Climate change disputes pose enduring legal, financial, and reputational risks for businesses, since, unlike political and regulatory mimicry, climate impacts do not end when administrations do. These disputes involve judicial or quasi-judicial proceedings addressing climate law, policy, or science, and have expanded to over 60 jurisdictions.
This post focuses on Europe and outlines three key areas of climate-related risk and opportunity following major international court decisions. Despite slower transition momentum, emissions targets remain, and companies should integrate these developments into their ESG planning.
1. Likely increased regulation of, and cases initiated in relation to, fossil fuels and Scope 3 emissions
In its Advisory Opinion of 23 July 2025 (“ICJ AO”), the ICJ explicitly stated that a State can trigger its responsibility for failure to regulate, with due diligence, public or private fossil fuel licensing, exploration, subsidization, production and consumption where they cause significant harm to the climate system. The wrongful act would not be the emissions per se, but the breach of conventional and customary international legal obligations relating to protection of the climate system from significant harm from anthropogenic GHG emissions. While not legally binding, this AO may well be a harbinger of increased regulation and scrutiny of the industry, and it itself builds on two significant developments.
First, in May 2024, the International Tribunal of the Law of the Sea found in its own Advisory Opinion (“ITLOS AO”) that anthropogenic GHG constitute marine pollution, and that States are obliged to conduct environmental impact assessments in respect of any planned public or private activity that may cause substantial pollution to the marine environment. States must also keep under continuous surveillance the GHG emissions of activities they authorise. The sources of anthropogenic GHG pollution covered by the ITLOS AO extend to pollution from land-based sources, from vessels or from or through the atmosphere. The ITLOS AO has already been cited in at least one domestic judicial review – Oceana UK v. Secretary of State for Energy Security and Net Zero – against new hydrocarbon licences in the UK, specifically to argue that emissions from hydrocarbon projects (including Scope 3 emissions) should be considered as part of environmental impact assessments (“EIAs”).
Second, several regional and national court decisions have emphasized Scope 3 emissions. The European Free Trade Association Court found, in a May 2025 advisory opinion, that Scope 3 emissions are part of the “effects” of a project, which finding is likely to generate increased challenges to both planned and existing hydrocarbon projects in EFTA jurisdictions and further afield. This decision was also consistent with the UK Supreme Court ruling in Finch v Surrey County Council [2024] UKSC 20 which ordered the inclusion of Scope 3 emissions in the EIA of an onshore oil well. It is noteworthy that the UK EIA regime is based on the EU EIA Directive, and so this decision has relevance across Europe.
The above developments are likely to lead to heightened regulatory and judicial scrutiny of carbon-intensive projects (through EIAs and other measures) and potentially ISDS proceedings involving high-emitting companies. Of note is the separate declaration of Judge Cleveland, appended to the main ICJ AO and of persuasive legal authority, who held that international investment instruments must be interpreted in light of the stringent due diligence standard to which States are bound in respect of climate change.
The above may also provide impetus for such companies – which otherwise may not be subject to Scope 3 reporting under the Corporate Sustainability Reporting Directive until 2028 – to put emissions tracking and reporting systems in place promptly. The developments will also have been closely followed at EU level given the proposed amendment to Article 22 of the Corporate Sustainability Due Diligence Directive in the Omnibus proposal under negotiation. Criticised by the ECB, the amendment would render the requirement for companies to adopt and put into effect transition plans up to 2050 a mere duty to adopt such plans (which is said to weaken state regulation of GHGs).
2. Stronger basis for companies to challenge State measures unfavourable to renewable power generation
A corollary of the expressed need to transition away from fossil fuels is the imperative to increase energy production from clean power. Indeed, the Joint Declaration of Judges Bhandari and Cleveland explicitly mentions the need to transition towards clean energy production.
It will be interesting to observe litigation and ISDS developments in this regard as certain jurisdictions, such as the US, have taken measures aimed at stymying development of renewable energy infrastructure.
Companies / developers of renewable energy projects are already successfully using arguments, based on climate change laws which require authorities to make decisions consistent with climate objectives, to overturn decisions of national authorities refusing planning permission e.g. Coolglass Windfarm Limited v. An Bord Pleanala [2025] IEHC 1, where climate considerations trumped visual concerns on appeal to the Irish High Court and the project went ahead. Interestingly, the court relied on the ECrtHR case of KlimaSeniorinnen (see below) which had been invoked by the claimant.
Renewable energy developers would also be well advised to rely on the RED III Directive and Temporary Renewable Energy Regulation when making their arguments.
3. Increased focus in claims on human rights and quantification of GHG reductions / carbon budgets
The European Court of Human Rights (“ECrtHR”) held, in the case of Verein KlimaSeniorinnen Schweiz and Others v. Switzerland in April 2024, that states have a positive obligation under the ECHR to regulate climate change to protect human rights. While States had a margin of appreciation in how they regulate, the Court stressed they needed to specify not just a target timeline for achieving carbon neutrality but also an “overall remaining carbon budget for the same time frame, or another equivalent method.” Switzerland’s failure to quantify, through a carbon budget approach “or otherwise”, its national GHG emissions limitations was held to be a reason for its breach. This national budget was referred to in the decision as the “fair share” of the global budget (see paras. 78, 550(a) and 569-573) and the current focus on detailed timeframes and budgets may also lead to additional claims.
After the Finch judgment in the UK, several hydrocarbon projects in the UK were suspended by UK courts. The courts referred to earlier decisions in the Finch case, and to the KlimaSeniorinnen ruling, in holding that the developers should thus have been aware of the need to balance legal certainty of investments against mitigation of climate change. The ECrtHR decision has therefore already shown its relevance in energy project disputes.