AMSTERDAM – On Tuesday, Shell (NYSE: SHEL), the oil and gas major, won an appeal against a landmark ruling that required it to accelerate carbon reduction efforts, dealing a blow to campaigners who have turned to legal channels to pursue climate action.
The appeals court in The Hague said Shell is responsible for reducing greenhouse gas emissions to protect people from global warming.
But it dismissed the 2021 ruling that ordered Shell to cut its absolute carbon emissions by 45% by 2030 compared to 2019 levels, including those caused by the use of its products.
Since then, Russia’s invasion of Ukraine in 2022 that led to a spike in oil and gas prices has sharpened governments’ and shareholders’ focus on costs and in many cases, weakened climate ambitions.
Tuesday’s ruling coincides with the COP29 U.N. climate summit in Baku, Azerbaijan, where opening procedures were delayed on Monday by a dispute over how prominent the future of fossil fuels should be on the agenda.
Friends of the Earth Netherlands, which brought the Dutch case in 2019, said it would continue its fight against large polluters, but did not say whether it would launch a further appeal at the Netherlands’ Supreme Court.
“This hurts,” director Donald Pols said. “At the same time, this case has shown that large polluters are not above the law.”
Shell CEO Wael Sawan said Shell believed the decision was “the right one for the global energy transition, the Netherlands, and our company”.
Also on Tuesday, Shell (NYSE: SHEL) and Norway’s Equinor (NYSE: EQNR) urged a Scottish court to uphold Britain’s approval for the development of two North Sea oil and gas fields, as environmental campaigners attempted to block the projects.
CLIMATE MITIGATION
The case in the Hague, where Shell (NYSE: SHEL) was headquartered until it completed its move to London in 2022, was viewed as pivotal for both sides of the emissions divide and helped to inspire other lawsuits.
In appeal hearings earlier this year, Shell argued that only states, not courts, could demand companies to reduce emissions.
The court agreed with Shell that an absolute order to reduce emissions from its products could have an adverse effect worldwide, as it could lead customers to switch from using Shell’s gas to more polluting coal.
“In general, any reduction in greenhouse gas emissions is positive to mitigate climate change,” Presiding Judge Carla Joustra said.
“But that does not mean that a reduction order for Shell has that same effect.”
Shell (NYSE: SHEL) said it was well on track to meet the court order for its own production, where emissions were 30% below 2016 levels last year.
In common with some of its peers, Shell scaled back its renewable operations, which can take longer to generate profits compared with oil and gas.
However, it plans to invest $10-15 billion between 2023 and 2025 in low-carbon energy.
In March, it weakened targets for the products it sells, to a 15-20% reduction in net carbon intensity by 2030 relative to 2016, while it retired a previous target to reduce its carbon intensity by 45% by 2035.
Citi analysts said Tuesday’s ruling was the best-case outcome for Shell.
“While success with the appeals court may not be the end of the legal process, by signaling that company strategy is now more firmly in the hands of shareholders, we believe it has a positive impact,” Citi said.
Shell (NYSE: SHEL) shares traded down 1.33% in premarket trading Tuesday.
