Oil and gas giant Shell, on Tuesday, won an appeal against a landmark 2021 court ruling that had ordered the company to significantly accelerate its carbon reduction efforts.
The original ruling, delivered by a Dutch court, mandated Shell to cut its absolute carbon emissions by 45% by 2030, compared to 2019 levels, including emissions from the use of its products. The decision dealt a blow to environmental activists who have increasingly turned to the courts in pursuit of climate action.
The appeal court in The Hague affirmed that Shell had a responsibility to reduce greenhouse gas emissions to protect people from global warming but dismissed the 2021 order. The court sided with Shell’s argument that such demands should be determined by governments, not courts. Moreover, the court acknowledged that ordering Shell to reduce product-related emissions could drive consumers to switch to more polluting alternatives, such as coal, potentially worsening global emissions.
“In general, any reduction in greenhouse gas emissions is positive to mitigate climate change,” Presiding Judge Carla Joustra stated. “But that does not mean that a reduction order for Shell has that same effect.”
Shell’s CEO, Wael Sawan, welcomed the decision, saying it was “the right one for the global energy transition, the Netherlands, and our company.”
The ruling came amid the ongoing COP29 U.N. climate summit in Baku, Azerbaijan, where the role of fossil fuels in the global energy mix remained a contentious issue.
Meanwhile, Russia’s 2022 invasion of Ukraine and the resulting surge in oil and gas prices have shifted governmental and shareholder focus towards cost management, often at the expense of aggressive climate targets.
Friends of the Earth Netherlands, the environmental group that filed the original lawsuit in 2019, expressed disappointment but vowed to continue its battle against major polluters. “This hurts,” said Donald Pols, the group’s director. “At the same time, this case has shown that large polluters are not above the law.”
While Shell scaled back its renewable energy operations in favour of more profitable oil and gas ventures, it planned to invest between $10 billion and $15 billion in low-carbon energy by 2025. The company reported that it is on track to meet the court’s order regarding its own operations, noting that emissions from its production were already 30% below 2016 levels by last year.
However, Shell recently revised its targets for the carbon intensity of the products it sold . In March, the company adjusted its goal to a 15-20% reduction in net carbon intensity by 2030, down from previous, more ambitious targets.
Citi analysts described Tuesday’s ruling as a “best-case outcome” for Shell, noting that the court’s decision shifted control over company strategy more firmly into the hands of shareholders. Despite the legal win, Shell shares traded down by 0.3% on Tuesday, reflecting broader trends in the energy sector.
While Friends of the Earth has not yet confirmed whether it will appeal the ruling to the Netherlands’ Supreme Court, it was clear that the battle over corporate responsibility for climate action was far from over.
