Climate activists won a landmark victory over Anglo-Dutch Shell corporation, effectively forcing the company to accelerate plans to cut carbon emissions by 45% by 2030. Achieving these goals could put pressure on the company’s new production projects.
On May 26, a Dutch court ordered Shell, one of the largest oil and gas companies and the largest oil and gas trader in the world, to accelerate plans to reduce emissions. Shell is now required to cut carbon emissions by 45% by 2030 from 2019 levels, according to the court ruling. Despite the fact that Shell still has a chance to challenge the court’s decision, it may become an important precedent: similar claims from eco-activists may begin to come to other major European energy companies.
The People v Shell lawsuit was filed in 2019 by seven organizations, including Greenpeace and Friends of the Earth Netherlands, as well as 17,000 Dutch citizens.
According to the plaintiffs, Shell threatens human rights as it continues to invest in fossil fuels.
Shell’s own strategy envisioned a 6% reduction in CO2 emissions (including those generated from the fuel sold by the company) from 2016 levels by 2023, by 20% by 2030, by 45% by 2035 and complete carbon neutrality by 2050 year. As part of this strategy, Shell was ready at the first stage to cut oil production by 1–2% per year, which essentially meant abandoning new oil projects. Now the Anglo-Dutch company will have to accelerate its exit from carbon-intensive projects around the world.
Fitch expert Dmitry Marinchenko notes that European oil majors began to formulate their “energy transition” strategies several years ago and the court’s decision could become an important precedent that will force companies to move faster towards their emission targets. “Perhaps this will mean that large companies will gradually withdraw from some projects abroad, and this primarily concerns oil with high production costs,” he said.
According to Nikita Zotov from Vygon Consulting, if Shell refuses to launch new oil and gas projects, then it will reduce emissions from production and final consumption of its products by 35% by 2030 due to a natural decline in oil production by 1-2% per year, landing forests, zero methane leaks and industrial carbon capture and storage projects.
At the same time, the company’s priorities now are the development of the gas business, since it is less carbon-intensive, as well as the preservation of the highest-margin projects in the portfolio, the analyst recalls.
The Shell group is responsible for its own CO2 emissions and those of its suppliers, the verdict said.
It is the first time a company has been legally obliged to align its policies with the Paris climate accords, says Friends of the Earth (FoE).
Though the decision only applies in the Netherlands, it could have wider effects elsewhere. BBC Netherlands correspondent Anna Holligan tweeted that it was a “precedent-setting judgement”.
A Shell spokesperson said they “fully expect to appeal today’s disappointing court decision” and added that they are stepping up efforts to cut emissions.
“Urgent action is needed on climate change, which is why we have accelerated our efforts to become a net-zero emissions energy company by 2050,” the spokesperson said, adding that Shell was investing “billions of dollars in low-carbon energy, including electric vehicle charging, hydrogen, renewables and biofuels”.
“This is really great news and a gigantic victory for the earth, our children and for all of us,” FoE director Donald Pols said in a statement. “The judge leaves no doubt about it: Shell is causing dangerous climate change and must now stop it quickly.”
Under the terms of the Paris Agreement on climate change, nearly 200 nations agreed to keep global temperatures “well below” 2C above pre-industrial levels.
The legally binding treaty came into force on 4 November 2016. The US withdrew under former President Donald Trump but has since rejoined under President Joe Biden.
A number of groups around the world are now trying to force companies and governments to comply with the accords through the courts.
Shell has previously said it wants net zero emissions for itself and from products used by its customers by 2050.
In December its defence lawyers told the Dutch court the company was already taking “serious steps” to move away from fossil fuels, and said there was no legal basis for the case.
Other major oil companies are also making changes amid a greater global focus on cutting emissions.
In May, 26 Chevron investors voted in favour of a proposal to cut its customer emissions, while shareholders at Exxon elected two climate activists to its board after months of wrangling over its business direction.
The Shell verdict is a massive win for environmental campaigners, and other industrial giants will be scrambling to figure out how it could affect them.
Because suddenly it’s not good enough for firms to comply with the law on their emissions – in an extraordinary case like this, they have to comply with global climate policy too.
The company’s defence is that if people feel progress towards cutting emissions is too slow, they should lobby governments – not Shell – to change policies and introduce financial incentives.
The judges have clearly decided that Shell should be taking responsibility itself for cutting emissions much faster.
The firm will surely appeal – and it might well win the case in a higher court.
But this verdict alone will be a warning to companies around the world that the battle against climate change may be spelling the end of anything resembling “business as usual”.
Judge Larisa Alwin said Shell must “at once” reduce its CO2 output, adding that the ruling would have “far-reaching consequences” for the company and may “curb the potential growth of the Shell group”.
“The interest served with the reduction obligation outweighs the Shell group’s commercial interests,” she said.
Roger Cox, lawyer for Friends of the Earth Netherlands, also known as Milieudefensie, called on organisations across the world to “pick up the gauntlet”, and take legal action to force multinationals to play their full part in tackling the climate emergency.
He said: “This is a turning point in history. This case is unique because it is the first time a judge has ordered a large polluting corporation to comply with the Paris climate agreement. This ruling may also have major consequences for other big polluters.”
Donald Pols, director of Milieudefensie, described the decision as “a monumental victory”.
Shell, which said it would appeal the judgment, was the ninth biggest polluter in the world in 1988-2015, according to the Carbon Majors database. An appeal against the ruling could last two years but Cox said he hoped the company’s executives and shareholders would act in the meantime.
Shell had said in February it would accelerate the transition of its business to net-zero emissions, including targets to reduce the carbon intensity of energy products by 6-8% by 2023, 20% by 2030, 45% by 2035 and 100% by 2050.
But lawyers for the plaintiffs successfully argued that the company had been aware for decades of the dangerous consequences of CO2 emissions and its targets remained insufficiently robust.
It was claimed that Shell was breaching article 6:162 of the Dutch civil code and violating articles 2 and 8 of the European convention on human rights – the right to life and the right to family life – by causing a danger to others when alternative measures could be taken.
The court ruled that there were indeed obligations under both Dutch law and the convention and that the company had known for “a long time” about the damage of carbon emissions.
While the company had not acted unlawfully, the court said it had established that there would be an “imminent violation of the reduction obligation”.
It added that the company’s “policy intentions and ambitions for the Shell group largely amount to rather intangible, undefined and non-binding plans for the long-term”.
It found they were “dependent on the pace at which global society moves towards the climate goals of the Paris agreement”, allowing it to move more slowly, and that the “emissions reduction targets for 2030 are lacking completely”.
Shell had argued that there was no legal basis for the case and that governments alone are responsible for meeting Paris targets. The court found that “since 2012 there has been broad international consensus about the need for non-state action, because states cannot tackle the climate issue on their own”.
Shell’s activities and products are responsible for about 1% of global emissions every year but the company is investing billions more in oil and gas, the court heard.
Bas Eickhout, a Green MEP on the European parliament’s environment committee, said: “This ruling is really good news for the climate. It increases the pressure on large polluters and helps us in Europe to tighten climate policy for them as well. They can no longer escape the climate crisis: the international climate targets must also apply to them.”
A Shell spokesperson said: “Urgent action is needed on climate change which is why we have accelerated our efforts to become a net-zero emissions energy company by 2050, in step with society, with short-term targets to track our progress.
“We are investing billions of dollars in low-carbon energy, including electric vehicle charging, hydrogen, renewables and biofuels. We want to grow demand for these products and scale up our new energy businesses even more quickly. We will continue to focus on these efforts and fully expect to appeal today’s disappointing court decision.”
Shell – full name Royal Dutch Shell – is a British-Dutch multinational. Because its headquarters are in The Hague, FoE was able to bring a case to a Dutch court.
Earlier this year another Dutch court ruled that Shell was responsible for damage caused by oil leaks in the Niger Delta, and ordered the company to pay compensation to farmers.
Shell, however, has said the leaks were the result of “sabotage”.
