Court issues major emissions order
Climate change concern marks shifts at Shell and Exxon that may reverberate throughout fossil fuel industry
Royal Dutch Shell was ordered by a Dutch court to slash its emissions harder and faster than planned, a ruling that could have far-reaching consequences for the rest of the global fossil fuel industry.
Shell, which said it expects to appeal the ruling, has pledged to reduce its greenhouse gas emissions by 20% within a decade and to netzero before 2050. That’s not enough, a court in The Hague ruled Wednesday, ordering the oil producer to slash emissions 45% by 2030 compared to 2019 levels.
The court said the ruling applies to the entire Shell group, which is headquartered in the Dutch city and incorporated in the U.K. That raises the prospect of the company having to radically speed up its current climate and divestment policies to hit the new target. The ruling will be scrutinized globally amid a new era of litigation related to climate change.
“This is big news for carbon emitters everywhere, not just in the oil industry,” said Angus Walker, an environmental lawyer at BDP Pitmans in London. “This may spread from large emitters to small, and from the Netherlands to
other countries, at least in terms of challenges, if not successful ones.”
Shell Chemical, a division of the Dutch behemoth, is building a multibillion petrochemical complex in Beaver County, which it anticipates will start churning out plastic pellets sometime next year.
According to its air permit with the Pennsylvania Department of Environmental Protection, the facility may emit up to 2.2 million tons of carbon dioxide when operational.
Shell’s total greenhouse gas emissions were 1.65 billion tons of carbon dioxide equivalent in 2019, around the same as Russia, the world’s fourth-largest polluter.
While many countries, including the Netherlands, have signed on to the Paris Agreement on climate change, companies such as Shell were not part of the deal and so far haven’t been bound by national pledges.
That didn’t stop Larisa Alwin, the Dutch presiding judge, from stating that companies have a burden to shoulder, too.
“Companies have an independent responsibility, aside from what states do,” Judge Alwin said in her decision. “Even if states do nothing or only a little, companies have the responsibility to respect human rights.”
The landmark ruling came on the same day Shell’s U.S. rivals faced pushback from environmentally conscious investors. Chevron investors voted in favor of a proposal to reduce emissions from the company’s customers.
And a first-time activist investor with a tiny stake in Exxon Mobil Corp. scored a historic win in its proxy fight with the oil giant, signaling the growing importance of climate change to investors.
Engine No. 1 — the littleknown firm that vaulted into the spotlight in December when it began agitating Exxon to come up with a better plan to fight global warming — has won at least two seats on the company’s board at Wednesday’s annual shareholders meeting, according to a preliminary tally.
That Engine No. 1, with just a 0.02% stake and no history of activism in oil and gas, could win even a partial victory against a titan like Exxon, the Western world’s biggest crude producer, shows how seriously environmental concerns are being taken in the boardrooms of the country’s largest companies.
The vote is also striking because of the force with which Exxon battled the activist, which also criticized the company for its lackluster financial performance. Exxon refused to to meet with the nominees, and CEO Darren Woods told shareholders earlier this month that voting for them would “derail our progress and jeopardize your dividend.”
Exxon drills in the Marcellus and Utica shales in Appalachia through its subsidiary XTO Energy.
Climate cases
There are currently 1,800 lawsuits related to climate change being fought in courtrooms around the world, according to the climatecasechart. com database. The Shell verdict could have a powerful ripple effect, not least among its European peers including BP and Total. Those companies have set similar emissions targets, which have also been criticized by campaigners for not going far enough.
The case against Shell was brought by local environmental group MilieuDefensie. The campaigners accused the company of violating human rights by not adhering to the Paris Agreement’s aim of limiting the increase in global temperatures.
The courts have become an increasingly successful arena for campaigners to hold governments and countries to account over pollution and climate change. This is the second time in quick succession a Dutch court has ruled that Shell’s parent company in The Hague is liable for environmental damages in other jurisdictions.
In January, a court of appeals said Hague-headquartered Shell had a duty of care to prevent leaks in Nigeria. The German government fell foul of a judge over its climate targets when its top court ruled that Chancellor Angela Merkel’s climateprotection efforts were falling short in April.
“Urgent action is needed on climate change, which is why we have accelerated our efforts to become a netzero emissions energy company by 2050,” a Shell spokesperson said. “We are investing billions of dollars in low-carbon energy, including electric vehicle charging, hydrogen, renewables and biofuels.”
Shell already has targets to reduce its greenhouse gas emissions. But so far those figures have only come down, thanks to the impact of the coronavirus pandemic as well as selling oil and gas assets.
While divestments reduce Shell’s own emissions profile, those pollutants are still pumped into the atmosphere and can sometimes even increase.