Shell has won its appeal against a landmark climate ruling from 2021 that required the energy giant to cut its carbon emissions by 45% by 2030.
The Court of Appeal of The Hague overturned the District Court of The Hagueโs 2021 ruling in the case brought against Shell plc by Milieudefensie, other NGOs, and a group of private individuals.
The outcome, which comes during the opening days of the COP29 climate summit in Azerbaijan, marks the latest twist in a precedent-setting case that could have far-reaching implications for the future of climate litigation.
In May 2021, The Hague District Court ruled that Shell must reduce its greenhouse gas emissions by 45% from 2019 levels by 2030. The case was brought against Shell in 2019 by Milieudefensie, an environmental campaign group and the Dutch branch of Friends of the Earth, alongside six other bodies and more than 17,000 Dutch citizens.
The 2021 District Court ruling, was the first time a court had ordered a private company to comply with global climate policy as outlined in the 2015 Paris climate agreement.
The verdict, which came when Shell had its headquarters in The Hague, also said the company was responsible for all emissions across its value chain, including those from the products they sell โ known as Scope 3 emissions.
However, Shell appealed the 2021 decision and subsequently moved its headquarters to the UK, a relocation that was criticized for being partly motivated by the courtroom defeat. The Hague district court ruling had only been legally binding in the Netherlands.
In appeal hearings held earlier this year, Shell argued that the case had no legal basis.
Shellโs lawyers said demands for companies to curb greenhouse gas emissions could not be made by courts, but only by governments, Reuters reported.
Following several hearings, the Dutch Appeal Court in the Hague reversed the decision on Tuesday 12th November 2024, stating that while Shell is required to reduce its emissions, โthere is currently insufficient agreement on a specific reduction percentage that an individual company such as Shell should adhere to.
โThe court of appeal denied the claims of Milieudefensie because the court was unable to establish that the social standard of care entails an obligation for Shell to reduce its CO2 emissions by 45%, or some other percentage,โ the court said in a statement.
Furthermore, the appeal court said that urging Shell to drastically cut its Scope 3 emissions by a specific percentage was โineffectiveโ because other companies could step in to take over that trade, and โthis would consequently not result in a reduction in CO2 emissions.โ
Shell welcomed the decision of the appeal court ruling to overturn the 2021 verdict.
โWe are pleased with the courtโs decision, which we believe is the right one for the global energy transition, the Netherlands, and our company,โ said Shell plc Chief Executive Officer Wael Sawan.
โOur target to become a net-zero emissions energy business by 2050 remains at the heart of Shellโs strategy and is transforming our business. This includes continuing our work to halve emissions from our operations by 20301. We are making good progress in our strategy to deliver more value with less emissions.โ
The appeal court ruling marks a pivotal moment in the ongoing dialogue about corporate responsibility and climate change. While Shellโs immediate obligations have been adjusted, the ruling sets a precedent for future cases and reinforces the shared responsibility of all stakeholders in addressing this critical issue.
Notably, Shell has stated previously, that a court ruling would not reduce overall customer demand for products such as petrol and diesel for cars or for gas to heat and power homes and businesses. It would do little to reduce emissions, as customers would take their business elsewhere.
Shell strongly believes that smart policies from governments, along with investment and action across all sectors, will drive the progress towards net-zero emissions that we all want to see.
Key Takeaways from the Courtโs Decision:
๐ฅ๐ผ๐น๐ฒ ๐ผ๐ณ ๐ฃ๐ฟ๐ถ๐๐ฎ๐๐ฒ ๐ฃ๐ฎ๐ฟ๐๐ถ๐ฒ๐: The Court emphasized that while combating climate change is primarily the responsibility of legislators, private entities also have explicit duties to act responsibly and mitigate climate impacts.
๐ฆ๐ต๐ฒ๐น๐นโ๐ ๐๐ ๐ถ๐๐๐ถ๐ป๐ด ๐๐ณ๐ณ๐ผ๐ฟ๐๐:The Court acknowledged the steps Shell has already taken towards reducing its carbon footprint, noting that these efforts are substantial and ongoing.
๐ก๐ผ๐ป-๐๐๐๐๐ถ๐ฐ๐ถ๐ฎ๐ฏ๐ถ๐น๐ถ๐๐ ๐ผ๐ณ ๐ ๐ถ๐น๐ถ๐ฒ๐๐ฑ๐ฒ๐ณ๐ฒ๐ป๐๐ถ๐ฒโ๐ ๐๐น๐ฎ๐ถ๐บ๐: The Court found that the specific claims made by Milieudefensie were not justiciable given the nature of the demands and the actions Shell has already initiated.
๐๐ฟ๐ฎ๐บ๐ฒ๐๐ผ๐ฟ๐ธ ๐ณ๐ผ๐ฟ ๐๐๐๐๐ฟ๐ฒ ๐๐ฐ๐๐ถ๐ผ๐ป๐: Despite overturning the previous ruling, the Court provided a robust framework for future climate litigation, ensuring that the fight against climate change can continue effectively.
๐๐ป๐๐ฒ๐ฟ๐ด๐ฒ๐ป๐ฒ๐ฟ๐ฎ๐๐ถ๐ผ๐ป๐ฎ๐น ๐๐พ๐๐ถ๐๐: The decision highlighted the importance of considering the impacts on future generations, reinforcing the need for sustainable and long-term climate policies.
๐๐๐ฑ๐ถ๐ฐ๐ถ๐ฎ๐น ๐ข๐๐ฒ๐ฟ๐๐ถ๐ด๐ต๐: The Court affirmed the judiciaryโs role in reviewing climate policies, ensuring that short-term interests do not overshadow the urgent need for sustainable action.
๐๐น๐ผ๐ฏ๐ฎ๐น ๐๐บ๐ฝ๐น๐ถ๐ฐ๐ฎ๐๐ถ๐ผ๐ป๐: The ruling underscores the complexity of global climate governance and the need for coordinated efforts across both public and private sectors.
๐๐ฅ๐ข๐ฆ๐๐ญ๐ ๐๐ก๐๐ง๐ ๐ ๐๐ง๐ ๐๐ฎ๐ฆ๐๐ง ๐๐ข๐ ๐ก๐ญ๐ฌ: The court acknowledged that states have a human rights obligation to protect their citizens from dangerous climate change. While companies like Shell are not direct parties to human rights treaties, the court noted that certain human rights obligations could extend to companies. Shell, therefore, has a responsibility under Dutch private law to help prevent dangerous climate impacts resulting from its business activities. This duty is influenced by international guidelines, such as the OECD Guidelines and the UNGPs, which Shell has endorsed.
๐๐๐ ๐ข๐ฌ๐ฅ๐๐ญ๐ข๐ฏ๐ ๐๐ง๐ ๐๐๐ ๐ฎ๐ฅ๐๐ญ๐จ๐ซ๐ฒ ๐๐จ๐ง๐ญ๐๐ฑ๐ญ: Since the initial ruling, new EU climate legislationโparticularly the European Green Deal and related regulationsโhas reinforced the EUโs commitment to a 55% reduction in greenhouse gases by 2030. However, these regulations do not impose a specific 45% emissions reduction requirement on individual companies. Shell argued that it is the legislatureโs role, not the courts, to set such detailed obligations for companies. The court agreed, stating that the existing EU and Dutch climate laws did not establish a specific legal requirement for a 45% reduction by Shell.
๐๐๐จ๐ฉ๐ 1 ๐๐ง๐ 2 ๐๐ฆ๐ข๐ฌ๐ฌ๐ข๐จ๐ง๐ฌ: The court found that Shellโs current targets for reducing its direct emissions (Scope 1) and emissions from purchased energy (Scope 2) were adequate. Shellโs commitment to a 50% reduction in Scope 1 and 2 emissions by 2030 meets the demands set by Milieudefensie, so there was no reason for the court to order further reduction on these scopes.
๐๐๐จ๐ฉ๐ 3 ๐๐ฆ๐ข๐ฌ๐ฌ๐ข๐จ๐ง๐ฌ: The court held that Milieudefensieโs requested 45% reduction target for Scope 3 emissions (those from the use of Shellโs products by customers) was overly broad. The court found that it could not impose an absolute 45% Scope 3 reduction on Shell without a clear legal foundation and a detailed analysis specific to Shellโs portfolio.
๐๐๐๐๐๐ญ๐ข๐ฏ๐๐ง๐๐ฌ๐ฌ ๐จ๐ ๐๐๐จ๐ฉ๐ 3 ๐๐๐๐ฎ๐๐ญ๐ข๐จ๐ง๐ฌ: The court questioned the impact of a court-ordered Scope 3 reduction on climate change, noting Shellโs argument that such reductions may not lower global emissions if other companies fill the fossil fuel demand. The court accepted that a mandated reduction might not effectively support Milieudefensieโs goals if consumers can obtain equivalent fossil fuels elsewhere.
