Shell vowed to appeal against a May 26 district court decision in the Netherlands ordering the company to accelerate emissions reductions and cuts its carbon footprint by 45% globally by 2030, in a case brought by climate activists.
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The Hague district court said Shell had a duty to reduce its own emissions and those of its suppliers and customers and warned the company it was in "imminent" danger of breaching its responsibilities, in a case brought by campaign group Milieudefensie together with other organizations and some 17,000 individuals.
Shell's strategy envisages reducing its carbon "intensity" by 20% by 2030 and 45% by 2035, from a 2016 baseline, however, the demand for a sharper 45% cut by 2030 is based on the pathway set out by the Intergovernmental Panel on Climate Change for limiting global warming to 1.5 Degrees Celsius.
The court acknowledged Shell's existing strategy, but said, "the policy is not concrete, has many caveats and is based on monitoring social developments rather than the company's own responsibility for achieving a CO2 reduction."
"The court finds that there is an imminent breach of the reduction obligation. Therefore, the court has ordered Royal Dutch Shell to reduce the emissions of the Shell group, its suppliers and its customers by net 45%, as compared to 2019 levels, by the end of 2030, through the corporate policy of the Shell group," it said.
The obligation on Shell to cut both its own emissions and those of its suppliers and customers "follows from the unwritten standard of care applicable to Shell, which the court has interpreted based on the facts, widespread consensus and internationally accepted standards," it added.
"As regards its suppliers and customers, Shell has a significant best-efforts obligation, which means that Shell must use its influence through [its] corporate policy."
Stating its intention to appeal, Shell acknowledged the importance of emissions reduction and pointed to its published strategy, including short- and medium-term carbon targets, adding it believed its emissions had already peaked in 2018 and its oil production in 2019.
"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," Shell said. "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."
BURDEN OF PROOF
All the world's major oil companies face growing legal pressure from environmental campaigners and investors, with a dissident investor in ExxonMobil currently pushing for changes in the composition of the US company's board to better reflect climate concerns.
Tom Cummins, partner at global law firm Ashurst, said the Dutch ruling was "arguably the most significant climate change-related judgment yet, which emphasizes that companies and not just governments may be the target of strategic litigation which seeks to drive changes in behavior."
However, investment bank Jefferies questioned whether climate change could legally be pinned on oil and gas companies and whether campaigners could legally use human rights law in climate-related suits against companies. It cited a UK Law Society article saying: "Notwithstanding a number of high-profile successful climate change-related claims, the law of causation remains a key hurdle... The complexity of the energy sector, supply chains and consumer choices all create numerous breaks in the chain of causation, making it difficult to attribute climate change to the actions of one or even multiple companies, institutions or governments."