Quantifying Climate Change Damages
An Emerging but Underdeveloped Frontier
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octubre 28, 2026
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Last year, the International Court of Justice (“ICJ”) delivered a unanimous advisory opinion on the Obligations of States in Respect of Climate Change. The opinion marks the highest level of participation in ICJ history. Over 100 states and international organizations presented statements. The process started as a question of the international legal obligations to protect the climate and possible interstate claims for damages in the event of noncompliance. In its opinion, the ICJ states that when a State fails to meet its international obligations related to climate change it incurs responsibility under the law of state responsibility.1 The ICJ’s opinion does not itself create a damages methodology, but tribunals and practitioners will need one.
When practitioners think of environmental damage and international arbitration, the dominant narrative is about companies suing states for passing climate regulations. That narrative, while important, obscures an important question: can international arbitration serve as an effective forum for the flip side — accountability for activities that damage the environment.
The answer, based on the cases decided to date, is: rarely, partially and with significant limitations. The ASIL Task Force on ISDS and Climate Change, launched in 2025, aims to develop structured guidance on these questions — including how attribution science can be used to establish causation in climate-related disputes and how damages should be assessed where harm is diffuse and cumulative.
International arbitration will be asked to do more, not less. The question is whether its procedural architecture, damages doctrine and expert evidence frameworks will prove adequate to the task. To quantify damages will be complex, but it is possible. While dedicated climate change damages cases remain rare, the quantification frameworks developed in environmental litigation and arbitration — from remediation cost modeling to ecosystem services valuation — offer a ready methodology for translating climate harm into compensable damages.
The ICJ’s full reparation view includes restitution (returning things to the status quo ante, if possible), compensation (for financially assessable damage) and/or satisfaction (for moral or non-material harm).
Quantifying damages for international arbitration purposes will be challenging, since harm caused by climate change is diffuse, cumulative and multi-causal. However, this does not mean that it is not possible to quantify damage reliably. There is a lot to learn from valuations and damages in the context of environmental law litigation and other valuations.
To prove damage to ecosystem resources and services, rigorous scientific studies will be necessary. Climate harm is especially complex to quantify — the same unit of emissions can have vastly different effects depending on the baseline climate sensitivity of the affected region, the timing and duration of exposure and the cascading interactions between temperature, precipitation and ecosystem function. Attribution science — which links specific warming outcomes to specific emitters — is advancing rapidly, but translating those findings into compensable damages still requires specialized expertise across climate modeling, ecology and economics. Two concepts are foundational to that quantification: remediation and restoration.
A party obligated only to remediate can satisfy its duty by making a site safe for a particular use (say, industrial) without recreating what was there before. A party obligated to restore faces a much higher and more expensive standard — one that may in some cases be technically impossible to fully meet (e.g., an old-growth forest or a wetland ecosystem). For example, Oregon sued Monsanto — the sole PCB producer — for contaminating waterways with the compound. Oregon analyzed the effects on the different species, economists valued that restoration analyzing what would it take to return each affected pieces. The case was settled with a payment of around 700 million USD.2
Environmental Counterclaims Come of Age
The most significant development in this area has come from the Ecuadorian Amazon, in two interconnected ICSID cases arising from oil extraction: Burlington Resources v. Ecuador (2017) and Perenco v. Ecuador (2019).
Both cases followed the same basic pattern. The investors-initiated arbitration against Ecuador under investment treaties, claiming expropriation and unfair treatment after Ecuador imposed a 99% windfall tax on oil revenues. Ecuador responded with counterclaims for environmental damage caused by the investors’ operations in the Amazonian rainforest. The question of whether ICSID tribunals had jurisdiction over those counterclaims was itself contested. The tribunals said yes — and that jurisdictional holding is, in itself, a significant development.
On the merits, both tribunals upheld Ecuador’s environmental counterclaims and ordered the investors to compensate Ecuador for environmental remediation costs.3
The Ecuador cases established that environmental counterclaims can succeed in investment arbitration — but they remain grounded in direct, site-specific contamination that can be physically sampled and costed. The question of whether similar accountability can attach to diffuse, cumulative emissions harm is now being tested in domestic courts with direct implications for how international tribunals will eventually approach the same question.
The significance for international arbitration is the causal logic. Applying that logic to an arbitral damages framework would require precisely the kind of counterfactual definition and attribution science that current practice has not yet fully developed.
The Structural Problem: Arbitration Will Need to Stand Up to the New Requirements
Causation is perhaps harder in arbitration than in domestic litigation. The standard tools of environmental causation — epidemiological evidence, site sampling, expert testimony — translate imperfectly into arbitral proceedings designed for commercial disputes. The gap between Ecuador’s $2.5 billion claim and the $93 million the independent expert attributed to Perenco illustrates the problem: quantifying diffuse, long-accumulated environmental harm in a legal framework designed for discrete commercial wrongs requires methodological innovation that tribunals are still developing.
The causation problem is, at its root, a causal identification problem of the kind that econometricians deal with routinely — and environmental damages cases are a particularly hard instance of it. Measuring what was lost requires specifying a counterfactual: the state of the ecosystem that would have existed absent the damaging activity. Alberro (2026) identifies a systematic error in how damages experts approach this task: they conflate three operations that must be kept separate. The first is definition — specifying the counterfactual as a precise thought experiment: which variables change, which structural relationships hold across the hypothetical, what the baseline trajectory of the affected system would have been. The second is identification: establishing whether the defined counterfactual can in principle be recovered from observable data given the available evidence and the underlying data-generating process. The third and only after both prior steps are satisfied, is estimation: selecting the technique best suited to recover the parameter from a finite sample. When experts skip directly to estimation — choosing a remediation cost model or a baseline comparison and running the numbers — they are producing an answer to a question they have not yet clearly stated. The Perenco expert divergence (Ecuador: $2.5 billion; Perenco: $10 million) illustrates the cost: both sides constructed elaborate estimation models from incompatible baselines and temporal attribution assumptions, without first establishing whether their respective counterfactual ecosystems were recoverable from the contamination data at all.
The remediation cost standard, while administrable, captures only one dimension of environmental harm — the cost of physical restoration.
It does not capture lost ecosystem services, harm to communities and livelihoods, non-use values (what the public loses when a pristine environment is degraded even if no one directly uses it), or the long-term biodiversity consequences of contamination. The US Natural Resource Damage Assessment framework, which attempts to capture some of these broader categories, has no equivalent in international arbitration.
Climate change valuation presents a challenge that precedes any calculation: before you can measure a loss, you need to be able to define what would have existed without it. What a particular beach, reef, or rainforest would look like today had a given country not emitted a given volume of CO₂ over the past century, is a difficult counterfactual to define with precision. An old-growth forest is the clearest example: what was destroyed is not “a forest of uncertain species composition” but centuries of ecological succession that cannot be reconstructed from data. A cost-of-restoration model applied to that setting will produce a precise number — but precise is not the same as meaningful. The honest output in these cases is a range, with explicit assumptions and acknowledged limits, not an exact point estimate.
What Comes Next
The landscape may shift materially in the coming years. The ICJ’s advisory opinion considers that states bear international legal responsibility for climate harm and creates the predicate for damages claims that did not previously exist at this level of authority. That will mean more cases — brought by states, communities and ultimately private claimants as treaty frameworks evolve — and each of those cases will require a credible answer to the quantum question. The advisory opinion does not supply that answer. It shifts the burden to practitioners and experts. That work requires a rethinking of the counterfactual — not as a legal formality, but as a prior scientific and economic question: what would the affected ecosystem, community, or economy have looked like absent the defendant’s emissions and is that counterfactual recoverable from the available attribution science and economic data? Getting that question right is the precondition for getting the number right.
The question — how to quantify and compensate for climate harm that has already occurred — remains unanswered in both domestic and international fora. International arbitration, with its experience in complex damages quantification and its established framework for expert evidence, may ultimately be well positioned to answer that question, but it will need to develop the methodological infrastructure.
Applying the define-identify-estimate sequence would not require new data or new science. Environmental economics already has the tools — habitat equivalency analysis, resource equivalency analysis, ecosystem services valuation, natural capital accounting — but those tools are routinely applied before the counterfactual they are meant to measure has been defined with sufficient precision for the results to be defensible. Sequencing the analysis correctly would not narrow the range of recoverable damages; it would make the basis for that range transparent and contestable, which is the minimum condition for any damages figure to be scientifically defensible.
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Publicado
octubre 28, 2026
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