From the Civil Mediation Blog in September 2024.

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Mediating Climate Change Disputes: Navigating Scope 3 Effects and International Law Implementation in Energy Transition Projects

Introduction

As the global community intensifies its efforts to combat climate change, the transition to sustainable energy sources has become a critical challenge, especially within the realm of administrative law. This challenge is reflected often in disputes between citizens, state entities, and corporations, particularly over the interpretation and application of regulations concerning Scope 3 emissions—those indirect emissions that occur within a company’s value chain.

A recent landmark case, R (on the application of Finch on behalf of the Weald Action Group) v Surrey County Council and others [2024] UKSC 20, has underscored the importance of correctly interpreting the Town and Country Planning (Environmental Impact Assessment) Regulations 2017. Specifically, the case revolved around whether local planning authorities, when considering applications involving commercial oil extraction, must assess the environmental impact of ‘downstream‘ greenhouse gas emissions resulting from the eventual use of refined oil products.

Mediation, increasingly recognized across various legal contexts, presents a promising and cost-effective approach for resolving these complex and emotionally charged conflicts. The  Court of Appeal decision in Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416 has significantly altered the landscape for mediation in UK administrative law. This ruling held that compulsory mediation is not contrary to Article 6 of the European Convention on Human Rights (ECHR), which guarantees the right to a fair trial, thereby opening the door for courts to mandate mediation in appropriate cases, including those involving complex climate change disputes.

Mediation and International Law Implementation

A critical advantage of mediation in climate change disputes is its potential to address the lack of consistency in applying new interpretations of International Tribunal for the Law of the Sea (ITLOS) and International Court of Justice (ICJ) advisories and rulings in domestic law. This aspect is particularly crucial as it allows for cross-border implementation in jurisdictions that currently may not support best practices.

Mediation can serve as a bridge between international legal standards and domestic implementation, reducing the risk of non-compliance. However, when drafting voluntary multi-jurisdiction commitments, care should be taken to ensure that the spirit of climate change regulations is consistently applied across international boundaries. This approach can help harmonize the application of international environmental law principles in various national contexts, potentially leading to more uniform and effective climate change mitigation efforts globally.

Limitations of Mediation

Despite its advantages, mediation is not suitable for all disputes. Cases where mediation may be inappropriate include:

• When a legal precedent is needed
• Where there’s an abusive imbalance of power between parties
• If one party is dishonest or untrustworthy
• When the mediator lacks necessary qualifications or experience
• If a specific outcome is required by a certain date
• When full force and effect under the New York Convention is necessary for multi-jurisdictional enforcement

The Cost-Effectiveness of Mediation in Climate Change Disputes

One of the most compelling reasons to embrace mediation in climate change disputes is its potential for significant cost savings relative to litigation. Data from various sources underscores the financial benefits of mediation compared to traditional litigation or arbitration:

• World Bank data: For a dispute valued at $200,000, arbitration costs average 17.3% of the dispute value, whereas mediation costs only 4.7%.
• Civil law jurisdictions: For disputes valued at $10 million, arbitration costs average 5.6% of the dispute value, compared to just 1.5% for mediation.
• Common law jurisdictions: For disputes of the same value, arbitration costs average 14.3% of the dispute value, while mediation costs are just 3.3%.

Mediation can offer cost savings of up to 70-80% compared to traditional dispute resolution methods. In the context of climate change disputes, which often involve multiple stakeholders and extensive technical evidence, these savings are not just substantial—they can be transformative.

Moreover, combining mediation with arbitration (a mixed-mode approach) can lead to average cost savings of 40.1% compared to arbitration alone. This hybrid approach is particularly beneficial in administrative law cases, where technical complexity often necessitates a combination of collaborative problem-solving and expert evaluation.

Administrative Law and Climate Change Disputes

Administrative law is central to climate change mitigation efforts, especially in the permitting process for energy transition projects. These processes often include:

• Environmental impact assessments
• Public consultations
• Interpretation and application of emissions regulations
• Balancing economic development with environmental protection

Disputes in this area often arise between citizens and NGOs on one side, and state agencies and corporations on the other, each interpreting regulations and scientific data differently. The complexity of these cases, particularly those involving Scope 3 emissions, makes them ideal candidates for mediation, if parties accept the scientific fact-based framework of the Intergovernmental Panel on Climate Change. Not only can mediation lead to significant cost savings, but it also provides a framework for resolving these disputes more effectively.

Scope 3 Emissions in Administrative Law Disputes

Scope 3 emissions are notoriously challenging to quantify and attribute, making them a frequent point of contention in energy transition projects and their associated permitting processes. Unlike Scope 1 (direct emissions) and Scope 2 (indirect emissions from purchased energy), Scope 3 emissions involve a broader set of activities and require collaboration across the entire value chain.

In administrative law, where stakeholders such as energy producers, NGOs, consumers, and regulatory bodies have vested interests, the interpretation of Scope 3 effects can significantly impact decision-making and project outcomes. Mediating these disputes requires not only a deep understanding of environmental science and administrative law but also an awareness of the cognitive biases that can influence stakeholders’ perceptions.

Cognitive Biases in Administrative Law and Climate Change Conflicts

Several cognitive biases can cloud judgment and hinder effective dispute resolution, particularly in the context of administrative law:

• Confirmation Bias: Stakeholders may selectively interpret regulations or scientific data that confirm their pre-existing beliefs about the impact of Scope 3 emissions.
• Anchoring Bias: Initial assessments of Scope 3 emissions in permit applications can disproportionately influence subsequent judgments by regulatory bodies or opposing parties.
• Framing Effect: The presentation of information in environmental impact assessments can significantly affect how it is perceived by different stakeholders.
• Groupthink: In public consultations or multi-stakeholder discussions, consensus-driven processes might suppress dissenting views, leading to suboptimal decisions.
• Optimism Bias: Government agencies or project proponents may underestimate the long-term impacts of Scope 3 emissions or overestimate their ability to mitigate these effects.
• Status Quo Bias: Regulatory bodies may resist changes to existing permitting processes, even when presented with evidence of their inadequacy in addressing climate change issues.

Turning Threats into Opportunities Through Mediation in Administrative Law

Mediation offers a structured yet flexible process that can help stakeholders navigate these biases and reach a consensus on Scope 3 emissions within the administrative law framework. The key strategies to transform climate change disputes from threats into opportunities are:

1. Identifying Underlying Interests in the Permitting Process: Mediation allows parties to explore the underlying interests that drive their positions on permit applications. By uncovering these interests, mediators can help find common ground and develop solutions that address the broader goals of all stakeholders.
2. Reframing Regulatory Issues: A skilled mediator can reframe the discussion around Scope 3 emissions and regulatory compliance, shifting the focus from adversarial positions to collaborative problem-solving, leading to more innovative and effective regulatory solutions.
3. Addressing Cognitive Biases in Administrative Decision-Making: Mediators can mitigate the effects of cognitive biases by introducing neutral, third-party experts to provide balanced assessments of Scope 3 emissions and encouraging stakeholders to consider a range of regulatory scenarios and outcomes.
4. Creating a Safe Space for Public-Private Dialogue: Mediation provides a confidential environment where stakeholders, including citizens, NGOs, government agencies, and corporations, can express their concerns without fear of judgment or retaliation. This is particularly important in administrative law disputes, where power imbalances can be significant.
5. Designing Tailored Regulatory Solutions: Unlike traditional administrative hearings or litigation, which often result in win-lose outcomes, mediation allows for the creation of customized solutions that can benefit all parties. For example, a mediated agreement might include commitments to enhanced monitoring and reporting mechanisms, community benefit agreements, or industry-wide best practices for managing Scope 3 emissions.

The Role of Compulsory Mediation in Administrative Law

The Churchill v Merthyr decision now enables courts to mandate mediation in climate change disputes within the administrative law context. This could be particularly beneficial in cases involving Scope 3 emissions and permitting processes. Mediation in administrative law disputes could:

• Ensure that all parties, including citizens and state agencies, engage in good-faith efforts to find mutually beneficial solutions before resorting to litigation.
• Provide a structured environment for addressing cognitive biases and exploring creative regulatory approaches.
• Allow for more flexible and adaptive outcomes than traditional administrative hearings or judicial reviews.
• Potentially lead to faster and more cost-effective resolutions of climate-related disputes, benefiting both the public and private sectors.

However, it is crucial that any compulsory mediation process in administrative law is designed and implemented in a way that ensures fairness, addresses power imbalances, and doesn’t unduly delay access to the courts if mediation proves unsuccessful.

Conclusion

Mediation, with its focus on collaboration, flexibility, and addressing underlying interests, is well-suited to resolving administrative law disputes over Scope 3 emissions in energy transition projects. By addressing cognitive biases and reframing disputes as opportunities for innovation and cooperation, mediation can assist stakeholders achieve sustainable outcomes that support environmental goals, business interests, and the public good.

The significant cost savings offered by mediation—up to 70-80% compared to traditional litigation—make it an attractive option for all parties involved in climate change disputes. These savings can be redirected towards implementing more effective environmental protection measures or supporting sustainable energy initiatives.

As climate change energy conversion continues to pose significant challenges, the ability to mediate complex administrative law disputes effectively will be crucial in turning potential threats into opportunities for positive change. By embracing mediation as a central strategy in energy transition projects and their associated regulatory processes, stakeholders can navigate the complexities of Scope 3 emissions, enhance the effectiveness of environmental regulations, and contribute to a more sustainable future—all while significantly reducing the financial burden of dispute resolution.

Moreover, by bridging the gap between international legal principles and national implementation mediation has the potential to address inconsistencies in the application of ITLOS and ICJ advisories and rulings into domestic law.  It  offers a unique opportunity to harmonize international environmental standards across jurisdictions.

About Philip Corsano

Philip is the founder of 22CG a mediation boutique which specializes in Climate Change Disputes.  Philip has worked in large scale project finance in energy globally, including Environmental Impacts  over 35 years.  He held senior position at  DFC, World Bank and private banking groups.  He is a qualified CMC mediator, was called to the Bar in 2024 and has an MBA from London Business School and a graduate  Decision Science qualification from Stanford.