Shell emerges victorious from battle to overturn ruling in historic climate litigation case

As its appeal against a landmark ruling issued by a Dutch court bore fruit, Shell, now headquartered in the UK and not the Netherlands as was the case during the original ruling, has welcomed its new legal win, which overturns the decision that ordered the energy giant to step up its carbon emissions reduction game.

While the case against Shell was filed in 2019 by the Dutch environmental organization Milieudefensie, other non-governmental organizations (NGOs), and a group of private individuals, the ruling, hailed as first-of-its-kind, did not come until May 2021. At the time, the District Court in The Hague ordered the oil major to curb its worldwide aggregate carbon emissions by 45% by 2030, compared to 2019 levels, deeming the company responsible for emissions from customers (scope 3) and suppliers.

Shortly after the ruling, Shell’s former CEO, Ben van Beurden, set out his vision about the best way forward to enable the firm to rise to the challenge. Less than a month after the ruling, the oil major pledged to take some ‘bold but measured’ steps to accelerate the reduction of carbon emissions from its operations, but in July 2021 it confirmed its plans to appeal the court’s decision.

While Shell first pledged to become a net-zero emissions energy business by 2050 or sooner in April 2020, the oil major set a new target in October 2021 to halve its scope 1 and 2 emissions compared to 2016 levels by 2030, regardless of the outcome of the appeal. The new aspiration covered all scope 1 and 2 emissions under the company’s operational control and brought forward its target to eliminate routine gas flaring from its operated upstream assets from 2030 to 2025.

Several months later, Marjan van Loon, President-Directeur Shell Nederland, disclosed in March 2022 that the appeal was filed against the District Court’s 2021 ruling. However, Shell’s appeal did not have the effect of suspending the decision. The firm concurs with Milieudefensie on urgent action being required to tackle climate change, but it claims to have a different view on how this goal should be achieved, as it does not believe a court ruling against one company is the right solution for the transition to cleaner energy.

Ahead of the Court of Appeal’s judgment, Saskia Kapinga, Vice President of External Relations, listed five reasons why Shell was appealing the climate case, reiterating that the firm does not see the court ruling as the right solution for the energy transition, deeming it to be “ineffective and counterproductive,” as “an individual company will not bring down global emissions and will not help the climate.” To illustrate the raised issue, Kapinga pointed out: “If Shell stopped selling kerosene for aviation or petrol for cars, people would not fly or drive less, customers would simply turn to other suppliers.”

The company’s Vice President of External Relations underlined: “Climate policy is a task for governments, not courts. The energy transition is a balancing act where countries manage trade-offs in different ways and at different paces. Only governments and legislators have the democratic and constitutional legitimacy to make such decisions

“Shell does not control the emissions of its customers. While Shell can offer lower carbon alternatives such as electric vehicle charging and encourage their uptake, it is governments and legislators that create policies and legislation to incentivise or disincentivise consumer choices for energy.”

While claiming that upholding the court order would be “disastrous” for the Netherlands, Kapinga justified its view by saying that applying the decision to all companies operating in the Netherlands would “harm the Dutch investment climate, jobs and the economy.”

“What Milieudefensie wants – to impose absolute emissions reduction targets on Shell and other companies – has no basis in the law. The Dutch Government and Dutch Parliament have all expressly rejected political motions to impose absolute reduction targets on individual companies,” emphasized  Kapinga.

After the Court of Appeal of The Hague overturned the District Court of The Hague’s 2021 ruling on November 12, Shell underlined that the past few years had highlighted the critical importance of secure and affordable energy for economies and people’s lives. The firm is convinced that the growing energy demand must be met while tackling the urgent challenge of climate change.

Wael Sawan, Shell’s current CEO, underlined: “We are pleased with the court’s decision, which we believe is the right one for the global energy transition, the Netherlands and our company. Our target to become a net-zero emissions energy business by 2050 remains at the heart of Shell’s strategy and is transforming our business. This includes continuing our work to halve emissions from our operations by 2030. We are making good progress in our strategy to deliver more value with less emissions.”

The UK-headquartered player, just like other energy giants, is actively pursuing more oil and gas alongside low-carbon and renewable energy, which is in line with the company’s plans to spend around $40 billion on its Integrated Gas and Upstream businesses while investing $10-15 billion from 2023 to 2025 to support the development of low-carbon energy solutions, including biofuels, hydrogen, electric vehicle charging, and carbon capture and storage (CCS).

Shell, which invested $5.6 billion in low-carbon solutions in 2023 or 23% of its capital spending, pinpointed smart policies from governments, investment, and action across all sectors as tools that would drive the progress towards net-zero emissions. The firm’s data for 2023 shows it achieved more than 60% of its target to cut in half scope 1 and 2 emissions from its operations by 2030, compared with 2016 levels.

By the end of 2023, Shell also achieved its short-term target to reduce the net carbon intensity of the energy products it sells, a 6.3% reduction against its target of 6-8%, compared with the same baseline year. The firm, which continues to keep its methane emissions intensity well below 0.2%, slashed methane emissions further last year, reaching a 70% reduction since 2016.

Last but not least, Shell set a new ambition in 2024 to reduce customer emissions by 15-20% from the use of its oil products, such as gasoline, diesel, and kerosene, by 2030, compared with 2021 (Scope 3, Category 11), to help drive the decarbonization of transport. These emissions were 517 million tonnes carbon dioxide equivalent (CO2e) in 2023 and 569 million tonnes CO2e in 2021.

Some see Shell’s victory in this climate case as a setback in reliance on legal action to push Big Oil toward a faster transition to a low-carbon and zero-emission future. In line with this, Friends of the Earth Netherlands has described the UK-headquartered firm’s win as “a blow to climate justice.”

Donald Pols, Director of Milieudefensie/Friends of the Earth Netherlands, exclaimed: “We are shocked by today’s judgment. It is a setback for us, for the climate movement and for millions of people around the world who worry about their future. But if there’s one thing to know about us, it’s that we don’t give up. This setback will only help us grow stronger. Large polluters are powerful. But united, we as people have the power to change them.”

As this ruling comes just as the UN Climate Change Conference (COP29) kicks off and follows the push at COP for carbon markets, Friends of the Earth Netherlands identifies corporate impunity and influence as “a major threat to climate action.” Activists are convinced the ruling will fuel the zest to keep taking big polluters and governments to court to demand climate justice.

“Although a setback, the historic victory of 2021 and its impacts on the climate movement affirms that collective action is a way forward, challenging big polluters,” according to Friends of the Earth Netherlands.