick Johnstone, n31, Annie
Petsonk, Daniel J Dudek and Jospeh Goffman, n33.
380
the environmental policy requirements for effective environmental

outcomes including environmental protection,
79
administrative
flexibility and global equity;80 and

the
legal
requirements
for
the
effective
implementation,
administration and enforcement of a legally enforceable climate

change regime including clear rules, stringent monitoring and
verification processes and appropriate enforcement mechanisms.81
The mechanisms of CDM, JI and emissions trading mechanisms were introduced

by the parties to the climate change regime as a means of providing a costeffective way of achieving global greenhouse gas emission reductions.
Therefore, to operate effectively, these market instruments must result in costeffective outcomes.82 The literature reviewed identifies a range of factors which
may have an impact on the effectiveness of the operation of market mechanisms.
The effectiveness of the market mechanisms as flexible and cost-effective
measures will depend upon the current and future domestic and international
legal schemes developed to regulate these market instruments. Any restrictions
on market access and trade, high transaction costs or other market distortions will
79
Russell S Jutlah, 'Economic Instruments and Environmental Policy in Canada' (1998) 8 Journal of
Environmental Law and Practice 323; Nathaniel O. Keohane, Richard L. Revesz and Robert N.
Stavins, n43; Tomasz Zylicz, 'Improving Environment through Permit Trading: the Limits to a Market
Approach' in Ekko C Ierland (ed), International Environmental Economics: Theories, Models and
Applications to Climate Change, International Trade and Acidification (1994) Amsterdam, Elsevier,
283.
80
Brent M. Haddad and John Palmisano, 'Market Darwinism vs. Market Creationism: Adaptability
and Fairness in the Design of Greenhouse Gas Trading Mechanisms' (2001) 1(4) International
Environmental Agreements: Politics, Law and Economics 427; Adam Rose, ''Equity' Considerations
of Tradeable Carbon Emission Entitlements' in United Nations Conference on Trade and
Development (ed), Combating Global Warming: study on a global system of tradeable carbon
emission entitlements (1992) New York, United Nations, 55; Leslie Shiell, 'Equity and efficiency in
international markets for pollution permits' (2003) 46(1) Journal of Environmental Economics and
Management 38; Hermann E. Ott and Wolfgang Sachs, 'The Ethics of International Emissions
Trading' in Luiz Pinguelli-Rosa and Mohan Munasinghe (eds), Ethics, Equity and International
Negotiations on Climate Change (2002) Cheltenham, UK, Edward Elgar, 159.
81
See, for example, discussions in Gregory Rose, 'A Compliance System for the Kyoto Protocol'
(2001) 7(2) New South Wales Law Journal 37 and Sonja Peterson, 'Monitoring, Accounting and
Enforcement in Emissions Trading Regimes' (Paper presented at the OECD Global Forum on
Trading and Project Based Mechanisms, Paris, 2003).
82
Patricia A. Monahan, n42, 19.
381
increase the economic cost of fulfilling the emission reduction commitments and
will reduce the effectiveness of the market as an innovative policy tool.83 Costs
of information procurement, contract negotiations and monitoring and
verification as well as the multiple layers of domestic and international approvals
may also hinder the flexibility and cost-effectiveness of these market
instruments.
84
In addition, any incompatibility between domestic legal
institutions and the agreed framework for the climate change regime will impede
the flexibility and environmental effectiveness of the mechanisms.85
Accordingly, the prerequisites for the effective operation of these market

mechanisms can be synthesised into the following principles:
clear definition of fungible, tradeable emission instruments with

appropriate legal protection in carbon market systems; 86
clear, transparent and consistent rules for participation in the

market;87
83
Darren Kennedy et al, 'Global Economic Impacts of the Kyoto Protocol' in Australian Department
of Foreign Affairs and Trade (ed), Trading Greenhouse Emissions: Some Australian Perspectives
(1998) Canberra, Commonwealth of Australia, 91 at 101-103.
84
Axel Michaelowa, 'Flexible Instruments of Climate Policy' in Axel Michaelowa and Michael
Dutschke (eds), Climate Policy and Development: Flexible Instruments and Developing Countries
(2000) Cheltenham, UK, Edward Elgar, 1 at 12. Frauke Eckermann et al, 'The Role of Transaction
Costs and Risk Premia in the Determination of Climate Change Policy Responses' (Discussion Paper
No. 03-59, ZEW (Centre for European Economic Research), 2003).
85
In relation to compatibility of domestic and international trading systems see Jae Edmonds et al,
'International Emissions Trading and Global Climate Change: Impacts on the Costs of Greenhouse
Gas Mitigation' (Pew Center on Global Climate Change, 1999) at 32 and Jan-Tjeerd Boom, 'Design of
International Emissions Trading Scheme: A Comparison and Analysis' (2005) unpublished (provided
by the author on 29 September 2005) at 11.
86
Richard B Stewart and Phillipe Sands, 'The Legal and Institutional Framework for a Plurilateral
Greenhouse Gas Emissions Trading System' in Greenhouse Gas Market Perspectives Trade and
Investment Implications of the Climate Change Regime: Recent Research on Institutional and
Economic Aspects of Carbon Trading, UNCTAD/DITC/TED/Misc.9 (2001) United Nations, 5 at 10
and Tom Tietenberg, 'Implementation Issues: A General Survey' in United Nations Conference on
carbon emission entitlements (1992) New York, United Nations, 127 at 133. See also Joe Motha,
'Tradeable Permits: Terms and Taxonomy' in Bureau of Transport Economics (ed), Trading
Greenhouse Emissions: Some Australian Perspectives (1998) Canberra, Bureau of Transport
Economics, 25; Zhong Xiang Zhang, 'The Design and Implementation of an International Trading
Scheme for Greenhouse Gas Emissions' (2002) 39(4) Peace Research Abstracts 459 and Kjell Roland,
'From Offsets to Tradeable Entitlements' in United Nations Conference on Trade and Development
(ed), Combating Global Warming: study on a global system of tradeable carbon emission
entitlements (1992) New York, United Nations, 23.
382
an open access market with minimal restrictions on trade and an open

flow of information to the market;88
compatibility between the design of the carbon markets in all

participating domestic jurisdictions and the market under the climate
change regime;89 and
appropriate monitoring and reporting processes, within each legal

framework, to ensure player confidence in the market 90 and to enable
non-compliance to be identified and appropriately addressed. 91
The implications of these requirements on the necessary legal infrastructure to

regulate greenhouse gas emissions, in conjunction with a carbon market system,
are discussed in the following paragraphs.
A Clear Definition of Tradeable Emission Instruments

The greatest legacy of the Kyoto Protocol is arguably its introduction of property
rights in the carbon sink mechanisms of the global atmosphere thus creating a
market in the protection of the global atmospheric commons. Property rights in
the tradeable emission instrument are one of the core pillars of an effective
87
Richard F. Kosobud, 'Emissions Trading Emerges from the Shadows' in Richard F. Kosobud (ed),
3 at 29; Robert Stavins, 'What Do We Really Know About Market-Based Approaches to
Environmental Policy? Lessons from Twenty-Five Years of Experience' in Richard F. Kosobud (ed),
49 at 55.
88
Richard Kosobud, n87, 25.
89
Richard Baron and Stephen Bygrave, 'Towards International Emissions Trading: Design
Implications for Linkages' (OECD, IEA, 2002) at 38-39 and 58. Erik Haites, 'Harmonisation Between
National and International Tradable Permit Schemes' (Paper presented at the OECD Global Forum on
Trading and Project Based Mechanisms, Paris, 2003) at 108. See also Zhong Xiang Zhang, 'Should
the Rules of Allocating Emissions Permits be Harmonised?' (1999) 31 (1) Ecological Economics;
(2000) 14(4) Journal of Planning Literature .
90
Richard Kosobud, n87, 30; Robert Stavins, n87, 56.
91
(UNCTAD/GDS/GFSB?Misc.6, United Nations Conference on Trade and Development, 1999) at 84.
383
market system. Traditional principles of property law refer to the need for these
rights in property to bestow on the holder the rights of usus, abusus and fructus.
Usus being the right to use the resource; abusus the right to destroy it, to give it
away and to sell it; and fructus the ability to harvest the fruits of that resource.
Therefore, the nature of the property right will play a significant role in the
ultimate success of the international climate change regime. However, the parties
to the Kyoto Protocol specifically recognised that the Kyoto Protocol has not
created or bestowed any right, title or entitlement to emissions of any kind on
parties.92 Moreover, at a domestic level, these tradeable instruments may take
various forms including private property rights, permits to emit, public rights,
security instruments or some other form of intangible asset.
The effectiveness of the multi-national carbon market will depend upon the
harmonious recognition and treatment of the tradeable emission instruments. In
order to hold value as an element in domestic legal systems, these instruments
must be legitimised and protected by the legal system. Greater legitimacy will
lead to greater player confidence in the market resulting in increased numbers of
market dealings and, ultimately, a more effective carbon market.
The significance of the legal nature of the property rights have been described as
follows:
Property must have a clear-cut or crystalline quality which admits of no doubt
either as to its presence or, just as important, as to its absence or infringement. The
rights to which property relates must have a hard-edged definitional integrity
conducive to the intellectual orderliness of the regime as a whole. Property must
come in neat, pre-packaged conceptual compartments, immune from capacious
tampering or even well-intentioned amplification.93 (emphasis added)
92
UNFCCC, Decision 5/CP.6 'The Bonn Agreements on the Implementation of the Buenos Aires
Plan of Action', (FCCC/CP/2001/5), Part VI, Division 1 at 42.
93
Kevin Gray and Susan Francis Gray, 'The Idea of Property in Land' in Susan Bright and John
Dewar (eds), Land Law: Themes and Perspectives (1998) New York, Oxford University Press, at 3132.
384
Property in this context refers to the legal relationship between the holder and the
object and to the bundle of rights able to be exercised in relation it. 94 The
concept of property as a bundle of rights has been described as principally the
rights to possess the property, to use the property, to exclude others from the
property, and to dispose of the property by sale or by gift. 95 Private property
rights must be able to be defined, defended and divested.96 To be clearly defined,
the physical attributes of the resource must be appropriately specified so as to be
measurable and identifiable. 97 As commented:
for a market to an effective instrument of governance, the nature and subject matter
of these rights must be clear, certain and predictable. Whether they have these
characteristics is a reflection not only of their own nature but also of the operational
powers and capacities associated with these rights.98
The fluidity of the atmosphere makes such identification and measure physically
impossible. An owner cannot point to a portion of the invisible atmosphere and
state that gas is mine. However, the sink capabilities of the atmosphere are
technically definable through scientific research and the Kyoto Protocol has
enabled virtual trade in this artificial construct within defined limits. 99 It is
therefore possible to be conceptually clear as to what each allowance represents
in terms of the level of permitted emissions associated with each tradeable
instrument.
94
For example, Yanner v Eaton (1999) 201 CLR 351 per Gleeson CJ, Gaudron J, Kirby J and Hayne J.
Moore v Regents of the University of California (1990) 793 P. 2d 479 per Mosk J.
96
Yandle,n13, 15.
97
Terry L. Anderson and Donald R. Leal, Free Market Environmentalism (1991) Boulder, Westview
Press at 20.
98
Douglas E. Fisher, 'Delivering the National Water Initiative, New Frameworks for Law and
Regulation, The Emergence of Innovative Legal Doctrine' (Paper presented at the Delivering the
National Water Initiative: understanding the social and industry dimensions, Parliament House
Canberra, 4-5 December 2006) at 23.
99
Yandle, n13 at 29 uses the example of the thickness of the ozone layer as a definable property right.
95
385
In terms of effectiveness of the climate change regime, the following legal

attributes can be identified as critical features for the effective use of tradeable
emission instruments in a market system: duration; exclusivity; transferability;
divisibility; quality of title; and flexibility. 100 Without the presence of each of
these elements, the allocated legal instrument will be more akin to regulatory
property, with limited property protections, than a commodity and will attract a
lesser value with repercussions for the effectiveness of the market system. 101
Consequently, to establish true commodities in the market system, the climate
change regime must create clearly defined, fungible, tradeable emission
instruments appropriately protected by rules securing ownership and transfer.102
The benefits associated with these instruments should also be capable of
unambiguous identification, protection, assignment, transfer and banking and
should be capable of being made the subject of a mortgage or charge. The
system must also instil market player confidence in the longevity of the market
and the long term protection and recognition of the trading instruments. In
particular, participants in the international climate market will require assurances
that their instruments will be recognised and protected in the post-2012
regulatory landscape.
However, this need for adequate property rights protections in order to achieve
market efficiency has the potential to create tensions with the achievement of the
environmental goals of the climate change regime. Such focus on the protection
of the emission rights of the individual could prevent strong regulation to address
the global threat of climate change and the need for humankind as a whole to act
to protect the atmospheric commons. Accordingly, a balance must be achieved
in all such regimes between the short term protection of rights in property and the
need to protect the global society in the long term.
100
Scott quoted in Alina Averchenko, Factors of Effectiveness of the International Climate Change
Regime (PhD Thesis, University of Bath, 2004) at 102.
101
For a discussion of commodification in the water context see Janice Gray, 'Legal Approaches to
the Management and Regulation of Water from Riparian Rights to Commodification' (2006) 1(2)
Transforming Cultures eJournal 64.
102
Richard B Stewart and Phillipe Sands, n86, 10 and Susan Rose-Ackerman, 'Environmental
Liability Law' in Tom Tietenberg (ed), Innovation in Environmental Policy: Economic and Legal
Aspects of Recent Developments in Environmental Enforcement and Liability (1992) Hants, Edward
Elgar 223 at 223. Joe Motha, n86; Zhong Xiang Zhang, n86 and Kjell Roland, n86.
386
B Clear, Transparent and Consistent Rules

All legal frameworks to regulate climate change must ensure that they observe
the need for legitimacy and authority in the rule-making functions. The presence
of such legitimacy will enhance the pulling power of such regimes and, at an
international level, may coerce States to comply with rules when it is not
necessarily in their short term interest to do so. 103 Consequently, the more an
institution is perceived as legitimate, the more stable and effective it is likely to
be in operation.104 The United Nations Development Programme formulated a
collection of principles which it considers imperative for the establishment of
internationally good governance and which are equally relevant to the climate
change regime.
These principles include: legitimacy and voice; direction;
performance; accountability; and fairness. 105 To achieve the first principle of

legitimacy and voice, the international climate change regime must ensure that
due process has been followed in the establishment of its rules. The rule-making
processes of the climate change regime must comply with the fundamental
requirements of the rule of law and must meet those essential characteristics of
fairness, justice and integrity. 106 The climate change regime must, inter alia,
provide meaningful public engagement and participation in decision-making
processes.
The principle of direction looks to the institutional structure and the power of the
institutions of the climate change regime, in particular, their leadership and
ability to set future policy directions and to adapt to changing environmental,
economic and social conditions.
Performance refers to the efficiency and
effectiveness of those institutions and their regulatory instruments in achieving

cost-effective reductions in emissions under the climate change regime. The
103
Thomas M. Franck, 'Legitimacy in the International System' (1988) 82 American Journal of

International Law 705 at 705.
104
Daniel Bodansky, 'The Legitimacy of International Governance: A Coming Challenge for
International Environmental Law' (1999) 93 American Journal of International Law 596, drawing on
the findings of Weber, at 603.
105
John Graham, Bruce Amos and Tim Plumptre 'Principles for Good Governance in the 21st
Century' (Institution on Governance, 2003).
106
Thomas M. Franck, n103, 709.
387
concepts of accountability and fairness are intrinsically linked with the need for
transparency and equity in the regulation of greenhouse gas emissions across the
globe.
C Access to the Market and Minimal Restrictions on Trade

An optimal market system requires transparency in the system with clearly
defined rules for players in the market, minimal restrictions on trade and an open
flow of information to the market. 107 These requirements are necessary in order
to instil market confidence in the system and to promote optimal market
performance. In terms of trade in emission instruments, economic principles
suggest that, to enhance market efficiency, administrators must avoid excessive
regulation of private transactions. 108 Requirements for approval prior to trade or
the imposition of conditions on use will have an impact on the flexibility of the
mechanisms.109 These restrictions will translate into cost and time implications
for the parties.
Open access to the market will also encourage market liquidity and facilitate an
efficient market system. 110 Any restrictions on participation in the market or on
the ability to trade will impede this market efficiency even if such restrictions are
valid on legal or environmental grounds. 111 However, the drive for market
efficiency must be balanced against the need for regulators to maintain flexibility
in the implementation of the regime, for example, in the adjustment of the
number of tradeable emission instruments in response to new predictions
regarding the threats of adverse climate change.
107
Richard F. Kosobud, n87, 29; Robert Stavins, n87, 55.

Axel Michaelowa, n84, 9; Susan Rose-Ackerman, n102, 233.
109
Annie Petsonk, Daniel J Dudek and Jospeh Goffman, n33, 6-7.
110
Richard F. Kosobud, n87, 25.
111
Ibid.
108
388
D Compatible Design of International and Domestic Market Systems

The climate change regime, like many international treaties, relies on compatible
implementation at a domestic level to ensure its operation.
Therefore, the
effective operation of a global, multi-national, carbon market requires domestic

institutions and measures to be compatible with the terms of the Kyoto Protocol
and with its institutional structures.112 From a modern environmental governance
perspective, there must also be consistent and complementary interactions
between the climate change regime and other international environmental
regimes. This includes horizontal interactions between institutions at the same
level of the organisation and vertical interactions between hierarchically ordered
units from the local to the international level. 113
The climate change regime remains largely silent on the manner in which parties
should implement their international obligations within the domestic sphere.
This has resulted in the adoption of hybrids of domestic policy approaches to
emissions reductions incorporating a combination of policies, command and
control instruments, carbon taxes, subsidies and incentives and greenhouse gas
offset and cap and trade systems. As a result, there is a significant issue as to
the lack of compatibility and potential inconsistencies between the emergent
domestic approaches and international objectives.
A number of parties have or are proposing to develop linkages between proposed

or existing emissions trading models.
From an economic perspective, these
linkages between national emissions trading systems may provide opportunities

to meet the targets at a lower total cost and with increased market liquidity and
112
Kluwer Law International at xix.
113
Oran R Young, The Institutional Dimension of Environmental Change: Fit, Interplay, and Scale
(2002) Cambridge, The MIT Press at 113-132 cited in Sebatsian Oberthur and Thomas Gehring (eds),
Institutional Interaction in Global Environmental Governance: Synergy and Conflict among
International and EU Policies (2006) Cambridge, The MIT Press at 21.
389
player competitiveness 114 However, if different schemes have vastly different

systems and quality controls, this could affect the environmental integrity of the
system.115
In order to achieve the utopia of a multi-national global market in tradeable

emission instruments, envisaged by the Kyoto Protocol, the scheme will need to
merge these distinct market systems with their different treatments of greenhouse
gas emissions, definitions of credits, conditions of use and market values. 116
Monitoring, verification and enforcement approaches between various systems
are critical issues due to the risk of potentially unsound credits accessing the
international market via countries with more lax verification systems. 117
Inconsistencies in penalties, or lack of enforcement of strong penalties, will also
cause difficulties as this may provide an incentive for non-compliance to be
exported to the system where the penalty level is the lowest.118
E Appropriate Monitoring, Verification and Enforcement Processes

Ultimately, the UNFCCC and Kyoto Protocol are together aimed at avoiding the
adverse effects of climate change through the reduction of greenhouse gas
emission levels. In particular, the target of the Kyoto Protocol is to achieve a
minimum five per cent reduction in global greenhouse gas emission levels,
compared to 1990 levels, by the end of the first commitment period in 2012.
Accordingly, one factor of analysis would logically be whether the design of the
regulatory framework can assist in achieving the environmental objectives of the
regime. The achievement of the emission reduction targets requires the creation
of mechanisms for monitoring, verification and enforcement. Such a regime
must be supported by appropriate methods of enforcement which are embedded
114
Erik Haites, n89, 105. Deborah Stowell, Climate Trading: Development of Greenhouse Gas
Markets (2005) Hampshire, Great Britain, Palgrave Macmillan at 95.
115
Deborah Stowell, ibid, 214.
116
Charles W. L. Hill, Global Business Today (4th ed, 2006) Boston, McGraw-Hill Irwin at 7. These
issues are considered further in Chapter Seven.
117
Sonja Peterson, n81, 195.
118
Ibid. See also Erik Haites, n89, 108.
390
with the concepts of fairness, justice, and due process and these mechanisms
must be implemented in a transparent and consistent manner in order to gain the
acceptance of the global community and to act as suitable deterrents.
Without the parties meeting their emission reduction targets, the environmental
integrity and credibility of both the market mechanisms and the Kyoto Protocol
will be undermined.119 Additionally, in the absence of appropriate enforcement,
there will be little incentive to alter current global behaviours regarding
greenhouse gas emission levels. 120 Accordingly, the effectiveness of the market,
as an innovative policy tool, requires that there be in place not only appropriate
monitoring and verification of the creation and trade of the emission instruments
but also sanctions for any identified non-compliances. 121
Monitoring and
verification of greenhouse gas emissions, emission reduction projects and

resulting tradeable emission instruments are integral components of a working
market system and essential to achieve environmentally acceptable outcomes
under the climate change regime. 122 Monitoring under the climate change regime
takes place through the preparation of national inventories of greenhouse gas
emissions.
Accordingly, a high quality system for gathering and verifying
information on sources and sinks of greenhouse gases is a prerequisite for

authoritative review and legitimate response. 123 With many national inventories
relying on estimates of their emissions, rather than concrete monitoring of actual
emissions, the accuracy of these reports may be questioned with resulting
impacts on the environmental integrity of the climate change regime.
119
Erik Haites and Malik Amin Aslam, n40, 6.

Ronald B. Mitchell, 'Flexibility, Compliance and Norm Development in the Climate Regime' in
Olav Schram Stokke, Jon Hovi and Geir Ulfstein (eds), Implementing the Climate Regime:
International Compliance (2005) London, Earthscan, 65 at 65.
121
Tom Tietenberg et al, n91, 53, 84.
122
Richard F. Kosobud, n87, 30; Robert Stavins, n87, 56.
123
Compliance (2005) London, Earthscan, at 5.
120
391
LEGAL FEATURES OF THE EMERGENT CARBON MARKETS

A The International Climate Market
As discussed above, the Kyoto Protocol creates a range of market instruments
relating to the emission of greenhouse gases to the atmosphere including AAUs,
CERs and ERUs. International trade in each of these emission instruments was
also established as one of the innovative mechanisms adopted under the climate
change regime.
Eligible Annex-1 parties may buy or sell their allowances
through emissions trading. 124 The ability to engage in emissions trading is

conditional upon the State party being in compliance with certain eligibility
requirements including the obligation to submit annual estimates of emissions
and to maintain a level of reserve allowances within the national registry. 125
AAUs may also be traded by private entities where they are authorised to trade
on behalf of a State.126
Through the combined effect of the flexibility mechanisms of CDM, JI and

global emissions trading parties to the climate change regime are, prima facie,
provided with the means to achieve global emissions reductions at those
locations where the cost of reduction is lowest. These trading mechanisms are
still largely in their embryonic stages and the success of these emission
instruments depends upon the effectiveness of the legal rules and frameworks
created, both domestically and internationally, for the implementation and
operation of these emerging carbon trading markets. Although negotiations for
the post-2012 climate change regime are still in progress, it seems very likely that
the key features of these tradeable instruments and the international climate
market will be included in any negotiated regime. The UNFCCC Executive
Secretary has estimated that the carbon market under the Kyoto Protocol will
124

UNFCCC, Decision 3/CMP.1 n47, at [2]. The automated International Transaction Log (ITL),
managed by the UNFCCC Secretariat, verifies the validity of the transactions prior to allowing them
to proceed between registries, UNFCCC, Decision 13/CMP.1: Modalities for the Accounting of
Assigned Amounts under Article 7, paragraph 4, of the Kyoto Protocol: Annex II: Registry
Requirements (FCCC/KP/CMP/2005/8/Add.2), Section D [38].
126
UNFCCC, Decision 3/CMP 1 n47, at [5].
125
392
increase from 30 billions Euros in 2006 to 63 billion Euros in 2008. 127 The
growth of trade in AAUs will depend largely on the politically acceptability of
buying so-called hot air or surplus AAUs from Russia and the Ukraine who
have excess allowances following the collapse of the soviet union and subsequent
economic crisis in the 1990s. 128 There has been a recent growth in the primary
and secondary CER markets.129 Given its later starting date, there has been only
limited trade in ERUs under the JI mechanism. 130
Future growth in this
international market will be significantly affected by the ability to submit these

instruments in compliance with the emerging regional and domestic trading
schemes as well as improvements to the approval processes for CDM and JI
projects to reduce transactions costs, uncertainty and risk for investors.
A key legal issue in the international climate market is the absence of definition
of the tradeable emission instruments. By failing to appropriately characterise
the nature of the emission instruments under the international climate change
regime, these rights must be dealt with in a haphazard and ad hoc fashion by
domestic legal principles under a range of civil law and common law systems
which were not established with the treatment of these novel forms of property in
mind. As a result of this forced fusion, the bundle of rights associated with a
tradeable emission instrument will differ according to: the origins of the
instrument, that is, the applicable laws for how and where it was created; its
contractual treatment; and its recognition and treatment in the jurisdiction in
which the instrument is held. The result is inconsistency and uncertainty in the
bundle of rights and protections associated with these instruments across the
international market system. Moreover, the specification of these rights is not
127
Yvo de Boer, 'Key Note Address: Executive Secretary, United Nations Framework Convention on
Climate Change' (Paper presented at the Carbon Market Insights 2008, Copenhagen, Denmark, 11
March 2008) at 4.
128
Kjetil Roine and Endre M. Tvinnereim, 'The Global Carbon Market in 2007' in David Lunsford
(ed), Greenhouse Gas Market 2007 Building Upon A Solid Foundation: The Emergence of a Global
Emissions Trading System (2007) Geneva, International Emissions Trading Association, 42 at 44.
129
Ibid,43. The primary market relates to the sale of credits, prior to issue by the CDM Executive
Board, through emission reduction purchase agreements (ERPA) while the secondary market trades
CERs which have actually been issued by the board.
130
Ibid.
393
assisted by the circular definitions currently utilised in standard form contracts

for the generation and sale of tradeable emission instruments.131
B The Emergence of Domestic Carbon Trading Systems

The international climate change regime relies upon the domestic implementation
of emission reduction policies and initiatives to achieve its objectives of avoiding
the adverse effects of climate change. Through its silence on the matter, it also
(inadvertently) establishes a critical role for national laws in the creation, trade
and legal treatment of the range of artificial emission instruments created under
the Kyoto Protocol.
131
Many standard form contracts have emerged for use in international transactions of carbon credits.
In the case of contracts for emission reduction projects, these contracts are vital to managing risks and
liabilities associated with both the project and the ultimate transfer of credits. For example, the
International Emissions Trading Association standard form Emission Reduction Purchaser
Agreement, Version 3 (2006) and Code of CDM Terms Version 1 (2006) is widely used for CDM
projects involving the sale of generated CERs. That standard form agreement adopts a somewhat
circular definition for Certified Emission Reduction and refers to the Kyoto Protocol to define the
rights associated with those instruments. The definition reads as follows: a unit issued pursuant to
Article 12 of the Kyoto Protocol as well as other relevant International Rules and is equal to one
metric tonne of Carbon Dioxide Equivalent, calculated in accordance with the International Rules.
International Rules are defined as: the UNFCCC, the Kyoto Protocol, the Marrakesh Accords, any
relevant decisions, guidelines, Modalities and procedures, made by the COP/MOP and Executive
Board, in each case as amended from time to time. These circular definitions of tradeable emission
instruments are a common occurrence in transactions on the international climate market.
The IETA Agreement also contains a number of contractual provisions addressing the generation and
transfer of CERs. These include a description of the project which will generate the CERs and
specification of the number of credits to be purchased at the agreed unit price. The IETA Agreement
also imposes obligations on the seller for the verification and registration of the project and for the
implementation of the agreed monitoring plan. Where agreed by the parties, the agreement may also
include conditions precedent regarding host country approval of the project. Following verification,
the IETA Agreement requires the seller to procure delivery of the requisite number of CERs to the
purchasers CDM registry account.
The agreement addresses a range of circumstances that may give rise to rights to terminate. Events of
default include the withdrawal of one partys government from the Kyoto Protocol. In the event that
this occurs, instruments may not be issued to CDM and JI project participants from that nation party.
In the event of non-delivery of CERs, the agreement provides the purchaser with a number of options
including the provision of replacement CERS by the seller, the provision of Market Damages for the
delivery shortfall and termination of the agreement. However, where the shortfall is the result of a
change in law (rending delivery of the instruments unlawful) or the occurrence of a force majeure
event then the seller is relieved from its obligations under the agreement.
Interestingly, the above contractual provisions do not specify the full rights and liabilities associated
with these CERs in terms of ownership, use and transfer. Presumably, this is due to concerns that an
over enthusiastic definition might result in instruments which are not compatible with, or recognised
by, the international climate market. However, given the acute silence at the international level, the
contractual agreement is a critical medium for providing further clarification on the bundle of rights
and protections.
394
In response to the creation of the international climate market, climate change

regulation, at domestic and regional levels, place a heavy emphasis on the
benefits of utilising market mechanisms to facilitate the achievement of emission
reductions:
the main characteristic [of climate law] is the extraordinary reliance on economic
policy instruments...as the principal means of influencing energy use and GHG
emissions. Indeed, no field of environmental law relies more on economic
mechanisms.132
If the emergent carbon trading schemes do make concerted efforts to adopt

compatible designs then linkages may be forged between these market systems.
The resulting benefits of linked, multi-national, carbon markets could potentially
include a larger volume of traders, harmonious monitoring and reporting
standards, fungibility of emission instruments and the more cost-effective
operation of the overall carbon market. However, to operate effectively, the
climate change regime and any linked domestic or regional emissions trading
scheme must create clearly defined emission instruments with appropriate legal
protections. Such clarity is necessary in order to inform the global carbon market
as to what is being sold, for the market to determine what monetary value to
assign to those rights and for the holder of the instrument to be empowered to use
and protect his or her bundle of rights. Regrettably, few domestic jurisdictions
have created specific statutory laws to clarify legal ownership of these emission
reduction credits and those that have done so have adopted ad hoc inconsistent
approaches.
Consequently, these tradeable instruments take on a number of
different forms under the international market and their legal characteristics vary
significantly through international, domestic and contractual spheres thus
undermining the potential effectiveness of these markets.
132
Environmental Law' [2004](1) Environmental Liability 19 at 19.
395
C European Union Emissions Trading Scheme

The member states of the European Union (EU) elected to fulfil their
commitments under the Kyoto Protocol as an EU Bubble and have a collective
commitment to achieve an eight per cent reduction in greenhouse gas emissions
by 2012.133 The EU commenced a multi-national emissions trading scheme (EU
Scheme) from January 2005 as one of the key policy measures to achieve
greenhouse gas emission reductions and to assist EU member states to meet their
target under the Kyoto Protocol.134 Each member state was obliged to implement
the EU Scheme through the passing of national legislation consistent with the
directives of the EU Parliament.
The trading scheme imposes caps on the
national carbon dioxide emissions of all member states which must then be
translated into national plans with allocations for the various domestic sectors.
There are also proposals to expand the EU Scheme, post-2012, to address
emissions from air transportation, and potentially, maritime transportation. 135
The European Union Scheme is administered by the EU Commission and

implemented through statutory enactments within the domestic jurisdictions of
participating member States.136 Accordingly, the market scheme applies across a
range of domestic legal systems with their varying climate policies and property
law principles. The scheme is subject to a double layer of regulation by both the
EU administrator and the local national administrator. Those local administrators
implement the scheme in accordance with the directives issued by the EU
Commission, other statutory enactments and any applicable local laws. Within
the EU, AAUs issued under the Kyoto Protocol are bestowed a dual purpose.
133
This is permitted under Article 4.1 of the Kyoto Protocol, n2.

European Union (2005) Greenhouse Gas Emission Allowance Trading Scheme at
http://europa.eu/scadplus/leg/en/lvb/l28012.htm at 14 June 2008. EU Directive 2003/87/EC (entry
into force 25.10.2003) published in OJL of the 25.10.2003.
135
Frank Convery, Denny Ellerman and Christian De Perthuis, 'The European Carbon Market in
Action: Lessons From the First Trading Period Interim Report' (MIT CEEPR, Mission Climat of
Caisse des Depots, University College Dublin, 2008) at 24. The regulation of, and attribution of
responsibility for, emissions from aviation and maritime are also being considered at an international
level by the International Civil Aviation Organization (ICAO) and the International Maritime
Organization (IMO).
136
EU wide political cooperation to address transnational environmental problems was acknowledged
as part of the Single European Act 1986 (EU). Ibid, 7.
134
396
The allowances are both AAUs for the purposes of the Kyoto Protocol and
allowances for the purposes of the EU Scheme. 137
As with the Kyoto Protocol, the EU Scheme is also silent on the exact legal
nature of the allowances issued under the scheme and the rights and obligations
associated with those allowances. The EU defines its allowances as:
an allowance to emit one tonne of carbon dioxide equivalent during a specified
period, which shall be valid only for the purposes of meeting the requirements of
this Directive and shall be transferable in accordance with the provisions of this
Directive.138
Allowances are issued by each member State to the operator of each prescribed
installation and are valid for the period in which they are issued.139 Operators
are only permitted to emit greenhouse gases in accordance with an issued
greenhouse gas emission permit. 140 It is a condition of that permit that the
operator surrender allowances, at the end of each calendar year, equal to the total
emissions of the installation. 141 Allowances are issued to the installations in
accordance with each member States National Allocation Plan. 142
Those
National Allocation Plans are required to be submitted to and approved by the

EU.143
137
Accordingly, EU allowances can have different legal characteristics at the same time at two
different legal planes. Anthony Hobley and Peter Hawkes, 'GHG Emissions Trading Registries' in
Mechanisms: Making Kyoto Work (2005) Oxford, Oxford University Press, 127 at 143.
138
European Union, Directive 2003/87/EC of the European Parliament and of the Council of 13
October 2003 establishing a scheme for greenhouse gas emission allowance trading within the
Community and amending Council Directive 96/61/EC (entry into force 25.10.2003) published in
OJL of the 25.10.2003., Article 3 (a).
139
140
Ibid, Article 6(1).
141
Ibid, Article 6(2)(e).
142
Ibid, Article 9.
143
Ibid.
397
Allowances are valid for the commitment period in which they are issued and are
able to be held by any person.144 Allowances are able to be transferred between
members of the European Union and to third parties who have entered into a
bilateral agreement with the EU. 145 In addition, member States may allow
operators to surrender a proportion of required allowanc es, in the form of CERs
and ERUs, from CDM and JI projects implemented outside of the EU.146
The EU Registry is comprised of a series of linked national registries between the

member States. These national registries are standardised electronic databases
with a communication link. 147 Operators and individuals within the member
State may establish accounts in their local registries. As with the international
system, all transactions between the EU registries will proceed via the
Community Independent Transaction Log. The independent transaction log will
identify irregularities in the issue, transfer and cancellation of allowances. 148
Where an irregularity is identified, the member State must not register the
transaction until the irregularities have been resolved. Accordingly, rights of
transfer of EU allowances are conditional upon the approval of both the
member State and the Central Administrator. It is possible that errors may occur
in this process and it is questionable whether the EU Commission could be held
legally responsible. Commentators suggest that claims might be brought where
the termination of a transaction is on the ground that the local registry is not in
compliance with the eligibility requirements of the Kyoto Protocol. In those
circumstances, it is possible that this would amount to indirect appropriation of
144
Ibid, Articles 13(1) and 19 (2).

Ibid, Article 12.
146
European Union. Directive 2004/101/EC of the European Parliament and of the Council as of 27
October 2004 amending Directive 2003/87/EC establishing a scheme for greenhouse gas emission
allowance trading within the Community in respect of the Kyoto Protocol's project mechanism (entry
into force 13.11.2004) published in OJL 338 of 13.11.2004, Paragraphs (5),(7) and (10).
147
Commission Regulation (EC) No 2216/2004 of 21 December 2004 for a standardised and secured
system of registries pursuant to Directive 2003/87/EC of the European Parliament and of the Council
and Decision No 280/2004/EC of the European Parliament and of the Council, Official Journal of the
European Union L. 386/1 (29.12.2004).
148
2003/87/EC, n138, Article 20.
145
398
the investment of a foreign investor, but this is largely unchartered territory and
the success of such a claim remains uncertain. 149
The allowances under these trading schemes are created, traded and held in a
virtual environment.
Accordingly, security of holding accounts and the
electronic servers are vital components of protecting the bundles of rights

associated with these legal instruments.
In particular, the holder should be
entitled to compensation for any losses resulting from the breach of that security
where the holder is not at fault. 150
Allowances are able to be transferred between members of the European Union

and third parties who have entered into a bilateral agreement with the EU.151
Norway, Iceland and Liechtenstein linked the Norwegian emissions trading
system with the EU Scheme in 2008 following steps to ensure compatibility in
the rules regarding sectoral coverage, allocation, monitoring and verification. 152 It
is possible, from a legal perspective, that the proposed Australian emissions
trading scheme could be linked to the EU Scheme through bilateral
arrangements. However, for this to be effective, the nature and treatment of
allowances must be consistent across all of the linked emissions trading systems.
A review of Phase I of the EU Scheme concluded that there was significant

inconsistency between the National Allocation Plans of each country, particularly
in relation to the rules for new participants and exiting participants, leading to
149
Anthony Hobley and Peter Hawkes, n137, 150-151.

The EU Directives and Regulation relating to the emissions trading scheme do not exclude any
liability for those losses incurred as a result of failure in the registry as this is prohibited under the EC
Treaty. Annex V of the regulation sets out the core terms and conditions which account holders may
be required to accept and this does include provisions which limit the liability of the registry
administrator and/or the account holder.
151
2003/87/EC, n138, Article 12.
152
Frank Convery, Denny Ellerman and Christian De Perthuis, n135, 22.
150
399
undue complexity and lack of transparency of rules. 153
The market also
experienced significant price volatility as a result of the surplus of allowances

with Phase 1 allowances falling to less than one Euro in 2007.154 Phase II of the
EU Scheme will have more stringent limits on the allocation of allowances and
more harmonised treatment of installations across the member States. 155 The
exact legal nature of the allowances issued under the EU Scheme remains
uncertain and domestic treatment under the varying property laws varies between
member States.
This is an ongoing legal issue to be resolved in both the
international climate market and the EU Scheme.
D United Kingdom Emissions Trading Scheme

Members of the EU are required to implement the Directive for the establishment
of a scheme for greenhouse gas emission allowance trading into domestic law.
In the United Kingdom (UK), this was achieved through the Greenhouse Gas
Emissions Trading Scheme Regulations 2005 (the UK Regulation). 156
In
preparing the legislation, it was unfortunate that the UK did not take the
opportunity to clarify the definition of allowances for the purposes of the UK.
Instead, the UK Regulation simply refers to the meaning adopted in the EU
Directive and the nature of the right being allocated remains unclear. 157 Even
less satisfactory is the adopted definition of greenhouse gas emissions permit
which does not refer to the EU Directive for its interpretation but is stated as
meaning a permit granted under the regulation. 158 The conditions able to be
imposed on the permit are stated in broader terms in the UK Regulation than
those specified under the EU Directive and a UK permit may be issued with
such conditions as the regulator considers appropriate. 159
153
Commission of the European Communities, 'Communication : Further Guidance on Allocation

Plans for the 2008 to 2012 Trading Period of the EU Emission Trading Scheme' (COM (2005) 703,
2005) at 16.
154
Frank Convery, Denny Ellerman and Christian De Perthuis, n135, 15.
155
Ibid, 25.
156
Greenhouse Gas Emissions Trading Scheme Regulations 2005 (Statutory Instrument 2005 No.
925)(UK).
157
Ibid, Regulation 2.
158
Ibid, referring to the issue of permits under Regulation 9.
159
Ibid, Regulation 10.
400
A separate mandatory emissions trading scheme will be introduced in the UK,

from 2010, under the Carbon Reduction Commitment (CRC) scheme. 160 The
scheme will apply to large businesses and public sector organisations whose
energy use emissions are currently not regulated under the EU Scheme or other
UK programs.161
The UK registry performs three different roles with respect to trading. It was a
registry for the purposes of the UK Emissions Trading Scheme which ran from
2002 to 2006. It is an EU registry for the purposes of the EU Emissions Trading
Scheme and it is a national registry for the purposes of the Kyoto Protocol. As
such, the ramifications of failed transactions and compromised servers, especially
in the international arena, are profound and the apparent lack of administrator
accountability for such losses appears unreasonable. 162
E New Zealand Emissions Trading Scheme

The New Zealand (NZ) Government is also intending to implement a NZ
emissions trading scheme from 2008 to assist in achieving its target under the
Kyoto Protocol. 163 The scheme is based on the trade of so-called New Zealand
Units. For the first commitment period of the Kyoto Protocol from 2008 to 2012,
each New Zealand unit will be backed by one Kyoto Protocol unit held by the
Crown and the market will operate under the global cap set by the Kyoto
160
The first capped phase will begin in 2013. DEFRA, Action in the UK-Carbon Reduction
Commitment http://www.defra.gov.uk/environment/climatechange/uk/business/crc/qanda.htm at 14
June 2008.
161
Including the UK Climate Change Agreements. Ibid.
162
Any liability relating to, among other matters, delays, errors, unauthorised accesses, software faults
and server failures is limited to 5,000 for any liability arising in any year including where an account
holder holds multiple accounts. Economic losses, such as loss of profits and opportunity loss, and
liabilities relating to lost security rights, software or data corruption and regulatory fines or penalties
are excluded. UK Environment Agency EU Emissions Trading Scheme: UK Registry: Registry
Terms and Conditions (Version 1.0: May 2005), Clauses 8.1 and 8.2.
163
New Zealand Government, 'Climate Change (Emissions Trading and Renewable Preference) Bill
2007 (NZ): Explanatory Note' (2007) at 4. Bill introduced to the New Zealand Parliament in
December 2007. This bill will amend the Climate Change Response Act 2002 (NZ).
401
Protocol.164 Liable entities must surrender one emission unit to cover each metric
tonne of eligible emissions in a compliance period.165 AAUs and CERs from
certain eligible activities under the international climate market may be
surrendered in compliance with the New Zealand scheme. 166 A self-assessment
compliance scheme, similar to that used in the taxation system, will be utilised
but any identified non-compliance will result in the imposition of penalties and
an obligation to make good the shortfall. 167
The market is designed to
incrementally cover all greenhouse gases and all sectors, including agriculture
and forestry, by 2013. 168
The NZ scheme will involve the devolution to
landowners of both the credits for forestry activities that lead to a removal of
carbon dioxide from the atmosphere, and the liabilities for the subsequent release
of carbon dioxide into the atmosphere by harvesting or deforestation. 169 Sales
and purchases from the international climate market are permitted and it is
intended that future linkages with other domestic and regional emissions trading
schemes will be established. 170
However, this scheme has quite a unique
approach to emissions trading and may not be compatible with other established
markets such as the EU Scheme.
164
New Zealand Government, 'Climate Change (Emissions Trading and Renewable Preference) Bill
2007 (NZ): Explanatory Note' (2007) at 6. New Zealand Government, 'The Framework for A New
Zealand Emissions Trading Scheme' (2007) at 5, 47. New Zealands agreed target under the Kyoto
Protocol is to reduce emissions to 1990 levels by 2012.
165
New Zealand Ministry for the Environment and the Treasury, 'The New Zealand Government's
Proposal for an Emissions Trading Scheme' in David Lunsford (ed), Greenhouse Gas Market 2007
Building Upon A Solid Foundation: The Emergence of a Global Emissions Trading System (2007)
Geneva, International Emissions Trading Association, 6 at 6.
166
CERs from nuclear activities are currently excluded from the scheme. New Zealand Government,
'Climate Change (Emissions Trading and Renewable Preference) Bill 2007 (NZ): Explanatory Note'
(2007) at 6.
167
Civil penalties will be imposed for identified non-compliance with more severe criminal penalties
to be imposed where the participant (including company directors) does so knowingly. New Zealand
Government, 'The Framework for A New Zealand Emissions Trading Scheme' (2007) at 51-53, 55.
New Zealand Ministry for the Environment and the Treasury, n165, 7.
168
New Zealand Ministry for the Environment and the Treasury, n165, 6.
169
Ibid.
170
New Zealand Government, n167, 46. New Zealand Government, 'Climate Change (Emissions
Trading and Renewable Preference) Bill 2007 (NZ): Explanatory Note' (2007) at 7.
402
F US State-Based Trading Scheme

There are also a number of proposed regulated emissions trading schemes for the
future including the US Regional Greenhouse Gas Initiative (RGGI) which is
scheduled to commence in 2009. RGGI comprises of a multi-state cap and trade
program using a market-based emissions trading system. 171 Ten US Northeast
and Mid-Atlantic states have agreed to implement a cap on carbon dioxide
emissions from those electricity generators with a capacity larger than 25MW
and with more than 50 per cent fossil fuel use. 172 The agreed cap is to achieve
reductions of 10 per cent below 1990 greenhouse gas emissions levels by 2017.
Similar initiatives, and possible involvement in the RGGI market, are being
considered by a number of other US States.173
G Voluntary Carbon Trading Schemes

The emerging international and regional carbon markets have acted as a catalyst
for the implementation of emission reduction projects and the sale and purchase
of emission instruments on the voluntary markets. From the sky above to the
Earth below, the generation and acquisition of credits has been utilised for a
range of emissions including those associated with air travel, sea transport, car
manufacturing and the hosting of conferences and concerts. It is possible to
create a carbon asset or emission instrument purely by way of contract. That
contractual asset will exist regardless of whether it is recognised by a regulatory
scheme or under the international climate change regime.
These contracts
generally provide for the independent verification of the level of abatement of

emissions resulting in the contractual creation and transfer of Verified Emission
Reductions (VERs).
171
Regional Greenhouse Gas Initiative Memorandum of Understanding 20 December 2005

http://www.rggi.org/agreement.htm at 14 June 2008.
172
RGGI, About RGGI, http://www.rggi.org/about.htm at 14 June 2008. Anthony DePalma, 'Nine
States in Plan to Cut Emissions by Power Plants', The New York Times 24 August 2005,
http://www.nytimes.com/2005/08/24/nyregion/24air.html?ex=1282536000&en=9b4ffd991f98cd72&e
i=5088&partner=rssnyt&emc=rss at 14 June 2008.
173
RGGI, Participating States http://www.rggi.org/states.htm at 14 June 2008.
403
Voluntary emission reductions may be generated and traded for a variety of

reasons. The VER may be created from the abatement activities of an approved
CDM project prior to its registration with the CDM Board or from a CDM
project that has failed to meet the stringent approval requirements under the
CDM rules. 174 Purchasers of VERs may invest in these credits in order to
voluntarily offset their emissions or they may hold them in anticipation of these
instruments being recognised by, and able to be submitted in compliance with, a
future domestic emission trading scheme. This will involve a high level of risk
for the purchaser regarding the compatibility of the voluntary standard of
verification with any future statutory requirements for the recognition of the
instrument.
VERs may be established through an entirely independent contractual process or

through a voluntary abatement scheme with its own standards and requirements
for generation of the credits. Under a voluntary emissions reduction scheme,
each participant contractually agrees to comply with a voluntary emission
reduction target that is set in accordance with a prescribed baseline year.
Examples of voluntary schemes include the US Chicago Climate Exchange
(CCX), and the previous Australian Greenhouse Challenge and Greenhouse
Challenge Plus programs.175
Participants must reduce their actual emissions or
acquire and retire VERs to meet their targets. Contractually agreed penalties are
imposed for non-compliance with the rules of the voluntary scheme. These
programs rely on voluntary cooperative agreements between the regulator and
participants which specify the level of emissions reductions to be achieved;
monitoring and reporting obligations; and the consequences of non-compliance.176
174
Martijn Wilder and Liz Day, 'Voluntary Carbon Market A Legal Perspective' in David Lunsford
(ed), Greenhouse Gas Market 2007 Building Upon A Solid Foundation: The Emergence of a Global
Emissions Trading System (2007) Geneva, International Emissions Trading Association, 121 at 121.
175
For a discussion of the operation of the voluntary Greenhouse Challenge programs (1995-2005)
see Rory Sullivan, 'Greenhouse Challenge Plus: a new departure or more of the same?' (2006) 23(1)
Environmental and Planning Law Journal 60 at 69. From 1 July 2006, participation in Greenhouse
Challenge Plus became mandatory for those Australian companies claiming excise credits of more
than $3 million per annum. AGO Fuel Tax Credits and Greenhouse Challenge Plus Membership
http://www.greenhouse.gov.au/challenge/members/fueltaxcredits.html at 14 June 2008.
176
Rory Sullivan, ibid, 62.
404
CCX was launched in 2003 and was the first emission reduction and trading
system to address all six greenhouse gases. The scheme was self-regulatory and
allowed entities from any country to agree voluntarily to the imposition of
binding obligations to reduce their greenhouse gas emissions reductions.
In
Phase I, ending in December 2006, CCX members were required to reduce direct
emissions to four per cent below the specified baseline period of 1998-2001.177
Phase II, will continue until 2010 and requires CCX members to reduce their
emissions to six per cent below that baseline. 178 Non-compliance results in the
imposition of enforceable penalties. The commodity traded on the CCX is the
CFI contract which represents 100 metric tons of carbon dioxide equivalent. CFI
contracts are comprised of both Exchange Allowances and Exchange Offsets.
Exchange Allowances are issued to Members in accordance with their emission
baseline whilst Exchange Offsets are generated by qualifying offset projects.179
There are proposals to link the CCX with the EU Scheme and to allow EU
allowances to be used in compliance with CCX obligations.
The Greenhouse Friendly program certified and independently verified voluntary

abatement and offset projects in Australia. Approved Abatement Projects must
have demonstrated that the abatement generated was additional to business as
usual and generated permanent and verifiable greenhouse gas emissions
reductions or sequestration 180 Approved abatement projects have included energy
efficiency initiatives, waste diversion and recycling, land fill gas capture and
flaring, renewable energy generation, and tree planting and avoided deforestation
projects.181
177
Chicago Climate Exchange, About CCX at http://www.chicagoclimatex.com/content.jsf?id=821

at 14 June 2008.
178
Ibid.
179
Eligible offset projects, including CDM projects, must be registered and are subject to third party
verification. Chicago Climate Exchange, CCX Offsets Projects at
http://www.chicagoclimatex.com/content.jsf?id=23 at 14 June 2008. Ibid.
180
181
Australian Greenhouse Office, Abatement Projects
http://www.greenhouse.gov.au/greenhousefriendly/abatement/projects.html at 14 June 2008.
405
The Australian Climate Exchange (ACX) was launched in 2007 to facilitate the
sale of VERs from the Greenhouse Friendly program and any other future
emissions commodities.182 There is significant scope for the generation of offsets
from Australian land to be sold to participants in the existing regulatory schemes
provided that the projects are consistent with the rules and requirements of those
other regimes. The types of activities that could generate offsets include changes
in soil management and land management practices as well as the deliberate
planting and cultivation of vegetation and trees on the land to store greenhouse
gases.
Approved Greenhouse Friendly abatement projects could be used by Greenhouse

Challenge Plus members to offset their emissions. Those projects have included
tree planting and avoided deforestation projects and the Carbon Pool and Carbon
Smart projects. To apply for approval as an abatement project under Greenhouse
Friendly applicants must have:
prepared and submitted an Eligibility Statement;
prepared an Emissions Abatement Study for the project;
developed a Project Monitoring Plan;
had these documents independently verified; and
submitted the application to the Australian Greenhouse Office.183
Environmental planting projects must have demonstrated that the projects

involve an investment or behaviour change that would not normally be
undertaken as part of established operating practices. 184 Greenhouse Friendly
182
ACX, Australian Climate Exchange: Trading Platform

http://www.climateexchange.com.au/Content/tpAbout.aspx at 14 June 2008. The ACX currently lists
VERs from non-forest abatement projects approved by the Australian Greenhouse Office under the
Greenhouse Friendly program.
183
184
Ibid, 21.
406
abatement projects must occur within Australia and must generate greenhouse
gas emission reductions or sequestration that are: additional (beyond business as
usual); permanent; and verifiable. 185 Consequently, there are a number of legal
issues in the successful implementation of offset activities involving the
generation of carbon from the maintenance of vegetation stocks on land. These
include:
additionality of reductions;
permanence of reductions;
security of tenure and rights to access and maintain carbon stocks;
contractual rights and obligations of the landholder and government;

and
interactions with existing statutes and the future regulation of

agricultural emissions by the Federal government.
The project must undertake an activity that goes beyond the business as usual
management practices of the landholder. It should not be an activity that is
mandated by any enforced law, statute or other regulatory framework. 186
Accordingly, any abatement associated with vegetation reserves maintained on
land as a result of statutory prohibitions, such as the Vegetation Management Act
1999 (Qld), will find the threshold of additionality problematic to reach.187 The
permanence of emissions reductions from trees and vegetation is also a
significant issue. Carbon stocks in vegetation fluctuate over time and emissions
reductions are not permanent. Because of this, under the Kyoto Protocol only
temporary credits are issued for carbon sink projects.
185
In contrast, under the
Ibid, 19.
Voluntary Carbon Standard, 'Voluntary Carbon Standard 2007' (VCS Association, 2007) at 14-15.
187
Projects implemented to meet regulatory compliance obligations are not eligible abatement
projects under the Greenhouse Friendly program, Australian Greenhouse Office, 'Greenhouse
Friendly Guidelines' (AGO, 2006) at 19.
186
407
Greenhouse Friendly program permanent credits are issued provided that the
stocks are maintained for at least seventy years. 188
The third issue is the ability to guarantee to both the regulator and the purchaser
of the credits that the landholder is able to ensure continued rights to access the
land and protect the carbon stocks. The regulator of the Greenhouse Friendly
program requires evidence of secure ownership of both the sequestered carbon
and the land on which it resides. For an owner with freehold title to the land this
is challenging enough but to an occupier in possession under a lease of Crown
land it is highly problematic as the Crown retains broad prerogative powers of
reservation and resumption in respect of leasehold land.
There is also the question of who owns the trees and vegetation on the land? It
appears that these are vested in the Crown under the terms of most standard form
state leases. If this is the case then the relevant state government would have to
assign ownership of the carbon to the landholder as well as being a signatory to
all contractual agreements between the landholder and the purchaser.
As noted, VERs may also be created established outside of these formal

programs.
In such cases, most projects are implemented and certified by
independent verifiers to an agreed standard. Independent verification is essential

in order to ensure that the emission reductions that the VERs represent have
actually been achieved. However, not all VERs are verified resulting in some
criticism that those instruments are lacking in environmental credibility. 189 There
is also no central register for the surrender of used VERs with the potential for
these instruments to be onsold and used to offset multiple emission sources.190
188
Australian Greenhouse Office, 'Greenhouse Friendly Guidelines' (AGO, 2006) at 19-21.

House of Commons Environmental Audit Committee, 'The Voluntary Carbon Offset Market'
(House of Commons, 2007) at 18.
190
Martijn Wilder and Liz Day, n174, 122.
189
408
There are a range of standards available for use in the independent verification of
offset projects. The Voluntary Carbon Standard is intended to ensure that all
VCS offsets are real, additional, measurable, permanent, independently verified
and unique (that is, the same abatement is not used more than once to offset
emissions). 191 The Gold Standard for Voluntary Offsets, developed by nongovernmental organisations, also applies additional criteria to ensure that
meaningful consultation with local stakeholders is carried out and that abatement
projects assist in achieving sustainable development.192 Gold Standard VERs are
only created following independent validation and verification by an expert
accredited under the international climate change regime.193 Finally, the Climate,
Community and Biodiversity Standards (CBB) have also been developed for
land-based projects that are intended to deliver climate, biodiversity and
community benefits.194
191
Voluntary Carbon Standard 2007 (VCS 2007) About the VCS http://www.v-c-s.org/about.html at
14 June 2008.
192
Only project activities involving renewable energy and enduse energy efficiency measures which
promote sustainable development are eligible for accreditation under the Gold Standard. The Gold
Standard, 'The Gold Standard: Voluntary Emission Reductions (VERs) Manual for Project
Developers' (2006 (version 5)) at 10, 13; www.cdmgoldstandard.org at 14 June 2008.
193
The Gold Standard, 'The Gold Standard: Voluntary Emission Reductions (VERs) Manual for
Project Developers' (2006 (version 5)) at 32-36.
194
CCBA, 'Climate, Community and Biodiversity Project Design Standards' (The Climate,
Community and Biodiversity Alliance, 2005) at 6-7; www.climatestandards.org/images/pdf/CCBStandards.pdf at 13 June 2008. There are three levels of CCB
validation: approved, silver and gold.
409
It should be emphasised that instruments generated from voluntary projects may

not have statutory recognition under any future emissions trading scheme. These
VERs exist primarily within the four corners of the contract and will be protected
only as a contractual right unless specific legislation is passed to address these
rights.195 Accordingly, the scope and content of the contractual documentation for
these abatement projects is crucial in order to delineate clearly the rights and
liabilities to be allocated between the parties. 196
H Designing An Emissions Trading System For Australia

As can be seen from the above analysis, a range of regulated and voluntary
carbon markets have emerged across the globe all possessing significantly
different legal features. These schemes have been created in broad terms making
it difficult to predict the legal interactions that may occur between these schemes.
Moreover, many of these schemes are still in the design stages with much of their
195
Martijn Wilder, Monique Willis and Katherine Lake, n65, 54.

A contract for the sale of credits generated from abatement or offset projects should generally
address the follow aspects:
i.
definition of the project in terms of its geographic location, timeline for implementation
and description of the emissions reduction or sequestration activities to be undertaken;
ii.
specification of the requirements for ongoing monitoring of abatement activities and
maintenance of carbon stocks (for forest offset projects);
iii.
specification of the agreed baseline of the project and the methodology for calculating
the credits to be generated from the emissions reduction or sequestration activities;
iv.
specification of the standard of verification to be applied to the project and the process
for verification and certification of emissions reductions;
v.
identification of the time for the crystallisation of the credits; the quantity of credits to
be delivered and the process for the issuance and transfer of those credits into the
buyers registry account;
vi.
specification of the agreed price per unit for the carbon credits;
vii.
definition of the bundle of rights associated with the credits to be generated and
transferred including the provision of a warranty from the seller stating that the credits
to be transferred are unencumbered and freely transfer able;
viii.
allocation of the costs of implementation of the project and other transactional costs
including the payment of applicable taxes;
ix.
allocation of the risks and liability for any shortfall in the level of abatement of the
project, non-delivery of credits and other default events including provisions to obtain
insurance; and
x.
specification of the dispute resolution process to be applied in the event of a dispute
between the parties.
The emission instrument will adopt a different character, in terms of the bundle of rights associated
with the credit, depending upon the jurisdiction in which those instruments are created, held and used.
Accordingly, the choice of governing law for the contract will also have a significant bearing on the
legal interpretation of the nature of the credits under the contract.
196
410
key features yet to be settled and with many practical legal issues yet to be
encountered. Even those market systems that have been implemented for some
years now, including the EU scheme, are still in the learning by doing process
but appear to be doing little to address the mounting raft of unresolved legal
issues. Together, these factors make it difficult to derive the commonalities in
the legal approaches across these emerging schemes.
It now appears certain that Australia will have an emissions trading system in
operation from 2010. Given the obvious dysfunctions of these existing multinational markets, the design of the Australian scheme will be critical in enabling
it to operate in an optimal fashion. However, the design and legal features of any
future carbon market remain unsettled including key components relating to: the
emission reduction targets for the scheme; the participants to be regulated; the
nature of the tradeable emission instrument and the rules for the creation,
allocation, trade and surrender of the emission instruments. The treatment of
offsets and CCS under any such regime is also unclear.
A range of discussion papers and proposed models have been released into the
public arena over recent years. 197 However, no clear guide on the preferred design
of the future Australian system has been released by the current government. It is
clear that an extensive process of economic modelling and public consultation
will be required prior to the enactment of such a scheme. 198
Given this
uncertainty, the following paragraphs present the key legal requirements that
should be addressed in any design of an effective emissions trading system.
197
Including National Emissions Trading Taskforce, 'Possible Design for a National Greenhouse Gas
Emissions Trading Scheme' (NETT, 2006),
http://www.cabinet.nsw.gov.au/greenhouse/emissionstrading at 14 June 2008; Prime Ministerial Task
Group on Emissions Trading, 'Report of the Task Group on Emissions Trading' (The Department of
the Prime Minister and Cabinet, 2007); Garnaut Climate Change Review, 'Interim Report to the
Commonwealth, State and Territory Governments of Australia' (2008); Garnaut Climate Change
Review, 'Emissions Trading Scheme Discussion Paper' (2008).
198
The final report of the Garnaut Climate Change Review is expected to be released by the end of
September 2008. This report will be one of many factors taken into consideration by the Federal
government in devising the emission trading scheme. Draft legislation for the implementation of an
Australian scheme is intended to be released for public comment by the end of 2008.
411
Setting the Emission Reduction Target
The imposition of an enforceable emission reduction obligation, or target, is a

primary component of any proposed future emissions trading scheme.
Without a clear greenhouse gas emission reduction obligation, the resource
allocation function of the trading market will have no purpose. This will
render the trading scheme environmentally, economically and legally
ineffective. Accordingly, the legal framework should be designed with an
appropriate emissions stabilisation pathway, linked to specific emission
reduction targets, with an identified time-frame for achievement. Such a
target must be inextricably linked with the emerging science. The EU has
adopted an independent target of reducing its emissions by 20 per cent below
1990 levels by 2020 and is seeking a global commitment to long-term
reductions of 60-80 per cent by 2050. 199
These targets are aimed at
stabilising atmospheric emissions at 450 ppm and limiting a rise in the

Earths temperature to 2 degrees Celsius. 200
The current Australian Prime Minister has indicated that it will adopt an
emission reduction target of 60 per cent reductions in emissions, below 2000
levels, by 2050.201 That target is not yet reflected in legislation and interim
targets have not been announced.
199
The EU has stated that it will increase that target to 30 per cent if other developed countries follow
suit. European Council Meeting, Brussels, 8-9 March 2006 Presidency Conclusions Part III at [32],
http://www.consilium.europa.eu/ueDocs/cms_Data/docs/pressData/en/ec/93135.pdf at 14 June 2008.
200
Ibid. The EU advocates that an increase of greater then 2 degrees Celsius will lead to adverse
anthropogenic climate change.
201
Prime Minister Kevin Rudd has committed to the adoption of a long term target for Australia of
reducing emissions by 60 per cent on 2000 levels by 2050 with interim targets to be established.
Prime Minister Kevin Rudd, Ratifying the Kyoto Protocol (3 December 2007, Media Statement)
http://www.alp.org.au/media/1207/mspm030.php at 14 June 2008
412
The Australian Garnaut Climate Change Review has indicated that:

it is in Australias interest to seek the strongest feasible global mitigation
outcomes 450 ppm as currently recommended by the science advisers to
the UNFCCC and accepted by the European Union.202
However, if stabilisation of atmospheric concentrations at 450 ppm is

adopted by Australia then that would equate to a reduction of 90 per cent in
Australias national emissions:
under the 450 ppmstabilisation illustrative scenariosif it were agreed
that per capita emissions would converge by 2050, then Australias
absolute emissions would have to be roughly 90 per cent.below 2000
levels in 2050.203
The adoption of a target for Australia may be influenced by ongoing

international negotiations regarding post-2012 emission reduction duties
under the climate change regime. Nevertheless, the adoption of long-term
and interim emission reduction targets are a critical prerequisite for the
design of an effective legal framework to regulate climate change in
Australia.
II Identifying the Participants

Once Australia has identified its current and future estimated greenhouse gas
emissions, and agreed to short-term and long-term emissions reduction goals
for Australia, then the specific features of the trading regime can be
determined. At this time, it will be necessary to consider a process to
transition the existing mandatory renewable energy trading schemes in
Australia into the new regime and to decommission those schemes.204
202
203
Ibid, 39.
204
These have included: the Commonwealth Mandatory Renewable Energy Target Scheme; New
South Wales/ACT Greenhouse Gas Abatement Scheme; Victorian Renewable Energy Target Scheme
413
A primary concern will be identifying those sectors and greenhouse gases to

be included in the trading regime. To be compatible with the climate change
regime, it is preferable that the scheme extends to all six greenhouse gases.205
The EU Scheme currently includes carbon dioxide only and regulates large
industrial and energy-intensive installations.
206
In contrast, the UK
Sustainable Development Commission has recommended a trading scheme

for all individuals with per capita carbon quotas. 207 Accordingly to the
Garnaut Climate Change Review the coverage of the Australian emissions
trading scheme should be as broad as possible within practical constraints
imposed by measurability and transaction costs in order to:
provide an incentive for emissions reductions in all sectors, maximise
market liquidity, to minimise the costs of an ETS, and to avoid
distortions.208
While a large number of participants will improve the functioning of the

overall market this also involves higher administration and monitoring costs.
The largest source of Australian emissions is the stationary energy sub-sector
and the transportation sub-sector is also a significant contributor. 209 The
number of participants must be able to be managed administratively and the
emissions from each emitter must be able to be monitored. For example,
there are currently concerns regarding the ability to accurately measure
and Queensland 13 per cent Gas Scheme. There will significant issues in attempting to merge these
trading schemes into a national carbon market with their significant variances in the creation and
treatment of tradeable instruments.
205
A similar opinion is reached in Garnaut Climate Change Review, 'Emissions Trading Scheme
Discussion Paper' (2008) at 27.
206
There is a proposal to include the aviation and shipping sectors in the future.
207
Sustainable Development Commission, Personal Carbon Trading: a radical concept?
http://www.sd-commission.org.uk/pages/carbontrading.html at 14 June 2008.
208
Garnaut Climate Change Review, 'Emissions Trading Scheme Discussion Paper' (2008) at 27.
209
and Heritage, Canberra' (Australia State of the Environment Committee, 2006) at 27, available at
414
emissions from the agriculture and forestry sectors in Australia. 210 The
Garnaut Climate Change Review notes that emissions from stationary energy,
transport, waste, and industrial processes could all be included in an
emissions trading scheme and that agriculture and forestry should be included
once measurement and monitoring concerns are resolved. 211
III Defining the Tradeable Emission Instruments

As noted, it is imperative that the legal instruments in the emissions trading
system are clearly defined.
The statute must define, in a clear and
unambiguous manner, the nature of the tradeable emission instruments and

the protections and obligations associated with those instruments.
Accordingly, it is necessary for domestic laws across Australia to apply
consistent rules regarding; the right to hold and to deal with the instruments,
taxation liabilities applicable to those dealings, whether compensation is to
be afforded for the acquisition or affectation of those rights and other relevant
legal principles. It should also be considered whether restrictions should be
imposed on the trade and transfer of these allowances within Australia or
with overseas parties. 212
IV The Legal Infrastructure

The legal system must be designed to be effective in the implementation,
administration and enforcement of the emissions trading system. This will
require the imposition of a strict legal duty to reduce greenhouse gas
emissions in conjunction with obligations to monitor and report on levels of
emissions from regulated entities. To facilitate the trading function of the
210
Ibid, 27-28.
Garnaut Climate Change Review, 'Emissions Trading Scheme Discussion Paper' (2008) at 28-29.
212
The Garnaut Climate Change Review interim reports do not consider this legal issue but merely
cite Coase in support of the premise that economic efficiency will be achieved as long as property
rights are fully defined and that completely free trade of all property rights is possible. Ibid, 32.
211
415
regime, there must also be clear rules for the creation, allocation, transfer and
domestic treatment of emission instruments.
It is critical to integrate an effective legal system with the requirements for an

effective market system.
This tension is illustrated by the following
potentially contradictory approaches by the Garnaut Climate Change Review

that the challenge in establishing sound governance arrangements is to
underwrite stability, continuity, competence and credibility213 and:
in developing the ETS design, the singular objective should be to provide a
transactional space that enables the transmission of permits to economic
agents for whom they represent the greatest economic value.214
Monitoring of high number of participants could require significant

resourcing of government departments. Vested interests may also attempt to
place pressures on government to favour them in administrative decisions.
Because of this, the Garnaut Climate Change Review recommends the
creation of an Independent Carbon Bank (ICB) to administer the Australian
emissions trading scheme.215
It is vital that appropriate penalties and liabilities are imposed by a central

regulator to identified cases of non-compliance. In terms of enforcement, the
penalty for non-compliance must be significantly higher than the market
price of the permit in order to act as a proper deterrent. To ensure that the
aggregate cap is not exceeded, there should also be imposed an obligation to
make good the excess emissions and to acquire and surrender emission
instruments from the market.216
213
Ibid, 44.
Ibid,5.
215
Ibid, 41.
216
A similar approach is considered by the Garnaut Climate Change Review, ibid, 17,44.
214
416
V The Use of Offsets and CCS in the System

Rules must also be established regarded the permissibility of submitting
offset credits and using CCS in partial or full compliance with emission
reduction obligations. It is critical that the regulator ensure that all submitted
offset credits, whether from voluntary, regulated or CDM/JI projects, are
generated by abatement projects that have resulted in additional, permanent
and verifiable greenhouse gas emissions reductions. As noted, additionality
can be a problematic issue. 217
In terms of environmental effectiveness, the use of offset credits from

sequestration activities such as forestry, agriculture and CCS should be
limited and treated in a manner compatible with the rules under the Kyoto
Protocol. If permitted into the scheme, the non-permanence of emissions
reductions from these projects should be appropriately acknowledged within
the trading system. 218 The imposition of stringent monitoring and independent
verification processes should also be prescribed to ensure that emissions
reductions from these abatement projects are in fact real and verifiable.
VI Linkages with Other International and Regional Carbon Markets

The Australian emissions trading system should also be designed and
implemented in a manner which is consistent with the international climate
change framework and other emerging regional and domestic carbon trading
schemes. If Australia succeeds in implementing an emissions trading system,
with a compatible legal framework, then it may be able to link with other
217
For example, legal additionality must demonstrate that the abatement of emissions by the project
goes beyond what is required to comply with existing laws and regulations. Issues of contention for
the regulator, particularly in respect of agriculture and forestry projects, will include the selected
baseline for emissions reductions and the eligibility date for the commencement of abatement
projects.
218
The inclusion of these offset credits may also prevent linkages with the EU Scheme which
currently excludes CERs from nuclear and LULUCF and, under certain conditions, large-scale hydro
power projects of over 20MW capacity. However, the New Zealand Scheme does permit the use of
these offsets.
417
existing or proposed emissions trading systems such as the international

carbon market, the EU Scheme, US markets and NZ trading system either
through the international climate change regime or separate bilateral
agreements.219
Requirements for an Effective Multi-National Global Market
Ideally, the current mosaic of emerging emissions trading markets across the
world would merge, ultimately, into a fully functioning, multi-national global
carbon market 220 An illustration of the possible future global carbon market is
depicted in Figure Five. Once those linkages have been established, each linked
market will become vulnerable to the presence of poor governance structures and
policies in those linked countries which could potentially result in a total failure
of the multi-national market.
Consequently, nations must make attempts to
achieve a consistent definition of the legal nature of these tradeable emission

instruments throughout the linked jurisdictions with harmonised monitoring,
reporting and compliance mechanisms across the multiple markets. Concerted
efforts must also be made to achieve greater consistency in the domestic
treatment of emission instruments under the various domestic regimes for the
protection of property.
The above analysis highlights the lack of consistency between the emerging
international, regional and domestic carbon trading schemes, and the variances in
the treatment of tradeable emission instruments between various domestic
jurisdictions.
There is no universal definition of the tradeable emission
instrument, no universal carbon price and no universal legal framework for the
carbon market.
Moreover, there is an emerging patchwork of inconsistent
219
For New Zealand suggestions see New Zealand Institute of Economic Research, Emissions
Trading Scheme for New Zealand: a report for Business New Zealand (26 March 2007) at
http://www.businessnz.org.nz/file/1188/Emissions%20Trading%20Scheme%20for%20NZ.pdf at 14
June 2008.
220
Cf. Garnaut Climate Change Review which recommends limiting linkages with the CDM market
of the Kyoto Protocol. Garnaut Climate Change Review, 'Emissions Trading Scheme Discussion
Paper' (2008) at 35.
418
voluntary, mandatory, cap and trade and baseline and credit market systems with
incompatible definitions of instruments, trading rules, recognition of abatement
projects, reporting obligations and penalties for non-compliance. The strongest
driver and influence on the design of other markets appears to be the EU Scheme.
However, the EU Scheme is still in its infancy. Phase 1 was a pilot program
deliberately intended to enable the EU to learn by trial and error.221 In this context,
the linkage of these present systems into a multi-national global carbon market is
quite untenable.
Responsibility for this resulting assembly of incompatible markets resides with

the climate change regime and is largely the result of the immaturity, complexity
and confusion within the international climate market system including its weak
legal structure. This is compounded by the embracement of national flexibility in
the implementation of the climate change regime and the lack of direction given
to parties as to the form and content of domestic climate change systems.
Even if the climate change regime was successful in achieving harmony between
the emerging carbon markets it must still contend with the unique legal systems,
onto which these markets are fused, and with their varying approaches to the
creation, treatment and legal protection of emission instruments.
The
implications arising from an inconsistent treatment of these tradeable rights are

threefold. It will introduce uncertainty and inefficiency into the administration
and enforcement of the carbon market. It will prevent the market from achieving
confidence in the regulatory system and in the treatment of accrued rights with
resulting implications for carbon pricing. The lack of full status under existing
property laws may also prevent owners from protecting their rights and from
achieving appropriate compensation when those rights are adversely affected.
These will undermine player confidence in the market and affect the inherent
financial value of the instrument. Collectively, these issues will prevent the full
221
Frank Convery, Denny Ellerman and Christian De Perthuis, n135, 23, 25.
419
commodification of the rights in greenhouse gas emissions which will undermine

the achievement of global, cost-effective, emission reductions. To address this
deficiency, the international community must establish a common definition for
these allowances and clearly characterise the bundle of rights of ownership, use
and transfer.
There will be obvious difficulties in achieving international
consensus on a global model of property law principles across the disparate civil
and common law systems. However, ideally, all domestic party jurisdictions
would be compelled through an international treaty to enact legislation which
harmoniously recognises these defined allowances and provides consistent
domestic legal protections for their ownership, use and transfer.
420
Regional
EU
ETS
State-Based
RGGI
Market (US)
Voluntary/
Binding
Japan ETS?
New Zealand
ETS
The
Multi-National
Global Carbon
Market
International
Climate
Market
Voluntary
CCX Market
(US)
AUS
Voluntary
ETS
AUS
ETS
Figure 5: N. Durrant The Future of the Multi-National Global Carbon Market?
421
AN EFFECTIVE LEGAL REGIME FOR THE CREATION OF CARBON

OFFSETS: RIGHTS TO STORE IN THE EARTHS SINKS
In addition to the acquisition of credits from the market, there are a number of
potential mechanisms by which large-scale emitters, including the coal industry,
could generate emission reductions to offset other greenhouse gas emissions.
The Earth has a number of natural stocks which are able to absorb carbon. These
include oceans, fossil fuel deposits, the terrestrial system and the atmosphere.222
The terrestrial system includes rocks, sediments, wetlands, forests, soils,
grasslands and agriculture.
Photosynthesis absorbs atmospheric carbon into
plants, their roots and soil. 223 Changes in land use management can also improve
the amount of carbon sequestration in soils such as improved degradation and
erosion controls, rehabilitation of degraded lands, conservation tillage, improved
fertilisation and forage rotations. 224 In addition, there are a number of direct
options by which greenhouse gases may be artificially stored in the geological
foundations of the earth. The procedure can be used to extract carbon from
emitting stacks and to transfer it for ocean sequestration or geological
sequestration using CCS projects. These biological and geological carbon sinks
enable liable parties to implement measures to reduce temporarily their level of
emissions for the relevant commitment period. In addition, provided that they
can be registered and verified, these projects may generate greenhouse gas
emission credits under the CDM or under domestic abatement schemes.
222
Julian Dumanski, Klaus von Grebmer and Christian J Pieri, 'Opportunities in Agriculture and
Forestry to Mitigate Greenhouse; Results of a Scientific Consultation' (St Michaels, 1998) at 2.
223
Ibid.
224
Ibid, 2-3.
422
Accordingly, the following paragraphs will consider the legal rights to store
greenhouse gases in both biological and geological sinks and the associated
regulation of these emission reduction projects under international and national
environmental law. Recommendations will also be provided for reform of these
regulatory arrangements to provide a more consistent, coherent legal approach.
A BioSequestration: storage in forests and soils

Biological carbon sinks enable entities to implement measures to reduce,
temporarily, their level of greenhouse gas emissions. In addition, if appropriately
registered and verified, these projects may be able to generate greenhouse gas
emission credits under the CDM or under appropriate national legislation in the
host country.
Atmospheric carbon is absorbed into plants through the process of

photosynthesis.225 This carbon is stored in the branches, leaves and roots of the
trees. However, such absorption is not permanent. Plants and trees release a
certain amount of carbon dioxide through respiration and the dropping of leaves,
bark and branches which decay and release carbon dioxide to the soil and to the
atmosphere. 226 In addition, land clearing, timber harvesting, bushfire, disease
and decay will all result in the release of carbon. 227
Changes in land use management can also improve the amount of carbon
sequestration in soils such as improved degradation and erosion controls,
rehabilitation of degraded lands, conservation tillage, improved fertilisation and
225
Julian Dumanski, Klaus von Grebmer and Christian J Pieri, n222, 2.

Australian Greenhouse Office Australian Department of the Environment and Heritage, 'Planning
Forest Sink Projects: A Guide to Legal, Taxation and Contractual Issues' (Australian Greenhouse
Office, 2005) at section 2.1.
227
Ibid, section 2.1.
226
423
forage rotations. 228 These are all changes which can enhance the natural sinks of
the Earth in minimising the amount of atmospheric carbon.
Estimating the amount of carbon stored in a forest stand at a particular point in

time is difficult given the fluxes which occur. Therefore constant monitoring is
required. There are also liability issues associated with the lack of permanence
of the actual emission reductions from these projects and any credits which are
issued for these projects. Furthermore, forest sequestration projects have been
criticised for promoting the planting of trees which absorb higher levels of
carbon rather than species of trees which would necessarily enhance biological
diversity.
B Carbon Sequestration and Australian Laws

Carbon sequestration projects raise a number of questions regarding the nature of
the rights created in the carbon which is sequestered in the trees. The rights
relate to both existing and potential sequestration of an intangible resource and
pose a significant challenge to conventional property law principles. Many
Australian jurisdictions recognise the right to own carbon sequestered in the trees
and vegetation on land separate from the rights relating to the land itself. 229
However, there is no unified approach to these rights and the legislative treatment
varies drastically across the various jurisdictions. This inconsistency provides
significant challenges for offset projects, particularly where project developers
hold land multi-jurisdictionally and must contend with a multitude of compliance
regimes.
228
229
Dumanski, von Grebmer and Pieri, n222, 2-3.

Other than the Australian Capital Territory or the Northern Territory.
424
In New South Wales (NSW), the Conveyancing Act 1919 provides for the
creation and ownership of separate carbon sequestration rights in respect of the
land.230 A carbon sequestration rights is defined as a right conferred on a person
by agreement or otherwise to the legal, commercial or other benefit (whether
present or future) of carbon sequestration by any existing or future tree or forest
on the land after 1990.231
The profit prendre deemed to exist in relation to the carbon sequestration right
is described by the legislation as:
(a) the profit from the land is taken to be the legal, commercial or other benefit
(whether present or future) of carbon sequestration by any existing or future tree or
forest on the land that is the subject of the carbon sequestration right.232
These profit prendre provide the holder of the right with an interest in the
land.233 Traditionally, a profit prendre has related to the right to take things
from the land such as part of the soil, minerals, natural produce, fish or wild
animals.234 This is not strictly compatible with sequestration as that relates to the
storage of carbon on the land rather than the taking of a thing from the land.235
Forest covenants are also able to be registered on title which address incidental
matters associated with the carbon rights such as the provision of access to or the
maintenance of trees or forests and the ownership of the trees on the land.236
230
Conveyancing Act 1919 (NSW) section 87A.

Ibid.
232
Conveyancing Act 1919 (NSW) section 88AB(2).
233
Conveyancing Act 1919 (NSW) section 88AB(1).
234
Alfred F. Beckett Ltd v Lyons [1967] Ch 449 at 482B. Kevin Gray, Elements of Land Law (2nd ed,
1993) London, Butterworths at 1045.
235
Paul Curnow and Louisa Fitz-Gerald, 'Biobanking in New South Wales: Legal Issues in the Design
and Implementation of a Biodiversity Offsets and Banking Scheme' (2006) 23(4) Environmental and
Planning Law Journal 298 at 305.
236
Conveyancing Act 1919 (NSW) ss87A,88F.
231
425
A similar approach is adopted in Tasmania which provides for the registration of

forestry rights, deemed to be profit prendre. 237 Forestry covenants are also able
to be registered on title and are binding on the assignees and personal
representatives of the covenantor and on all successors in title of the covenantor
to the land. 238
Queensland permits the registration of agreements regarding Natural Resource

Products provided that, where the land is held under the Land Act 1994, the
owner owns the natural resource product as an improvement on the land as
defined under that Act.239 Improvement is defined in relatively broad terms and
includes cultivation, garden, orchard or plantation. 240
Natural resource products may include:
all parts of a tree or vegetation, whether alive or dead, including parts

below the ground;
carbon stored in a tree or vegetation; and
carbon sequestration by a tree or vegetation. 241
A natural resources product agreement may: vest all or part of the natural
resource product in another person; grant another person the right to enter the
land to establish, maintain or harvest the natural resource product or to carry out
works or activities for the natural resource product; or grant another person the
right to deal with the natural resource product. 242 The benefited persons rights
to the natural resource product, under the agreement, are a profit prendre for the
237
Forestry Rights Registration Act 1990 (Tas) section 5.

Forestry Rights Registration Act 1990 (Tas) section 6.
239
Forestry Act 1959 (Qld) section 61J(1A).
240
Land Act 1994 (Qld), Schedule 6.
241
Forestry Act 1959 (Qld) Part 6B, Schedule 3.
242
Forestry Act 1959 (Qld) section 61J(3).
238
426
purposes of the Land Act 1994 or the Land Title Act 1994.243 However, the
legislation states that the vesting of the natural resource product, under the
agreement, does not create an interest in land under the Land Act 1994 or the
Land Title Act 1994.244
In Western Australia a carbon right can be created in perpetuity as a separate

interest in the land. 245
The carbon right is both a hereditament and an
encumbrance on the land.246 The proprietor of a carbon right enjoys the legal and
commercial benefits and risks arising from changes to the atmosphere that are
caused by carbon sequestration and carbon release occurring in or on the land.247
In addition, the legislation permits the holder of a carbon right to register carbon
covenants in relation to the land. 248 A carbon covenant becomes a separate
interest in, and runs with, the relevant carbon right as well as attaching to, and
running with, the burdened land. 249
In Victoria, the Forestry Rights Act 1996 permits a land owner to enter into a
forest property agreement which may: grant a right to plant, maintain and harvest
forest property on the land; grant a carbon sequestration right in relation to the
forest property; and vest ownership of the forest property in a third party. 250 A
forest property owner can also enter into a carbon rights agreement which
transfers their carbon sequestration rights to a third party. 251
243
Forestry Act 1959 (Qld) section 61J(5). Land Act 1994 (Qld), Chapter 6, Part 4, Division 8B; Land
Title Act 1994 (Qld), Part 6, Division 4B.
244
Forestry Act 1959 (Qld) section 61J(4).
245
But it cannot be varied, Carbon Rights Act 2003 (WA) ss5,6, 9.
246
Carbon Rights Act 2003 (WA) section 6.
247
Carbon Rights Act 2003 (WA) section 8(1).
248
Carbon Rights Act 2003 (WA) ss10-11.
249
Carbon Rights Act 2003 (WA) section 12.
250
Forestry Rights Act 1996 (Vic) section 5.
251
427
Certain formality requirements must be met for forest property agreements and
carbon rights agreements to be valid. 252
For example, the forest property
agreement must specify:

the parties to the agreement;
the land to which it applies;
the forest property to which it applies, including a description of

that forest property sufficient to adequately identify it;
the date on or circumstances under which the agreement

terminates; and
the rights and duties of the parties to the agreement.253
The Forest Property Agreement is able to be registered on title.254 However, a

forest property right is deemed to not be an interest in land.255 The right of entry
or access provided in the agreement is not a right of way. 256 A carbon rights
agreement is also not an interest in land. 257
The South Australian Forest Property Act 2000 establishes two forms of forest
property agreements; vegetation agreements and carbon rights agreements. The
Act states that the capacity of forest vegetation to absorb carbon from the
atmosphere is a form of property in the nature of a chose in action.258 Under the
Act, a carbon right attaches to the forest vegetation to which it relates, and
ownership of the right passes with ownership of the forest vegetation. 259
However, ownership of the carbon right can be separated from ownership of the
252
Forestry Rights Act 1996 (Vic) ss6,12.

254
255
Forestry Rights Act 1996 (Vic) ss11(b).
256
Forestry Rights Act 1996 (Vic) ss11(c).
257
Forestry Rights Act 1996 (Vic) ss14.
258
Forest Property Act 2000 (SA) section 3A(1).
259
Forest Property Act 2000 (SA) section 3A(2).
253
428
forest vegetation under a forest property agreement.
260
Forest property
agreements may be registered and are enforceable against successors in title.261

However, if unregistered, the interest of the transferee is an equitable interest and
liable to be defeated by purchasers in good faith, for value and without notice of
the agreement.262
There is a kaleidoscope of inconsistent approaches to the treatment of carbon

rights across the Australian states and territories and these regimes appear to have
been devised with little regard for their impact on the traditional principles of
property law in Australia. The treatment of land and, in particular, carbon rights
is fragmented and does not sit comfortably within the existing property law
system.
There is a critical need to create a new form of property right to
appropriately address these novel rights relating to the sequestration of

greenhouse gases rather than continuing this awkward treatment of carbon rights.
Furthermore, these state-based carbon rights recognising ownership in the stored
carbon are inextricable linked with tradeable emission instruments which may be
issued as a result of the sequestration of carbon in the forest offset project under
the Kyoto Protocol or some other voluntary or regulated domestic carbon trading
scheme. There is significant legal uncertainty regarding the interaction between
these statutory carbon rights and the issued emission instruments, particularly
where the carbon stocks sequestered in the vegetation are depleted following sale
of the associated emission instrument.
The treatment and longevity of the
emission instrument will depend upon the governing scheme. If it is the Kyoto
Protocol then only temporary instruments are issued for forest offsets and the
instrument will be subsequently cancelled. However, if the instrument has been
sold to the unregulated voluntary market then its treatment will be entirely
contractual and it is possible that it would continue to be bought and sold as an
offset despite the loss of carbon stocks.263
260
Ibid.
Forest Property Act 2000 (SA) ss7, 9.
262
Forest Property Act 2000 (SA) section 7.
263
Its treatment under a regulated domestic carbon trading scheme will depend entirely on the rules
established to deal with this legal issue.
261
429
AN EFFECTIVE LEGAL REGIME FOR CCS: RIGHTS TO STORE

GASES IN THE EARTHS SUB-SURFACE
Entities may also be able to capture the carbon dioxide at its point of source and
artificially store it in formations through the use of CCS technology. CCS
involves the capture of the emissions from mining operations, electricity
generation plants and other industrial sources and the injection of the carbon
dioxide deep into the Earths geological foundations such as deep sea-beds
(Ocean Sequestration) or subterranean formations (Geological Sequestration).264
Pilot projects are being implemented in Australia and overseas. Australian

examples in operation include the Otway Basin Pilot Project for the injection of
carbon dioxide into depleted oil and gas reservoirs in the State of Victoria.265
The legal treatment of this new technology is largely untested. Indeed, as the
technological options emerged in recent years, it became apparent that there was
an acute absence of national and international law directly applicable to the
regulation of these sequestration activities.
A critical issue relates to the sovereign rights of nations to physically access the
ocean sub-surfaces and geological formations, under current international laws,
and to store the carbon dioxide in those areas. Accordingly, the key legal issues
to be resolved relate, first, to the rights to physically access the ocean subsurfaces and geological formations to store the carbon dioxide and, second, to the
long term liabilities associated with the storage of that carbon.
264
Elizabeth Wilson and Mark de Figueiredo, 'Geological Carbon Dioxide Sequestration: An Analysis
of Subsurface Property Law' (2006) 36(2) Environmental Law Reporter 10114 at 10114.
265
This is the first geo-sequestration demonstration project in Australia,
http://www.co2crc.com.au/otway/ at 14 June 2008. Another proposed project, the Zerogen integrated
gasification combined cycle with carbon capture and storage in Queensland is still in the approval
application stage http://www.zerogen.com.au/about/timeline at 14 June 2008.
430
The right to sequest carbon will depend upon the location of the proposed storage
activity. Where the geological sequestration is intended to take place within
sovereign territory then regulation will take place at a national level. This will
also be the case where ocean sequestration is to take place within the territorial
sea of a nation. The territorial sea extends out from twelve miles from the
coastline. Projects may also take place within the Exclusive Economic Zone
(EEZ) which extends from the territorial sea out to a maximum of 200 nautical
miles from the baselines of the coast.266 Provided that the nation has claimed the
EEZ, in that area, coastal States have sovereign rights of exploration, exploitation
and management of the natural resources located in the seabed and waters.267
The status of the EEZ varies from country to country. For example, Australia has
claimed its EEZ through the Seas and Submerged Lands Act 1973 (Cth) whereas
the United Kingdom has not claimed its area.
Alternatively, States may exercise sovereign rights to explore and exploit the
natural resources of the sea bed and subsoil of the continental shelf. 268 Beyond
the EEZ is the high seas in which all States are free to carry out activities
provided that due regard is given to the interests of other States and to the rights
under UNCLOS regarding international seabed activities. 269
A Sequestration within the High Seas

The concept of carbon sequestration was not originally addressed by international
law principles simply because the notion of carbon capture and storage was not
contemplated at the time of their creation. However, there are some relevant
international conventions which relate to sequestration beneath the oceans.
These include the United Nations Convention on the Law of the Sea 1982
266
Ray Purdy and Richard Macrory, 'Geological Carbon Sequestration: Critical Legal Issues'
(Working Paper 45, Tyndall Centre for Climate Change Research, 2004) at 12.
267
United Nations Convention on the Law of the Sea 1982 (UNCLOS) (Agreed 10 December 1982,
Entered into force, 16 November 1994)., Article 2(3). Ray Purdy and Richard Macrory, ibid.
268
UNCLOS, n267, Articles 76 and 77.
269
431
(UNCLOS), London Convention of 1972 and the London Protocol of 1996. The
application of these international agreements is discussed in the following
paragraphs.
UNCLOS seeks to provide a legal order for the seas and oceans and imposes a
number of general obligations regarding the ocean space. UNCLOS imposes a
general obligation on States to protect and preserve the marine environment and
notes that States may exploit their natural resources in accordance with that duty
to protect.270 UNCLOS requires that States:
shall take, individually or jointly as appropriate, all measures consistent with this
Convention that are necessary to prevent, reduce and control pollution of the marine
environment from any source, using the best practicable means at their disposal and
in accordance with their capabilities.271
Pollution of the marine environment is defined in UNCLOS to include:

the introduction by man, directly or indirectly, of substances or energy into the
marine environment, including estuaries, which results or is likely to result in such
deleterious effects as harm to living resources and marine life, hazards to human
health, hindrance to marine activities, including fishing and other legitimate uses of
the sea, impairment of quality for use of sea water and reduction of amenities.272
It is possible that carbon dioxide, in certain quantities, could amount to pollution

due to the resulting increase in ocean acidity levels. 273 According to one
commentator, the argument could be made that UNCLOS has been breached by
those States which emit carbon dioxide thereby permitting the warming of sea
surface temperatures; the increase of sea levels; and the increase in carbon
270

272
Ibid, Article 1(1)(4).
273
Purdy and Macrory, n266,18.
271
432
dioxide in the sea waters. 274 However, there are a number of difficulties in
bringing such an action for breach including standing and causation issues.275
UNCLOS also imposes obligations on States to take all measures necessary to

ensure that activities under their jurisdiction or control are conducted so as not to
cause damage by pollution to other States and their environment. 276
All
necessary measures includes, inter alia, those designed to minimise to the fullest
possible extent:
the release of toxic, harmful or noxious substances, especially those which are
persistent, from land-based sources, from or through the atmosphere or by
dumping.277
Dumping in this context means as any deliberate disposal of wastes or other

matter from vessels, aircraft, platforms or other man-made structures at sea.278 It
does not include placement of matter for a purpose other than the mere disposal
thereof, provided that such placement is not contrary to the aims of UNCLOS.279
The broad rules and framework of UNCLOS are enhanced by the texts of the
London Convention and the London Protocol. The London Convention seeks to
control pollution of the marine environment including the dumping of waste or
other matter that is liable to create hazards to human health, to harm living
resources and marine life, to damage amenities or to interfere with other
274
W.C.G. Burns, 'Potential Causes of Action for Climate Change Damages in International Fora: The
Law of the Sea Convention' (2006) 2(1) McGill International Journal of Sustainable Development
Law and Policy 27 at 38,41,43. Australia has ratified UNCLOS. The US signed UNCLOS but has not
ratified the agreement.
http://untreaty.un.org/ENGLISH/bible/englishinternetbible/partI/chapterXXI/treaty7.asp at 14 June
2008.
275
Ibid.
276
277
Ibid, Article 194(3)(a).
278
Ibid, Articles1 (5)(a)(i).
279
Ibid, Article 1(5)(b)(ii).
433
legitimate uses of the sea. 280 Pollution is not defined. The application of the
London Convention is limited, in similar terms to UNCLOS, to the deliberate
disposal at sea of wastes or other matter from vessels, aircraft, platforms or other
man-made structures at sea. 281 The Convention applies to all marine waters other
than the internal waters of States.282
The dumping of certain specified wastes, as set out in the Annexes, is prohibited
in the London Convention. 283 In addition, specified wastes above a certain
amount require a special permit whilst other wastes are able to be dumped in
accordance with a general permit. 284 Carbon dioxide is not specifically included
in the Annexes to the Convention.
It is debatable whether it is able to be
characterised as falling within the prohibited concept of industrial waste as

waste materials generated by manufacturing or processing operations. 285 Carbon
dioxide from mining processes could potentially fall within this definition but
electricity production is less likely to constitute manufacture. The Scientific
Group to the Convention stated in 1999 that waste derived from fossil fuels did
amount to industrial waste. 286
However, the definition of industrial waste
specifically excludes any uncontaminated organic materials of natural origin. 287

Therefore emissions resulting from natural processes such as forestry or soils
would not apply.
The London Convention operates in parallel with the London Protocol, which
entered into force in 2006, and it is being incrementally ratified by the parties.
280
IMO, Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter,
the London Convention 1972 (the) (entered into force 1975), Article 1.
281
Ibid, Article 3 (1)(a).
282
Ibid, Article 3(3).
283
Ibid, Article 4(1).
284
Ibid.
285
Ibid, Annex 1(11). Purdy and Macrory, n266, at 21-22.
286
Purdy and Macrory, n266, 25.
287
London Convention, n280, Annex 1(11)(f).
434
The primary objective of the London Protocol is for the parties to:
individually and collectively protect and preserve the marine environment from all
sources of pollution and take effective measures, according to their scientific,
technical and economic capabilities, to prevent, reduce and where practicable
eliminate pollution caused by dumping or incineration at sea of wastes or other
matter.288
Pollution is defined under the Protocol in similar terms to those under

UNCLOS.289 The definition of dumping, under the London Protocol, is also cast
in similar terms to the Convention but includes an additional element of any
storage of wastes or other matter in the seabed and the subsoil thereof from
vessels, aircraft, platforms or other man-made structures at sea.290 The London
Protocol also applies to all marine waters but also applies to the sea, sea-bed and
subsoil. 291
It does not include sub-seabed repositories accessed only from
land.292
The London Protocol applies the precautionary principle in the following terms:
contracting Parties shall apply a precautionary approach to environmental
protection from dumping of wastes or other matter whereby appropriate
preventative measures are taken when there is reason to believe that wastes or other
matter introduced into the marine environment are likely to cause harm even when
there is no conclusive evidence to prove a causal relation between inputs and their
effects.293 (emphasis added)
288
IMO, Protocol on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter, the
London Protocol 1996 (entered into force 2006), Article 2.
289
290
Ibid, Article (1)(4).
291
Ibid, Article 1(7).
292
Ibid.
293
Ibid, Article 3(1).
435
The London Protocol prohibits the dumping of any wastes or other matter other
than those listed in Annex 1.294 Annex 1 now includes CO2 streams from CO2
capture processes in addition to inert, inorganic geological material and
organic material of natural origin.
The dumping of these wastes may be
permitted following the issue of a permit for the activity by the International
Maritime Organisation. Approval to issue the permit will be subject to guiding
regulations for carbon sequestration which are still to be agreed by the parties.
The amendments to the London Protocol specify that carbon dioxide streams
may only be considered for dumping, if: disposal is into a sub-seabed geological
formation; they consist overwhelmingly of carbon dioxide (they may contain
incidental associated substances derived from the source material and the capture
and sequestration processes used); and no wastes or other matter are added for
the purpose of disposing of them. 295
Regulation of GeoSequestration Projects in Australia
In addition to ocean sequestration, sequestration could also take place in

geological formations within Australian territory. The carrying out of those
activities would be regulated by Australian legislation. The carrying out of
geological sequestration activities in Australia will encompass many phases
including the capture of the carbon dioxide, its transportation, injection
underground and indefinite storage. All of these activities require some level of
government approval and regulation.
Initial steps have been taken in Australia to establish nationally consistent

framework principles and guidelines for the establishment
of carbon
sequestration projects. The Carbon Dioxide Capture and Geological Storage

Regulation was endorsed by the Federal Ministerial Council on Mineral and
294
Ibid, Article 4(1).

These amendments entered into force on 10 February 2007, IMO, Marine Environment/Dumping
of Wastes and Other Matter/CO2 Sequestration and Storage http://www.imo.org/ at 14 June 2008.
295
436
Petroleum Resources in November 2005. 296 These regulations identify the key
areas of concern regarding CCS activities which require a nationally consistent
policy response. These legal issues include:
the environmental assessment and approvals processes to be applied to

the projects;
rights to access the sub-surface and property rights in the stored

substance;
long-term monitoring and verification obligations; and
liabilities and responsibilities in relation to the stored carbon.
The regulation does not yet have legal status. Until specific, consistent,
legislation is enacted in Australia to address the novel legal issues associated
with CCS, regulation of projects will largely occur through the amendment and
extrapolation of existing environment and planning legislation and petroleum
exploration and mining regulations. 297 Accordingly, the core legal concerns to be
addressed in any consistent regulatory frameworks relate to the environmental
assessment and approval processes to be applied to these projects, the right to
access the project site, property rights in the stored substance and responsibilities
(and liabilities) associated with the leakage of carbon dioxide. These issues are
discussed further in the following paragraphs.
296
Ministerial Council on Mineral and Petroleum Resources, 'Carbon Dioxide Capture and Geological
Storage: Australian Regulatory Guiding Principles' (Ministerial Council on Mineral and Petroleum
Resources, 2005) at 4-5, http://www.ret.gov.au/General/ResourcesCCS/Pages/RegulatoryGuidingPrinciplesforCarbonDioxideCaptureandGeologicalStorageCCS.aspx
at 14 June 2008. The Federal House Standing Committee on Science and Innovation commenced an
inquiry into geosequestration technology, including regulatory and approval issues, in June 2006.
http://www.aph.gov.au/house/committee/scin/geosequestration at 14 June 2008.
297
The Federal Government recently released an exposure draft of the Offshore Petroleum
Amendments (Greenhouse Gas Storage) Bill 2008 (Cth) aimed at regulating the exploration and
storage activities for CCS projects undertaken in the offshore waters of Australia. The regime intends
for CCS projects to be handed over to the Federal government in the months or years following
injection and for monitoring of the site to then reside with the government. The bill is silent on the
long-term liability of the government for any leakage of the stored gases.
437
Environmental Assessments and Approval Processes
The processes of capture and transportation of the carbon dioxide could

potentially be addressed though the existing regulation of industrial
processes, carriage by pipelines and transport of dangerous goods. However,
regulation of the injection and storage of the carbon dioxide will require new
consistent regulation to address the potential risks and liabilities of these
projects.
There is currently some disparate legislation in Australia which contemplates

the establishment of carbon sequestration projects. For example, in South
Australia (SA) the use of a natural reservoir to store carbon dioxide is a
regulated activity and a licence must be obtained under the SA legislation.298
Regulated substances, which includes carbon dioxide, may be transported by
a transmission pipeline subject to a pipeline licence. 299 The SA Petroleum
Act specifically considers rights of ownership in carbon dioxide. In terms of
reservoirs suitable for storage of the carbon dioxide, the SA Petroleum Act
states that property in this so-called regulated resource is vested in the
Crown.300 For carbon dioxide produced by a person, the SA Petroleum Act
states that, on production, the carbon dioxide becomes the property of the
person who produced it.301
In Victoria, carbon dioxide which is part of a naturally occurring mixture of

hydrocarbons falls within the definition of petroleum and may be stored
within the area of a production licence under the Petroleum Act 1998
(Vic). 302 Queensland has also enacted legislation which provides for the
storage of prescribed storage gases, including carbon dioxide, in underground
298
Petroleum Act 2000 (SA) section 10.

300
Petroleum Act 2000 (SA) ss 4 and 5.
301
302
Petroleum Act 1998 (Vic) section 6, Division 7 and Division 8. This definition applies only to
naturally occurring carbon dioxide and not to carbon dioxide as a by-product such as in coal fired
electricity plants.
299
438
reservoirs. 303 The Queensland regime enables petroleum lease holders to

enter into storage agreements with third parties for the storage of carbon
dioxide within underground reservoirs within the lease area. 304 Upon the
ending of the petroleum lease, if no claim to ownership of the stored gas is
made, then the stored gas will become the property of the State of
Queensland.305
A large geological sequestration project proposed for the Gorgon area gas
fields, off the coast of Western Australia, resulted in the enactment of
specific legislation for the sequestration activities of that project.
That
legislation prohibits the injection of carbon dioxide into underground

reservoirs without the approval of the Minister. 306 The Act extends the
application of the Petroleum Pipelines Act 1969 (WA) to permit the
conveyance of carbon dioxide through those petroleum pipelines. 307 The
Minister has indicated that the endorsed Carbon Dioxide Capture and
Geological Storage Regulation will be applied to the approval process for
carbon storage in the Gorgon project.
II Access to Property and Property Rights

Ownership of the carbon dioxide, once sequestered, is somewhat uncertain
under Australian common law. Ownership may vest in the placer of the
carbon dioxide or in the owner of the land.
In the absence of specific
legislation, rights to sequest carbon underground will primarily depend upon

the bundles of rights which are held by the State in relation to the sub-surface
in those jurisdictions. A key question is therefore; who owns the geological
void into which the gases are to be placed and stored? General common law
303
Petroleum and Gas (Production and Safety) Act 2004 (Qld), ss12 and 13.
Petroleum and Gas (Production and Safety) Act 2004 (Qld) Part 6.
305
Petroleum and Gas (Production and Safety) Act 2004 (Qld), ss 212-214. This is likely to render
the state responsibility for the liabilities associated with any leakage of the stored gases.
306
Barrow Island Act 2003 (WA) section 13.
307
Barrow Island Act 2003 (WA) section 11.
304
439
principle state that the owner of land enjoys exclusive rights of ownership
from the heavens above to the centre of the Earth below. 308 The exact depth
of ownership remains largely unresolved but will include sufficient depth to
permit access to mineral and geothermal resources. 309 In addition, certain
statutory assignments act to place rights to minerals found within the subsurface of the land in the State.
The question is then; what rights of access and ownership must be obtained
by private entities in order to store such carbon dioxide within the Earths
core? Furthermore, what liabilities may accrue for any harm caused as a
result of such storage? Where the land is not vested in the Crown, and
ownership does not reside in the project developer, access will need to be
secured through a combination of leasing and licensing arrangements. As
well as access, project developers would need to agree to contractual
provisions addressing a number of legal issues including:
ownership rights to the stored carbon;
indemnities for any damage caused from the presence of the project;
insurance requirements; and
long-term monitoring obligations of the project developer.
III Liabilities Associated with the Stored Carbon Dioxide

CCS activities encompass long timeframes for storage, and potentially
indefinite storage, of gases. This gives rise to a need for stringent, regular and
ongoing monitoring programs to minimise the risk of leakage of these
substances from the storage site. Such programs should be mandatory and
308
Derived from the maxim cuis est solum eius est usque ad coelum et ad inferos referred to in the
report of Bury v Pope (1586) Cr Eliz 118; 78 ER 375.
309
Geothermal Kinetics Inc v Union Oil Co of California 141 Cal Rptr 879 (1977).
440
compliance with these monitoring obligations must be strictly enforced by

the relevant authority. Given that these storage sites could be operative for
thousands of years, it is arguable that rights and liabilities in the management
of the stored carbon dioxide should be assigned to government entities which
would legally exist in the longer term. This could be done in the form of
bonds or guarantees to the State to protect it against any costs and liabilities
incurred from management of the project.
Significant statutory liabilities may accrue for the stored carbon.
First,
owners of the carbon and owners or occupiers of the land could be liable for
the unlawful disposal of waste, and contamination of land, if exemptions are
not obtained under the local environmental protection legislation.310 Second,
leakage of the stored carbon may occur. This could occur in two different
ways.
The first is abrupt leakage of carbon dioxide to the atmosphere
through migration of the gases to the surface. The second is gradual

migration of the carbon dioxide into surrounding geological formations or
groundwater sources. 311
An environmental authority would normally be required to undertake the

storage of potentially harmful or hazardous substances. Contravention of any
of the conditions of the environmental authority would give rise to certain
statutory liabilities. 312 As a best case scenario, 99 per cent of the stored
carbon will remain within the storage area over a 1000 year period.313 More
310
For example, in Queensland under Part 8, ss 442, 443 of the Environmental Protection Act 1994
(Qld) and the Environmental Protection (Waste Management) Regulation 2000 (Qld). In New South
Wales under ss 115, 142A,143 of the Protection of the Environment Operations Act 1997 (NSW).
311
James McLaren and James Fahey, 'Key Legal and Regulatory Considerations for the
Geosequestration of Carbon Dioxide in Australia' (2005) 24(1) Australian Resources and Energy Law
Journal 45 at 51.
312
For example, in Queensland this is an offence under section 430 of the Environmental Protection
Act 1994 (Qld). The maximum penalty is 2000 penalty units or 2 years imprisonment.
313
IPCC, 'Special Report on Carbon Dioxide and Storage: Summary for Policy Makers and Technical
Summary' (Approved and Accepted by IPCC Working Group III and 24th Session of the IPCC,
Montreal, Intergovernmental Panel on Climate Change, 2005)
http://www.mnp.nl/ipcc/pages_media/SRCCS-final/ccsspm.pdf at 14 June 2008. The IPCC report
441
significant quantities of carbon leakage could result in risks to human life and
health, particularly if those quantities leak into a confined area. The IPCC
considers that concentrations greater than seven to ten per cent of carbon
dioxide in the air would pose immediate dangers to human life and health.314
Gradual and diffuse leakage would also pose a risk to local groundwater and
soils.315 Accordingly, project developers, owners and occupiers of the land
and other responsible entities could be liable for causing environmental harm
under existing environmental protection statutes in Australia. 316
In addition to potential statutory liability for the leakage, at common law,

persons associated with the project may also be liable for the off-site
migration of carbon dioxide from actions in trespass, nuisance and
negligence. The remedies resulting from a successful action could include
damages for losses suffered as well as injunctions to discontinue the
offending activity.
C Recommendations for the Consistent Regulation of CCS

Some commentators consider CCS to be the best solution for both the global
climate system and modern industrialised society. Others consider reliance on
such sequestration to reduce emissions to be contrary to the spirit and
objectives of the international climate change regime.
The benefit of this
technological option lies in its ability to reduce, temporarily, the level of

greenhouse gas emissions that we are collectively releasing to the atmosphere.
This is intended to relieve the urgency of achieving immediate reductions in
considers that it is very likely that 99 per cent of the stored carbon would remain over a 100 year
period and it is likely that 99 per cent would remain over a 1000 year period, at 31.
314
Ibid, 31.
315
Ibid.
316
Through the statutory offences of causing serious or material environmental harm or
environmental nuisance, for example under ss 436, 437, 438, and 440 of the Environmental
Protection Act 1994 (Qld) and of negligently causing harmful substances to leak, for example under
ss 116 and 126 of the Protection of the Environment Operations Act 1997 (NSW). See also the
Environment Protection Act 1986 (WA), Environment Protection Act 1993 (SA), Environment
Protection Act 1970 (Vic) and the Environmental Management and Pollution Control Act 1994 (Tas).
442
atmospheric greenhouse gas concentrations whilst society implements measures

to transition to a low-carbon economy. The significant costs involved in
implementing these activities, especially where CCS is a mandatory requirement
for significant fossil fuel use, may well provide the necessary financial incentives
for the deployment of alternative forms of energy including solar, hydro and
geothermal energy sources. 317 Regardless of the moral status of utilising CCS to
address emissions, international law and domestic environmental legal systems
are not yet prepared for the mass influx of sequestration project proposals. The
technology is largely untested and environmental and local planning authorities
do not yet possess the appropriate regulatory tools to properly carry out their
approval functions in relation to these uncertain, long-term, high-risk activities.
The answer, once again, lies in the need for a consistent regulatory framework.
Given the potential locations of these projects in ocean waters, as well as in
national territories, it is preferable that this framework, and its guiding principles,
are agreed and implemented at an international level with local acknowledgment
and practical application through domestic environmental protection and
planning laws.
These agreed principles should provide consistent answers to the following legal
issues:
the characteristics of ideal storage sites;
the level of environment assessment required for the project;
ownership of the stored gas;
the type and regularity of monitoring required for the project;
the allocation of responsibility for the project and for any arising
liability;
317
The IPCC recommends the introduction of policies that create a real or implicit price of carbon and
could create incentives to invest in low-greenhouse gas alternatives. IPCC 2007 IPCC Fourth
Assessment Report, Working III Report: Mitigation of Climate Change Summary for Policy
Makers at [23].
443
post-closure responsibilities; and
requirements
for
insurance,
guarantees
and
other
financial
arrangements.
Clearly there is significant work to be done on achieving a consistent approach to
the legal regulation of CCS both in Australia and internationally.
RECOMMENDATIONS FOR A MORE EFFECTIVE LEGAL REGIME

TO COMPLEMENT THE USE OF MARKET MECHANISMS
The creation of an effective carbon market requires the implementation of a

supportive legal regime which encompasses the critical components of: an
enforceable duty to reduce emissions (with appropriate monitoring and
enforcement mechanisms); a tradeable emission instrument within an effective
trading system; and a scheme for the creation and recognition of abatement
projects. All of these critical components form part of the legal framework
adopted by the international community to reduce greenhouse gas emissions and
avoid the adverse impacts of climate change. However, the myriad of emergent
regional and domestic markets form an awkward collage of regulatory
approaches with no common philosophy regarding the nature of the emission
reduction duty, tradeable emission instruments, treatment of offsets and
regulation of CCS. This appears to be the case of too many chiefs, not enough
indians.
Weaknesses in the design and implementation of the international
climate market, combined with the lack of clear direction to nations mandating
the legal features of domestic carbon markets, has resulted in a multitude of
incompatible world best market designs. The resulting global carbon market
is emerging as a collection of immature, fundamentally disconnected, carbon
markets with little prospect for optimal performance. The establishment of a
truly multi-national global carbon market will require significant legal reforms
444
that include, among other matters, the radical transformation of traditional

domestic approaches to the protection of rights in property. The harmonious
creation and recognition of new forms of property in carbon is required to
address, separately, ownership in rights to emit greenhouse gases; sequestered
greenhouse gases in offset projects; and stored greenhouse gases in CCS projects
as well as the development of principles to address the complex legal interplay
between these three categories of legal rights and duties. 318
Given the depth and urgency of emission reductions required to minimise the
adverse impacts of climate change, society has placed a disconcerting emphasis
on the curative abilities of the carbon market to heal societys addiction to fossil
fuel use. Market incentives alone do not appear to be sufficient to promote the
necessary, short-term modifications in energy use and practices. 319 Global and
domestic regulation of climate change will be substantively ineffective if
excessive faith is placed in the operation of market incentives without the
supporting backbone of a strong regulatory structure to achieve abrupt and longterm behavioural changes. The international community must achieve a legal
framework which combines the benefits of harnessing innovation, through the
tradeable emission instrument and carbon market, with the strengths of traditional
command and control regulation.
In particular, the choice of emissions
stabilisation pathway and the resulting caps adopted for each carbon market
system are critical. The targets of the first commitment period of the Kyoto
Protocol are clearly inadequate to achieve the environmental objective of
avoiding adverse climate change. Furthermore, the international regime permits
the creation of additional offsets from the implementation of emission reduction
projects with the effect of increasing the cap for the scheme. Given the absence
318
The nature of the property rights in emissions will depend upon what is being done with the
greenhouse gases eg emission, sequestration or CCS and the jurisdiction in which it takes place. In
addition to property law principles, these rights will also be affected by any applicable contractual
provisions; rules of the emission trading scheme; and domestic regulatory regimes.
319
See, for example, Nicholas Stern, 'Key Elements of a Global Deal on Climate Change' (London
School of Economics and Political Science, 2008) at 20 other policy instruments will also be
needed.international emissions trading is likely to be necessary but not sufficient to meet a 50% by
2050 [target].
445
of a strong international role model, it is hardly surprising that the emerging

domestic trading systems are criticised for lacking environmental credibility.
An effective multi-national approach to the regulation of climate change must do

so through many facets and in a comprehensive and harmonious manner. It is
imperative that a strong international regime is adopted which obliges each
nation State to implement a strong domestic regulatory regime for the mitigation
and offset of greenhouse gas emissions and for adaptation to the now inevitable
impacts of climate change. Accordingly, the creation of an effective carbon
trading market must be but one policy response within a portfolio of integrated
legal measures to impose duties and prohibitions in relation to resource use,
impose liability for non-compliance with those duties, and provide incentives to
promote more sustainable outcomes across our global community.
446
Chapter Eight Conclusion
This thesis has examined critically the potential role of the law in achieving the
significant and rapid reductions in global greenhouse gas emissions required to
avoid the adverse impacts of climate change. It has done so through an analysis
and evaluation of the emerging regulatory, liability and market approaches under
international and Australian laws. A number of deficiencies have been identified
in these emerging legal approaches, at international and national levels, and
recommendations have been presented regarding necessary reforms.
The
purpose of this concluding chapter is to synthesise the key deficiencies in the

current legal response to the consequences of climate change and to present a
series of recommendations to achieve a more effective legal response to this
challenging global phenomenon in the future.
THE ROLE OF LAW IN RESPONDING TO CLIMATE CHANGE
The law has traditionally formed a critical backbone to any effective regime to
address emerging social concerns. As has been stated:
for those who suffer, in body or in spirit, from the imperfection of the human world
as it is, the best way to make a better world is the way of law.1
The role of law is to structure our society and to serve social policies through a
powerful array of statutes, courts, police, and devices such as taxes, permits,
insurance, subsidies and, ultimately, criminal sanctions. 2 Law has traditionally
Phillip Allott, 'The True Function of Law in the International Community' (1998) 5 Indiana Journal
of Global Legal Studies 391 at 413.
2
Nicholas A. Robinson, 'A Legal Perspective on Sustainable Development' in J Owen Saunders (ed),
The Legal Challenge of Sustainable Development: Essays From the Fourth Institute Conference on
Natural Resources Law (1990) Ottawa, Canadian Institute of Resources Law, 15 at 15.
447
served the role of protecting the status quo, maintaining traditional liberal values
and providing a stable social and economic environment. 3 The law is able to
react to changing priorities in our society but it does so through the sedate,
incremental evolution of the legal system. In this respect:
what law does is to allow a society to choose its future. Law is made in the past, to
be applied in the present, in order to make society take a particular form in the
future.4
It is concluded that the law does have a significant role to play in any effective
response to the global threat of climate change. However, in attempting to
respond to climate change, the law is confronted by a unique set of challenging
circumstances that it has never before confronted. The phenomenon of climate
change is temporally and geographically challenging and it is scientifically
complex and uncertain. Any effective legal response must cross the public and
private divide, through international and domestic spheres, and must achieve
unprecedented levels of national and international cooperation.
The current
international and Australian legal approaches are clearly dysfunctional and

ineffective and the law as it stands is overwhelmingly inadequate to meet the
enormity of the challenge posed by climate change.
Consequently, addressing climate change,
in particular, and
societys
environmental sustainability, more generally, requires a serious re-evaluation of

the effective role to be played by the law:
faced with climate change and other environmental threats, as well as persistent
poverty for billions of the Earths people, what reason demands is that we
improve the way law works for sustainable development. Law must be strengthened,
and compliance must be ensured, to achieve this paramount goal of society. 5
Ibid,19.
Phillip Allott, n1, 399.
5
Durwood Zaelke, Matthew Stilwell and Oran R Young, 'Compliance, Rule of Law and Good
Governance, What Reason Demands: Making Law Work for Sustainable Development' in Durwood
4
448
Consequently, the law does have the potential to be a dynamic, and powerful,
instrument for reform but to do so it must be used not only reactively, in an ad
hoc and piecemeal fashion, but also proactively to stimulate social reform and
drive behavioural changes to reduce global emissions and respond to the threat of
climate change effectively.6 To achieve this, society must harness the benefits of
a range of traditional and modern legal instruments including regulation, liability
and market approaches. Furthermore, each of these critical components must be
reformed to enhance their complementary operation and to ensure an integrated
legal response is undertaken by the legislature, executive and judiciary.
EFFECTIVENESS OF EXISTING LEGAL RESPONSES

A Regulatory Approaches
I
International
This thesis has analysed the existing international regulatory institutions,

rules, liabilities and market mechanisms established under the climate change
regime.
It has concluded that the regulatory design of this regime is
innovative, sophisticated and complex but it is also fragmented and legally

ineffective. There is an obvious absence of a strict, universal, duty to reduce
emissions by sufficient amounts, and within the necessary timeframes, to
avoid the adverse impacts of climate change.
Moreover, the so-called
sanctions for non-compliance are lacking in any clear deterrent value which
may result in an accepted culture of non-compliance with these international
agreements. The emphasis on flexibility and cost-effectiveness under the
Kyoto Protocol, and the absence of directions regarding domestic abatement
initiatives; the design of domestic carbon markets; and the consistent national
treatment of emission instruments, will all operate to undermine the
effectiveness of the international regime. The result is a regulatory gap in
Zaelke, Donald Kaniaru and Eva Kruzikova (eds), Making Law Work: Environmental Compliance
and Sustainable Development: Volume 1 (2005) London, Cameron May, 29 at 29.
6
Nicholas A. Robinson, n2, 15.
449
which nation States have a largely unlimited discretion to do as they please,

when they please.
Institutionally, the regime has also created a complex menagerie of

regulatory bodies and rules to facilitate the flexible market mechanisms of
CDM, JI and emissions trading in order to achieve emission reductions in the
most-cost effective manner. However, this innovative regulatory approach,
in harnessing the financial incentive of the tradeable emission instrument and
engaging the private sphere, has been emphasised at the expense of any solid
regulatory core to drive deep-rooted changes in national emitting behaviours.
Consequently, the effectiveness of the carbon market as a regulatory tool is
being, and will continue to be, undermined by this lack of an adequate and
enforceable restriction on global emissions. Moreover, there is a lack of due
process provided for private entities under the regime which undermines
confidence in these mechanisms and prevent the optimal performance of the
market.
II Within Australia
In recent years, the scientific reports from the Intergovernmental Panel on
Climate Change (IPCC) have become more and more blunt in their warnings
as to the seriousness and urgency of the threat of climate change. Despite
this, some climate sceptics have remained in the international community
amid concerns regarding the economic implications of achieving rapid and
substantial reductions in greenhouse gas emissions. As a result, in Australia,
there have been only limited regulatory initiatives implemented to address
climate change and the emphasis has been on voluntary, ad hoc, programs.
The resulting multiples of federal, state-based and local climate change
policies, rules and decision-making principles are legally disparate,
uncoordinated and predominantly ineffective in responding to climate
change.
Consequently, the Australian legal approach has had little
substantive effect on national levels of business as usual emissions.
450
In the absence of a comprehensive legal approach to restrict Australias

greenhouse gas emissions, the existing federal, state and local environmental
protection and planning regulations, across Australia, have the potential to
play a significant role through the evaluation of major projects, minimisation
of greenhouse gas emissions and avoidance of environmental harm. Such a
role falls well within the scope and purpose of these regimes. However, this
thesis has identified a significant dichotomy between the law as written and
the law as applied in practice which generally ignores the environmental
implications of large-scale emissions.
This is largely the result of a
fundamental misconception regarding the proper role of the principles of

ecologically sustainable development (ESD) in the application of the law; a
serious misunderstanding as to nature of climate change and lingering doubt
regarding the accuracy of the IPCC predictions.
B Liability Approaches
The absence of the comprehensive mitigation of greenhouse gas emissions in
Australia, in conjunction with the general lack of progress by the global
community, means that some adverse impacts of climate change are inevitable.
As a result, there is a need for a new regulatory approach, both internationally
and within Australia, to promote adaptation to these impacts including measures
to enhance the levels of environmental sustainability of our society. Moreover,
the international climate change regime remains silent on the principles for the
allocation of legal responsibility for the harm caused by the impacts of climate
change. In the absence of a customised domestic statutory regime, it will fall to
the Australian common law to distribute liability for the harms and losses
experienced as a result of greenhouse gas emissions and the consequential
impacts of climate change. However, the scientific complexities and causative
uncertainties of climate change will present almost insurmountable obstacles to a
successful suit for loss caused by climate change under the principles of nuisance
and negligence. In particular, it would be a near impossible task to meet the
451
threshold for establishing a causative link between emissions, climate change and
the harm suffered given the inherent complexity and unpredictability of the
climate system.
Consequently, it is concluded that the common law is not
currently equipped to accommodate these novel legal disputes. Furthermore,

given the slow, incremental, evolution of the legal system, it is not the most
appropriate mechanism by which to address these emerging losses.
New
approaches will need to be devised to enable legitimate claims to be made;

credible causative links to be established; and fair and just compensation to be
awarded under appropriate, transparent and equitable legal principles which are
able to accommodate the presence of these unique circumstances. It is submitted
that such swift and radical transformations in the law would be most
appropriately implemented by the legislature.
C Market Approaches
In an endeavour to address the issues of climate change swiftly and costeffectively, the international community has adopted the innovative legal
instrument of the tradeable emission instrument within an international trading
system. This has acted as a catalyst for the design and implementation of a range
of emerging domestic, regional and global markets, both voluntary and
mandatory, which are intended to link ultimately into a multi-national, global,
carbon market. However, the ad hoc design of these schemes, at international
and domestic levels, has created a patchwork of disparate systems that are
overwhelmingly incompatible in their current forms and could forge only a
legally dysfunctional, environmentally ineffective and economically inefficient
multi-national market system.
The central legal feature in all of these carbon trading schemes must be a strict,
enforceable and deep target for reducing emissions, as indicated by the IPCC, to
enable the global community to avoid the adverse impacts of climate change. To
respond effectively to climate change, and achieve these substantial reductions in
global emissions in the most cost-effective manner, these trading regimes must
452
also be extensively re-designed to achieve compatibility and harmony in their

legal features including in the nature of the tradeable instruments and their
treatment under domestic laws; the acceptability of offsets and sequestration
activities in complete or partial compliance with the scheme; and the sanctions to
be imposed for non-compliance.
Furthermore, these tradeable emission
instruments have been arbitrarily fused onto existing domestic legal systems with
little or no regard for their impact on, and interaction with, existing laws and
principles. These laws and principles, particularly those relating to property, are
longstanding, well-established components of our legal system and cannot be
capriciously revoked or manipulated to respond to this international artificial
creation of new forms of legal rights. Nevertheless, these artificial constructs
now require the creation of new forms of property rights that are specifically
designed to recognise and accommodate ownership in: rights to emit greenhouse
gases; sequestered greenhouse gases in offset projects; and stored greenhouse
gases in CCS projects as well as the development of principles to address the
complex legal interplay between these three categories of legal rights and duties.
RECOMMENDATIONS FOR A MORE EFFECTIVE LEGAL RESPONSE
The phenomenon of climate change is an archetypal environmental problem that

requires an unprecedented level of global cooperation in order to achieve an
effective legal response. Such a response can only be achieved through the sum
of private actions within the national sphere.
Consequently, responding to
climate change requires mutually reinforcing approaches at local, national and

international levels and behavioural adjustments by all individuals, businesses
and governments.7 Given this, it is apparent that the depth of cooperation in the
UNFCCC is by no means sufficient to begin solving the problem. 8 For the
J Robinson et al, Climate Change Law: Emissions Trading in the EU and the UK (2007) London,
Cameron May, Foreword at 23.
8
Heleen de Coninck, 'Designing Institutions for Climate Change: Why rational design involves
technology' (Paper presented at the Amsterdam Conference on Human Dimensions of Global
Environmental Change, Amsterdam, May 2007) at 10.
453
international community to create a more effective legal response, it must begin

to move away from the traditional emphasis on protected national sovereignty
towards a fuller integration of domestic and international approaches to reducing
emissions and responding to climate change. In this era of globalisation, we
must achieve greater alignment between national laws and international
obligations and these must be embedded and achieved through the domestic
actions of each party at federal, state and local levels. This will require new and
enhanced cooperative institutions at an international level with the creation of
national counterparts to provide strong guidance on appropriate and compatible
national policies and approaches to addressing the climate change challenge.
Within Australia, this would require a drastic increase in the level of federal, state
and territory cooperation to attain harmoniously a common environmental goal.
The international regime must create a strict, universal, duty to reduce

greenhouse gas emissions, in response to the guidance of the IPCC, with an
appropriate monitoring and compliance regime that accommodates both public
and private entities. Such duties must be transposed into the domestic regulatory
environment
with
appropriate
monitoring
and
enforcement
processes.
Domestically, this should include prohibitions on the emission of greenhouse

gases above a certain threshold, without authorisations to emit, combined with an
obligation to submit sufficient emission instruments representing all liable
emissions.
Sanctions must be imposed for non-compliance including an
obligation to make good and surrender acquired instruments from the market
equal to the excess emissions. The Federal government must also facilitate and
regulate the creation of offsets from environmentally credible projects within
Australia as well as the implementation of appropriate carbon capture and storage
projects (or CCS). It is also recommended that authorisations to emit include a
duty to take all reasonable steps to mitigate or avoid the greenhouse gas
emissions from an activity including through the mandated use of alternative
energy sources; technological changes; and enhanced efficiency of energy use.
This is in accordance with the approach of the international climate change
454
regime which requires substantial domestic mitigation activities in conjunction

with carbon trading.
There is also a critical role to be played by environmental impact assessment

processes in Australia through the mandatory integration of these assessments as
part of all governmental decision-making particularly, approval functions
regarding major projects.
For this to be effective, Australia must adopt a
nationally consistent framework for the evaluation and regulation of major

projects with large-scale emissions. The proper application of our environmental
protection and planning regulations demands the meaningful consideration of
both the short-term and long-term economic, social and environmental
implications from these proposed actions. Greater education must be provided to
determining authorities to assist them in understanding the risks associated with
estimated levels and timeframes of greenhouse gas emissions. Not only is this
necessary to achieve compliance with Australias international obligations, it is
also essential for the effective regulation of our emissions and for the promotion
of greater environmental sustainability across Australia.
It is also imperative that the corporate sector is held accountable for their
contribution to the loss or harm experienced by the Australian community as a
result of the impacts of climate change. In accordance with the polluter pays
principle, entities should be required to pay for the proportional costs associated
with their pollution through, for example, an obligation to make payment into a
national trust in return for authorisations to emit. 9 Funds from that trust could
then be used to promote adaptation in the community to minimise loss or damage
and to provide fair and just compensation for climate change related harm. 10 The
Support for this approach can be found in the following comment: putting a price on greenhouse
gas emissions should be a central pillar of mitigation policy. It is crucial to make polluters pay for the
damages they cause in order to change behaviour on the massive, widespread, and cross-cutting scale
necessary to tackle climate change, Nicholas Stern, 'Key Elements of a Global Deal on Climate
Change' (London School of Economics and Political Science, 2008) at 18.
10
This fund will have multiple functions to perform in allocating resources for loss or damage to
persons, private property and community infrastructure as well as facilitating access to insurance and
455
common law also has a role to play in ensuring justice is served in relation to past
emissions, and in particular, for the continued large-scale emissions following the
clear scientific warnings of the IPCC. New legal principles will need to be
devised which are fair and transparent whilst establishing appropriate evidentiary
thresholds to accommodate the prevailing scientific uncertainty and give proper
effect to the precautionary principle in practice. Once again, such revolutionary
developments in the law more appropriately reside in the jurisdiction of the
legislature.
It is concluded that market mechanisms do have a potentially significant role to

play in an effective legal response through incentivising emission reductions
within the private sphere.11 However, to be effective, the emerging carbon market
must be crafted so as to ensure its optimal operation and internal compatibility
with respect to the nature of the emission instrument, its treatment under
domestic laws, the acceptability of offsets or sequestration activities in complete
or partial compliance with the scheme, and the sanctions to be imposed for noncompliance. Even if an effective global carbon market is created, markets alone
do not appear to be adequate to achieve the global imperative of significant and
rapid reductions in emissions necessary to avoid the adverse impacts of climate
change.
Consequently, an effective carbon market must be but one policy
response within a portfolio of legal measures to promote public and private

investment in the development and diffusion of low-emission technologies,
increased efficiency of energy use and changes in preferences regarding the
choice of energy sources. The development of novel technology brings with it
novel risks and legal issues and will necessarily involve the adjustment and
expansion of existing legal frameworks to regulate appropriately these emerging
new technologies. Accelerated attitudinal changes will also be needed across all
levels of society and information exchange will be essential in educating and
to protective measures to enable the community to take steps to protect against the risks of climate
change. The administration of the fund could take on a similar form to the Superfund established in
the US to deal with contaminated land http://www.epa.gov/superfund/ at 23 June 2008.
11
Andrew Gouldson and Joseph Murphy, Regulatory Realities : the implementation and impact of
industrial environmental regulation (1998) London, Earthscan at 3.
456
informing the public and in promoting acceptance and active compliance with
this new era of environmental consciousness.
Consequently, this thesis has
concluded that the global community must utilise a combination of enforceable

legal rights and duties, within a cooperative model of governance, to promote
innovation and swift behavioural changes on the pathway towards a more
sustainable, low carbon, energy future.12
The potential role of law in responding to the impacts of climate change does not
stop there.
This new paradigm in multi-national environmental regulation
requires the law to play a proactive role in driving changes across social,
economic and ecological spectrums. The dual goals of emission reductions and
enhanced sustainability must be embedded rapidly in all levels of law making
from the global, to the national, and the local with effective governance across
and within the public and private spheres. A holistic and integrated approach to
addressing climate change is required within all domestic jurisdictions and
particularly, in Australia given the fragmented approach to environmental
regulation. It is only national governments that can respond effectively to these
international obligations. This requires a re-interpretation and transformation of
the existing domestic regulatory, liability and market approaches. It also requires
that the principles of environmental sustainability, or ESD, are thrust from the
periphery of decision-making to the central touchstone against which all
domestic laws and actions are assessed. In responding to the consequences of
climate change, environmental sustainability seeks to manage societys use of the
Earths natural energy sources and sinks and to maintain optimal and sustainable
ecological systems for the benefit of present and future generations. Crucially, it
also requires that concessions be made by private interests to protect global
public goods including through the universal acceptance of emission reduction
obligations. Such reform is imperative given the rate and scope of social and
12
Nigel Bankes, 'Legal Prescriptions for an Atmosphere That Will Sustain the Earth' in J Owen
Saunders (ed), The Legal Challenge of Sustainable Development: Essays From the Fourth Institute
Conference on Natural Resources Law (1990) Ottawa, Canadian Institute of Resources Law, 155 at
157.
457
economic transformation required to minimise the global adverse impacts of

climate change.
This entrenchment of these concepts of ESD within the Australian legal system
requires the adoption of an ambitious new legislative standard that demands the
integration of the principles of environmental sustainability, precaution and intergenerational equity in the creation and application of all laws. Consideration and
promotion of these principles must be made a mandatory component of all rule
making and approval functions across Australia rather than residing merely in the
discretionary functions of authorities. It is unlikely that this can be achieved
through the adoption of a new government policy alone. The magnitude of the
required attitudinal shift means such a principle should be legislatively or
constitutionally grounded and embedded nationally as a supreme imperative
within all aspects of rule-making, decision-making and enforcement.
The
principles of ESD provide an ideal overarching framework for Australian laws

but a level of particularity will be required in order to specify the application of
those principles in a practical setting. Consequently, the legislative expression of
this duty must particularise the primary and secondary priorities of society in the
promotion of ESD including the primary goals of reducing greenhouse gas
emissions and adapting to the impacts of climate change.
CONCLUDING COMMENT
In undertaking a critical analysis of the existing legal response to climate change,
at an international level and within Australia, one would expect to encounter a
complementary portfolio of integrated legal instruments which create legal rights
and duties through regulation; address non-compliance and unlawful acts through
liability provisions; and promote innovation to minimise global greenhouse gas
emissions through market measures. In reality, this thesis has concluded that the
current legal response is comprised of a series of discordant, ad hoc, regulatory,
liability and market approaches. The international and domestic legal regimes
are currently clearly inadequate for the task of regulating greenhouse gas
458
emissions and responding to the serious consequences of climate change. In

short, the regulatory approach fails to properly regulate the critical subject-matter
of greenhouse gas emissions. The liability provisions are inadequate to provide
fair and equitable principles for attributing responsibility for either unlawful
emissions or the harmful impacts of climate change.
Thirdly, the market
mechanisms provide excessive flexibility to the market without the supporting

backbone of integrated regulatory and liability provisions.
The end result is
indeed an innovative legal response to the implications of climate change but it

is also one which will be legally, environmentally and economically unsuccessful
in addressing the urgency of this global challenge. The law may be but one part
in the global solution. But it is a critical part. An effective global solution will
be found only in reforming the existing legal frameworks to create an integrated
legal response to climate change which utilises effective regulatory, liability and
market mechanisms to promote the behavioural changes that are essential in
achieving the rapid transition to a low carbon society.
459
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THE ROLE OF LAW IN

Thesis submitted in fulfilment of the requirements

Faculty of Law/Institute for Sustainable Resources

Climate change presents as the archetypal environmental problem with short-term

CHAPTER ONE INTRODUCTION ..................................................................................... 35

RELATIONSHIP OF RESEARCH TO EXISTING LITERATURE ..................................................... 40

SCOPE OF THIS RESEARCH STUDY...................................................................................... 46

CHAPTER TWO CLIMATE CHANGE IN CONTEXT:SCIENCE, ECONOMICS AND LAW .... 54

THE FIRST IPCC ASSESSMENT REPORT .............................................................................. 59

INTERNATIONAL RESPONSES TO THE IMPACTS OF CLIMATE CHANGE .................. 73

GENERAL OBLIGATIONS UNDER THE UNFCCC................................................................... 73

COMPARATIVE MODELS OF ATMOSPHERIC REGULATION ......................................... 79

CONCLUDING COMMENTS .................................................................................................... 96

CHAPTER THREE - THE ARCHITECTURE OF THE CLIMATE CHANGE REGIME: AN

JURISDICTIONAL SCOPE OF THE COP/MOP ....................................................................... 112

FRAGMENTED REGULATION OF THE FLEXIBILTY MECHANISMS............................ 119

OPERATION OF THE CDM ................................................................................................. 119

DEFICIENCIES IN THE MONITORING AND ENFORCEMENT OF THE

DUE PROCESS AND NON-COMPLIANT STATE PARTIES ....................................................... 143

INTERNATIONAL STATE RESPONSIBILITY AND CLIMATE HARM............................. 148

THE FLEXIBILITY MECHANISMS ....................................................................................... 168

CONCLUSION ........................................................................................................................... 173

OBJECTIVES OF THE AP6 .................................................................................................. 197

THE POTENTIAL IMPACT OF AUSTRALIAN REGULATION ON NATIONAL

THE EUROPEAN UNION .................................................................................................... 204

CONCLUDING COMMENTS .................................................................................................. 208

CHAPTER FIVE - THE ROLE OF ENVIRONMENTAL REGULATION, IN AUSTRALIA, IN

THE PROPER ROLE OF EIA PROCESS IN ASSESSING EMISSIONS .......................................... 231

EVALUATING EMISSIONS AND ENVIRONMENTAL EFFECTS: THE LAW IN

THE TREATMENT OF CAUSATION IN ENVIRONMENTAL CASE LAW ..................................... 240

POTENTIAL COMMONWEALTH REGULATION OF GREENHOUSE GAS EMISSIONS

AUSTRALIAS LEVEL OF COMPLIANCE WITH THE CLIMATE CHANGE REGIME . 269

THE DUTY TO ADAPT TO CLIMATE CHANGE ..................................................................... 271

CHAPTER SIX - THE POTENTIAL ROLE OF THE COMMON LAW OF TORTS IN

DUTY OF CARE AND PHYSICAL HARM .............................................................................. 299

CAUSATION AND LIABILITY IN CLIMATE SUITS............................................................ 305

THE STANDARD OF CARE AND EMISSIONS OF GREENHOUSE GASES ................................... 305

BREACH OF DUTY AND DAMAGE IN CLIMATE SUITS ................................................... 313

ESTABLISHING FACTUAL CAUSATION IN CLIMATE SUITS ................................................... 313

PROFESSIONAL ADVISORS, CLIMATE CHANGE AND NEGLIGENCE ...................................... 326

POTENTIAL DEFENCES TO CLIMATE SUITS IN NEGLIGENCE .................................... 335

ELEMENTS OF NUISANCE ................................................................................................. 338

ADEQUACY OF REMEDIES IN NEGLIGENCE AND NUISANCE ...................................... 349

CHAPTER SEVEN THE ROLE OF LAW IN A MULTI-NATIONAL GLOBAL CARBON

LEGAL INNOVATION IN PROTECTING THE ATMOSPHERIC COMMONS .................................. 365

EFFECTIVENESS OF THE EMERGING GLOBAL CARBON MARKET ........................... 380

CLEAR DEFINITION OF TRADEABLE EMISSION INSTRUMENTS ............................................ 383

LEGAL FEATURES OF THE EMERGENT CARBON MARKETS ...................................... 392

THE INTERNATIONAL CLIMATE MARKET .......................................................................... 392

AN EFFECTIVE LEGAL REGIME FOR THE CREATION OF CARBON OFFSETS:

BIOSEQUESTRATION: STORAGE IN FORESTS AND SOILS ...................................................... 423

AN EFFECTIVE LEGAL REGIME FOR CCS: RIGHTS TO STORE GASES IN THE

SEQUESTRATION WITHIN THE HIGH SEAS ......................................................................... 431

CHAPTER EIGHT CONCLUSION446

REGULATORY APPROACHES........................................................................................... 449

RECOMMENDATIONS FOR A MORE EFFECTIVE LEGAL RESPONSE......................... 453

BIBLIOGRAPHY .............................................................................................................. 460

FIGURE 1: THE GREENHOUSE EFFECT. ................................................................. 56

Carstens v Pittwater Council (1999) 111 LGERA 1 at 25.

Halverson v Dobler [2006] NSWSC 1307.

St George Club Ltd v Hines (1961) 35 ALJR 106.

Earl of Harrington v Derby Corporation [1905] 1 Ch 205.