#10: China Court Rules in Favor of Climate Activists in Landmark Case Against Coal Plant
A grassroots NGO‘s lawsuit against polluters highlights the hurdles of pricing climate damages and the wider obstacles faced by the nation's climate litigation efforts
Hi, long time no see!
As promised, the Shuang Tan newsletter has returned. Beginning this week, we will publish one or more original articles each week. From commentary and explainer pieces to in-depth Q&A, we will explore various aspects of China’s energy transition and climate action.
Today’s edition, created in collaboration with Yuan Ye, a freelance writer based in China, presents a detailed analysis of a recent public interest lawsuit against a coal plant that reveals the complexities of climate litigation in China.
A central issue in this lawsuit is valuing the damages caused by carbon dioxide (CO2) emissions. While it is scientifically agreed that greenhouse gases like CO2 cause climate change, determining a fair value for the damages to nature, the environment, and the climate in Chinese judicial practice remains an emerging challenge.
We learned that the plaintiff, a grassroots environmental group, and its legal team initially sought to use the prevailing trading price in China’s carbon market as a benchmark for damage compensation. However, the carbon price reflects the long-term reduction efforts within the policy framework in which the market operates. The cost of purchasing additional carbon emission allowances, although often mistakenly seen by corporations as merely the marginal cost of additional emissions, does not correspond to the economic value of the actual damage caused by emissions.
Are there alternative reference values, such as the cost of tree planting or direct carbon capture to remove carbon from the atmosphere? The challenges lie in the significant cost variations among these technical solutions. Should we also consider the costs of adapting to climate change? What about the broader impact on planetary health?
But before delving into the specifics of calculating damage, the plaintiff faces a more immediate question: is it even possible to assess the climate impact of some 800,000 tons of CO2 when climate change mechanisms operate on a global scale?
Not to mention, anyone who attempts to advocate for immediate emission cuts in polluting industries in China will quickly find themselves hitting a wall, as carbon dioxide is not a legally regulated pollutant in China.
China has been reluctant to set up an absolute cap on carbon emissions, despite its ambitious climate pledges and the high probability of achieving—or having achieved—an early peak. This approach has directly impacted the design of China’s ETS. The cap-and-trade system, which is about to celebrate its third anniversary in a few days, still lacks a cap for allowed emissions.
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China Court Rules in Favor of Climate Activists in Landmark Case Against Coal Plant
A grassroots NGO’s lawsuit against polluters highlights the difficulties of pricing climate damages and the obstacles faced by the nation's climate litigation efforts
By YUAN Ye
A regional court in China recently ruled in favor of climate activists in a lawsuit against a local coal power plant, marking a significant development as the country experiences increased legal claims against polluters and companies engaging in greenwashing.
The landmark ruling ordered Xingyi Shangcheng Power Generation Co., Ltd., a local coal power plant in Guizhou, southwestern China, to pay a 9,400 RMB ($1,295) fine for causing “ecological loss” and reprimanded the company for a public apology.
Grassland Alliance, a grassroots NGO based in Beijing that filed the case last year, celebrates it as the win of the first public interest lawsuit addressing China’s dual carbon climate goals.
However, a closer look into the case shows that the court did not support the environmental group’s claim regarding the damages caused by the coal power plant’s excess carbon emissions.
Will the case usher in a new era of climate litigation in China?
Noncompliance in the Carbon Market
The plant’s noncompliance with China’s newly introduced national carbon market is at the heart of the case.
In 2021, China, the largest contributor to global carbon emissions, rolled out this market to enhance its control over greenhouse gas emissions. Today, this young market covers around 5.1 billion metric tons of annual carbon dioxide (CO2) emissions from more than 2,000 thermal power plants across China.
However, the world’s largest carbon market faces integrity concerns, with fraudulent data being one of the top challenges and noncompliance being the other. According to the plaintiff, the defendant “damages the environment” by churning out air pollutants and climate-warming CO2 and failing to offset its excess emissions as required by the emission trading system (ETS).
In 2021, the defendant exceeded its free emission allowance by producing an additional 818,148 tons of CO2. As of January 2022, a month after the completion of the implementation cycle, the defendant had only managed to surrender roughly 4% of its due from the excess emission.
But the court determined that the coal power plant had “no intentional delay.” According to the verdict, the plant “has almost lost its ability to meet its obligations” in the carbon market due to financial difficulties, a challenge shared by many Chinese coal power plants. Later, however, the defendant purchased sufficient permits to offset its deficit after the trial began.
Lin Qibei, a long-time environmental activist and consultant to the plaintiff, says that they hope to use this case to push corporations to “fulfill their climate responsibility.” The court supported this claim. The verdict states that the defendant has not “actively taken measures” to do its part in achieving China’s carbon peaking and carbon neutrality goals.
Yet, Lin’s other wish—improving the transparency of China’s carbon market—appeared less evident to the court. As Lin deepens his understanding of carbon pricing, the environmental activist wants to see more evidence of how the new market promotes substantial mitigation actions.
As of December 2023, the total transactions in the China ETS surpassed 24.9 billion RMB ($3.4 billion), similar to the annual GDP of Djibouti in East Africa.
“Lots of money flows in and out of the carbon market. Where did it go?“ says Lin.
‘No Room’ to Discuss Climate Damages
Although the Guizhou court ruled in favor of the plaintiff, the NGO has filed an appeal. The environmental activists hope that the higher court will recognize their crucial claim that the coal power plant is worsening the climate by emitting too many greenhouse gases.
In the national carbon market, power companies like the defendant receive an annual quota for their carbon emissions, which is currently allocated for free. They only incur costs when purchasing supplementary permits or carbon credits to offset their excess emissions.
One major point of contention in court is how to quantify the impact of emitting one ton of CO2, which presents a technical challenge and highlights a policy gap. Further complicating the situation is that CO2 is not yet considered a pollutant in China.
Wang Wenjing, a Beijing-based lawyer representing the plaintiff, despite his extensive experience in public interest suits on environmental issues, says the damage determination presents an unprecedented challenge for him and the court, with no precedent cases available for reference.
The regional court also finds it a difficult topic that requires broader consultation. The verdict reveals that Guizhou provincial and national environmental authorities weighed in on the issue, concluding that there is “no room for discussion” since CO2 is not classified as a pollutant and there are no specific legal grounds that limit its emissions.
Zhu Mingzhe, a lecturer in Just Transition at the University of Glasgow, acknowledges the difficulty of changing the tides with one small court case like this one.
In contrast to the growing consensus in other regions, “people in China don’t see CO2 as causing pollution—either legally or in public perception,” says Zhu.
Despite their relative inexperience on climate issues, the plaintiff and its legal team are committed to pushing the boundary. The group has been actively seeking advice from legal experts and practitioners to identify feasible solutions to put a price tag on the damage. Their most recent inspiration is to demonstrate the health impacts on the local communities surrounding the plant.
“Even if the court fines the company just 1 yuan for emitting CO2, it would set an example for future cases,” says Wang.
Potential with Conditions
According to a UN study, climate litigation has more than doubled since 2017. In China, efforts to strengthen climate change regulations through legal procedures have also grown.
Last year, China’s first climate lawsuit reached a historic settlement after seven years of legal battles. The defendant, State Grid Gansu, agreed to invest 900 million RMB ($124 million) to better support new energy consumption after being accused of violating a renewable energy law and causing wind and solar power curtailment.
The court has become an increasingly vital force in China’s multi-level climate campaign, experts say. An increasing number of lawsuits, primarily involving corporate disputes, have been filed in recent years as energy-intensive industries face stricter scrutiny under the government's carbon reduction policies. However, only a few of these cases have a strong climate component.
It appears that climate-related lawsuits may be gaining increasing support from the national judiciary. Last February, China’s Supreme People’s Court released its first guidance document on climate change cases. Experts expect the positive signal would encourage China’s public interest prosecutors to add climate cases to the thousands of environmental challenges they bring every year.
In an interview with Eco-Business last year, Dimitri de Boer from Client Earth stated that climate litigation now “has the potential” to drive China towards achieving its climate goals.
“They [the lawsuits] have made local governments and businesses realize that environmental laws are just as important as other laws, and can't simply be ignored,” says De Boer in the Eco-Business interview.
Wang also believes that public interest litigation is an effective way to advance climate action in China, particularly in mobilizing corporate responsibility and ensuring accountability.
Zhu, the researcher, cautions that the room for confrontational legal action remains very limited in China compared to countries like the United States. According to the researcher, China’s top-down climate governance is “more about driving industrial upgrades” than “punishing polluters”.
Today, only procuratorates and certain organizations qualified to file legal cases can initiate climate litigation in China. Zhu says that under the current legal framework, there is “basically no space” for individuals to challenge the government and major emitters.
As a result, climate activists in China are particularly prudent and tend to adopt a more strategic approach to combating climate inaction in court, according to Lin.
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