Shell Wins Appeal Against Court Order to Reduce Carbon Emissions By 45%

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 Hague’s 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 — 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.

Shell’s 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, “there is currently insufficient agreement on a specific reduction percentage that an individual company such as Shell should adhere to.

“The 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,” 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 “ineffective” because other companies could step in to take over that trade, and “this would consequently not result in a reduction in CO2 emissions.”

Shell welcomed the decision of the appeal court ruling to overturn the 2021 verdict.

“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,” said Shell plc Chief Executive Officer Wael Sawan.

“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 20301. We are making good progress in our strategy to deliver more value with less emissions.”

The appeal court ruling marks a pivotal moment in the ongoing dialogue about corporate responsibility and climate change. While Shell’s 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 Court’s Decision:

𝗥𝗼𝗹𝗲 𝗼𝗳 𝗣𝗿𝗶𝘃𝗮𝘁𝗲 𝗣𝗮𝗿𝘁𝗶𝗲𝘀: 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.

𝗦𝗵𝗲𝗹𝗹’𝘀 𝗘𝘅𝗶𝘀𝘁𝗶𝗻𝗴 𝗘𝗳𝗳𝗼𝗿𝘁𝘀:The Court acknowledged the steps Shell has already taken towards reducing its carbon footprint, noting that these efforts are substantial and ongoing.

𝗡𝗼𝗻-𝗝𝘂𝘀𝘁𝗶𝗰𝗶𝗮𝗯𝗶𝗹𝗶𝘁𝘆 𝗼𝗳 𝗠𝗶𝗹𝗶𝗲𝘂𝗱𝗲𝗳𝗲𝗻𝘀𝗶𝗲’𝘀 𝗖𝗹𝗮𝗶𝗺𝘀: 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.

𝗙𝗿𝗮𝗺𝗲𝘄𝗼𝗿𝗸 𝗳𝗼𝗿 𝗙𝘂𝘁𝘂𝗿𝗲 𝗔𝗰𝘁𝗶𝗼𝗻𝘀: 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.

𝗜𝗻𝘁𝗲𝗿𝗴𝗲𝗻𝗲𝗿𝗮𝘁𝗶𝗼𝗻𝗮𝗹 𝗘𝗾𝘂𝗶𝘁𝘆: The decision highlighted the importance of considering the impacts on future generations, reinforcing the need for sustainable and long-term climate policies.

𝗝𝘂𝗱𝗶𝗰𝗶𝗮𝗹 𝗢𝘃𝗲𝗿𝘀𝗶𝗴𝗵𝘁: The Court affirmed the judiciary’s role in reviewing climate policies, ensuring that short-term interests do not overshadow the urgent need for sustainable action.

𝗚𝗹𝗼𝗯𝗮𝗹 𝗜𝗺𝗽𝗹𝗶𝗰𝗮𝘁𝗶𝗼𝗻𝘀: The ruling underscores the complexity of global climate governance and the need for coordinated efforts across both public and private sectors.

𝐂𝐥𝐢𝐦𝐚𝐭𝐞 𝐂𝐡𝐚𝐧𝐠𝐞 𝐚𝐧𝐝 𝐇𝐮𝐦𝐚𝐧 𝐑𝐢𝐠𝐡𝐭𝐬: 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.

𝐋𝐞𝐠𝐢𝐬𝐥𝐚𝐭𝐢𝐯𝐞 𝐚𝐧𝐝 𝐑𝐞𝐠𝐮𝐥𝐚𝐭𝐨𝐫𝐲 𝐂𝐨𝐧𝐭𝐞𝐱𝐭: Since the initial ruling, new EU climate legislation—particularly the European Green Deal and related regulations—has reinforced the EU’s 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 legislature’s 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.

𝐒𝐜𝐨𝐩𝐞 1 𝐚𝐧𝐝 2 𝐄𝐦𝐢𝐬𝐬𝐢𝐨𝐧𝐬: The court found that Shell’s current targets for reducing its direct emissions (Scope 1) and emissions from purchased energy (Scope 2) were adequate. Shell’s 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.

𝐒𝐜𝐨𝐩𝐞 3 𝐄𝐦𝐢𝐬𝐬𝐢𝐨𝐧𝐬: The court held that Milieudefensie’s requested 45% reduction target for Scope 3 emissions (those from the use of Shell’s 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 Shell’s portfolio.

𝐄𝐟𝐟𝐞𝐜𝐭𝐢𝐯𝐞𝐧𝐞𝐬𝐬 𝐨𝐟 𝐒𝐜𝐨𝐩𝐞 3 𝐑𝐞𝐝𝐮𝐜𝐭𝐢𝐨𝐧𝐬: The court questioned the impact of a court-ordered Scope 3 reduction on climate change, noting Shell’s 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 Milieudefensie’s goals if consumers can obtain equivalent fossil fuels elsewhere.