In spite of Dutch court partial u-turn in Shell case, campaigners remain optimistic

The decision by a Dutch court to overturn a previous ruling that Shell must reduce its scope 3 emissions by 45% by 2030 has been welcomed as a victory for the oil major, however environmentalists say that the fact the court accepted key points of their claim is a success that will pave the way for similar cases being examined internationally.

On November 12th, the Court of Appeal of The Hague overturned the District Court of The Hague’s 2021 ruling in the case brought against Shell by Dutch environmental group Milieudefensie as well as other NGOs and a group of private citizens, saying that it could not apply a blanket 45% by 2030 scope 3 reduction mandate on the oil major.

“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’s CEO 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 2030,” he said. “We are making good progress in our strategy to deliver more value with less emissions.”

However Milieudefensie said the ruling was a “setback” in its fight against climate change.

“The different possible reduction percentages that were presented to the court by Milieudefensie and Shell in this case were very far apart” a Milieudefensie spokesperson told Gas Outlook.

He said the target of 45% reduction was based, in part, on scenarios put together by the Intergovernmental Panel on Climate Change and the International Energy Agency.

While the NGO is still mulling what steps to take next, including a potential appeal against this latest decision, it welcomed the fact the court confirmed some of the key mandates of the previous sentence.

“This ruling is in many ways a step forward for climate litigation, since the court of appeal ruled that to be protected against dangerous climate change is a human rights issue, Shell has a legal obligation to protect human rights,” and “polluting companies need to contribute their share to achieving the goals of the Paris Agreement,” he continued.

Moreover, it said “new oil and gas fields could be at odds with the Paris Agreement.”

“We expect that this case will be used for many existing and future climate cases.”

The Dutch court accepted “large parts of the claim of Milieudefensie in this case, including on fundamental points,” London-based climate change law and litigation expert Sophie Marjanac told Gas Outlook.

“These included firstly, that the company has a legal duty in private or civil law to reduce its greenhouse gas emissions, based on the principle of protection of human rights.”

“The court accepted that human rights principles that are usually only enforceable against governments can also be enforced by civil society against private companies.”

It also found that “the company is also legally responsible for its scope 3 emissions,” namely those arising from burning of its products.

Moreover, it stated that emission reductions should aim to meet the goals of the Paris Agreement, and to therefore reach net zero by the year 2050 thus “reinforcing this global norm in Dutch law.”

The Dutch court also left in place the finding of the lower court that the 45% reduction in scope 1 and 2 emissions (from operations) must be met by 2030.

“This has implications for other Dutch companies who will have to reduce their operational emissions by 2030 or face litigation,” she pointed out.

Crucially, the court also said that it is “reasonable to expect oil and gas companies to take into account the negative consequences of a further expansion of the supply of fossil fuels for the energy transition also when investing in the production of fossil fuels.”

“Shell’s planned investments in new oil and gas fields may be at odds with this.”

“Therefore the court left open the door for a case based not on a whole-of-business scope 3 target, but a target focused on production figures for oil and gas.”

“This means that another case could be brought that would succeed, based on the principles set out in the judgement,” she anticipated.

“This case therefore simply buys Shell time, it does not mean that liability will not be imposed in future,” she added.

Noah Walker-Crawford, research fellow at the Grantham Research Institute on Climate Change and the Environment, told Gas Outlook, that the court was “tasked with deciding whether Shell has a legal duty to reduce its emissions in line with long-term commitments under the Paris Agreement.”

“It ruled that Shell is obligated to address climate change, but found an insufficient scientific basis for determining by how much it should reduce its scope 3 emissions.”

“With its reasoning, the court reinforced the legal view that both governments and corporations have legal responsibilities to take action on climate change.”

“These responsibilities emerge from established legal structures including the Paris Agreement and human rights law,” he said.

“In their ruling, the judges explicitly stated that the exploitation of new fossil fuels is not in line with existing carbon budgets, opening the door for legal claims against exploration and exploitation of new fields,” he added.

Common legal ground

Marjanac said the case also contributes to building common legal ground for emissions reduction targets.

One case that might be affected is the ‘Smith versus Fonterra’ case brought by a Maori elder Mike Smith against the seven largest greenhouse gas emitters in New Zealand, she said.

In 2022, the New Zealand Supreme Court found that the case could proceed to trial, stating that the common law “must develop, if at all, in the fertile fields of trial, not on the barren rocks of a strike out application.”

“This means that there is a chance that similar principles could be found to apply under the New Zealand common law, which could influence other common law countries like India, Australia and the UK,” she said.

“The Shell decision will absolutely affect that decision, as the legal theory is very similar, and New Zealand’s Supreme Court cited the Dutch Urgenda decision and a number of other international cases as part of its reasoning.”

“This shows how these cases that are based on similar principles build on and influence each other,” she added.