Dutch Court Orders Shell To Aggressively Cut Carbon Emissions In Landmark Decision

There’s been a lot of speculation this year about what it might take for western governments like the US to meet the carbon emissions targets laid out in the Paris Accords, which President Biden has enthusiastically rejoined. One study by the IEA concluded that all oil and gas firms would have to halt new projects in order to achieve net-zero emissions by 2050.

While progressives increasingly demand more aggressive change, moderate Democrats and Republicans have long insisted that markets would naturally wean society off of its dependence on fossil fuels as renewables, nuclear and other alternatives to fossil fuel become more affordable. As COVID led to a memorable drop in demand that sent spot oil prices into negative territory last spring, investors have made clear that ESG investing and carbon credits are growing increasingly popular, alongside divestment movements. A recent runup in gas prices has also helped spur interest in alternatives.

However, over in Europe, EU courts are stepping in to force one of the world’s biggest energy companies to accelerate its green commitments. Royal Dutch Shell has just lost a landmark case brought by environmental activists in Dutch courts in the Hague. The court ruled that the company must cut its greenhouse gas emissions more aggressively: by 2030, Shell’s net carbon emissions needed to be 45% lower than 2019 levels. The FT said the ruling could have “far-reaching consequences” not just for Shell, but for its competitors as well. Though Shell said it expects to appeal the decision.

Previously, Shell had promised to reduce its greenhouse gas emissions by 20% within a decade, and to net-zero before 2050.

If it stands, the ruling would set a precedent for similar cases against the world’s biggest corporate polluters who could now be exposed to similar lawsuits that could force an ESG reckoning that oil firms have repeatedly tried to delay.

Judge Alwin, who handed down the decision on Wednesday, said it would require the company to accelerate “a change of policy” from Shell that could “curb the potential growth of the Shell group”.

“The interest served with the reduction obligation outweighs the Shell group’s commercial interests,” she added.

The big change here is that until now oil companies have mostly faced lawsuits related to environmental damages that they specifically caused, like an oil spill. Now, court rulings could allow activists to influence energy company policy more directly, with courts threatening massive fines if the firms don’t comply.

One analyst who spoke with Bloomberg said the decision could have far-reaching ramifications for oil companies.

“This is big news for carbon emitters everywhere, not just in the oil industry,” Angus Walker, an environmental lawyer at BDP Pitmans in London, said. “This may spread from large emitters to small, and from the Netherlands to other countries, at least in terms of challenges, if not successful ones.”

Shell has poured billions of dollars in investment into low-carbon energy, including electric vehicle charging, hydrogen, renewables and biofuels. Even so, the firm has insisted it wouldn’t set targets for fossil fuel reduction targets saying they would be arbitrary given that demand is the ultimate factor. Other firms, like European rival BP, have agreed to reduction targets, thought whether they will be met remains to be seen.

Shell’s lawyers argued in its case that society and the market must change before Shell does. But the judge countered that the company “must do more than monitoring developments in society and complying with the regulations in the countries where the Shell group operates.”

And although Shell had no input and never agreed to the Paris Climate Accord, Judge Alwin ruled that the company must still shoulder the burden since the Netherlands, which is one of its parent companies, has agreed to the deal.

“Companies have an independent responsibility, aside from what states do,” Judge Alwin said in her decision. “Even if states do nothing or only a little, companies have the responsibility to respect human rights.”

The ruling followed a legal campaign led by Milieudefensie, the Dutch wing of activist group Friends of the Earth, which celebrated the decision, with one spokesman for the group declaring it “a monumental victory” for the climate movement.