Climate litigation against auto industry switching to the fast lane?

Climate litigation cases against the automotive industry are likely to ramp up in the coming year as climate activist groups increasingly look to target the sector.

There was hope at COP26 of an international agreement to end the sale of polluting cars by 2040. These deadlines are thought to be necessary to meet the goals of the Paris Climate Accords. However, several significant industry players and the world’s largest car markets – China, the US and Germany – declined to sign the pledge. This refusal is likely to encourage not only NGOs but, increasingly, shareholders and car owners to bring cases against car manufacturers.

As we predicted last year, we have seen an increase in climate change litigation against private sector organisations. The automotive industry is now facing a growing number of cases.

In September 2021 German NGO Deutsche Umwelthilfe commenced legal action against Volkswagen, BMW and Mercedes-Benz for the companies’ perceived climate inaction, requesting that the courts order the car manufacturers to cease or cap sales of internal combustion engine cars, unless they can prove greenhouse gas neutrality.  Greenpeace has also commenced a similar claim against Volkswagen.  

It is unclear whether any of these cases will be successful but they are likely to increase the pressure on the automotive market to take the activist groups’ demands more seriously, given the potential for further litigation, not just in Germany and Europe but also in the US. In addition to the threat of litigation, carmakers are also having to adhere to ongoing regulatory demands. To date, more than 20 countries have announced the full phase-out of internal combustion engine (ICE) car sales over the next 10‑30 years.

Increasingly climate-conscious consumers may also be more likely to purchase their vehicles from companies which show a bigger commitment to climate action.

Insurers and reinsurers and their customers are watching the developing climate change litigation landscape as the switch in focus to corporates has the potential to significantly impact the future risk agenda for those sectors which fall under scrutiny for climate related activity.

View all our Insurance 2022 Predictions here