Giant Shell has won an appeal on Tuesday against a landmark ruling that had required it to accelerate efforts to reduce carbon emissions.
The decision from the appeals court in The Hague overturns a 2021 ruling that ordered Shell to slash its absolute carbon emissions by 45% by 2030, compared to 2019 levels, including emissions resulting from the use of its products.
The appeals court acknowledged Shell’s responsibility to reduce greenhouse gas emissions to protect people from global warming.
However, it dismissed the original ruling’s strict emission reduction mandate. The court sided with Shell’s argument that demands for emission reductions should be made by governments, not by the courts.
The court also noted that an absolute reduction order could lead to unintended global consequences if Shell customers switched to more polluting alternatives, such as coal.
“In general, any reduction in greenhouse gas emissions is positive to mitigate climate change,” Presiding Judge Carla Joustra said in the ruling. “But that does not mean that a reduction order for Shell has that same effect.”
The decision came amid shifting global priorities following Russia’s invasion of Ukraine in 2022, which drove up oil and gas prices and, in many cases, weakened the climate ambitions of governments and shareholders.
Tuesday’s ruling also coincides with the COP29 UN climate summit in Baku, Azerbaijan, where discussions have been delayed by a dispute over the role of fossil fuels in the agenda.
Environmental advocacy group Friends of the Earth Netherlands, which brought the initial case against Shell in 2019, expressed disappointment with the appeals court’s decision.
The organisation has not indicated whether it will pursue a further appeal at the Netherlands’ Supreme Court.
“This hurts,” said Donald Pols, director of Friends of the Earth Netherlands. “At the same time, this case has shown that large polluters are not above the law.”
Shell CEO Wael Sawan welcomed the ruling, stating, “Shell believes the decision was the right one for the global energy transition, the Netherlands, and our company.” Sawan’s comments align with Shell’s stance that emissions mandates should not be imposed by courts but decided at a national and international level.
Shell argued earlier this year that court-ordered emissions cuts could disrupt the global energy transition by pushing customers toward coal and other more polluting energy sources. The appeals court agreed, acknowledging the potential adverse effects of such mandates on the worldwide energy landscape.
Shell maintains it is already on track to meet emission reductions within its own production. The company reported a 30% reduction in production-related emissions compared to 2016 levels as of last year.
However, like other major oil and gas firms, Shell has scaled back its renewable energy investments in recent years, citing slower returns compared to its fossil fuel operations.
Shell plans to invest $10-15 billion between 2023 and 2025 in low-carbon energy but recently revised its target to reduce net carbon intensity for its products, aiming for a 15-20% reduction by 2030 relative to 2016 levels. The company also retired a previous target for a 45% reduction by 2035.
Citi analysts viewed the court’s decision as a positive outcome for Shell’s strategy. “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 analysts commented.
Following the announcement, Shell shares traded down 0.7% by 13:45 GMT, aligning with the broader sector, as analysts indicated the court decision had already been largely priced into the market.
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