Shell wins landmark climate case against order to cut emissions

A Dutch court has overturned a landmark ruling that ordered Shell to dramatically cut its greenhouse gas emissions, but the judgment may still leave heavily polluting companies open to more climate-related challenges, legal experts have said.
The court case in the Hague, dubbed “The People versus Shell”, was brought in 2019 by Friends of the Earth Netherlands and six other environmental organisations, together with more than 17,000 individuals.
The Dutch district court had sided with the environmental groups in ordering the FTSE 100 oil major to cut its emissions by 45 per cent by the end of the decade compared with 2019 levels, including those caused by customers using its products.
The Dutch arm of Friends of the Earth had argued that Shell’s business model threatened the goals of the Paris accord and so put human rights at risk by failing to do enough to prevent climate change.
The court of appeal in the Hague ruled that although Shell was required to reduce its emissions, there was “insufficient consensus in climate science on a specific reduction percentage to which an individual company like Shell should adhere”.
On the issue of emissions produced by Shell’s customers, the judges found that if Shell were to stop trading certain fuels, other companies would take its place, which would not result in a reduction in greenhouse gases.
Tom Cummins, a dispute resolution partner at Ashurst, the law firm, said that despite the earlier decision being quashed, the judgment would by no means close the door in the Netherlands or elsewhere to similar claims. “The court did accept that a private company could have obligations under the human rights law to mitigate the effects of climate change and to reduce emissions in order to achieve that,” he said.
Thom Wetzer, professor of law and finance at Oxford University, said that the ruling might be “a Pyrrhic victory that merely delays the inevitable”, because the court agreed in principle that it is able to order absolute emission reductions for Shell and other companies.
Shell has a target to halve scope one and two emissions by 2030 on a net basis compared with 2016 levels. By the end of last year, Shell had reduced those emissions by 31 per cent against 2016 and by 29 per cent compared with 2019. It has committed itself to eliminating all its emissions to “net zero” by 2050.
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Wael Sawan, chief executive of Shell, said: “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.”
In its appeal, Shell argued that demands for companies to reduce emissions could be made only by states and not courts. The group also countered that the “unwritten standard of care” on which the Dutch court based its ruling did not exist. Dutch legislators expressly rejected political motions to impose absolute reduction targets on individual companies three times since the verdict in 2021.
Donald Pols, chief executive at Friends of the Earth Netherlands, said the fight against major polluters was “a marathon, not a sprint”, adding: “We will continue in any case until all polluting companies stop causing dangerous climate change.
Sawan weakened some of the group’s climate targets in March in his first update of its energy transition strategy. A goal to cut the net “carbon intensity” of its products was scaled back to between 15 per cent and 20 per cent by 2030 compared with its level in 2016 and it had scrapped a 2035 target altogether. The company had previously been aiming for a 20 per cent reduction in its carbon intensity.
Carbon intensity presents emissions as a proportion of all the energy the company sells, which allows Shell to offset the carbon produced by its oil and gas operations against the less-polluting parts of the business.
Friends of the Earth would not say whether it intended to appeal against the decision, although it is expected to do so, which would be likely to prolong the case to 2027. The campaign group has three months to launch an appeal at the Dutch Supreme Court.
Shell’s shares closed down 32p, or 1.3 per cent, to £25.18 in London.
The 2021 order by a Dutch district court for Shell to cut its emissions by 45 per cent by the end of the decade, compared with 2019 levels, inspired a series of climate-related cases against other heavy corporate polluters, including TotalEnergies, the French oil major, and Holcim, the cement maker.
The case brought by environmental campaigners against Shell was the first to succeed in arguing that private companies had an obligation under human rights law to reduce greenhouse gas emissions, since failure to do enough to prevent climate change would threaten the goals of the Paris accord and put human rights at risk, the environmentalists successfully argued.
Despite the appeal court overturning the earlier decision, it agreed that Shell had an obligation towards citizens to limit its carbon emissions, based upon “the human right to protection against dangerous climate change”. Some legal experts think that this means the judgment could be used as grounds for more court cases to be brought against high polluters.
“Those advocating for courts to take a more interventionist approach will point to the findings on duty of care and the obligation on companies to take steps to mitigate the effects of climate change,” Tom Cummins, a partner at Ashurst, the law firm, said.
The claimants have three months to lodge their appeal with the Dutch Supreme Court, which is likely to take another 18 months to make a decision. However, forcing companies to slash emissions by a specific level might prove more difficult.
“That 45 per cent reduction figure that was relied upon by the claimant is an industry-wide percentage. How do you actually apply that in practice to a private company like Shell? I think the Supreme Court would similarly find it troubling and difficult to impose that obligation on a company,” Cummins said.
The court could equally be swayed by the argument that forcing Shell to reduce its so-called scope three emissions — those from the use of its products — might cause another polluter to fill the gap.