Global Climate Change and the Stability of Property Rights

Chapter 7
Global Climate Change and the Stability of Property Rights

A. Dan Tarlock

Global climate change will impact the use and enjoyment of land. There has been considerable research on its likely physical and social impacts, but there has been little effort to examine the impact that these changes will have on the law of property entitlements. Historically, property law – in civil, common, and mixed systems – consists of a set of abstract, universal principles that can be adapted to all changes in the ways in which societies use land. The primary functions of the law have been to promote title security and alienability subject to minimal constraints. Both functions are secured by laws that recognize exclusive entitlements designed to decrease the risk that other private parties or the state can disturb an owner’s title. In contrast, global climate changes introduces new risks to property holders such as boundary shifts between private and public ownership, the steep loss of value from ‘Acts of God’ rather than state regulation, and new pressures for state regulation to adapt to a changing climate. Climate change will also benefit many land owners. For example, land may be more desirable for human settlement and crop production, but the consequences of this for property law and regulation are beyond the scope of this article.

This chapter will examine two issues. First, it will discuss existing examples of property rights which have a built-in expectation of change such as water boundaries, in order to speculate about the lessons they teach for incorporating the risks of climate change into the law of property. Second, it will explore how global climate change may introduce the concept of moral hazard into the duty of the state to compensate victims of excessive regulation. The law often encourages property owners to develop in the face of known natural hazards because property owners know that either the state cannot force them to avoid the hazard or that they will be compensated if the hazard occurs and destroys their property. Global climate change may provide a new and more legitimate and powerful justification for regulations which compel landowners to avoid activities that put their property at risk.

Global Climate Change, Terrestrial Impacts and Property Rights

The potential impacts of global climate change on the use and enjoyment of land are becoming increasingly better understood. However, there has been little effort to examine the consequences of these potential impacts on the private law of property entitlements. Historically, property law in civil, common and mixed systems consists of a set of abstract, universal principles that can be adapted to any changes in the ways in which societies enjoy and transfer interests in land. The major function of the law has been to promote title security by decreasing the risk that other private parties or the state can disturb an owner’s title. In contrast to the status quo maintenance bias in property, global climate change introduces new risks to property holders such as boundary shifts between private and public ownership, the steep loss of value from ‘Acts of God’ rather than state regulation, and new pressures for state regulation of land to increase the moral hazards of ownership. The chapter first examines selected existing examples of property rights which have a built-in expectation of change such as water boundaries, to provide some models for global climate change-influenced rules. It next examines the incorporation of the moral hazard concept into property protection law to speculate how the risks of climate change can be incorporated into the law of property in order to provide a rationale for increased state regulatory power to deal with global climate change.

There are two strategies to address the projected adverse impacts of global climate change: mitigation and adaptation. Most domestic and international efforts have been directed toward mitigation, the reduction of greenhouse gas emissions. However, mitigation is an illusion (Monastersky 2009: 1091, 1092).1 Thus, all nations face the imperative of adapting to the inevitable impacts, negative and positive, of global climate change. Adaptation will require both new property laws and increased state regulation. Global climate change will have significant, although not fully understood (See United States Climate Change Program 2003), impacts on the physical form of much of the earth’s surface, the uses to which land will be put, and the value of certain lands. The most dramatic impact is sea-level rise which could eliminate human settlements² and wetlands. For this reason, the global climate change literature initially focused on the impacts of vulnerable coastal land. This concern now extends to dry land.

Property in areas subject to more extreme droughts and flooding may become less valuable for irrigation farming or dry land farming respectively. A 2008 report estimates the yearly damage to California real estate and illustrates the range of the landscape impacts of climate change common to vulnerable areas of the world. Excluding agriculture and forests, the Report estimates that global climate change damages will be US$0.2bn to 1.4bn for water and US$0.1bn to 2.5bn from fire (Roland-Holst and Kahrl 2008). The potential damage includes the risk of increased wildfires, sea level rise and the resulting coastal erosion and increased winter storm flood and wind damage. When forests and agricultural land damage are factored in, the yearly range is US$0.3bn to 4.3bn. New impacts continue to emerge. For example, public and private conservation reserves may become less functional as species migrate away from their intended warmer ‘homes’ (Ruhl 2008). In addition, land management is an increasingly important technique to reduce greenhouse gas emissions by sequestering carbon dioxide in forests and wetlands (Bosselman 2009).

Lawyers and climate policy students have addressed strategies to address sea level rise and have begun to speculate about the consequences of shifting and changing ecosystems. Less attention has been paid to the related question of whether global climate change will alter the law of property ownership and enjoyment. Land owners have always faced disasters and severe declines in the market value of land, but in general, disasters and value declines are assumed not to impact the legal ownership of property; ownership is an abstract interest in a thing and that interest remains as long as the thing remains. Both the common and civil law protect the owner’s right to exclude (jus prohibendi) rather than the right to fixed value.3 National constitutions and statutes only protect value when the government regulation triggers a duty to compensate (see Alterman 2010). Thus, the assumption is that insurance or new government compensation schemes will be the primary vehicles to buffer property owners from these shocks.4 Only in limited instances, almost exclusively dealing with water boundaries, does the existing law consider parcel loss from certain forces of nature to be a risk inherent in property ownership.

Property Rights: Risk versus Security

Property ownership always entails some risk that less than full, expected use and enjoyment of an entitlement will be recognized. Competing claims can displace title; even in the civil law countries with well-developed title registration systems, there is a risk of title failure. For example, Italian law can award title to the first person to register a sale even though there was a prior contract of sale and the first registrant knew of the contract.⁵ Common law jurisdictions allow title to be lost through adverse possession. The doctrine is harder to justify in land registration systems, but many civil law systems allow prescription or usucapation.⁶

Global climate change will increase the risks of property ownership and land titles in at least two ways. First, it will expand the situations in which private boundaries change. Owners in vulnerable coastal and other water-related areas face increased risks that pre-climate change patterns of entitlements will no longer hold. A dramatic example of this is occurring in the Panhandle of the United States federal state of Alaska. When the area was covered with glaciers, there was a navigable channel between the capital, Juneau and a port ten miles away on the Inland Passage. Area glaciers are melting, and the channel and associated wetlands are silting in as the land rises due to the release of the pressure placed on it by the ice. The land that ‘is emerging from the water to replace the lost wetlands [is] shifting property boundaries and causing people to argue about who owns the acreage and how it should be used’ (Dean 2009).

Second, and perhaps more important, governments will be forced to use climate change science to require that property owners take more aggressive adaptation measures. Some measures, such as increased coastal armouring, will protect existing entitlements. Others, however, will try and move people out of harm’s way or make it more expensive to build and live there. These could include the reduction of incentives to build (and to rebuild after a natural disaster) in vulnerable areas, to grow irrigated crops that demand large amounts of water in areas likely to face serious water shortages, or to continue the practice of constructing unsustainable, automobile dependent urban settlement patterns. This in turn will conflict with one of the central aims of modern property: the creation of perpetual interests in land.7

Philosophical justifications for private, strong individual property rights abound (Penner 1997). The common objective of property law is an abstract,⁸ uniform system of private control of resources. There is a widespread consensus that property law should serve three, interconnected overarching objectives in order to promote security of ownership: (1) the creation of individual, exclusive entitlements, (2) the creation of freely alienable rights which will support the use of markets to allocate scare resources, and (3) the demarcation of private entitlements secure from excessive inference by the Hobbesian sovereign.⁹ The role of the state in defining and regulating the use of property is recognized, but most theorists assert that the incidents of the entitlement, including the public and private boundary, should remain relatively constant over time. These objectives have, of course, always been imperfectly realized due to the costs of enforcing property rights and the persistence of counter-objectives. Still, we think of property as a relatively static rather than dynamic relationship between a person and a thing. This principle was dramatically applied when a panel of The European Court of Human Rights found that Great Britain’s relatively title holder adverse possession statute¹⁰ was a violation of Article 1 of Protocol 1 of the European Convention on Human Rights which protects the peaceful enjoyment of property.¹¹ The Grand Chambre reversed and found that adverse possession was a reasonable state limitation on title security,¹² but the first decision is a reminder of the power of the idea of the subordination of state power to the protection of the security and stability of private entitlements.

Dynamism and Risk

There has always been a counter dynamic aspect to property rights. The Grand Chambre’s decision in Pye recognized that seemingly secure property rights can be dislodged. However, the risks of disruption and change have always been treated as an exception to the stability principle. In general, common law property rights are more subject to change because the power of judges to create new rights and duties is greater than the power of civil law judges. Property owners have historically faced two types of risks to the stability. The first is a change in the law which decreases exclusivity. The second is that states may exercise their sovereign power to limit the use of property. An example of the first category occurred when the Supreme Court of the federal state of Ohio rejected a trespass suit by owners of land against an oil refinery.13 Underground injections caused a plume of contaminated substances to migrate beneath the plaintiffs’ land, but no loss of use, decrease in value or even a public health risk was proved. The owners demanded compensation nonetheless because trespass protects the expectation of exclusive possession, in contrast to nuisance law, and thus no actual damages need be shown and Anglo-American common law recognizes that one owns both upwards and downwards of the surface of the earth. But, the Court found the principle ‘inapplicable’. ‘Just as a property owner must accept some limitations on the ownership rights above the surface, we find that there are also limitations on property owners’ subsurface rights’. Thus, plaintiff’s right to exclude is limited to invasions that actually interfere with reasonable and foreseeable surface use.

The second category includes the whole range of land-use regulation found in all developed countries. States possess the inherent power to regulate the use of land. State power is constrained by constitutions and legislation which provide remedies for landowners who have suffered the substantial loss of value from regulation. The level of protection varies from country to country (Alterman 2010), but it is widely accepted that the state owes a duty of compensation in situations where an individual land owner has suffered a disproportionate loss of the value of his or her property. The loss of the ability to obtain the maximum potential value of a piece of land is seldom an occasion for compensation.

Usufructory Rights: Water Boundaries, Water Rights and Servitudes as Case Studies in the Inherent Risks of Ownership

Water Boundaries

Water boundaries can never be permanently fixed for two reasons: rivers, lakes and the sea are constantly changing adjoining land, and in all countries, the state owns the submerged lands of the sea and large rivers and lakes up to some boundary standard such as the mean high tide line or the high water mark.¹⁴ Thus, water boundaries on lakes, rivers and oceans are dynamic rather than static. Property owners may lose and gain soil due to erosion and reliction or the deposit of soil. The common and civil law classifies these processes as accretion or avulsion.15 A riparian land owner is entitled to the gradual deposit of soil that extends his original boundary.¹⁶ If water retreats, the land owner gains the newly exposed soil under the doctrine of reliction. Conversely, the owner may lose a portion of his original land if the stream course migrates landward. However, in rapid shifts, avulsion, boundaries do not shift.¹⁷

Ironically, efforts to deal with global climate change may require the state to create stable water boundaries that push private property boundaries landward. Florida’s legislation to do this and the subsequent takings challenge are instructive. The state enacted legislation which allows the state to freeze the public-private water boundary – the mean high tide line – and to establish an erosion control boundary (ECL), and declared that all artificial beach nourishment seaward of the ECL remains the property of the state. Littoral owners have a right of access along with the general public but no right to future accretions. Property owners challenged the ECL as an unconstitutional taking of private property. Although Florida had held that littoral rights such as view cannot be taken without compensation,¹⁸ the state Supreme Court classified view as a present right and the right to receive accretion as a contingent future one and ancillary to the right of access. This made is easier to conclude that the state had struck a reasonable balance between the public interest in preventing beach loss, the reduction of storm damage and the conservation of the shoreline and the property owner’s interest beach access.¹⁹ It also noted that hurricanes are avulsive events so the property boundary remains in place but the property owner has a reasonable period of time to reclaim the lost land. Thus, the legislation simply allowed the state, as public trust owners of land seaward of the mean high tide line, to do what the common law allows them to do. The United States Supreme Court affirmed because Florida Supreme Court decision was consistent with ‘background principles of state property law … It did not abolish Members’ right to future accretions, but merely held that the right was not implicated by the beach restoration project, because the doctrine of avulsion applied.’20

Water Rights

The law of water rights is another example of a property rights system which expressly incorporates the risk of non-enjoyment of the resource as well as of physical alteration directly into the legal right. Both the right to use water and the delineation of water boundaries carry with them the risk that the physical nature of the right, and thus its use and enjoyment, will not remain constant over time. All water right holders face the risk that the entitlement may be curtailed due to the vagaries of climate or the demands of competing users and uses (Tarlock 2010). For this reason, water rights have always been incomplete rather than complete property rights²¹ because they are correlative; one person’s use is subject to the correlative rights of others. In addition, the fact that water is unique and necessary for survival gives the state great discretion to establish the ground rules for the acquisition and exercise of water rights so as to incorporate the interests of other users and the public generally in private rights.

The fugitive nature of water makes water physically and legally different from land. Most legal systems assert that the public owns the waters of a territory.²² State ownership is a fiction for the assertion of the power to regulate all aspects of use and enjoyment. Private rights are not excluded but they are usufructory (Caponera 2003: 83, 84) rather than full, exclusive ownership. This said, however, water law is an example of a property regime which forces adaptive behaviour.

There are two major systems of United States water rights, and both illustrate the inherent risks in the use of water to which users must constantly adapt. The common law of riparian rights is a land ownership-based system which, modified by legislation, prevails in the eastern, humid United States. All land owners along a stream have an equal right to use the water, but the right is defined by general and open-ended reasonableness standards. The right can be firmed up only through judicial action. The result is that the right to use water is highly uncertain because courts can, in theory, displace prior users to make room for subsequent ones or changed conditions such as global climate change.

Riparian law has remained vague because there has been sufficient water to meet all competing demands. However, the incoherent nature of riparian rights discourages serious risk analysis. Many states have replaced the common law with permit systems. Regulated riparianism brings some certainty to the system because in practice it introduces a greater measure of stability through the protection of prior users, but risk remains because the duration of state water licenses is limited so there is no firm expectation that they will be renewed.

Prior appropriation is the opposite system and is, in theory, a complete global climate change risk allocation scheme. According to the catechism, prior appropriation allocates water in times of shortage by strict enforcement priority schedules which provide fair notice to junior users of their potential risks. However, prior enforcement is generally confined to small systems. The western states have worked hard to make sure that there are few calls for enforcement, and thus the law has never been used as a risk allocation system. There are major political, institutional and legal barriers to using the law to distribute the extreme risks of global climate change among large classes of water users The thrust of federal and state water policy from the conservation era23 to the 1980s has been to minimize the risks of shortages by constructing large carryover storage facilities. Thus, reservoirs and groundwater basins probably will be subjected to only the mildest form of rationing during droughts. In addition, formal and informal mechanisms share the burdens of shortages by pro rata rather than pro tanto delivery reductions. Given the expectations that there will be limited enforcement of priorities, junior water right holders will resist the consequences of hard prior appropriation, and states will try to avoid strict enforcement of the system when the results are inefficient.²⁴

Servitudes

Servitudes are lesser interests compared to ownership. A servitude allows one to use or control the use and enjoyment of the land of another. They are thus usufructory rights, and as such, have always been more fragile compared to ownership rights. The right to use is limited in scope.25